fed meaning

US core inflation came in hotter and has nudged expectations for a rate hike higher. While the Fed is probably inclined to hike 25bp, this is contigent of calm being restored to the financial system. Irrespective of this, the fallout from recent events will inevitably lead to a tightening of lending conditions which will weigh on growth and inflation 0.5% MoM increase in core inflation   Higher than expected Hot inflation lifts rate hike chances Headline US CPI rose 0.4% month-on-month in February, as expected, but core (ex food and energy) was up 0.5%, versus the 0.4% consensus. As a result, the annual rate of headline inflation slows to 6% from 6.4% while the annual rate of core inflation moderates to 5.5% from 5.6%. On the face of it this supports the case for a Federal Reserve rate hike next week (we are up to about 19bp priced now), but that is still contingent on market calm. Financial stability risks always trump

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FX Daily: Low Volatility Persists Amidst US Jobs Data Ripples

Beating Inflation: Are The Fed’s Dreams Gold’s Worst Nightmare?

Przemysław Radomski Przemysław Radomski 14.04.2022 16:28
While investors remain happy-go-lucky, fundamental data for gold and silver is now worse than in 2021. Is this the last chance to come back to earth? As another week comes to a close, the winds of change are blowing across the financial markets. However, while many investors and analysts can see only sunny days ahead, fundamental storm clouds should rain on their parade over the medium term, and it’s quite possible that it’s going to happen shortly. To explain, this week culminated with the USD Index soaring above 100, the U.S. 10-Year real yield hitting a new 2022 high, and Goldman Sachs’ Financial Conditions Index (FCI) hitting its highest level since the global financial crisis (GFC). However, the PMs paid no mind yet. In fact, investors across many asset classes continue to ignore the implications of these developments. So far. With sentiment poised to shift when the economic scars begin to show, the “this time is different” crowd may regret not heeding the early warning signs. For example, the Bank of Canada (BoC) announced a 50 basis point rate hike on Apr. 13., and with the Fed likely to follow suit in May, the domestic fundamental environment confronting the PMs couldn’t be more bearish. Please see below: Source: BoC Moreover, BoC Governor Tiff Macklem (Canada's Jerome Powell) said: "We are committed to using our policy interest rate to return inflation to target and will do so forcefully if needed." Furthermore, while he added that the BoC could "pause our tightening" if inflation subsides, he cautioned that "we may need to take rates modestly above neutral for a period to bring demand and supply back into balance and inflation back to target." However, with the latter much more likely than the former, the BoC's decision is likely a preview of what the Fed should deliver in the months ahead. Please see below: Source: Reuters To that point, while investors continue to drown out officials’ hawkish cries, I warned on Apr. 13 that the Fed knows full well about the difficulty of the task ahead. I wrote: Fed Governor Lael Brainard said on Apr. 12: “Inflation is too high, and getting inflation down is going to be our most important task.” She added: “I think there’s quite a bit of capacity for labor demand to moderate among businesses by actually reducing job openings without necessitating high levels of layoffs.” As a result, she’s telling you that Fed officials will make it their mission to slow down the U.S. economy.  With phrases like “capacity for labor demand to moderate” and “reducing job openings” code for what has to happen to calm wage inflation, the prospect of a dovish 180 is slim to none. As such, this is bullish for real yields and bearish for the PMs. More importantly, notice her use of that all-important buzzword? Source: Reuters And: Source: Reuters Moreover, where do you think she got it? Source: Reuters Echoing that sentiment, Chicago Fed President Charles Evans (a relative dove) said on Apr. 11 that more than one 50 basis point rate hike could be on the horizon. "Fifty is obviously worthy of consideration; perhaps it's highly likely even if you want to get to neutral by December." As a result, with the USD Index and the U.S. 10-Year real yield already soaring, what do you think will happen if the Fed pushes the U.S. federal funds rate "to neutral by December?" Please see below: Source: Reuters Even more hawkish, Fed Governor Christopher Waller said on Apr. 13: “I think we’re going to deal with inflation. We’ve laid out our plans. We’re in a position where the economy’s strong, so this is a good time to do aggressive actions because the economy can take it.” He added: “I think we want to get above neutral certainly by the latter half of the year, and we need to get closer to neutral as soon as possible.” As a result: Source: CNBC Now, if we presented these quotes to the permabulls, they would say: "So what? We already know that the Fed is going to raise interest rates."  However, while a higher U.S. federal funds rate is now the worst-kept secret, the impact on U.S. economic growth is far from priced in. With investors assuming the Fed will normalize inflation without hurting the U.S. economy, they are positioned for an unrealistic outcome. Stagflation, anyone? Moreover, with the gold and silver prices ignoring everything the Fed throws at them, they're attempting to re-write the history books. However, with Brainard and Waller telling you that their goal is to create a bullish environment for the USD Index and the U.S. 10-Year real yield, the PMs have fought this battle before and lost this battle before. To explain, I wrote on Apr. 6: Please remember that the Fed needs to slow the U.S. economy to calm inflation, and rising asset prices are mutually exclusive to this goal. Therefore, officials should keep hammering the financial markets until investors finally get the message. Moreover, with the Fed in inflation-fighting mode and reformed doves warning that the U.S. economy “could teeter” as the drama unfolds, the reality is that there is no easy solution to the Fed’s problem. To calm inflation, it has to kill demand. As that occurs, investors should suffer a severe crisis of confidence. To that point, Fed officials aren’t even pretending anymore. Waller said on Apr 13: “All we can do is kind of push down demand for these products and take some pressure off the prices that people have to pay for these products. We can’t produce more wheat, we can’t produce more semiconductors, but we can affect the demand for these products in a way that puts downward pressure and takes some pressure off of inflation.” Likewise, Waller was even more realistic when he spoke on Apr. 11: He said: “With housing, can we cool off demand for housing without tanking the construction industry? Can we cool down the labor demand without causing employment to fall? That’s the tricky road that we’re on.” As a result, while Fed officials understand how difficult it will be to normalize inflation, investors remain in la-la land. However, when the “collateral damage” eventually unfolds, the shift in sentiment should result in the profound re-pricing of several financial assets. Please see below: Source: Bloomberg Thus, investors’ uninformed state of denial will likely seem obvious in the months ahead. (Yes, I know, it’s difficult to remain rational while surrounded what’s irrational, and that’s the very thing that makes investing “simple, but not easy”). Moreover, while Macklem cautioned that the BoC could “pause our tightening” if inflation subsides, the same rule applies to the Fed. However, with inflation still raging, the Fed and the BoC are unlikely to change their hawkish tones anytime soon. Case in point. The U.S. Bureau of Labor Statistics (BLS) released the Producer Price Index (PPI) on Apr. 13.,and with outperformance across the board, green lights were present for all of the wrong reasons. For context, the gray figures in the middle column were economists’ consensus estimates. Please see below: Source: Investing.com Likewise, the NFIB released its Small Business Optimism Index on Apr. 12. The report revealed: “The NFIB Small Business Optimism Index decreased in March by 2.4 points to 93.2, the third consecutive month below the 48-year average of 98. Thirty-one percent of owners reported that inflation was the single most important problem in their business, up five points from February and the highest reading since the first quarter of 1981. Inflation has now replaced ‘labor quality’ as the number one problem.” How about this divergence? “Owners expecting better business conditions over the next six months decreased 14 points to a net negative 49%, the lowest level recorded in the 48-year-old survey.” “The net percent of owners raising average selling prices increased four points to a net 72% (seasonally adjusted), the highest reading recorded in the series.” Moreover, “a net 50 percent plan price hikes (up 4 points).” Please see below: Source: NFIB On top of that, “a net 49 percent reported raising compensation, down 1 point from January’s 48-year record high reading. A net 28 percent plan to raise compensation in the next three months, up 2 points from February.” Please see below: Source: NFIB Thus, while the Fed hopes to rein in inflation, U.S. small businesses plan more price hikes and wage increases than in February. Therefore, officials’ hawkish intentions are not nearly hawkish enough. As a result, the medium-term outlook for the U.S. federal funds rate, the USD Index and the U.S. 10-Year real yield couldn’t be more bullish. As mentioned, let’s not forget how optimism often turns to pessimism when the drama unfolds. The bottom line? Investors lack the foresight to see how the Fed’s rate hike cycle will likely unfold. Moreover, with Fed officials warning of the “collateral damage” that occurs when they curb demand to reduce inflation, the permabulls have simply closed their eyes and covered their ears. However, when sentiment is built on a foundation of sand, it often collapses when reality re-emerges. In conclusion, the PMs rallied on Apr 13 as momentum remains the name of the game. However, while sentiment remains robust, gold, silver, and mining stocks’ fundamentals are worse now than at any point in 2021. As a result, history shows that not only are the current prices unsustainable, but profound drawdowns are required for the PMs to reflect their intrusive values.   What to Watch for Next Week With more U.S. economic data to be released next week, the most important ones are as follows: Apr. 21: Philadelphia Fed manufacturing index With the regional data providing early insight into April’s inflation dynamics, continued price increases will put more pressure on the FOMC. Apr. 22: S&P Global’s U.S. manufacturing and services PMIs Unlike the Philadelphia Fed’s index, S&P Global’s data covers the entire U.S. As a result, the performance of growth, employment, and inflation will be of immense importance. All in all, economic data releases impact the PMs because they impact monetary policy. Moreover, if we continue to see higher employment and inflation, the Fed should keep its foot on the hawkish accelerator. And if that occurs, the outcome is profoundly bearish for the PMs. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
EUR: Range-bound Outlook Amid Tightened Swap Rate Gap

Fed Vs. ECB! Market Shocker Is Here! EUR/USD Plunged! (EUR) Shows Its Strength Amid ECB Rhetoric

Conotoxia Comments Conotoxia Comments 15.04.2022 14:51
Summary: After yesterday's press conference by Christine Lagarde, head of the European Central Bank, the exchange rate of the main currency pair EUR/USD fell below the level of 1.08 The pressure on the single currency may continue until the second round of the French elections The market is currently pricing two consecutive 50-basis-point rate hikes in the United States After yesterday's press conference by Christine Lagarde, head of the European Central Bank, the exchange rate of the main currency pair EUR/USD fell below the level of 1.08 for the first time since May 2020. Investors may have felt let down by the ECB's attitude. Prior to the April meeting of the bank's policymakers, the market priced that interest rates in the Eurozone would rise by 70 basis points this year. After yesterday's announcement and the press conference of the head of the ECB, the valuation dropped to 60 points. Related article: DAX, EUR/GBP And EUR/USD Recovered Thanks To ECB Interest Rate Decision!? European Central Bank Makes European Indices Gain The ECB is reluctant to... The ECB's statement implies that interest rate adjustments in the euro area will be gradual and will start "some time after" the end of the APP net asset purchase program, which is expected in Q3 this year. The fall of the euro and investor sentiment may also be affected by the war unleashed by Russia, rising commodity prices, concerns about slowing economic growth, as well as doubts about the outcome of the presidential elections in France. In the first round, the current President Emmanuel Macron won, but the far-right candidate Marine Le Pen came in second with a small loss and a chance to win the presidential seat in the second round on 24 April. EUR/USD: the specter of the 1.00 level All of the above factors may have contributed to EUR/USD falling back towards 1.080 during Thursday's session in an attempt to rebound on Friday. The pressure on the single currency may continue until the second round of the French elections, and if Le Pen wins it could push EUR/USD to the 1.0000 level. The war in Ukraine could makes Europe more vulnerable to economic slowdown than the US, which may also leave its mark on the major currency pair. Another asset of the dollar here seems to be the tendency of the Federal Reserve to raise interest rates faster. The market is currently pricing two consecutive 50-basis-point rate hikes in the United States, which may keep the divergence in monetary policy high and translate into EUR/USD exchange rate. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Forex service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 80.77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Price Of Gold (XAUUSD) Hitting $3000!? Gold almost reached $2000! Russia-Ukraine Conflict Doesn’t Hold Back. Will The Price Of Gold Go Any Higher?

Price Of Gold (XAUUSD) Hitting $3000!? Gold almost reached $2000! Russia-Ukraine Conflict Doesn’t Hold Back. Will The Price Of Gold Go Any Higher?

Mikołaj Marcinowski Mikołaj Marcinowski 18.04.2022 18:24
According to Reuters, Lviv has been attacked today and some people were killed what brings out another increase of prices around the world. Of course the safe haven has risen as well and we’re wondering what will be this week’s high of the yellow precious metal. Price Of Gold To Rise Further? Today’s price is as high as it was in March - the precious metal is back soaring, but it’s not sure, how long will the bullish trend last. As we see gold has been trading that high a few times in the last 3 months. The first appearance of definitely bullish gold is the beginning of the warfare so February 24th and March 8th when it was known, that negotiations didn’t took us to Russia-Ukraine ceasefire. Related article: Deutsche Bank Shook DAX! French Election, Inflation And ECB Are Factors Which Shaped DAX (GER 40), CAC40, FTSE 100 And IBEX35 - Top Gainers, Top Losers   Fed To Put The Gold Price Down!? Another factor which has been shaping price of gold over last months is Fed of course. Interest rate was raised by 100bps and hawkish rhetoric may suggest the tightening is not over! The influence of monetary policy is visible on the chart on the left hand side as on January 26th the interest rate was kept on the level of 0.25% and then on March 16th when the huge rate hike was “applied”. Article on Crypto: Hot Topic - NEAR Protocol! Terra (LUNA) has been seeing a consistent downward price trend, DAI Should Stay Close To $1   Price Of Gold (XAUUSD) – 3 Months Chart Source/Data: Reuters, Investing.com Charts: Courtesy of TradingView.com
Greenback Skyrockets! Record-Breaking US Dollar (USD)!? Is It Possible For Dollar Index (DXY) To Reach 112 As In Early 2000s? Fed Decision Incoming!

Greenback Skyrockets! Record-Breaking US Dollar (USD)!? Is It Possible For Dollar Index (DXY) To Reach 112 As In Early 2000s? Fed Decision Incoming!

Alex Kuptsikevich Alex Kuptsikevich 19.04.2022 10:34
The dollar index passed 101, which we last saw for just over a week at the height of the lockdowns. But history suggests that this rally has roughly passed the halfway point. DXY is unlikely to stop near 103-104 as it has done in the last six years Except for a brief period of stock market panic in March 2020, the last time the dollar was at this level against a basket of the six most popular currencies was in April 2017. The Dollar Index peaked in the 103-104 area in both cases and has not traded consistently higher for the past 20 years. Read next: (UKOIL) Brent Crude Oil Spikes to Highest Price For April, (NGAS) Natural Gas Hitting Pre-2008 Prices, Cotton Planting Has Begun The past two times, the dollar’s rise has been halted by the Fed, easing its policy or tone of commentary, as we have seen stock and commodity markets crash along with the USD rally. That is not the case this time, so the DXY is unlikely to stop near 103-104 as it has done in the last six years. For USDJPY, it could spike to 140, which has not been seen since 1998 We are now seeing a rise in the dollar, mainly on the Fed’s switch to monetary tightening mode. We saw that the last three such impulses of dollar growth, which started in 2014, 1998, and 1992 caused the DXY to appreciate by about 25%. For you: Forex Rates: British Pound (GBP) Strengthening? Weak (EUR) Euro? GBP, NZD And AUD Supported By Monetary Policy? Applying this pattern to the current case, we get that the dollar has exhausted just over half of its upside potential and could strengthen as much as 110-112 on the DXY in the next few months. For EURUSD, this scenario sets up a plunge towards parity, the lows of the last 20 years. For USDJPY, it could spike to 140, which has not been seen since 1998. And for GBPUSD, a return to 1.2000, the lows of the Brexit-fear era.
EM Index Inclusions and Exclusions: India Thrives, Egypt Faces Challenges

Japanese Yen (JPY) Weakens Against The Dollar, USD/CAD Stable And The Inevitable Strengthening Of The USD, IMF/World Bank Events

Rebecca Duthie Rebecca Duthie 19.04.2022 09:50
Summary: Analysis of; EUR/USD, EUR/GBP, USD/CAD, USD/JPY. Japanese Yen weakens as Bank of Japan fights against increasing Treasury Yields. USD Strengthening as the Fed remains hawkish. The EUR and GBP future prices awaiting the IMF and World Bank Events later this week. EUR/USD, Strengthening USD putting pressure on the EUR. EUR/USD market sentiment is currently reflected as bearish for this currency pair as the graph shows the declining price over the past week. In the past weeks, the Euro has been underperforming as a result of the Russia-Ukraine war causing fears of Eurozone stagflation. The ECB is stuck at the moment with increasing inflation and slow growth, the likelihood of the ECB’s capacity to match the aggressiveness of the Fed is low. Perhaps toward the end of the week we will see the EURO bounce against the USD inlight of the talks at the IMF/World bank events. EUR/USD Price Chart Read next: (UKOIL) Brent Crude Oil Spikes to Highest Price For April, (NGAS) Natural Gas Hitting Pre-2008 Prices, Cotton Planting Has Begun   The Value EUR/GBP Awaits Changes in Light of Major Appointments This Week The Euro seems to be strengthening against the GBP after it depreciated late last week. Since the market opened this morning, the investor sentiment for this currency pair has become bullish. There is suspicion that the sharp fall in the value of the EUR/GBP last Thursday may have come out of China in an attempt to stop any more strengthening in the Renminbi. The future value of this currency pair is important to watch in the coming days, with major appointments on talks about finances coming up, especially both the ECB and BoE governors talks at the IMF/World Bank events later this week. EUR/GBP Price Chart USD/CAD Currency Pair holding Stable amidst Current Market conditions The USD/CAD currency pair price is remaining relatively stable given the current risk-averse market sentiment. The USD/CAD currency pair is considered to be volatile, both the CAD and USD reacts quickly to the release of economic data and current market conditions. Despite investors being risk averse, the market sentiment seems to be bullish for the USD inlight of the Fed's hawkish attitude, growing concerns on inflation increases and US rising benchmark yields all leading to a strengthening USD. USD strengthening against the Japanese Yen The USD strengthened against the Yen this past week as a result of the increasing US Treasury yields and the expectation of positive economic data. The price of this currency pair reached the highest since March 2002. The Bank of Japan has been working hard to keep the Treasury yield below 0.25%, the opposite approach the Fed has taken in the fight against inflation, causing the yen to weaken. The Japanese finance minister raises concerns on the damaging effect the weakening yen could have on the weakening economy For you: Forex Rates: British Pound (GBP) Strengthening? Weak (EUR) Euro? GBP, NZD And AUD Supported By Monetary Policy?   USD/JPY Price Chart Sources: Finance.yahoo.com, Teletrade.eu.
Chart of the Week - Gold Miners vs Energy Producers - 20.04.2022

You Should Follow These Events And Assets! Saxo Bank's QuickTake: NAS100, S&P 500, Stoxx 50, EURUSD, USDJPY, XAUUSD, Crude Oil, Russia-Ukraine War - And More

Saxo Bank Saxo Bank 19.04.2022 10:16
Macro 2022-04-19 08:34 6 minutes to read Summary:  Markets are trying to maintain an even keel as bond yields and oil prices continue to press higher. Europe returns from its long holiday weekend today as the war in Ukraine is heating up in the east and the hawkish Fed voter Bullard says he would not rule out a 75-basis-point hike at the May 4 FOMC meeting. Gold failed a bid to take the 2,000 dollar per ounce threshold yesterday.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)  - US equities have been weak over the past week with negative reactions to earnings from US financials with JPMorgan Chase’s unexpected increase in credit provisions indicating credit conditions will worsen. This week major earnings releases in the US will dominate the reaction function and set the direction for the S&P 500 futures which are trading around the 4,400 level this morning with yesterday’s low at 4,355 being the key level to watch on the downside. Read next: (UKOIL) Brent Crude Oil Spikes to Highest Price For April, (NGAS) Natural Gas Hitting Pre-2008 Prices, Cotton Planting Has Begun   Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I)  Hang Seng Index retreated more than 2% after investors found the 25 bp reserve requirement ratio cut by the People’s Bank of China last Friday disappointing as they had been expecting a more typical 50 bp reduction and a 10 bp cut in the policy Medium-term Lending Facility (MLF) rate as well.  E-commerce names declined on report that the Chinse authority had asked e-commerce companies to a meeting and called on the latter to improve on practices on pricing and delivery of necessities to consumers during lockdowns. Alibaba and Meituan fell 3% to 5%. China Merchant Bank fell 11% following the abrupt departure of the Chinese bank’s president. CSI300 saw a modest decline with coal miners, agricultural chemicals and fertilizer producers, and energy sector seeing demand. Stoxx 50 (EU50.I)  – Stoxx 50 futures are stuck in the mud ahead of a critical week with US Q1 earnings releases and Russia’s new offensive in Donbass marking the beginning of the next and more critical phase of the war in Ukraine. Stoxx 50 futures are trading around the 3,750 level this morning and is boxed into a tight trading range from 3,710 to 3,800. EURUSD  – the euro traded and closed below the prior cycle low of 1.0800 after an initial sell-off through that level in the wake of last week’s ECB meeting failed to stick. Yield spreads at the short end of the curve, relative to the US, have generally trended sideways for nearly a month, although longer yields have risen more aggressively in the US since late March. USD liquidity concerns as risk sentiment is poor and the market fears more aggressive Fed quantitative tightening may be the key driver here. Watching the next chart level at 1.0636, the low from early 2020. USDJPY and JPY crosses.  The JPY continues to run away to the downside, with USDJPY hitting 128.00 for the first time since 2002, as long US treasury yields notched a new cycle peak yesterday and will soon threaten the 3.00% level if they continue to rise, underlining the policy divergence with the Bank of Japan, that continues to stick with its yield-curve-control policy that caps 10-year JGB yields at 0.25%. Both the Bank of Japan and the Japanese Ministry of Finance have stepped up their verbal interventions against JPY volatility as recently as overnight, but until a policy shift is spotted, or real intervention is mobilized, the market is content to continue driving the JPY lower. The next major chart point is the early 2002 high near at 135.00. AUDJPY has also surged to fresh record highs of 94.50+ as the AUD was slightly firmer following the hawkish tilt in RBA minutes. Suzuki is heading for a bilateral meeting with the US and comments would be on watch. For you: Forex Rates: British Pound (GBP) Strengthening? Weak (EUR) Euro? GBP, NZD And AUD Supported By Monetary Policy? Gold (XAUUSD) attempted but failed to reach $2000, more a psychological than technical resistance level during Monday’s low liquidity session. Leveraged funds (futures) and asset managers (ETFs) both bought gold in the week to April 12, a sign the technical and fundamental outlook have – for now - aligned in support of the yellow metal. The World Bank cut its forecast for global economic growth while Fed’s Bullard talked up the prospect for a 75 basis point rate hikes given the need to raise rates to around 3.5% this year. While higher interest rates may weigh, worries about inflation, growth, and increased market volatility together with the geo-political uncertainties have maintain the upper hand. Support at $1965. Crude oil (OILUKJUN22 & OILUSMAY22) has extended its pre-Easter rally after Libya shuts its largest oil field amid protest, thereby draining an already undersupplied market further. Chinese fuel demand, currently estimated to be down 2 million barrels per day is likely to recover swiftly once lockdowns are lifted after China vowed to repair the economic damage. More than 500,000 barrels per day is currently offline in Libya and together with the EU attempts to phase out Russian oil imports, the market is expected to remain tight despite the announced release from strategic reserves held by the US and IEA members. Brent finding some resistance around $113.75 with a break potentially signaling a fresh push towards $120 per barrel. Copper (COPPERUSJUL22) reached its second highest ever close on Monday, as global mining disruptions continued to weigh on a market where exchange-monitored inventories are already at alarmingly low levels. Around 20% of Peru’s exports are out of action following local community protests. In addition, a Chinese government pledge to support the economy once lockdowns are lifted, and the increased urgency to reduced dependency on fossil fuels via electrification are likely to underpin the price further. Resistance at $4.86, a local high, and support at $4.65, the 50-day moving average. US Treasuries (IEF, TLT) and European Sovereign Debt. Despite the fresh hawkish talk from St. Louis Fed president Bullard, who is a voter at FOMC meetings this year, the short end of the US yield curve remains relatively steady, while long yields have continued to test higher as the US yield curve steepens. The next major obvious test for the long end is the 2018 high for the 10-year Treasury benchmark at 3.25% What is going on? World Bank downgrades global growth estimates. The World Bank cut its 2022 outlook to 3.2% from 4.1%, dragged down by Europe and Central Asia amid the Russian invasion of Ukraine. World Bank Chief Economist Carmen Reinhart said there is “exceptional uncertainty” in global markets and further downgrades cannot be ruled out. Get ready for more hawkish Fed talk this week. We had James Bullard on the wires yesterday, and he planted the seeds of a 75-basis points rate hike given that the Fed needs to get to neutral rate very soon. The base case for the May meeting is still a 50-basis points rate hike, and a final word on that should be watched from Fed Chair Powell on Thursday as he speaks at the IMF conference. Still, brace for more volatility in yields and further gains in the US dollar as Fed continues to raise the bar of its hawkishness. The Bloomberg Grains Subindex (AIGG:xlon) has returned to challenge to the March record high with the near month corn contract (CORNJUL22) exceeding $8 per bushel for the first time in almost a decade while wheat (WHEATJUL22) has also resumed its recent strong rally. Catalysts being the war in Ukraine, potentially reducing this year's corn crop by 40%, as well as drought and heat damage to crops in the US Midwest. In addition, the recent strong surge in US natural gas prices has further lifted the cost of fertilizer, thereby potentially seeing US farmers switch more acreage to less nutrient intensive soybeans from wheat and corn. What are we watching next? JPY intervention?  The verbal intervention from the Bank of Japan and the Japanese Ministry of Finance have failed to impress the market. At some point the Japan’s MoF may feel it is necessary to mobilize an actual intervention in the market, something it has a long history of doing, though in the past, ironically in the direction of avoiding further JPY strength, not weakness. These interventions may not achieve more than temporary success if the underlying policy and market dynamic don’t shift (I.e., the Bank of Japan sticking to its current policy while inflationary pressures and yields elsewhere continue higher). But the risk of tremendous two-way, intraday volatility should be appreciated. War in Ukraine developments as Ukrainian president Zelenskiy said that Russia is initiating an effort to take the Donbas region in Easter Ukraine. An isolated force of Ukrainian forces in Mariupol continues to hold out against Russian efforts to take the city. Earnings Watch.  The Q1 earnings season started last week with EPS beating in all cases but Schwab indicated that earnings momentum is intact among US financials. JPMorgan Chase’s earnings release showed higher than expected credit provisions which may be early signs that the credit cycle is moving into its next phase. This week the key focus is on Johnson & Johnson (today), Netflix (today), Lockheed Martin (today), Halliburton (today), ASML (Wed), Sandvik (Wed), Tesla (Wed), Procter & Gamble (Wed), CATL (Thu), Nidec (Thu), ABB (Thu), NextEra Energy (Thu), Snap (Thu). Tuesday: Shenzhen Mindray Bio-Medical, Johnson & Johnson, Netflix, Lockheed Martin, IBM, Halliburton,  Wednesday: China Mobile, China Telecom, ASML, Heineken, ASM International, Sandvik, Tesla, Procter & Gamble, Abbott Laboratories, Anthem, CSX, Lam Research, Kinder Morgan, Baker Hughes Thursday: Contemporary Amperex Technology (CATL), Sartorius Stedim Biotech, Nidec, Investor AB, ABB, Danaher, NextEra Energy, Philip Morris, Union Pacific, AT&T, Blackstone, Intuitive Surgical, Freeport-McMoRan, Snap, Dow, Nucor Economic calendar highlights for today (times GMT) 0800 – Switzerland SNB Weekly Sight Deposits 1215 – Canada Mar. Housing Starts 1230 – US Mar. Housing Starts and Building Permits 1605 – US Fed’s Evans (non-Voter) to speak 1630 – Switzerland SNB’s Jordan to speak 2350 – Japan Mar. Trade Balance 0115 – China Rate Decision Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app:    
Tepid BoJ Stance Despite Inflation Surge: Future Policy Outlook

British Pound (GBP) Power! Will GBPUSD Go Down Anymore!? (Australian Dollar To US Dollar) AUD/USD Is Volatile, GER 40 (DAX) To Pause Longer?

Jing Ren Jing Ren 19.04.2022 08:42
Summary: GBPUSD tests critical floor AUDUSD breaks support GER 40 seeks support GBPUSD tests critical floor The RSI’s oversold situation may cause a temporary bounce towards 1.3060. The US dollar continues upward as markets wager a 50 bp Fed hike next month. The pound’s latest rally came to a halt in the supply zone around 1.3150 which coincides with the 30-day moving average.   Read next: (UKOIL) Brent Crude Oil Spikes to Highest Price For April, (NGAS) Natural Gas Hitting Pre-2008 Prices, Cotton Planting Has Begun   As the pair gives up its recent gains, the bears still retain control of the direction and seem to be ready to double down at rebounds. A drop below 1.3000 would attract momentum selling and push the pair to November 2020’s lows near 1.2860. The RSI’s oversold situation may cause a temporary bounce towards 1.3060. AUDUSD breaks support As the RSI recovers into the neutral area, the pair may face stiff selling pressure around the support-turned-resistance at 0.7400. The Australian dollar remains under pressure after dovish RBA minutes. A fall below the demand zone between 0.7380 and 0.7400, which sits on the 30-day moving average, has put the bulls further on the defensive.   For you: Forex Rates: British Pound (GBP) Strengthening? Weak (EUR) Euro? GBP, NZD And AUD Supported By Monetary Policy?   As the short-term prospect turns bearish, depressed offers compound the lack of bids, driving the Aussie even lower. 0.7300 would be the next target. As the RSI recovers into the neutral area, the pair may face stiff selling pressure around the support-turned-resistance at 0.7400. GER 40 seeks support The bulls need to push above 14320 in order to turn the cautious mood around. The Dax 40 retreats as risk appetite remains subdued across equity markets. The index is still under pressure after it struggled to hold above the psychological level of 14000. The current pennant may turn out to be another distribution phase. Additionally, a break below 13900 would make the index vulnerable to a new round of sell-off. 13600 would be the next support. The bulls need to push above 14320 in order to turn the cautious mood around. Then 14600 will be the final hurdle before an extended recovery could materialize.
EUR/USD: US Dollar (USD) Supported By A 75bp Rate Hike!? EUR Influenced By Last Week's Activities, Price Of Gold (XAUUSD) May Not Stop Below $1980

EUR/USD: US Dollar (USD) Supported By A 75bp Rate Hike!? EUR Influenced By Last Week's Activities, Price Of Gold (XAUUSD) May Not Stop Below $1980

Jing Ren Jing Ren 20.04.2022 08:12
EURUSD consolidates post-sell-off The US dollar rallies as a 75bp rate hike by the Fed could be on the table. The single currency remains under pressure after last week’s sell-off. 1.0920 has become an important supply area after buyers’ failed attempts to push higher. Further above, the psychological level of 1.1000 is another support-turned-resistance, suggesting that the path of least resistance is down. Bearish trend followers could be waiting to fade the next rebound. The pair is treading water above 1.0760 as the RSI rises back to the neutrality area. Article on Crypto: Altcoins Showing Promising Growth - Take a Look at Solana (SOL), POLKADOT (DOT) and SHIBA INU (SHIB-USD)| FXMAG.COM XAUUSD keeps high ground Gold slipped as the greenback rallied across the board amid the Fed’s increasingly hawkish stance. The previous rally cleared the resistance at 1990 but struggled to grind to the psychological level of 2000. A drop below 1961 revealed underlying weakness and caused a liquidation of leveraged buyers. 1940 at the base of a previous breakout is the next stop to gauge the bulls’ commitment. An oversold RSI may trigger a buy-the-dips behavior and lead to a limited rebound. 1980 is now the closest resistance. Read next: (UKOIL) Brent Crude Oil Spikes to Highest Price For April, (NGAS) Natural Gas Hitting Pre-2008 Prices, Cotton Planting Has Begun SPX 500 breaks channel The S&P 500 recoups losses as the quarterly earnings season heats up. The index has been sliding down in a bearish channel, which indicates a cautious mood in the short term. The latest rally above the upper band (4420) and resistance at 4460 could prompt sellers to cover their positions, paving the way for a potential reversal towards 4590. 4360 is a fresh support. In fact, a series of higher lows would show buying interest and convince followers to jump in with both feet. Otherwise, 4300 would be the next support.
USD/JPY: Japanese Authorities Signal Intervention Amid Rapid Currency Appreciation

$2000 Level Of Gold Price (XAUUSD) Noted But Not Yet Present! Awaiting Fed Vs. Gold Battle!

Alex Kuptsikevich Alex Kuptsikevich 20.04.2022 10:27
Gold is falling fast, having lost about 3% to $1940 from Monday's peak. On Monday, the bulls are locally capitulating after an unsuccessful attempt to push the price above $2000. It would be a mistake to attribute gold's fall to an expensive dollar. Since the start of the year, the dollar index and gold have had a more than 80% correlation versus -0.34% in 2021, reflecting that investors see gold and the dollar as defensive assets amid the Russia-Ukraine conflict. Yesterday the dollar index slowed its rise towards the end of the day. It reversed to a decline on Wednesday morning, while gold has been actively declining since the beginning of the week, reinforcing their close correlation. Read next: Monetary Policy Drives EUR/USD, The Future of the EUR/GBP Awaits the Bank Of England's Speech - Good Morning Forex| FXMAG.COM With EURUSD near 1.08, GBPUSD near 1.30 and USDJPY one step away from 130, the dollar is near historical extremes Gold's recent retreat could be a sign of hope for a détente in the European conflict and a desire to lock in profits from the powerful movement of recent days. As it is difficult to find signs of de-escalation in the news, we are leaning towards the second option. With EURUSD near 1.08, GBPUSD near 1.30 and USDJPY one step away from 130, the dollar is near historical extremes. The same can be seen in the Dollar Index, which since last week has been trading above 100, a psychologically crucial round level. Read next: Altcoins' Rally: Solana (SOL) Soars Even More, DOT and SHIBA INU Do The Same! | FXMAG.COM Since the beginning of February, gold has found support on the declines toward its 50-day moving average in the last rally. If a test of this level in the coming days also confirms the resilience of this support, we could see a new high soon. On the long-term gold chart, the pullback from the highs in 2020 and the subsequent smooth recovery is a handle in a "cup-and-handle" pattern, whereby a cup has formed over eight years since 2012. This pattern will gain strength should gold consolidate above $2000 with a final target near $3000.
EUR/CHF: Features and recommendations Read more: https://www.instaforex.eu/forex_analysis/313786

Euro To Swiss Franc Chart May Surprise! EUR/CHF – Top-Down Analysis!

Richard Nasr Richard Nasr 20.04.2022 12:08
DAILY: Left Chart. EURCHF is overall bearish and now approaching a resistance so we will be looking for sell setups on lower timeframes. H1: Right Chart EURCHF is forming a channel in red but the lower trendline is not valid yet, so we are waiting for a new swing low to form around it to consider it our trigger swing. Read next: Altcoins' Rally: Solana (SOL) Soars Even More, DOT and SHIBA INU Do The Same! | FXMAG.COM Trigger => Waiting for that swing low to form and then sell after a momentum candle close below it (gray zone) Meanwhile, until the sell is activated, EURCHF can still trade higher. Read next: (UKOIL) Brent Crude Oil Spikes to Highest Price For April, (NGAS) Natural Gas Hitting Pre-2008 Prices, Cotton Planting Has Begun Good luck! All Strategies Are Good; If Managed Properly! ~Rich
Cautious optimism

Breaking: Gold Price (XAUUSD) To Decrease Shortly? Bear Market Coming?

Przemysław Radomski Przemysław Radomski 20.04.2022 14:02
Despite increased war tensions, gold failed to break above $2,000. What’s worse, rising USDX and interest rates are already lurking on the horizon. The precious metals just performed exactly as they were likely to. Despite the increase in war tensions, PMs and miners reversed instead of rallying, which indicated that the rally has probably run its course. Since the tensions can now (most likely) either decline or stabilize, gold and silver prices will presumably fall right away, or after a while, as the market starts paying attention to gold’s two key fundamental drivers: the USD Index the real interest rates. Let’s not forget that while gold moved above its 2011 highs, silver and miners are well below the 50% retracement from their respective 2011 highs. Both are inversely correlated with the price of gold, and both are on the rise. It’s therefore most likely only a matter of time before gold declines, and the same goes for silver and mining stocks. In fact, silver and mining stocks are likely to fall harder than gold, as they’ve been very weak in recent years anyway. Let’s not forget that while gold moved above its 2011 highs, silver and miners are well below the 50% retracement from their respective 2011 highs. Let’s check what gold did yesterday. The gold price declined substantially, and it closed below its late-March 2022 high, thus invalidating the breakout above it. Instead of the breakout above $2,000, we saw the above. Instead of a bullish sign, we got a sell signal. We also got another from the stochastic indicator that not only moved below its signal line, but also below the 80 level. Moreover, let’s not forget that it all happened in tune with what we saw back in 2020, after gold’s major top. Back then, gold retraced slightly more than 61.8% of the decline. Although this time it retraced slightly less, both cases are still very similar. Just as gold reversed on Monday, so did silver. Consequently, this month’s recent upswing was not really bullish – it was a natural part of a bigger bearish pattern. Just as gold reversed on Monday, so did silver. It also outperformed gold on a very short-term basis, which served as another bearish confirmation. Silver’s outperformance of gold is often a sell signal, especially when it’s accompanied by mining stocks’ weakness, and we saw the latter too.   Consequently, the current outlook for the precious metals market appears bullish in the long run but bearish in the medium- and short term. During yesterday’s trading, silver and junior miners were down rather similarly, but the latter had also been down on Monday, while silver had ended the session in the green. Also, miners just invalidated their breakout above the March 2022 high in terms of the closing prices. No wonder here – the attempt to rally above the previous highs was accompanied by rather weak volume, suggesting that it would fail. It did, and that’s a sell sign on its own. Consequently, the current outlook for the precious metals market appears bullish in the long run but bearish in the medium- and short term. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
(TSLA) Tesla And Elon Musk Continue to Outperform the Market! What About Elon Musk-Twitter Negotiations' (TWTR) Influence?

(TSLA) Tesla And Elon Musk Continue to Outperform the Market! What About Elon Musk-Twitter Negotiations' (TWTR) Influence?

Rebecca Duthie Rebecca Duthie 21.04.2022 15:08
Since the market opened this morning, the price of Tesla’s stock has increased largely, this surge came after the earnings announcement for Tesla that took place late one Wednesday, which showed large increases in earnings and profits, reflecting unexpected growth for Q1. Tesla share price has surged in the past 24 hours as a result of musks earning announcement that took place late on Wednesday (CET) Read next: (XAGUSD) Price of Silver Vs. U.S Yields, Lumber and Corn Futures Dependent on Demand and Supply | FXMAG.COM The stock price was also affected by Musk’s determination to take over Twitter (TWTR) The price of Tesla's stock has shown very volatile price movements over the past week as a result of market sentiment and current market conditions. In addition, the stock price was also affected by Musk’s determination to take over twitter, an announcement that took place just over a week ago, since then the price has been rising again in general. Read next: Unexpectedly Gold Price (XAUUSD) Falls, Canada And Chicago - Weather Makes Wheat Futures Fluctuate. The Price Of Palladium - Industrial Activity Is Taking Strain | FXMAG.COM Research has shown that the value of Tesla's stock has a correlation between stock movements in the near term and earnings estimates. Currently the market sentiment for the stock is mixed as investors in general are unsure where the markets will go at this point and investors are seemingly more risk-averse amid the rising inflation and possibility of a looming recession. Tesla Stock Price Chart Sources: Finance.yahoo.com, investors.com  Read next: ECB Announcements to Possibly Tighten Monetary Policy Strengthens the Euro. EUR/USD, EUR/GBP, AUD/NZD and EUR/CHF All Increased | FXMAG.COM  
Powell signals Fed needs to be nimble, Canada Inflation hits near 40-year high, bitcoin tries to hold USD20k

What Moves Forex Rates? Strong US Dollar Affects British Pound (GBP), Japanese Yen (JPY) And CNH

Alex Kuptsikevich Alex Kuptsikevich 22.04.2022 13:32
The world's major currencies continue to surrender to the dollar one after another. Since the start of March, the yen has lost 11.5% and fallen to a 20-year low. But just as we saw the third world economy currency stabilise, the currency of the second one went on the move. Chinese currency had previously successfully resisted the strengthening of the USD since the middle of last year, but The dollar has added over 2% to the renminbi since the start of the week, the most significant move since 2015. It is also noteworthy that the Chinese currency had previously successfully resisted the strengthening of the USD since the middle of last year, but in an abrupt move, entered the area of the extremes of the last 12 months. Read next (FxPro): Still Going Up The Price Of Crude Oil (WTI/BRENT) When Energy Stocks Will Start To Soar? | FXMAG.COM We see an equally impressive attack on the Pound. The GBPUSD broke the support at 1.3000 on Friday, and it is already losing more than 1% so far today. USDCHF reached its highest point since June 2020, exceeding 0.9550. Read next (FxPro): Want To Exchange 100 GBP To USD? GBP/USD Below 1.3000! (GBP) British Pound Weakens! GBP To USD - 17-Months-Low! | FXMAG.COM The New Zealand and Australian dollars have been declining steadily since early April, despite hawkish action and comments from respective central banks. Moreover, the export-oriented economies of these countries should benefit from the emerging commodity prices. EURUSD is trading below 1.0800, near 2020 reversal levels and maintaining a very moderate trading range The USDCAD went back to month highs in less than two days, reversing Wednesday's sharp rally and earlier gains from hawkish comments by the Bank of Canada. EURUSD is trading below 1.0800, near 2020 reversal levels and maintaining a very moderate trading range. However, the swing in GBPUSD today and USDCNH throughout the week and the USDJPY drama since early March suggests that EURUSD could be the next victim of dollar bulls.
Fluctuations Of Forex Pairs! US Dollar's Strength Against Japanese Yen Performance (USD/JPY), Jason Sen Comments On Euro To Japanese Yen (EUR/JPY) And NZD/JPY Forex Rate

Fluctuations Of Forex Pairs! US Dollar's Strength Against Japanese Yen Performance (USD/JPY), Jason Sen Comments On Euro To Japanese Yen (EUR/JPY) And NZD/JPY Forex Rate

Jason Sen Jason Sen 25.04.2022 10:11
USDJPY running out of steam in severely overbought conditions as predicted but there is no sell signal yet so I cannot suggest shorts. A break above 129.50 however targets 129.90/95 then 130.25/35, perhaps as far as 130.75/85. First support again at 127.80/70. Expect strong support at 127.10/126.90. Longs need stops below 126.70. A break lower can target 126.00. EURJPY no sell signal yet despite overbought conditions but less than positive candles for the last 3 days probably signal a consolidation ahead. Having held the next target of 139.95/99 perfectly, if we do continue higher look for 140.40/50 & 140.85/95. Minor support at 138.70/50 but below 138.30 can target 137.70/50. ON further losses look for 137.20/10 with best support at 136.50/30 this week. Longs need stops below 136.10. Read next (By Jason Sen): Can (XAUUSD) Gold Price Plunge To $1800!? Silver Price (XAGUSD) To Decrease As Well? | FXMAG.COM NZDJPY holding below 8540 is a sell signal for today targeting 8500 & perhaps as far as strong support at 8450/30. Longs need stops below 8410. First resistance at 8545/65. Shorts need stops above 8485. EURUSD holds 37 YEAR TREND LINE SUPPORT AT 1.0760/20. Longs need stops below 1.0670. Obviously there is nothing more important than this level this week. Again we must beat 1.0840/20 to target 1.0920/40. A break above 1.0960 is a buy signal targeting 1.1030/50. USDCAD messy as we trade sideways for 9 months. We are back above the February lows & the sideways 100 & 200 day moving averages. Further gains test the strongest resistance for this week at 500 day & 100 week moving average at 1.2775/85. Shorts need stops above 1.2800. A break higher should be a medium term buy signal. Read next (By Jason Sen): Euro To US Dollar (EUR To USD): That's An Amazing USD Performance, Will USDCAD (Canadian Dollar) Stay Close? USDJPY (Japanese Yen) Beats Records! | FXMAG.COM First support at 1.2660/40. Longs need stops below 1.2620 GBPCAD support at the April low of 1.6293/81 held again. Strong resistance at 1.6400/20. Shorts need stops above 1.6450. A break higher is a buy signal initially targeting 1.6530/50. A break below 1.6265 is a sell signal. Look for 1.6190/80. Please email me if you need this report updated or Whatsapp: +66971910019 – To subscribe to this report please visit daytradeideas.co.uk or email jason@daytradeideas.co.uk
(NVDA) Nvidia Stock Price Plunged! Meme Stocks' Performance Seems To Be Surprisingly Good

US Yields Have Declined! Gold Price (XAUUSD) Is Back In The Game! Gold Trades Near $1900, COVID In China Leave Investors Unsure

Conotoxia Comments Conotoxia Comments 26.04.2022 10:25
The price of gold appears to be back above $1,900 per ounce on Tuesday, after a 3-day decline. The rise seems to have taken place with a slight weakening of the US dollar and a drop in US Treasury bond yields, which may have made bullion more attractive. Investors may be monitoring the deteriorating Covid virus situation in China after authorities in Beijing expanded testing to a larger part of the city The U.S. dollar appears to have retreated today from a two-year high reached during the previous session, while the 10-year bond yield may have fallen from a three-year high, retreating to around 2.8 percent. Given the growing uncertainty about the outlook for global economic growth, the market may be gauging the Federal Reserve's willingness to tighten monetary policy quickly. Additionally, investors may be monitoring the deteriorating Covid virus situation in China after authorities in Beijing expanded testing to a larger part of the city, raising fears of a shutdown of the capital. In addition, Russia told the world not to underestimate the significant risk of nuclear war, which it says it wants to reduce, and warned that conventional Western weapons are a target in Ukraine. Gold can be seen as a store of value during economic and political crises. Read next: Conotoxia - Who's Gonna Stop Dollar (USD)!? EUR/USD Plunging Below 1.00? What A Surprise! Crude Oil Price Goes Down!| FXMAG.COM European buyers have refused to buy millions of barrels of Urals crude from Rosneft PJSC Meanwhile, in the oil market, WTI crude futures appear to have risen to around $99.5 a barrel on Tuesday, after a two-day decline that took prices below $100. However, the supply situation appears to remain tight. There is still a risk that the EU could join the U.S. and U.K. in banning Russian oil imports as the war in Ukraine continues. European buyers have refused to buy millions of barrels of Urals crude from Rosneft PJSC, while Asian refiners have given up on Russian oil because of sanctions imposed on the company that carries the cargoes. As a result, the world on the one hand may be reducing oil demand by the prospect of weaker economic growth and lower demand from China due to the epidemic. On the other hand, there are still chances of reduced oil supply in Europe due to war and sanctions, which may put upward pressure on production. Thus, the price of WTI crude oil, due to the opposing factors, may remain in a consolidation of $92-114. Read next: Conotoxia - (USD) Dollar Index - Fed Floors It! Hawkish Rhetoric And Interest Rate Hike? British Pound In Crisis? GBP/USD Affected By Weak Retail Sales Data!| FXMAG.COM   Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Forex service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 80.77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
USD/JPY Tops Majors in Past Month; Strong Verbal Intervention from Japan's Ministry of Finance as Resistance Nears

Oh No! EUR/USD Hit 5-Year-Low! Probably Euro Is Not That Week, But US Dollar... Oh My It's A Monster!

Conotoxia Comments Conotoxia Comments 27.04.2022 15:36
The common currency does not seem to have a very successful time behind it. Only since the beginning of the year to the US dollar, the euro could lose almost 7%, and today we can observe the lowest EUR/USD exchange rate since 2017. Russia has stopped the flow of gas to Poland and Bulgaria and said it will remain cut off until those countries agree to pay in rubles The euro weakened to $1.065 and could be at its lowest level since April 2017. It seems that the Euro may be weakened by growth concerns and risks related to energy supplies from Russia. Russia has stopped the flow of gas to Poland and Bulgaria and said it will remain cut off until those countries agree to pay in rubles. Read next: Who's Gonna Stop Dollar (USD)!? EUR/USD Plunging Below 1.00? What A Surprise! Crude Oil Price Goes Down!| FXMAG.COM The latest data also showed that consumer sentiment in Europe's largest economy fell to a record low (the GfK consumer climate index in Germany fell to -26.5 by the end of April). Risk sentiment remains shaken by the war in Ukraine, rising inflation and policy tightening by central banks, which could translate into slowing global growth. French President Macron was re-elected with over 58% of the vote Money markets expect the Fed to raise interest rates by half a point at its next two meetings and the European Central Bank to raise rates by 25 basis points in July in an effort to tame inflation, which is currently hitting record levels in Europe and 40-year highs in the U.S. Meanwhile, incumbent French President Macron was re-elected with over 58% of the vote. His rival Marine Le Pen received over 41% of the vote, the highest share of the far-right in an election to date, which could also be a bit of a risk going forward for Europe. Read next: US Yields Have Declined! Gold Price (XAUUSD) Is Back In The Game! Gold Trades Near $1900, COVID In China Leave Investors Unsure| FXMAG.COM A weakening Eurozone currency could have the effect of importing inflation Later in the day, the market may still be waiting for Christine Lagarde's speech from the European Central Bank, which could also have a potential impact on the Euro. A weakening Eurozone currency could have the effect of importing inflation, which could make it harder to fight rising prices, so the market may be wondering to what level the EUR can still lose before the ECB intervenes. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Forex service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 80.77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
US Treasury Yields Surge: Implications for Global Markets and Economies

Solid (USD) Dollar, Not So Strong Euro (EUR)... Who Will Win The Battle? Dollar Index (DXY) Is Rising!?

Saxo Bank Saxo Bank 27.04.2022 15:31
Summary:  EURUSD is closing in on parity. Will it test it and break it? US Dollar Index close to test 2017 peak and resistance. If broken the Index is likely to reach levels not seen in 20 years. A test and especially a break of Parity is for sure something that will create headlines worldwide EURUSD has broken below support at around 1.0730 and is dropping fast towards key support at 1.0340. A break below, which is likely EURUSD will be set for parity i.e. EURUSD at 1.00.That level is not a technical level but merely a psychological level. A test and especially a break of Parity is for sure something that will create headlines worldwide. Read next: Saxo Bank: "FX Update: Tension builds on BoJ policy stance ahead of meeting tonight."| FXMAG.COM If parity is broken we are likely to see a dip to around 0.96 before a bigger correction. 0.96 was the bullish break out level from the 2000-2002 Bottom, Consolidation and Reversal area in the form of a Symmetrical Triangle pattern. RSI below 40 and no signs of exhaustion. Bollinger Bands expanding i.e. we are in initial phase of the (down)trend Source: Saxo Group The US Dollar Index is closing in on 2017 peak at around 103.82. If broken a likely price target is around 110 where there is a cluster of Fibonacci levels. Source: Saxo Group Source: Saxo Bank
The EUR/USD Pair Showed Local Speculative Interest In Short Positions Yesterday

(EUR/USD) US Dollar Continues To Strengthen, BoEs Inflation Forecast and Economic Outlook Due On Thursday - Good Morning Forex!

Rebecca Duthie Rebecca Duthie 03.05.2022 12:22
Summary: EUR/USD breaks below 1.05. BoE’s and Fed monetary policy decisions due on during the trading week. GBP relying on the Fed’s quantitative tightening decisions. EURO is under pressure. The EURO lost more ground to the USD during the trading day on Tuesday, the price is sitting below 1.05. The first quarter of 2022 has not been positive for the EURO, with the Russia-Ukraine conflict still raging, the post-covid world, the hawkish Fed and lockdowns in China, are all putting pressure on the already weakening EURO. The market sentiment for this currency pair is mixed. EUR/USD Price Chart Read next: GBP: BoE Expected to Raise Yields, US Dollar (USD) Strengthens across the board - Good Morning Forex!  GBP sees strength against the EUR The GBP has strengthened against the EUR since the market opened this morning, however market sentiment is showing bullish signals. The strengthening of the GBP comes in anticipation of the Bank of Englands (BoEs) announcements due on Thursday, the market expectation is to see a hawkish BoE. If the BoE remains dovish, we could see the EURO bounce back. EUR/GBP Price Chart USD/CAD beats March high on Tuesday. The USD strengthened against the CAD on Tuesday, it's a busy week for the USD, the Federal Reserve is due to announce its monetary policy decision. The market sentiment for this currency pair is showing bullish signals, however, investor sentiment and confidence could easily be swayed in the coming days. USD/CAD Price Chart GBP shows strength against the USD. The Bank of Englands (BoE) monetary policy is the key driver for its small recovery against the USD, however the future of this currency pair lies in the decision of the Fed. The Fed is expected to begin the balance sheet reduction process through quantitative tightening could have adverse effects on the GBP. The market sentiment for this currency pair is bullish. GBP/USD Price Chart Read next: US Dollar (USD) Continues To Trump The EUR, BoE Expected To Increase Interest Rates, SNB Remains Dovish, South African Rand (ZAR) Performance  Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com
The EUR/USD Pair Showed Local Speculative Interest In Short Positions Yesterday

Key events in developed markets next week - ING Economics - 9/05-13/05

ING Economics ING Economics 08.05.2022 22:15
The Fed will continue with 50bp rate hikes throughout this year despite the fall in CPI figures expected next week. However, the lack of activity in the UK may put a dent in the Bank of England's plans In this article US: Inflation may be past its peak UK first quarter bounce to mask weaker performance in March We expect further rate increases from the Bank of England in June and August before the committee presses the pause button US: Inflation may be past its peak Consumer price inflation is the key number out of the US next week and it should hopefully show inflation has passed the peak with the year-on-year rate slowing from 8.5% to 8.3%, and core inflation edging down to 6.1% from 6.5%. Lower gasoline prices will be a big help, as will a drop in second-hand car prices as heralded by data from the Mannheim car auctions. However, it will be a long slow descent to get to the 2% target. China’s zero-Covid strategy will continue to pressure supply chains as production and distribution of inputs remain disrupted. Geopolitical tensions add to the problems, while the incredibly tight labour market is also putting upward pressure on wages and labour costs more broadly. In an environment of strong corporate pricing power, these costs are being passed onto customers, meaning inflation will be sticky and slow to fall. As such, the Fed will continue to hike rates swiftly with 50bp rate hikes expected in June, July and September. Consumer confidence will also be published by the University of Michigan and equity market weakness coupled with anxiety over the rising cost of living looks set to keep sentiment subdued.  UK first quarter bounce to mask weaker performance in March A strong bounce in UK activity during January should be enough to put in a quarterly growth figure just shy of 1%. But this masks less exciting performance as the quarter went on, and we expect the monthly GDP figure for March to show no growth in economic activity overall. Retail sales fell for the second consecutive month, while health output probably fell again ahead of the end of free Covid testing at the end of that month. That latter factor, combined with early signs of the cost of living squeeze, as well as an extra bank holiday, suggest we should brace for a negative second-quarter GDP figure and indeed weak activity for the rest of 2022. Increasing concerns surrounding growth likely means the Bank of England will hike fewer times than markets expect this year. We expect further increases in June and August before the committee presses the pause button. Developed Markets Economic Calendar Source: Refinitiv, ING, *GMT TagsUnited States Inflation Federal Reserve Bank Of England   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
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Bitcoin Price (BTC/USD) Plunges, Is Crude Oil Endangered!? Awaiting Disney, AMC And Rivian Earnings | Soft US inflation could reverse risk appetite this week! | MarketTalk: What’s up today? | Swissquote

Swissquote Bank Swissquote Bank 09.05.2022 11:05
Last week closed on a negative note, as US NFP data came in stronger-than-expected, revived Federal Reserve (Fed) hawks, and sent the major US indices lower. And the new week starts on a negative note, as well, after the Chinese Li Keqiang warned that the jobs situation in China is getting ‘complicated and grave’ as the government’s zero Covid policy is taking a heavy toll on the country’s economy, and impacts the rest of the world negatively, as well. But US inflation print due Wednesday could help improving investor sentiment this week, if the data confirms a slow down in US inflation from multi-decade high levels. The next natural target for Bitcoin bears is the $30K psychological support Oil is up this Monday on G7 commitment to ban Russian oil, but Saudis cut the price of their oil due to the Chinee slow down. The US 10-year yield gains field above 3% mark, and US dollar consolidates near two-decade highs. Bitcoin dived to the lowest levels since January over the weekend. The next natural target for Bitcoin bears is the $30K psychological support. The only thing that could reverse the dollar appreciation against majors, and Bitcoin is a soft inflation read on Wednesday! Watch the full episode to find out more! 0:00 Intro 0:33 Week starts moody 1:12 Oil up 3:00 Strong jobs revive Fed hawks, but soft CPI could calm them down! 5:06 Macro events of the week 6:46 Bitcoin hits lowest since January 8:03 Earnings calendar: Lordstown, AMC, Disney, Occidental Petroleum & Rivian 8:51 End of Rivian’s lockup period, beginning of new challenge Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020.
Pound rises despite Boris turmoil

Is JPY Idle? British Pound To US Dollar (GBPUSD) And EUR/USD Have Decreased. "Risk-aversion lifts (USD) US dollar in Asia" | Oanda

Kenny Fisher Kenny Fisher 09.05.2022 12:54
China concerns boost the US dollar The US dollar booked some modest gains post-Non-Farm Payrolls on Friday, but the dollar index resistance zone at 104.00 held once again. The dollar index finished 0.11% higher at 103.66 having traded in a wide range intra-day. The risk aversion China slowdown price action seen in equities has spilt into currency markets today, lifting the US dollar after US 10-year yields closed comfortably above 3.0% on Friday. The dollar index has risen 0.34% to 104.00 and is, once again, making a determined test of resistance here. Support at 102.50 remains intact. A close above 104.00 will signal rapid gains to 105.00 and in the bigger picture, the technical picture still says a multi-month rally to above 120.00 is possible. EUR/USD and GBP/USD have fallen by 0.35% today to 1.0508 and 1.2290. EUR/USD support at 1.0470 is in jeopardy, while GBP/USD is threatening the Friday lows of 1.2275, having closed on support at 1.2325 last week. EUR/USD rallies above 1.0650 will be challenging to sustain now, with the 45-year trendline at 1.0800 now distant. Similarly, GBP/USD will run into headwinds between 1.2400 and 1.2500. The technical picture signals much lower levels for both and a formal declaration of war from Mr Putin against Ukraine today will signal a test of 1.0300 and 1.2000 in the coming days, if not sooner. USD/JPY has crept higher over the past few sessions, rising 0.30% today to 130.95. With the Bank of Japan showing no signs of adjusting its 0.25% JGB yield cap, and US rates continuing to climb as the Fed gets busy fighting inflation, downside pressure on the yen seems inevitable. Support lies at 128.50, but a rally by USD/JPY through 131.35 sets the stage for a move to the 135.00 area. Plummeting stock markets in Asia appear to be prompting heavy outflows from Asian currencies today, with USD/CNH and USD/CNY over 0.50%, as are the USD/THB and USD/INR. Elsewhere across the region, the US dollar has booked 0.30% plus gains versus the IDR, SGD, MYR, and KRW. Chinese officials have still not made overt noises about the pace of the CNY sell-off to 6.7050, despite setting a slightly stronger fixing today. USD/INR has traded at all-time highs around 77.255 today and has fallen around 1.80% since the RBI’s last week. That does leave the RBI in somewhat of a bind, and it is an issue the Bank Indonesia and others around Asia will be feeling sooner, rather than later. In the first instance, thanks to Asia’s huge FX reserves, I expect some judicious “smoothing” to be the first strategy. Indonesia, the Philippines, and South Korea have already taken this route, I suspect. If international sentiment continues to fall and the US dollar continues to gain, those noises may get louder, but ultimately, regional central banks will fight a losing battle if China remains comfortable with yuan depreciation. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
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Skyrocketing US Dollar (USD) Can Be Even More Boosted! US CPI Preview: Hard core inflation to propel dollar to new highs, and two other scenarios

FXStreet News FXStreet News 10.05.2022 16:50
Economists expect core US inflation to have risen by 0.4% MoM in April, a dollar-supportive figure. A repeat of March's 0.3% gain would sink the greenback on talk of "peak inflation." Conversely, an increase of 0.5% in underlying prices would put a 75 bps rate hike firmly on the table. Is that the peak over there? That question for mountain climbers resonates with investors, who are eager to see where inflation reaches its limits. The longer the fog continues, the longer the bloodbath in markets. For the dollar, it is a boon. The greenback's next significant moves hinge on the Core Consumer Price Index (Core CPI) which is projected to have risen by 0.4% in April and 0.3% in March. That surprisingly low figure in the previous month fuels hopes for a lower read this time and a light at the end of the tunnel for stock traders. I will argue that this light is only a fleeting glimpse. Why it matters First, why is Core CPI more important than headline CPI? While Americans undoubtedly consume gasoline and food, these items' prices are volatile and the Federal Reserve has little impact on them. These are mostly supply-side issues driven by global forces such as Russia's war in Ukraine and OPEC+ petrol output. The dollar moves to the tune of the Fed's interest rates. What the Fed can significantly impact is demand – if it raises interest rates, consumers are motivated to save money rather than take loans to make big purchases. It has vowed to bring inflation down with higher borrowing costs – and it can afford to do so. The latest jobs report showed a tight labor market. Employment has room to climb down from the highs. Why are monthly figures more important than yearly ones in the upcoming release? In the upcoming annual calculation, April 2021 will be omitted to include changes seen in April 2022 – and that month was different. Stimulus bump: Source: FXStreet At this time last year, inflation jumped due to the one-off effects of the rapid reopening of the economy and stimulus checks, while April this year was already a normal month. Core CPI leaped by 0.9% in April 2021 and no economist expects a similar rise this time. That is why annual figures are set to fall significantly, putting the focus on monthly data. Expectations and reactions 1) Core CPI at 0.4% as expected: As I have mentioned, estimates stand at a 0.4% increase in Core CPI MoM and every tenth of a percent matters. This is the most likely scenario and is a dollar-positive one. The 0.4% estimate comes after economists had missed last month's figure by 0.2%, so they are likely more cautious this time around. On an annualized basis, it would reflect a rise of almost 5%, substantially above the Fed's 2% target. It would also be higher than the 0.3% level recorded in March and would label that figure as a one-off slow down in price rises. In other words, peak inflation would remain a mystery. At the time of writing, bond markets foresee a 95.9% chance of a 50 bps hike. That may change. Source: FXStreet For the dollar, it would extend the greenback's rise – give it a green light to move higher after the pause in recent days. This scenario has a high probability. 2) Core CPI at 0.3%, below expectations: This scenario is based on the fact that persistently high energy prices have left less money in Americans' pockets for other goods and services, alleviating price pressures. It is also backed by the slowdown in monthly Average Hourly Earnings for April– 0.3% vs. 0.4% expected – but these monthly changes are prone to revisions. March's wage figure was revised up. Nevertheless, if America records two consecutive months of 0.3% underlying inflation rises, it would strengthen the Fed's conviction of raising rates by only 50 bps in June, lowering the chances of a bigger 75 bps increase. That would hurt the dollar and this scenario has a medium probability. An even bigger downfall with 0.2% would already put "peak inflation" high on the agenda, but the chances are low. 3) Core CPI at 0.5%, above expectations: This figure beat estimates in three of the past six releases, so an upside surprise cannot be ruled out. I will stress again, that it is only a tenth of a percentage point, but one that can make a big difference in the dollar's direction. Latest Core CPI outcomes: Source: FXStreet Such an outcome could represent a catch-up in price rises after the relative slowdown or could be boosted by one-off factors. For the dollar, it would represent a considerable shot in the arm, propelling it higher. Bond vigilantes would begin circling around a 75 bps hike once again. This scenario has a lower probability. Final thoughts The Fed is focused on inflation, not employment, and every tick in underlying prices would have an outsized impact on markets. The base case scenario is of ongoing high inflation – an ongoing hawkish approach by the world's most powerful central bank – and a driver of further dollar gains.
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The Dollar is King! | MarketTalk: What’s up today? | Swissquote

Swissquote Bank Swissquote Bank 10.05.2022 20:53
The selloff in stocks, bonds, and Bitcoin deepened on Monday. Even commodities sank and crude oil tumbled more than 8% on the back of mounting worries of a seriously tighter, and potentially ineffective Federal Reserve (Fed) policy that would, to fight back the skyrocketing inflation, pull back support aggressively enough to cause recession. Goldman says the S&P500 could fall to 3600 in case of contraction. Another worry is that, even with a significantly tighter monetary policy, the Fed may not be able to tame inflation as much as desired. This is what the inflation expectations tell us. The S&P500 dive another 3.20% yesterday, as Nasdaq tanked another 4.30%. And money doesn’t flow to ‘safer’ US sovereign bonds, as investors are rapidly unloading the US treasuries as well, given the Fed is now letting its holdings mature to reduce the size of its balance sheet which went through the roof since the 2007 subprime crisis. The US 10-year yield hit 3.20% yesterday, the highest level since November 2018. Read next: Tech Stocks Plunging!? Trade Desk Earnings Announcement Pushes Tech Giant Stock Down, Russian Ruble Strengthening and Ford Motor Co. | FXMAG.COM Gold lost more than 1.50% along with the everything rout yesterday and Bitcoin slipped shortly below the $30K level. The yen and the Swiss franc depreciated against the US dollar, as well. So, where does the money go? To the US dollar – the safest of the safe haven assets. But, there is one potential catalyzer this week, that could eventually slow down the market selloff: US inflation data due Wednesday. The consumer price index is expected to have eased to 8.1% in April from 8.5% printed a month earlier. A softer inflation is the only thing that could give hope to investors. Here is the link to the Medium blog article: https://medium.com/swissquote-education Watch the full episode to find out more! 0:00 Intro 0:25 Market selloff intensifies 3:03 Gold & Bitcoin fall along with traditional risk assets 4:29 Safe haven currencies fall, as... 4:55 ...the US dollar is the safest safe-haven 7:32 Goldman cuts its S&P500 price forecast 8:42 Soft US inflation could reverse sentiment in the short-run 9:09 ... but perhaps not for Rivian. Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020.
Nasdaq Slips as Tech Stocks Falter, US Inflation Data Awaits

Rising Inflation In The US Means Rising US Dollar (USD), Chinese COVID Policy Seems To Be Almost Impossible | US inflation, a make-or-break moment for investors! | MarketTalk: What’s up today? | Swissquote

Swissquote Bank Swissquote Bank 11.05.2022 11:12
It’s D-day of the week: we will see whether inflation in the US started easing in April after hitting a four-decade high in March, and if yes, by how much. A soft inflation read will come as a relief that the Federal Reserve’s (Fed) efforts to tame inflation start paying off, but any disappointment could send another shock wave to the market. In the FX, the US dollar extended gains, despite the easing yields yesterday, as the risk-off flows continued supporting the greenback For now, activity on Fed funds futures give almost 90% chance for a 50-bp hike in FOMC’s June meeting; there is a lot left to be priced for a 75bp hike, if the data doesn’t please. To avoid pricing in a 75bp hike at next FOMC meeting, we must see an encouraging cooldown in inflation. In the FX, the US dollar extended gains, despite the easing yields yesterday, as the risk-off flows continued supporting the greenback.   The barrel of US crude tipped a toe below the $100 level on news that the Europeans softened their sanctions proposal against the Russian oil The levels against the majors like euro, yen and sterling remained flat, but the positive pressure in the dollar, combined with Turkey’s unconventional monetary policy start giving signs of exhaustion. The dollar-try advanced past the 15 mark, and the government asked institutions to make their FX operations within the most liquid trading hours. Two weeks ago, the bank had revised its regulations on banks' reserve requirements, applying them to the asset side of balance sheets in order to strengthen its macroprudential policy toolkit. The latter required reserves now pressure the overnight rates to the upside – suggesting that the unconventional policy is near limits. Energy are up and down… but mostly up. The barrel of US crude tipped a toe below the $100 level on news that the Europeans softened their sanctions proposal against the Russian oil, but oil is already above the $100 this morning. The upside potential is fading due to slower global growth prospects, and the Chinese lockdown. Read next: Stablecoins In Times Of Crypto Crash. What is Terra (UST)? A Deep Look Into Terra Altcoin. Terra - Leading Decentralised And Open-Source Public Blockchain Protocol | FXMAG.COM Watch the full episode to find out more! 0:00 Intro 0:24 All eyes on US inflation data! 2:30 Market update 3:50 Strong US dollar threatens lira stability 5:50 Risks in energy markets remain tilted to the upside 6.35 Why Chinese zero Covid policy won’t work 8.07 Coinbase hit hard by crypto meltdown 8:39 Energy, still the best option for investors Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020.  
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Here Is Why US Inflation Data (CPI) Is That Important Not Only For US Dollar (USD) Its Index (DXY), But Also For Stocks, Bonds And Other Assets | Conotoxia

Conotoxia Comments Conotoxia Comments 11.05.2022 15:28
Today at 14:30 important macroeconomic data for the US economy will be published, which may also affect asset valuations outside the United States - we are talking about inflation data. In March 2022, inflation in the United States rose to 8.5 percent, which was the highest reading in 40 years. The rise in prices, in turn, may have affected several market measures. First, it forced the Fed to act, as the Federal Reserve is supposed to care about price stability and should raise interest rates if prices rise. This in turn could have influenced expectations of higher USD interest rates in the future and a strengthening of the dollar to levels last seen 20 years ago. Further expectations of rising rates could lead to an increase in bond yields, where for 10-year bonds they are in the region of 3%. The increase in bond yields, expectations of further tightening of monetary policy, and shrinking of the Fed's balance sheet, in turn, are information that could adversely affect the stock market, which in the case of the Nasdaq 100 index found itself in bear market territory. This spiral seen in many markets may continue until investors fully discount inflation, rising yields, and expectations of interest rate hikes. Interestingly, the latter had already begun to fall earlier in the week as recession fears increased. Currently, based on the federal funds rate contracts, the market is assuming a peak for hikes in mid-2023 at 3.00-3.25 percent. That's lower than the 3.5-.375 percent assumed as recently as the beginning of the month. The determinant, in turn, of whether there is a chance of full pricing for U.S. rate hikes may be where inflation will be. If this one peaks this six months and starts to fall, the market may stop assuming very aggressive Fed action. This, in turn, could bring relief to the bond market, the stock market, and also lead to the US dollar being close to its cyclical peak. Hence, today's and subsequent data on price growth in the U.S. economy could be so important. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Forex service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 80.77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Forex: GBP/USD. The Support Has Been Rejected 3 Times. Uptrend!

Inflation (US CPI) Rises, So Does US Dollar (USD)! (SPX) S&P 500 And Nasdaq Have Decreased! Is Hawkish Fed Going To Hunt Again? | FxPro |

Alex Kuptsikevich Alex Kuptsikevich 11.05.2022 15:36
The dollar got a fresh boost, with stocks coming under renewed pressure after a new batch of US inflation data. The annual inflation rate slowed from 8.5% to 8.3% The US consumer price index rose 0.3% in April after 1.2% a month earlier. The annual inflation rate slowed from 8.5% to 8.3% but was higher than the expected 8.1% y/y. Particularly worrying for markets is the development of core inflation. The corresponding index added 0.6% m/m and 6.2% y/y last month, higher than the expected 0.4% and 6.0%, continuing the sprawl of inflation. Higher-than-expected inflation is now positive for the dollar and weighs on equities as it suggests a more robust Fed response While the annual rate of core and core inflation seems to have peaked, higher-than-expected inflation is now positive for the dollar and weighs on equities as it suggests a more robust Fed response. With inflation far from the 2% target, the Fed will be inclined to act faster (raise rates more than 50 points at a time) or stop hiking at a higher level. A significant risk demand indicator, bitcoin, has already moved out of the range with a lower boundary in January 2021 Locally, we see a tug-of-war around the dollar against the euro and yen near the lows of the past two weeks and swings against the pound and the franc near this week’s extremes. However, a significant risk demand indicator, bitcoin, has already moved out of the range with a lower boundary in January 2021. The S&P500 and Nasdaq futures were also pushed back to this week’s lows, indicating continued bearish pressure.
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Gold $1200 Scenario? After Higher US CPI Release, Fed Is Expected To Tackle Inflation, So Gold Price (XAUUSD) May Plunge Again | FxPro

Alex Kuptsikevich Alex Kuptsikevich 11.05.2022 15:38
Gold dipped to $1832 on Wednesday morning, pulling back to a critical support line in the form of the 200-day moving average, losing more than 11% from the peak levels reached in early March. Gold has been losing buyers amid a jump in US government bond yields Gold has been under systematic pressure for the past month and a half amid a rally in the dollar. In addition to this increase in the underlying price, gold has been losing buyers amid a jump in US government bond yields. However, it is too early to talk about a break in the uptrend in gold, but only a retreat into deep defences ahead of essential data. Most of the time, the correlation between inflation expectations and long-term bond yields governs the dynamics in gold. Weak real bond yields lead to a pull in the precious metal as investors look to protect the purchasing value of capital.  A significant event for the gold outlook is today’s US inflation release With high interest rates and inflation control, investors prefer to earn yields in bonds by selling off gold. A significant event for the gold outlook is today’s US inflation release. The market reaction to this event could be decisive for gold in the coming days or weeks. If gold manages to develop a pullback from current levels, we could see a sharp increase in buying over the next few days Consolidation below $1830 on the day would be an essential bearish signal that could rapidly decline towards $1800. Moreover, there would be an immediate question of double-top formation through 2020 and 2022 peaks as an early signal of a long-term downward trend with a potential of $1200. If gold manages to develop a pullback from current levels, we could see a sharp increase in buying over the next few days, as we did in early February and late November. But unlike those episodes, this time, the bears might not wait for a quick reversal, and a further rally would be an important signal that gold continues to claw its way out of the prolonged correction. In this case, the nearest stops might be the levels near $1900, and further, the market might quickly target a renewal of the historic highs above $2075 before the end of the year. 
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Although US Bonds Yields May Be Higher, Current Circumstances Are Not Clear As US CPI Release And Correlated Fed Interest Rate Decision In June Are To Shape Markets | ING Economics

ING Economics ING Economics 11.05.2022 17:15
The inflation concerns are easing ahead of today’s US CPI reading. We doubt central bankers will back down so soon, however. Markets are coming around to our view that a peak is near in yields, but we think it might still be a couple of months away In this article US 10yr edges back below 3% on remarkable easing in inflation expectations The inflation scare is easing but beware of circular reasonings Global growth gloom means holding psychologically important levels will be more difficult Today’s events and market views The peak in yields may be near US 10yr edges back below 3% on remarkable easing in inflation expectations The juxtaposition between rising real rates and falling inflation expectations remains, and over the past 24 hours the fall in inflation expectations has been dominant. And that’s why the US 10yr yield has dipped back below 3%. Right now, US 10yr inflation expectations are in the region of 2.65%. They were in excess of 3%, albeit briefly, a few weeks back, at which point talk of a 75bp hike in June were sounding like a solid call. Now that inflation expectations are well down, the 50bp promised looks fine. "10yr real rate in the area of 1% would not look out of whack" Meanwhile the 10yr real yield is now above 30bp. Add that to the inflation expectation and we get the sub-3% 10yr Treasury yield. The move higher in the real yield has been spectacular. Back in March it was deeper than -100bp. The move to 30bp is a sign that the economy has morphed away from the need for ultra-loose policy. And a continued move higher takes it towards a more normal footing. In fact a 10yr real rate in the area of 1% would not look out of whack. If we got there, inflation expectations would fall far more. The adjustment higher in real yields is a threat to risk asset valuations Source: Refinitiv, ING   Today’s US CPI number will be important, but not determinative. In other words it should not have a material impact on the 10yr inflation expectation. That said, if it’s an outsized / surprise number, it’s then more likely to have an impact out the curve. Our central view is in line with the market view, where we do see a fall in contemporaneous inflation, consistent with the recent tendency for inflation expectations to ease lower. We’ve been surprised by this though, and think it’s too early to call it a trend. The inflation scare is easing but beware of circular reasonings The ‘peak inflation’ narrative should receive a boost from slowing US annual headline and core inflation readings today but we would be cautious about chasing the move lower in rates. As always, forward-looking markets could apply a heavy discount to central bank rhetoric but an acceleration in monthly core CPI means Fed officials are unlikely to change tack just yet. One should also remember that the decline from the inflation peak will be very slow indeed, keeping pressure on the Fed to act. Swaps show inflation is no longer the market's only concern Source: Refinitiv, ING   US CPI and Eurozone HICP swaps have dropped significantly this month Further afield, inflation compensation offered by US CPI and Eurozone HICP swaps has dropped significantly this month. Should markets conclude that central banks can now afford to be less hawkish? Only up to a point. To some extent, the drop in inflation swaps is owing to a deteriorating global macro environment, but the post-FOMC timing of this drop also suggests that it has at least as much to do with expectations that central banks will deliver on expected tightening. We would be careful with such circular reasonings. Global growth gloom means holding psychologically important levels will be more difficult For an example of the doubt setting in investors’ mind about central banks’ ability to tighten policy, look no further than yesterday’s better-than-expected German (Zew) and US (National Federation of Independent Business) sentiment indicators. None of the readings was enough to alleviate global growth gloom but the NFIB details in particular could have brought inflation fears back to the fore. We suspect it is too early to call the end of the hawkish re-pricing, with central bankers still very much on their front-foot when it comes to delivering monetary tightening. Bonds risk failing a psychologically important test Source: Refinitiv, ING   We have sympathy with the growing view that there is a short time limit to this tightening cycle We think a better candidate for a peak in yields in this cycle is during the third quarter of this year, after the ECB’s expected first hike and after the couple of additional 50bp hikes the Fed has committed to. This being said, turning points are notoriously difficult to pick and we have sympathy with the growing view that there is a short time limit to this tightening cycle. Should 10Y bonds fail to hold on to their recent jump above the psychologically important levels of 3% for Treasuries and 1% for Bunds, it may take a lot of good news to test these levels again. Today’s events and market views Germany (10Y) and Portugal (8Y) make up today’s Euro sovereign supply slate. This will come on top of a dual tranche NGeu syndicated deal in the 3Y (new issue) and 30Y (tap) sectors. In the US session, the Treasury will auction 10Y notes. The main release of note in the afternoon will be the April CPI report. Consensus is for the annual readings to cool down from the previous month but a monthly acceleration in core could muddy the picture for rates. There is also an extensive list of ECB speakers on the schedule, culminating with interventions from Christine Lagarde and Isabel Schnabel. TagsRates Daily   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
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It's Not The End Of US Inflation, Hawkish Fed And Tight Monetary Policy | US inflation has peaked, but it will be a long slow descent | ING Economics

ING Economics ING Economics 11.05.2022 22:13
US inflation has slowed marginally in April thanks to a fall in used car prices and gasoline. Fed rate hikes will bring demand into better balance with supply, but in the absence of major improvements in supply chains, labour shortages and geopolitical tensions the descent back to the 2% target will be slow In this article Inflation finally slows Past the peak? Housing will make inflation especially sticky Fed has a lot more work to do Rental prices continue to remain elevated 8.3% Annual rate of inflation for April 2022   Inflation finally slows In the immediate aftermath of the pandemic amid plunging energy, air fare and hotel prices, inflation bottomed at 0.1% year-on-year in May 2020 and has been on a rapid climbed to 8.5% ever since. Today though, the annual rate of US consumer price inflation has slowed from 8.5% in March to 8.3% in April. The core rate, which excludes food and energy prices slowed marginally more to stand at 6.2% versus 6.5% in March. While this was in line with our forecasts, the market had been looking for a larger moderation with consensus forecasts of 8.1% for headline CPI and 6.0% for core. The details show energy prices fell 2.7% month-on-month on lower gasoline costs, but this will be fully reversed next month given gasoline is back at all-time highs. Used car prices fell 0.4% MoM, not as much as hoped given the Mannheim car auction data, while apparel fell 0.8% after a strong series of price hikes. Everything else was firm though with food prices rising 0.9% MoM, new vehicles up 1.1% and primary rents (0.6% MoM) and owners' equivalent rent up 0.5% MoM. Airline fares jumped another 18.6% MoM! The chart below shows the contributions and clearly shows there is a moderation in core goods prices (orange bars), but this is being offset to a large extent by the service sector (yellow). Contributions to annual US inflation Source: Macrobond, ING Past the peak? We think that March 2022 will have marked the peak for annual inflation. Mannheim used car auction prices are down 6.4% over the past three months so used vehicle prices should fall further and they have quite a heavy weight of 4.1% of the total basket of goods and services within CPI. The shift in consumer demand from goods, whose availability has been significantly impacted by supply chain issues, towards services should also contribute to a gradual moderation in the rate of inflation. Nonetheless, we remain nervous about the impact from gasoline and the growing price pressures within services. Moreover, substantial declines in the annual rate of inflation are unlikely to materialise until there are significant improvements in geopolitical tensions (that would get energy prices lower), supply chain strains and labour market shortages. Unfortunately, there is little sign of any of this happening anytime soon – The Russia-Ukraine conflict shows no end in sight, Chinese lockdowns will continue to impact the global economy while last Friday’s jobs report showed a decline in the labour force participation rate leaving the economy with 1.9 job vacancies for every unemployed person in America. At the moment consumer demand is firm and businesses have pricing power, meaning that they can pass higher costs onto their customers. This was highlighted by yesterday’s National Federation of Independent Businesses survey reporting that a net 70% of small businesses raised prices over the past three months, with a net 46% expecting to raise prices further. We haven’t seen this sort of pricing power for the small business sector before and we doubt it is any weaker for larger firms. NFIB survey shows firms can continue to pass higher costs onto customers Source: Macrobond, ING Housing will make inflation especially sticky Furthermore, the housing market remains red hot and this feeds through into primary rents and owners’ equivalent rent (OER) components of inflation with a lag of around 12-18 months. Rent contracts are typically only changed once a year when your contract is renewed so it takes time to feed through while OER is a based on a survey question for what you would rent the house you own out for. Homeowners may not necessarily closely follow the month-to-month changes in the housing market so there is a delayed response. As the chart below shows, the housing components, accounting for more than 30% of the CPI basket, are not likely to turn lower soon. No reason to expect an imminent turn in rent components Source: Macrobond, ING Fed has a lot more work to do This situation intensifies the pressure on the Fed to hike interest rates. The central bank wants to take some of the heat out of the economy and bring demand back into better balance with the supply capacity of the US economy. This potentially means aggressive rate hikes and the risks of a marked slowdown/recession. This message was re-affirmed by several officials over the past couple of days and we look for 50bp rate hikes at the upcoming June, July and September FOMC meetings. With the Fed running down its balance sheet we expect the Fed to revert back to 25bp from November onwards with the target rate peaking at 3.25% in early 2023. Even with this Fed action and hopefully some improvements in the supply side story we have doubts that CPI will get back to 2% target before the end of 2023. TagsUS Recession Inflation Federal Reserve   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The US Has Again Benefited From Military Conflicts In Other Parts Of The World, The Capital From Europe And Other Regions Goes To The US

Fast rising U.S. CPI data adds to equity market woes | Saxo Bank

Saxo Bank Saxo Bank 12.05.2022 16:22
Summary:  The larger than expected April U.S. CPI and core CPI reversed the attempt of the equity market to rebound and brought major U.S. equity indices firmly back onto their down trends. The surprising strength in services is particularly worrying and the money market is pricing in 143 bp hikes (i.e. almost three 50 bp hikes) in the next three FOMC meetings. What’s happening in markets? What spooked markets overnight was US inflation rose more than expected, which gives the Fed more ammunition to rise rates (more than they mapped out). Rising rates will cause further carnage, as when rates rise, bond yields tend to rise, which may trigger the US 10-year bond yield, to rise back over 3%,  (which is a better yield than the Nasdaq and S&P500 combined – just think about that for a second). As such the Nasdaq (with an average dividend yield of 0.9%) continued to fall and lost 3.2%. The Tech heavy index is down 28% from its high, and the technical indicators suggest it will likely continue to fall on a weekly and monthly basis, which supports our bearish fundamental view. The S&P500 lost 1.7% on Wednesday, (it has an average dividend yield of 1.66%). The U.S. treasury yield curve flattened 13 bps since yesterday’s CPI release.  The 10-year yield fell 10 bps to 2.89% while the 2-year yield rose 3 bps to 2.64%. It is worthwhile to note that the 10-year yield has fallen 30 bps in just three days from its May 9 high of 3.20%.  The treasury market is sending signals of investors being worried about a sharper slow-down in the U.S. economy.  In Australia, the Aussie share market fell 1% and hit a support level 6,991 points, but energy companies hit new highs. If the ASX200 falls further bellow this level, it could fall 2.2% to the next support (at 6,837 points). The technical indicators, suggest this could occur, with the MACD and RSI suggesting a weekly and monthly could pull back. We ideally need to see better than expected news to break the cycle. All in all though, it’s worthwhile continuing to back those stocks that are outperforming and are likely to outperform this trajectory, with rising cashflow and earnings growth. Just take a look at today’s best performing stocks as an example. In Energy there is Ampol (ALD) up 3.5% with its shares hitting a 2-year high, and Viva Energy (VEA) up 3% to its highest level since 2019. China and Hong Kong equity markets rebounded from their lows. After a weak opening, stocks traded in Hong Kong, Shanghai and Shenzhen rebounded from their lows.  Hang Seng Index (HSI.I) was down  1% and CSI300 (000300.I) recouped all its early loss to close the morning session flat.  Infrastructure related A share, in particular county seat modernization names rallied.  Sunac China, China’s 4th largest property developer, failed to make a coupon payment of a dollar bond.  The news pushed down the shares of other Chinese developers traded in Hong Kong. Asia stocks follow Wall Street down. Japan’s Nikkei (NI225.I) was down 1% in the Asian morning following US CPI release overnight and the slide in US indices overnight. Steel makers like Japan Steel (5631) and Kobe Steel (5406) surged in a big way after earnings results and profit outlook was better than expected. Singapore’s STI Index (ES3) was also in the red. Singtel (Z74) was up over 1% leading on the index as it broadened its 5G network to underground metro line. Chinese electric car maker Nio (NIO) is going to start trading on the Singapore stock exchange form May 20. FX range trading continues. The USD had a hard time reacting to the US inflation print, suggesting range trading patterns may continue for now. While USDJPY slipped below 130 on lower real yields, EUR was still unable to overcome inflation and growth worries even with Lagarde hinting at a rate hike for July on stickier inflation, it dipped slightly to remain above 1.05 support. AUDUSD’s move above 0.7000 was not sustained and NZDUSD returned to sub-0.6300. GBPUSD is making a steadier move below 1.2300 ahead of UK GDP release. What to consider? US inflation may have peaked but the descent will be slow and painful. April U.S. CPI came at 8.3% YoY.  Core CPI, which excludes food & energy,  was 6.2% higher from a year ago.  Reiterating what we said in this piece, while headline inflation may be showing signs of peaking as base effects turn, it is likely to stay at these elevated levels. It was important to note that the 0.6% monthly increase of Core CPI  has brought inflation back to the uncomfortably high 0.5%-0.6% range from October 2021 to February 2022, after a temporary moderation in March.  Another worrying sign was the +0.7% core service price, which was the highest since 1990. Regular rents and owner-equivalent rents rose faster than expected and prices of reopening related spending, such as airfares and hotel lodging rose sharply. The US consumer remains very strong, which gives pricing power to companies. Services inflation will also broaden further, suggesting we are in for a higher-for-longer mode. Take into the mix, a prolonged war, sustained disruptions from China and still-tight labor market. This means Fed’s hawkish rhetoric is set to stay. The money market has moved towards pricing in a 50bp hike in the Sept FOMC on top of the two 50bp moves anticipated for June and July. Oil bulls pin their ears back: Both the Saudi oil Chief and UAE have warned that all energy sectors are running out of capacity, which supports our view that the oil price will hit higher levels over the longer term and also once China is out of lockdown. That being said, Saudi Aramco (ARAMCO) has strengthened regardless, along with many other oil companies, as their cashflows are rising at record paces. ARAMCO has now overtaken Apple as the world’s most valuable company. As we have been saying for some time now, it’s wise to consider revisiting oil stocks and oil ETFs. For instance, the ETF OOO that tracks the oil price, looks like it could break above a key trigger level and re-enter another uptrend, so that’s worth consideration. Also have a look at your favorite large oil stocks with rising earnings growth. Malaysia’s rate hike will be a signal for the region. Bank Negara Malaysia started the rate hike cycle yesterday as we had expected, turning away from its patient stance in April. This comes on the back of a similar rate increase decision from the Reserve Bank of India last week in an out-of-cycle meeting. Ringgit interest rate swaps are now pricing in over 75-basis points of rate hikes over the next 6 months. This similar surge in hawkish pricing is being seen across emerging Asia, suggesting more pain for EM bonds. Potential trading ides that could be worth your consideration? US dollar and US dollar ETFs move higher. As mentioned last week the USD dollar is supported higher along with US dollar ETFS. The Invesco USD Index Bullish Fund ETF closed at a brand new record high overnight. BetaShares USD ETF is also hitting higher levels and looks like. As previously mentioned, also as our head of FX Strategy also said, we are bullish on the USD, as higher volatility and bond yield are expected. This supports the USD and USD ETFs. BTC s in a bearish long term downtrend pressured by long term yield rising. For investors it could be worth considering shorting Bitcoin given rates are likely to continue to rise for now. Buy USDHKD 12-month forward. HKD interest rates are set to rise towards or even go above those of the USD as the Hong Kong Monetary Authority (HKMA) withdraw HKD liquidity in its move to buy HKD against USD.  As the USDHKD spot rate touches 7.85, which is the weak-side convertibility undertaking of the HKMA, the HKMA intervened by buying HKD versus the dollar this morning.  Given the strength of the US dollar and the weak economic sentiment in Hong Kong and the mainland, it is likely that the HKMA will have to continue to intervene and withdraw HKD liquidity further.  Given the ample ammunition that the HKMA has in defending HKD’s Linked-exchange Rate Regime, investors who are interested in betting on persistent weakness in the HKD would be better off to take a long position of USDHKD 12-month forward (currently at around 7.83) which can go up as HKD interest rate rise even when the spot being capped at 7.85.  Key economic releases this week: Thursday: India April CPI, US April PPI Friday: US Univ of Michigan sentiment, US import price index   Key earnings release this week: Thursday: Verbund, KBC Group, Brookfield, Fortum, Siemens, Allianz, Merck, Hapag-Lloyd, RWE, Atlantia, Snam, NTT, SoftBank Group, Aegon, Naturgy Energy, Motorola Solutions Friday: Deutsche Telekom, KDDI, Honda Motor, Alibaba   For a global look at markets – tune into our Podcast.  Source: Saxo Bank
Crypto Crash Shocked Many, The Most Sensational Bit Was The Terra (LUNA) Plunge. Is (USD) US Dollar's Rally About To End? BP Has Decreased Slightly, So Does GBP/USD. This Week Has Been Full Of Events | Swissquote

Crypto Crash Shocked Many, The Most Sensational Bit Was The Terra (LUNA) Plunge. Is (USD) US Dollar's Rally About To End? BP Has Decreased Slightly, So Does GBP/USD. This Week Has Been Full Of Events | Swissquote

Swissquote Bank Swissquote Bank 13.05.2022 10:35
The dust seems to be settling in cryptocurrencies. Terra and Luna are now worth almost nothing but Bitcoin returned past the $30K, which is a sign that the confidence in the broader sector may have not been damaged as much as we first feared. European stocks opened in the green and US futures are pointing to the upside, yet volatility remains high, warnings that the wind could change direction rapidly, and the high volatility environment is more favourable for further losses than sustainable gains. European gas futures gained another 13% yesterday, and the pressure on energy prices remain clearly tilted to the upside   On the geopolitical front, the Europeans are going around their own sanctions against Russia by opening accounts with Gazprom bank to pay the Russian gas in exchange of rubles (!!), but the latest news suggest that Russia is now cutting the German gas as a retaliation to its sanctions. Of course, the Europeans have been quite bad in this poker game - they showed too openly how scared they were to lose the Russian gas that now, Russia is gaining the upper hand. European gas futures gained another 13% yesterday, and the pressure on energy prices remain clearly tilted to the upside. Saudi Aramco has surpassed Apple in terms of market capitalization this week, to become the world’s most valuable company, and the US dollar index extended gains to a fresh 20-year high. Everyone is now wondering when the dollar rally will end! Read next: Altcoins: What Is Polkadot (DOT)? Cross-Chain Transfers Of Any Type Of Asset Or Data. A Deeper Look Into Polkadot Protocol | FXMAG.COM   Watch the full episode to find out more! 0:00 Intro 0:32 The dust settles in cryptocurrencies 2:22 Market update 3:13 Energy remains upbeat... 4:21 ... and Aramco is now the world's biggest compagny 5:00 High vol hints at further headache 6:34 Meme pop up 7:28 Dollar extends gains, raising bets that it's soon time for correction! Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020.
Oil Defies Broader Risk-off Sentiment: Commodities Update

Gold Price (XAUUSD) Nears 3-Month Low, The US Dollar (USD) Performance Agains (EUR) Euro Makes EUR/USD Decrease 2016's Lows And (BTC) Bitcoin Price Is Back Above $30K | Conotoxia

Conotoxia Comments Conotoxia Comments 13.05.2022 11:43
Gold held near three-month lows near 1,825 USD per ounce on Friday and is falling for the fourth week in a row from 1990 USD. One factor for the decline in gold prices could be the strengthening U.S. dollar, which seems to have stabilized near the 20-year high reached on Thursday. The USD strengthening may have followed the release of US consumer and producer inflation data, which seems to reinforce expectations of aggressive interest rate hikes by the Federal Reserve. This, in turn, may raise concerns about a weaker global economic outlook, helping to boost USD demand. The recent strengthening of the USD may also be related to the divergence in monetary policy on both sides of the Atlantic Recall that the U.S. core CPI remained near a 40-year high of 8.3 percent in April, while the core CPI also exceeded expectations at 6.2 percent, fueling fears that high price levels may persist. Thus, markets are anticipating increases of 50 basis points at each of the next two Fed meetings in June and July. Read next: Altcoins: What Is Polkadot (DOT)? Cross-Chain Transfers Of Any Type Of Asset Or Data. A Deeper Look Into Polkadot Protocol | FXMAG.COM This could also be significant for the EUR/USD major pair, which approached the 1.0350 level this week, its lowest level since December 2016. The recent strengthening of the USD may also be related to the divergence in monetary policy on both sides of the Atlantic. The Fed is moving towards aggressive hikes, while the European Central Bank may raise interest rates by 50-75 basis points in total by the end of the year. Thus, the scale of divergences seems to be very large. Bitcoin rebounded yesterday from its lowest level in almost 17 months and crossed the $30,000 mark today In addition to gold and the dollar, attention should again turn to the cryptocurrency market and towards stock market indices, where in both cases an attempt to defend against possible further declines may be underway. Bitcoin rebounded yesterday from its lowest level in almost 17 months and crossed the $30,000 mark today. Despite this, the world's most popular and widely used cryptocurrency is at this point on its way to its worst week in four months, falling more than 10 percent. Yesterday, the market additionally saw a likely panic as the tether to USD exchange rate departed at 1:1. At the apogee of fears for the collapse of the largest stablecoin, the cryptocurrency market seemed to have reached its weekly lows. Currently, USDT is trying to get back to the 1:1 exchange rate, and the rest of the market seems to be stabilizing. Read next: (BTC) Bitcoin’s Price Tanks Along With Equities. U.S. Stock Market Awaits CPI Report, Poor Performance From The FTSE 100. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Forex service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 80.77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Central Banks - What's Ahead?| Federal Reserve (USD), European Central Bank (EUR), Bank Of Japan (JPY), Bank Of England (GBP) | ING Economics

Central Banks - What's Ahead?| Federal Reserve (USD), European Central Bank (EUR), Bank Of Japan (JPY), Bank Of England (GBP) | ING Economics

ING Economics ING Economics 13.05.2022 18:57
Our team outline their forecasts for central banks, as policymakers continue to make changes in interest rates amid global inflation concerns In this article Federal Reserve European Central Bank Bank of England Bank of Japan Bank of Canada Reserve Bank of Australia Riksbank Norges Bank Swiss National Bank National Bank of Hungary Czech National Bank National Bank of Poland National Bank of Romania Central Bank of Turkey People's Bank of China Reserve Bank of India Bank of Korea Bank Indonesia Central banks around the world are grappling with high inflation Learn more on ING Economics Developed markets: Our calls at a glance Source: ING Federal Reserve Our call: 50bp rate hikes in June, July and September before switching to 25bp in November, December, and February 2023 as quantitative tightening (QT) is felt. Rate cuts in 2H 2023. Rationale: Domestic demand remains strong and in this environment businesses are able to pass higher energy, commodity, labour and supply chain-related costs onto their customers. The Fed is seeking to bring demand into better balance with the supply capacity of the economy. But moving into restrictive territory means slower growth and the risk of an adverse reaction and we expect the Fed to move to a more neutral position in late 2023. Risk to our call: Domestic demand is resilient with wage rises accelerating amid ongoing labour shortages, risking higher, more prolonged, inflation. Conversely, the economy reacts badly to rate hikes (the housing market is vulnerable) and recession prompts a more rapid reversal in Fed policy. James Knightley European Central Bank Our call: Rate hike in July and September plus a possible third hike at the turn of the year before pausing. Rationale: Uncertainty surrounding the economic outlook remains high but higher inflation for longer, additional inflationary pressure still in the pipeline, and fears that the window to act could be closing rather soon pushes the ECB to act earlier. Official comments since the late April ECB meeting suggest that there is growing consensus to normalise monetary policy, i.e. ending net asset purchases and the era of negative deposit rates. Only the timing is still under discussion. Looking beyond normalisation, however, high government debt, the need for investments, a potential loss in competitiveness, and prospects of easier monetary policy elsewhere argue against a series of rate hikes.  Risk to our call: A strong economic rebound after any end to the war in Ukraine and wage pressures building on the back of reshoring and labour shortages could keep the hawks at the ECB in the lead and push for further rate hikes in 2023. Carsten Brzeski Bank of England Our call: Rate hike in June and August before a pause. Rationale: With four rate rises under its belt, the committee has become more cautious and has hinted that markets are overestimating future hikes. Its latest forecasts showed that, if it hiked roughly six further times, inflation would be well below target in two to three years' time. While markets have been assuming the BoE’s hike profile will look similar to the Fed’s, the UK’s more ‘European’ growth outlook in the near term suggests a less imminent need for aggressive tightening. Risk to our call: Wage pressures continue to build, so if the growth story turns out to be less lacklustre than feared, the hawks on the committee may well push for a higher terminal rate by early 2023. Like our Fed call, that would also inevitably bring forward the date of the first rate cut. James Smith Bank of Japan Our call: Bank of Japan will maintain an accommodative policy stance. Rationale: CPI will rise up and stay above 2% for a while, but BoJ will downplay it as cost-push driven inflation that will prove temporary. Market expectations on a possible policy change were killed after last month’s BoJ meeting, and no action change before year-end is expected. Risk to our call: If a weak Japanese yen hurts the economy, then the bank may revisit its monetary policy stance, but that's more likely once Governor Haruhiko Kuroda retires next April. Min Joo Kang Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Chart of the Week : An ECB rate hike is imminent

How Is Euro Performing Against US Dollar (EUR/USD)? (EUR) Euro under pressure, falls below 1.04 | Oanda

Kenny Fisher Kenny Fisher 13.05.2022 16:15
The euro has stabilized on Friday, after a dreadful Thursday in which EUR/USD fell 1.26%. Russian announces sanctions The euro continues to struggle and is trading at lows last seen in January 2017. The Ukraine war has taken a bite out of the eurozone economy and sent the euro tumbling. The latest development weighing on the euro was Russia’s announcement of sanctions on some European gas importers, at a time when the EU is trying to garner support for a ban on Russian oil. Germany has said that it could manage without Russian oil, but the main stumbling block to the ban appears to be Hungary, which is very dependent on Russian energy supplies. The euro has broken through major support lines at 1.08 and 1.05, and if it breaches the 1.03 line, we could see move towards parity with the dollar. Read next: Altcoins: What Is Polkadot (DOT)? Cross-Chain Transfers Of Any Type Of Asset Or Data. A Deeper Look Into Polkadot Protocol | FXMAG.COM The wobbly euro hasn’t received any support from the ECB, which has been slow to shed its dovish policy. After years of monetary easing, ECB members are becoming more vocal about the need for tighter policy, and ECB President Christine Lagarde said earlier this week that QE would end in the third quarter, and a rate hike would follow “some time” after that. We could see a rate increase as early as July, although it’s unclear if the ECB will launch a rate cycle with a hike of 25 or 50 basis points. Read next: Stablecoins In Times Of Crypto Crash. What is Terra (UST)? A Deep Look Into Terra Altcoin. Terra - Leading Decentralised And Open-Source Public Blockchain Protocol | FXMAG.COM The US dollar has shined against the majors, buoyed by an aggressive Federal Reserve. The April US inflation report indicated that expectations of an inflation peak were premature, as CPI fell only slightly, from 8.5% to 8.3%. Fed Chair Powell has signalled that the Fed will deliver 0.50% rate increases in June and July, as the Fed is focused on lowering inflation, which has hit a 40-year high. There has been some talk of a 0.75% hike, but it is far more likely that the Fed will stick with 0.50% moves, hoping that they can do the trick and wrestle down inflation. EUR/USD Technical 1.0398 has switched to resistance. It is a weak line and could see further action during the day. Above, there is resistance at 1.0473 There is support at 1.0321 and 1.0246     This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Economic Calendar For July 21st. EUR/USD And GBP/USD - Trading Ideas

(GBP) British pound’s woes continue | Oanda

Kenny Fisher Kenny Fisher 13.05.2022 15:29
The British pound can’t seem to find its footing. GBP/USD hasn’t had a daily winning session since May 4th and closed on Thursday below the 1.22 line, for the first time since May 2020. In the European session, the pound is trading quietly at the 1.22 line. Recession fears, negative growth weighing on sterling The UK treated the markets to a data dump on Thursday, but the news was not positive. UK growth for Q2 showed a 0.8% gain, down sharply from 1.3% in Q4 of 2020 and missing the 1.0% estimate. In March, the economy contracted by 0.1%, compared to a 0.1% gain in February and shy of the estimate of 0.0%. Investors never like to hear the phrase ‘negative growth’ and the March GDP report pushed the pound lower on Thursday.  There was more bad news as Industrial Production, Manufacturing Production and Business Investment all slowed down and posted negative readings. Read next: Altcoins: What Is Polkadot (DOT)? Cross-Chain Transfers Of Any Type Of Asset Or Data. A Deeper Look Into Polkadot Protocol | FXMAG.COM The UK continues to grapple with spiralling inflation, and the BoE has warned that things could get even worse. CPI hit 7%  The BoE has raised rates to 1.0%, a 13-year high, but it will take time for higher interest rates to take a bite out of inflation. At last week’s policy meeting, the central bank warned that inflation could top 10% and there was the danger of a recession. The pound tumbled over 2% in response and has fallen another 125 points since then. Risk is tilted to the downside for the pound, which has tumbled about 7% since the beginning of April. Fed’s Powell confirmed by Senate Fed Chair Powell was overwhelmingly nominated for a second term on Thursday by the US Senate. Powell appears committed to delivering 0.50% rate hikes at the next two meetings, although there has been talk of a super-size 0.75% hike in order to curb soaring inflation. US inflation finally slowed in April, but the reading of 8.3% (8.5% prior) was hardly what the markets were looking for, and talk of an “inflation peak” proved to be premature. Read next: Stablecoins In Times Of Crypto Crash. What is Terra (UST)? A Deep Look Into Terra Altcoin. Terra - Leading Decentralised And Open-Source Public Blockchain Protocol | FXMAG.COM GBP/USD Technical 1.2199 remains under pressure in support. Below, there is support at 1.2056 GBP/USD faces resistance at 1.2272 and 1.2418 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
(SPX) S&P 500 Trades Near $4000 And Dow Jones (DJI) Is Not Very Far From $32K. Some May Say US Stock Markets Make Their Minds Flash Back To 2008 | FxPro

(SPX) S&P 500 Trades Near $4000 And Dow Jones (DJI) Is Not Very Far From $32K. Some May Say US Stock Markets Make Their Minds Flash Back To 2008 | FxPro

Alex Kuptsikevich Alex Kuptsikevich 16.05.2022 10:07
US stock markets closed last Friday with a substantial and widespread gain. Do we see a dead cat bounce or the beginning of a recovery? So far, there are more reasons to suspect the former. Technically, the S&P500 has managed to bounce back from a bear market territory and has temporarily returned to levels above 4000, while Dow is above 32000 The CNN Fear & Greed Index was down to 7 last week, rebounding to 12 by Monday. Current levels are still in extreme fear territory, but a rebound from multi-month lows often heralds a return of buyers who think the emotional sell-off has gone too far. Technically, the S&P500 has managed to bounce back from a bear market territory and has temporarily returned to levels above 4000, while Dow is above 32000. However, in our view, we saw positional profit-taking on Friday, but not the end of a downward trend. The weekly chart’s S&P500 and Dow Jones indices have not yet reached the oversold area where they appeared attractive for buying in March 2020. Read next: (TRX) TRON USD Decentralised Blockchain Platform That Focuses On Entertainment And Content Sharing. Altcoins: A Deep Look Into The TRON Network | FXMAG.COM Particularly worrying is the comparatively quiet nature of the sell-off. The market volatility index VIX remains the only one of the seven “Fear and Greed” components in neutral territory. The latter signals a systematic sell-off of assets rather than a panic flight. This is not a straightforward approach for the market to change. Treasury and Fed officials are often willing to flood the markets with liquidity in cases of extreme volatility. Still, without it, they see what is happening as a natural process in which it is harmful to interfere. So far, we can see the intention of a 50 point hike in the next two meetings in June and July after a similar move in May at the same time as the asset sales from the balance sheet The technical picture in the US indices now more closely resembles the first half of 2008. That means that the climax of the panic (October 2008) and the bottom (March 2009) are yet to come. This is also supported by the Fed’s rhetoric that hopes to avert an economic recession through policy tightening is prevented. So far, we can see the intention of a 50 point hike in the next two meetings in June and July after a similar move in May at the same time as the asset sales from the balance sheet. Read next: Altcoins: What Is Polkadot (DOT)? Cross-Chain Transfers Of Any Type Of Asset Or Data. A Deeper Look Into Polkadot Protocol | FXMAG.COM Monetary tightening locally looks like a breeding ground for bears, who might target the area below 30000 in the Dow Jones, trying to close the gap near 28300 from November 2020. For the S&P500, the bears’ ultimate target might be the 3300-3400 area, where the pre-pandemic peak and the starting point of the rally in November after the Biden victory are concentrated. Perhaps only by zeroing in on all the coronavirus and retail-associated gains in equities and taking inflation into negative territory could we see an inflow of long-term capital into equities.
FX Market Update: Calm Before the Central Bank Storm

Solid US retail sales point to growth rebound and more Fed hikes | ING Economics

ING Economics ING Economics 17.05.2022 22:13
The US retail sales report for April is very solid and points to a willingness amongst households to run down accumulated savings to maintain lifestyles at a time when inflation is hurting real income growth. It fully backs the case for a sharp recovery in GDP growth in 2Q and a series of 50bp rate hikes from the Federal Reserve Learn more on ING Economics Restaurants and dining contributed positively to US April retail sales 29% Increase in US retail sales since January 2020   Households happy to spend US retail sales rose 0.9% month-on-month in April, not quite as strong as the 1% consensus expectation, but there were substantial upward revisions for March to 1.4% MoM growth from the 0.5% rate initially reported. Moreover, the "core" figures that better match up with broader consumer spending trends were much better than expected. The control group that excludes volatile food, gasoline, food service and building material rose 1% (consensus 0.7%) after a 1.1% increase in March (originally reported as -0.1%). The details show motor vehicle and parts sales rose 2.2%, which is quite disappointing given unit auto sales data posted a 7.2% MoM rise to 14.29mn in April and prices were significantly higher. Maybe we will see more upward revisions down the line or timing issues may mean they feed through into May’s figure. Gasoline station sales fell 2.7% due to slightly lower prices – remember the retail sales report is a nominal dollar value figure. Food & beverage stores, building materials and sporting goods all saw modest falls, but this was more than offset by a 4% increase in miscellaneous stores, a 2.1% increase in non-store retailers, a 1.1% increase at department stores and a 2% increase in eating and drinking place. US retail sales performance by component Source: Macrobond, ING Households are prepared to run down some savings This is an impressive outcome given consumer confidence has been hit hard by the fact wages are not keeping pace with the increases in the cost of living. Nonetheless, employment is rising and household wealth has increased substantially during the pandemic thanks to accumulated savings (in part down to huge fiscal support) and soaring asset prices. Today’s report suggests household appear content to run down some of those savings to maintain lifestyles. People movement has fully recovered after Omicron wave Source: Macrobond, ING 3%+GDP growth on the cards for 2Q 2022 This is also borne out by data showing big improvement in people movement around retail and recreation areas (see chart above on google mobility data), surging restaurant dining and a recovery in air passenger numbers following the Covid Omicron wave. This gives us more confidence in our 2Q GDP forecast of 3-3.5% annualized growth. In an environment of 3.6% unemployment and 8.3% inflation this supports the case for a series of 50bp rate hikes from the Federal Reserve. TagsUS Spending Retail sales GDP Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Only Ugly US Data Could Reverse Sentiment | Gilt Yields In UK Were Steady To Lower

(WMT) Walmart Price Dropped Down As The Earnings Turned Out To Be Quite Low. Jerome Powell (FED) Seems To Be Ready To Get His Foot Down Regarding Monetary Policy And Boost US Dollar (USD) Further | Saxo Bank

Saxo Bank Saxo Bank 18.05.2022 09:10
Summary:  Risk sentiment remained strong in the US yesterday, as the major indices closed strongly at a more than one-week high on a day that saw both a strong US Retail Sales report for April and largest US retailer Walmart’s stock punished by the most in a single day since 1987 on a weak profit forecast. Fed Chair Powell said that the Fed won't hesitate to raise rates above neutral if necessary, helping to lift the entire US yield curve and perhaps helping to cool sentiment overnight.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - S&P 500 futures pushed higher yesterday closing the recent short-term selloff cycle that started last Monday but are trading a bit softer this morning around the 4,075 level. US retail sales yesterday showed that the US consumer is still alive and comments from Home Depot’s CEO suggest that the US housing market is still strong despite recent higher mortgage rates with tight supply of homes to last several years. Overall, the dynamics are still the same with tighter financial conditions ahead and hawkish comments yesterday from several Fed members suggest our defensive stance on US equities is correct. Stoxx 50 (EU50.I) - Stoxx 50 futures closed above its 50-day moving average that we highlighted as the key focus point for the market in yesterday’s quick take. This is the first time since 20 April when technology stocks were staging a comeback with risk appetite before everything turned lower again. If Stoxx 50 futures can manage to stay above this moving average, there might be enough energy for a test of the 3,800. European car sales figures are out this morning and they are still weak which might add a bit of negative pressure among carmakers and car parts suppliers. EURUSD – strong risk sentiment and a weaker US dollar clearly go hand in hand, as yesterday’s market action demonstrated, but the euro got an extra boost from ECB governing council member Klaas Knot saying that the ECB shouldn’t exclude 50-basis point hikes from the menu of options. This drove a strong boost in ECB rate expectations, with end-2022 now priced for a +0.45% policy rate, 10 bps higher than the previous day. EURUSD traded up through 1.0500, a bullish reversal as that was a sticking point on the way down. Still, very heavy lifting would be needed to turn the bearish tide, with next resistance at the prior pivot higher near 1.0640, while more like 1.0800-1.0850+ would be needed to suggest a structural reversal. A new sell-off in risk sentiment will test the degree to which the latest hawkish tile from a growing number of ECB members weighs on the EURUSD exchange rate. USDJPY and JPY pairs – watching JPY crosses and USDJPY closely after US treasury yields jumped yesterday, especially at the long end of the curve, to which the JPY is traditionally most sensitive. Japan’s Q1 GDP estimate out overnight was better than anticipated as nominal GDP rose +0.1% and the economy (in real terms) contracted less than expected. In the JPY crosses, we have seen a wild ride on the recent swings in risk sentiment that now have pairs like EURJPY, AUDJPY and GBPJPY back near important retracement levels after steep sell-offs last week. These will likely tilt lower if bond yields stay calm and we see renewed risk aversion. Otherwise, the Bank of Japan will likely only come under fresh pressure to alter its policy if the USDJPY rate jumps to strong new highs and, for example, if global oil prices do likewise, increasing cost-of-living in Japan, etc. Gold (XAUUSD) trades lower after Fed chair Powell said the Fed will keep raising rates until inflation is brought under control. His comments helped lift inflation adjusted US Treasury yields with the 10-year real yield rising to 0.25%. The weaker dollar yesterday also helped boost risk appetite with stocks being the main recipients of these flows. For now, the bears remain in control, especially after the rejection yesterday at $1838, the 200-day moving average on XAUUSD. Silver (XAGUSD) meanwhile enjoyed some tailwind from recovering industrial metals with the XAUXAG falling to 83.90 after hitting a 22-month high of 88.5 last week. Crude oil (OILUKJUL22 & OILUSJUN22) tried but failed to break higher on Tuesday after the tailwind from a potential pickup in Chinese demand, as lockdowns begin to lift, was being offset by hawkish comments on interest rates from Fed chair Powell, and news that the US may ease some economic sanctions on Venezuela, a 2m b/d producer in 2017 reduced to just 0.7m b/d at present. The bid, however, returned late in the day when the API published a bullish inventory report that pointed to a continued and worsening tightness in the US crude and gasoline market after they saw stocks falling by 2.4m barrels and 5.1m barrels, respectively. The EIA will release its official report later Wednesday. Dutch TTF benchmark gas (TTFMM2) remains rangebound within a €85 to €110 range despite the fact Europe's gas inventories are rebuilding at the fastest rate on record as the region's buyers outbid competitors from Asia to acquire as much gas as possible at any price. According to Gas Infrastructure Europe total stocks have since the March low climbed by 202 TWh to 446 TWh, and at this rate will surpass the five-year average within the next few weeks. Asia’s LNG buyers have been less active than normal, driven by a combination of stocks being allowed to run down due to soaring prices and lower Chinese demand as its coronavirus outbreaks and lockdowns take its toll on demand for gas. US Treasuries (TLT, IEF) - sold off yesterday and took the 10-year Treasury benchmark yield sharply back higher toward 3.00% in the wake of strong US Retail Sales data and amidst positive risk sentiment. If the 10-year yield continues higher after yesterday’s 10 basis point jump, it is worth nothing that the recent top of 3.2% was within a few basis points of the 2018 high for the cycle at 3.26%. Meanwhile, the 30-year T-bond yield closed at 3.185, the second-highest daily close for the cycle, with an intraday cycle high of 3.31%. The US Treasury is set to auction 20-year T-notes later today. What is going on? Fed Chair Powell says “won’t hesitate at all” to take Fed Funds rate above neutral after saying that “what we need to see is inflation coming down in a clear and convincing way, and we’re going to keep pushing until we see that.” Powell admitted that taking levels above neutral could bring some pain and a rise in the unemployment rate. End-2022 Fed expectations rose about 10 basis points yesterday and sit at 2.82”, just shy of the 2.88% cycle highs from before the May 4 FOMC meeting, at which Powell discouraged the idea of hiking more than 50 basis points at a time. UK Apr. CPI out this morning in line with expectations. The headline year-on-year reading was 9.0% vs. 9.1% expected and 7.0% in March, while the Core CPI was 6.2% as expected and vs.5.7% in Mar. The month-on-month headline CPI was 2.5% vs. 2.6% expected and 1.1% in March. Walmart, the world’s largest retailer, suffers worst single-day price drop since 1987 as it cut its profit forecast, citing margin pressure concerns due to inflation, and the CEO vowing that “price leadership is especially important right now.” Home Depot gains on strong Q1 and better than expected Q2 outlook. The US home improvement retailer gained yesterday on a surprise Q1 comp sales of +2.2% y/y vs est. -2.4% y/y and saying on the conference call that Q2 was off to a strong start; the company says it is not seeing the consumer holding back and sees tight housing inventory lasting for five years. Japan Q1 GDP contracted less than expected. Japan’s Q1 GDP showed a contraction of 1% q/q sa following a 3.8% expansion in Q4, but it was still better than expected. The omicron wave and supply drags created pressures, but the outlook for Q2 is appears to be improving as the economy reopens and pent-up demand boosts consumer spending. UK unemployment drops to a 50-year low of 3.7%. For the first time since records, job openings (1.3 million) outnumber those out of work. In addition, the number of payrolled employees grew by 121,000 between March and April, to 29.5 million. A lot of people have chosen salaried employment over self-employment due to fear of recession and higher cost of living. Wages continue to move upward. But this is not enough to cope with inflation. Pay, excluding bonuses, rose by 4.2 % between January and March while cost of living was at 7 % in March and is expected to jump to 9 % in April. The situation is becoming unbearable for many households. We believe that the Bank of England will have no other choice but to speed up the interest rate hike cycle before pausing perhaps after the summer. As expected, U.S. April retail sales show the U.S. domestic economy is very resilient. Retail sales were out at 0.9 % versus the expected 1 %. After adjusting for monthly inflation, it was at 0.6 %. This is still very solid. There is no sign of imminent recession in the United States when we look at the U.S. consumer. Peloton sees twice the demand for its $750 bond offering. The struggling health company has seen strong demand for its bonds in a sign that risk appetite is still intact in the high yield debt market in the US. Australian wage growth in Q1 slightly softer than expected. The report showed Australian wages rising only +0.7% QoQ and +2.4% YoY vs. +0.8%/+2.5% expected, respectively and vs. +2.3% YoY in Q4. What are we watching next? Earnings Watch. Today’s focus is Tencent given the latest support from the Chinese government including comments yesterday from the Vice Premier signaling support for platform companies. Consensus is looking for Q1 revenue of CNY 141.1bn up 4% y/y and EPS of CNY 2.77 down 5% y/y. SQM is also reporting today and is one of the world’s leading lithium miners earning 41% of its profits from lithium and 59% from fertilizers and plant nutrients including potassium, and as well as other agricultural sector products. Both lithium and fertilizers are seeing high prices due to tight supply-demand situation. Today: Tencent, Experian, Burberry, Singapore Airlines, Cisco, Lowe’s, Target, Analog Devices, TJX, Synopsys, Copart, Trip.com, SQM Thursday: Xiaomi, Generali, National Grid, Applied Materials, Palo Alto Networks, Ross Stores, DiDi Global Economic calendar highlights for today (times GMT) 0800 – South Africa 1230 – US Apr. Housing Starts and Building Permits 1230 – Canada Apr. CPI 1230 – Canada Apr. Home Price Index 1430 – EIA's Weekly Crude and Fuel Stock Report 2000 – US Fed’ Harker (Non-voter) to speak 2350 – Japan Apr. Trade Balance 0130 – Australia Apr. Employment Data Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Saxo Bank
Podcast: BoJ losing control. Geopolitical risks for Tesla

Fed hawks may not let the equity rally extend! | MarketTalk: What’s up today? | Swissquote

Swissquote Bank Swissquote Bank 18.05.2022 10:58
The US equity markets rallied yesterday after taking over a positive session from the Europeans. However, the US retail sales data didn’t necessarily hint at slowing spending, and Jerome Powell didn’t say things that investors would normally like to hear. Powell’s words didn’t hit the investor appetite immediate, but mixed activity in US futures hint that appetite may not remain as strong in the coming sessions. In the FX, the US dollar eased from two-decade highs. Gold trades around the $1800 mark and crude oil bumps into solid topsellers approaching above the $115pb   The EURUSD rebounded past the 1.05 and Cable traded past 1.24. Yet, prospects of higher US rates, and the positive divergence between the Fed and other central banks should prevent the dollar from falling significantly. Eurozone’s final inflation data is due today, and should confirm a rise to 7.5% in April, an eye-watering number which should keep the European Central Bank (ECB) hawks and the euro bulls alert, and help the single currency consolidate its latest gains against the US dollar. Gold trades around the $1800 mark and crude oil bumps into solid topsellers approaching above the $115pb. On the earnings front, the US retailers reveal mixed earnings but they all agree on one thing: inflation impacts activity. Watch the full episode to find out more! 0:00 Intro 0:22 Market update 2:06 Jerome Powell is decided to bring inflation down! 2:48 High EZ inflation to keep euro bulls alert 3:41 ...but the dollar may not ease much! 4:42 Gold under the pressure on rising rates 5:31 Crude oil bumps into topsellers past $115pb 6:47 US retailers reveal mixed results, but agree that inflation is an issue Read next: Altcoins: What Is Monero? Explaining XMR. Untraceable Cryptocurrency!? | FXMAG.COM Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020.
Oanda Podcast: US Jobs Report, SVB Financial Fallout And More

What are investors afraid of? | Conotoxia

Conotoxia Comments Conotoxia Comments 18.05.2022 15:42
As it does every month, Bank of America conducts a survey of fund managers with nearly $900 billion AUM. Its results in the May edition seem very interesting, indicating the risks and actions of institutional investors. According to the survey, investors appear to be hoarding cash as the outlook for global economic growth falls to an all-time low and fears of stagflation increase. Cash holdings among investors have reached their highest level since September 2001, according to the report. A survey this month of investors managing $872 billion also found that hawkish central banks are seen as the biggest risk to financial markets. A global recession came in second, and concerns about stagflation rose to their highest level since 2008. The findings could show an uninspiring outlook for global equities, which are already on track for their longest weekly losing streak since the global financial crisis, as central banks turn off the tap on money at a time of stubbornly high inflation. The BofA report said the stock market may be in a bear market, but the final lows have not yet been reached. More interest rate hikes by the Federal Reserve are still expected, and the market is not yet in full capitulation. The BofA survey also found that technology stocks are under the most pressure since 2006. Overall, investors were most attuned to holding cash, and are least inclined to go for: emerging market stocks, eurozone stocks and bonds at the moment. The report also found that the so-called most crowded trades at the moment are long positions on oil (28%), short positions on U.S. Treasury bonds (25%), long on technology stocks (14%), and long on bitcoin (8%). According to the respondents, the value to which the S&P 500 index would have to fall for the Fed to start refraining from further monetary policy tightening falls at the level of 3529, i.e. about 12% below the current level. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Forex service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 80.77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
RBA Pauses Rates as Australian Dollar Slides; ISM Manufacturing PMI in Focus

S&P 500 (SPX), Dow Jones (DJI), Nasdaq And Walmart (WMT) Falled, But Probably Not In Love | Conotoxia

Conotoxia Comments Conotoxia Comments 19.05.2022 12:27
Fear of a recession may be one of the reasons pushing risky asset prices lower. Yesterday alone, the Dow Jones fell 3.57 percent and the S&P 500 fell 4.04 percent, its biggest one-day drop since June 2020. The Nasdaq Composite was off 4.73 percent. The U.S. economy is mainly spinning thanks to consumption and largely living on credit Another turnaround on Wall Street came after the release of the results of U.S. big-box retail chains such as Wal-Mart and Target. The share price of the former fell by almost 25 percent from its April peak, and the latter by about 40 percent. Why is this important? The U.S. economy is mainly spinning thanks to consumption and largely living on credit. Decrease in consumption by higher inflation, as shown by the results of companies and their comments to the results, can therefore be a wake-up call that the US economy will no longer grow so rapidly. As a result, there has been an even greater fear of recession, which in the current inflationary environment brings to mind the stagflation of the 70s-80s in the United States. Add to that rising lending rates through interest rate hikes, broken supply chains and an expensive U.S. dollar eroding export profits. According to some, this is the perfect set of factors that could push the market further into the embrace of a waking bear market. Investors also might be looking for the point at which they believe the dollar and U.S. bonds have priced in a full cycle of rate hikes before the Fed In a more optimistic scenario, however, they may predict that inflation will peak in the second or third quarter of this year and then begin to decline starting in the fourth quarter of 2022. At that point, consumers could breathe a sigh of relief as prices would still rise, but no longer as fast as before. The same could be true for the stock market, which statistically, in cycles of interest rate hikes, seemed to create corrections in the first reaction and then continued earlier trends. Investors also might be looking for the point at which they believe the dollar and U.S. bonds have priced in a full cycle of rate hikes before the Fed. At that point, they could switch from the dollar to bonds or stocks, which could also put the brakes on the declines currently seen. Read next: Altcoins: What Is Monero? Explaining XMR. Untraceable Cryptocurrency!? | FXMAG.COM Since the beginning of the year alone, the Nasdaq index has fallen by 27 percent, the S&P 500 by more than 18 percent, and the Dow Jones by less than 15 percent. U.S. 10-year bonds have shrunk by 8 percent, and gold has fallen by 0.5 percent. Meanwhile, the U.S. dollar has gained about 8 percent. This could quite clearly show that the cash phase of the cycle may be underway. It may be followed, according to theory, by the bond phase of the cycle and only the equity phase of the cycle. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Forex service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 80.77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Market Trends and Currency Positioning: USD Net Short Position, Euro and Pound Analysis - 22.08.2023

(EUR/USD, EUR/GBP) Market Participants Betting On A More Hawkish ECB, A Dovish BoJ Weighs On The Safe-Haven Currency (USD/JPY) - Good Morning Forex!

Rebecca Duthie Rebecca Duthie 19.05.2022 12:39
Summary: The market sentiment for the EUR/USD currency pair turns mixed. Inflation and economic data weighing on the GBP. BoJ continues to fight rising interest rates. AUD strengthens amidst favourable unemployment data. The market seems to be favouring the Euro for a change The market is signalling mixed market sentiment for this currency pair. The U.S dollar lost ground to the EUR during Thursdays early trading, however, the demand for the safe-haven asset remains steady due to investor risk sentiment still being fragile. Earlier this week the Fed announced they would push interest rates as high as necessary to fight the surging inflation. On Thursday the market is waiting for the minutes from the latest European Central Bank (ECB) meeting to be released, hoping there will be an indication of a tightening in monetary policy. Read next: (EUR/USD) Hopes Of A Hawkish ECB Shows Favour To The Euro, (EUR/GBP) UK CPI Inflation Data Knocks The Pound Sterling - Good Morning Forex!  This begs the question: despite the Fed's already hawkish monetary policy, why is the market not pricing in much for the hawkish Fed, but pricing in a lot for the European Central Bank (ECB) ? EUR/USD Price Chart BoE and ECB expected to raise interest rates The market is reflecting a mixed market sentiment on Thursday. Earlier in the trading week, UK economic data releases weighted on the value of the Pound Sterling, global investor sentiment and the current equity bear market are both aspects that could mean further losses for the GBP. Earlier on in the trading week, the GBP gained on both the Euro and the US Dollar, but a midweek sentiment turn around has bought the Pound Sterling back down. Both the ECB and the Bank of England (BOE) are expected to raise interest rates. EUR/GBP Price Chart Follow FXMAG.COM on Google News! USD continues to beat the JPY The Japanese yen seems to be an underperformer in the past week, perhaps this is due to the rising U.S yields by the Fed amidst the Bank of Japan (BoJ) fighting against tightening their monetary policy. Should the market face a big risk-off sentiment, the JPY might see some gains, however in this currency pair, it may not be noticeable due to the USD also being seen as a safe-haven currency. USD/JPY Price Chart AUD regains some investor confidence Market sentiment for this currency pair is bullish. Investor confidence has increased in the Australian Dollar after the unemployment rate for April came in at 3.9% which not only exceeded market expectations but is also the lowest rate since the 1970s. AUD/JPY Price Chart Read next: (EUR/USD, EUR/GBP) Euro Strengthens In The Wake Of Villeroys Comments On Monday, (AUD/JPY), (GBP/USD) Pound Sterling Showing Strength - Good Morning Forex!   Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com
Fed Decision Is Incoming. Is US Economy Going To Change? Less Jobless Claims In The USA? Intensified rotation in the US labour market | FxPro

Fed Decision Is Incoming. Is US Economy Going To Change? Less Jobless Claims In The USA? Intensified rotation in the US labour market | FxPro

Alex Kuptsikevich Alex Kuptsikevich 19.05.2022 15:47
The US labour market is becoming increasingly tight, but at the same time, the rate of job alternation is increasing steadily. The latest weekly data shows that the number of new jobless claims is dropping further to 1.317 million, a new low since 1969 when the US population was 40% less than now. At the same time, the number of initial claims last week stood at 218,000 against 197,000 a week earlier, continuing the upward trend of the previous two months. Since the recurrence rates are methodically declining and the latest employment report noted an increase in employment, it is logical to assume that the rise in initial claims is due to people being more active and finding work quickly. Read next: Altcoins: What Is Monero? Explaining XMR. Untraceable Cryptocurrency!? | FXMAG.COM One of the secondary effects of the current labour market situation might be a continued high rate of wage growth. This is a good signal of economic activity. Still, it should also increase the vigilance of the hawks at the US Federal Reserve, setting them up to tighten the monetary policy nuts tighter and faster.
Market Trends and Currency Positioning: USD Net Short Position, Euro and Pound Analysis - 22.08.2023

FX Daily: Activity currencies remain under pressure | ING Economics

ING Economics ING Economics 19.05.2022 09:56
Wednesday was another bad day for equities where the MSCI World equity index fell another 3%. The fact that expectations for Fed policy tightening remain intact is a sign that investors appreciate that tackling inflation is now the priority for central banks. This continues to favour the anti-cyclical dollar, but also now the Japanese yen Source: Shutterstock USD: The cavalry ain't coming Yesterday saw the S&P 500 sell off 4%, led by consumer stocks. The fact that some of the biggest main street names are under pressure on the back of profit warnings is a reminder that the squeeze on real incomes is starting to hit home. Over prior decades, decades associated with very dovish Fed policy, one might have expected this magnitude of an equity market sell-off to put a dent in Fed tightening expectations - or expectations that the Fed would come to the equity market's rescue. In fact, the Fed funds futures strip barely budged yesterday. We read this as a sign that investors now appreciate that tackling inflation is the number one priority of the Fed - and the Fed will not easily be blown off course. At the same time, we are still only hearing concerns from Chinese policymakers about the slowdown, rather than any promise of major fiscal support. And one could argue what would be the use of major fiscal support if workers and residents remain trapped in Covid lockdowns? For that reason, it seems very difficult to argue that renminbi depreciation has run its course and we cannot rule out USD/CNY pushing through the 6.80 area over coming weeks and months. This all leaves the anti-cyclical dollar quite well supported. We had made the case on Tuesday for a bounce in the oversold dollar. That bounce did not last long and again it is hard to rule out the dollar edging back to recent highs. Not until the Fed blinks on policy tightening or the rest of the world's growth prospects start to look attractive - neither of which seem likely over coming months - will the dollar put in an important top.  For today, the US calendar is light with just initial claims and existing home sales for April. Housing looks to be one of the most vulnerable sectors of the US economy, but its slowdown (and its effect on dragging core inflation lower) looks a story for much later in the year. DXY has seen a modest bull market correction this week, but can probably edge higher to 104.10 today. Read next: Altcoins: What Is Monero? Explaining XMR. Untraceable Cryptocurrency!? | FXMAG.COM EUR: ECB will have to talk a good game Providing the euro a little support this week has been even more hawkish commentary from the European Central Bank. We had felt that the market would struggle to price in more than 75bp of ECB tightening this year, but central bank hawks such as Klaas Knot have introduced the idea of the ECB moving in 50bp increments. This has helped narrow the two-year German Schatz-US Treasury spread to 225bp from recent wides at 250bp and provided some modest support for the dollar. This can be seen as verbal intervention from the ECB to support the euro. An important policy paper from the ECB a few years ago concluded that two-year rate differentials were the most significant driver of EUR/USD and the ECB's best hope of stablising EUR/USD may indeed be to talk up prospects of the forthcoming tightening cycle. For today, look out for the minutes of the April ECB meeting, where again it might choose to emphasise the more hawkish elements. EUR/USD has had its oversold bounce to 1.0550 and with the global environment remaining challenged, EUR/USD could today drift back through 1.0450/60 to 1.0400. Elsewhere, we note some short-term similarities between both the Swiss franc and the Czech koruna. The central banks behind both currencies would prefer stronger currencies to play their role in delivering stable/tighter monetary conditions. We conclude that EUR/CHF upside may be more limited - and the downside more open - than most believe. While for EUR/CZK, the Czech National Bank (CNB) will want EUR/CZK to continue trading under 25.00 and perhaps lower still - until at least 1 July when a new CNB governor takes over.  GBP: One month realised volatility at 8%! EUR/GBP one month realised volatility is back at 8% - which is very high for a European FX pair. Expect this volatility to continue given much uncertainty about the policy path for both the Bank of England (BoE) and the ECB. Here, we happen to think that tightening cycles in both are over-priced and one would probably think that the BoE cycle gets repriced lower first. Expect EUR/GBP to continue to trade in a very wide 0.8400-0.8600 range, while cable looks more one-way traffic. We have seen the bear market bounce to 1.2500 this week and the difficult external environment would favour a break of 1.2330 support in a move back to the 1.22 lows.  Read next: Altcoins: What Is Polkadot (DOT)? Cross-Chain Transfers Of Any Type Of Asset Or Data. A Deeper Look Into Polkadot Protocol | FXMAG.COM ZAR: SARB expected to hike 50bp today The South African Reserve Bank (SARB) is widely expected to hike 50bp to 4.75% today. The policy rate is quite low by emerging market standards, but that is because core inflation is only running at 3.9% year-on-year. A 50bp hike looks unlikely to generate much support to the rand, which is currently being re-priced off of the Chinese growth cycle. With $70bn of portfolio capital having left emerging markets since Russia invaded Ukraine - and with South Africa having large weights in emerging market debt and equity benchmarks - we expect the rand to stay under pressure for the time being.  16.35 is big resistance for USD/ZAR, above which 17.00 beckons for later in the year. Rising US real yields and the China slowdown continue to make the bear case for emerging markets.   Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Euro Area Final CPI Ahead of ECB's Interest Rate Decision on Thursday

Major Index NASDAQ (IXIC) Sell Off After Equities Fall, Will the ECB Turn Hawkish?

Rebecca Duthie Rebecca Duthie 20.05.2022 09:50
Summary: Despite growing confidence in the stock market, major indices are struggling to keep up with the volatile market. The ECBs turn to a hawkish attitude could lead toward a stronger Euro. Nasdaq loses value during the trading day on Thursday Equity stocks attempted to rebound during trading on Thursday after a sell-off. The sell off came as market participants grew concerned about whether the Fed’s continuous hawkish attitude could cause a slow down in the U.S economy. In general the investor sell-off attitude seems to be easing somewhat, however markets still remain volatile. NASDAQ Price Chart Read next: Altcoins: What Is PancakeSwap (CAKE)? A Deeper Look Into The PancakeSwap Platform| FXMAG.COM European Central Banks possible tightening of monetary policy During trading on Thursday the Euro saw some strengthening based on the hopes of a more hawkish European Central Bank (ECB) in the summer. As the European Central Bank looks at a 50bps hike in interest rates this July, investor confidence is starting to restore in the Euro. The Euro showed particular strength against the pound sterling, which simultaneously pushed back their next interest rate hike. Sources: pounsterlinglive.com, finance.yahoo.com Follow FXMAG.COM on Google News
(FTSE) FTSE 100 Rallies In Response To Positive Economic Data, US Dollar Expected To See More Volatility

(FTSE) FTSE 100 Rallies In Response To Positive Economic Data, US Dollar Expected To See More Volatility

Rebecca Duthie Rebecca Duthie 20.05.2022 20:30
Summary: FTSE showing signs of increasing amidst favorable UK economic data US Dollar to have a busy week next week. Read next: Major Index NASDAQ (IXIC) Sell Off After Equities Fall, Will the ECB Turn Hawkish?  FTSE 100 Increasing The FTSE 100 index rallied on Friday. This rally comes in the wake of the retail data released that well exceeded market expectations. Retail data came in at a 1.4% increase in contrast to the expected value of -0.2%. Food sales increased by 2.8% and car fuel sales also rose 1.4% in April. This data indicated to the market that consumers are showing resilience to the current economic situations. In addition, the positive data has improved investor sentiment towards the UK market. FTSE Price Chart US Dollar expected to see more volatility Next week is full of important U.S economic data announcements and events which we can expect to add more volatility to the US Dollar. On Wednesday the FOMC minutes will likely give the market a clearer look at the thoughts of the current state of the US economy and whether or not we can expect to see more interest rate hikes. On Thursday the Fed will release their preferred inflation reading PCE which is expected to highlight the growing US pressures. All the factors above will lead to a heightened volatility in the US Dollar. Sources: finance.yahoo.com, dailyfx.com
USD/JPY: Japanese Authorities Signal Intervention Amid Rapid Currency Appreciation

US stocks snap 7-day downtrend. Commodity stocks in wheat, energy and lithium brighten | Saxo Bank

Saxo Bank Saxo Bank 24.05.2022 14:34
Summary:  A technical rally occurred overnight, seeing the S&P500 gain after 7 days of declines, while Agriculture and Energy stocks shone the most, gaining even more momentum proving they are an inflation hedge. In quality tech, Apple shares rose 4% with long-term investors dripping in buy orders. Meanwhile, in big banks JPMorgan gained 6% upon forecasting net interest income to rise, which supported gains in Bank of America, Citigroup. We don’t think the market is at breaking point yet. However see Commodity gains intensifying and offering further upside, as the world worries global wheat supplies could run out in 10 weeks, while demand for lithium batteries rises seeing lithium companies upgrade their earnings and rally. What’s happening in markets that you need to know Big picture themes? Of the Equity Baskets we track across different sectors, we can see select risk appetite is starting to come back in to the market; China’s little giants are up the most month-to-date, supported by China’s fresh interest rate cut. Meanwhile, Cybersecurity stocks were up overnight (but are still down 24% YTD). Year-to-date though, our high conviction asset class, Commodities continues to see the most growth, followed by Defence. In the S&P500 oversold Ag and Bank stocks shine; Agri and Farm Tech stocks were up the most overnight, followed by Diversified Banks. In terms of standout stocks; Ross Stores and Deere (DE) rose the most (9%, 7%), after being two of the most oversold stocks last week. In S&P500 Deer was THE most oversold member. Deer makes 65% of its revenue from Agricultural equipment and selling turf. Earnings are expected to grind higher in 2022 and Deer pays a small dividend yield (1.25%). Asia Pacific’s stocks are trading mixed following more Tech disappointment in the US. While risk sentiment was upbeat overnight on Wall Street, Asia Pac’s markets turned most lower following Snap’s warning that it is unlikely to meet revenue and profit forecasts. Tech sentiment eroded again and further consumer staples earnings results this week are keeping investors cautious. Australia’s ASX200 trades flat, weight by tech falling,  with Block (SQ) down 6% after Bitcoin trades under $30k (Block makes most of its money from BTC transactions). Meanwhile, ASX lithium stocks continue to surge, supported by the new Australian government’s EV stimulus, seeing Liontown (LTR), Allkem (AKE), MinRes (MIN), Pilbara (PLS) dominate the leaderboard and rise 3-4%. Japan’s Nikkei (NI225.I) is down 0.3% led by Recruit (6098) which operates the popular HR engine “Indeed” and company information website “Glassdoor”. Singapore’s STI index (ES3) was however up 0.2% despite a record high inflation and a potential chicken-price shock. Read next: Stablecoins In Times Of Crypto Crash. What is Terra (UST)? A Deep Look Into Terra Altcoin. Terra - Leading Decentralised And Open-Source Public Blockchain Protocol | FXMAG.COM Chinese and Hong Kong equites see lackluster trading despite incremental stimulus measures from the State Council and Biden’s remarks on reviewing tariffs on goods from China.   The attempt to rally in the opening hour in response to positive news of 33 stimulus measures from China’s State Council failed.  Overnight news that Biden will discuss with Treasury Secretary Yellen about reviewing tariffs on goods from China as part of the Biden administration’s effort to ease U.S. inflationary pressures did not incur much excitement. Hang Seng Index (HSI.I) fell 0.8% and CSI300(000300.I) was 0.3% lower. Among the 33 measures was a reduction of RMB60 billion in the purchase tax on passenger cars Great Wall.  Great Wall Motor (02333), Geely (00175) and Guangzhou Automobile (02238) rose 3% to 10% while shares of EV makers fell 3%-9%.  Although reporting a larger than expected 159% YoY increase in revenues and a 30bp improvement of gross margins to 10.4% in Q1, XPeng’s (09868) share fell almost 9% on cautious Q2 guidance.  What to consider? Fed speakers remaining flexible. Fed’s Bostic backed a series of 50bps rate hike moves overnight but hinted at a pause in September if inflation comes down but also opened doors to more aggressive moves if inflation doesn’t cool. Fed’s George said she expects the central bank to raise interest rates to 2% by August (which also means about 100-125bps of rate hikes from the current 0.75-1% rates or 2-3 50bps rate hikes). While the base effects may make headline inflation appear to be softening into the summer, real price pressures aren’t going anywhere and Fed’s hiking pace is likely to continue to prove to be slow. AUD and NZD unable to sustain gains. A fresh slide was seen in NZD this morning following the unexpected decline in retail spending reported today. RBNZ decision is due tomorrow  (in early Asian hours) and it is still a close call between 25 and 50bps rate hike. But it’s more important to note that RBNZ is way ahead of other central banks and getting close to neutral faster than others, which means room for further upside in NZD is limited. AUDUSD is also back below 0.7100 and remains prone to a reversal in risk sentiment more than any domestic developments. While the AUDUSD rose to a 3-week high yesterday, supported by the Australian Labor Government being sworn in after winning the election and bringing in an EV policy ($2k tax incentives), vowing to keep Defense Spending at over 2% of GPD and pledging to offer more childcare support to keep employment high. The USD will likely remain favored for now as risk aversion returns and cut the rally of the AUD.  ECB getting ready to move to exit negative rates. ECB President Lagarde’s comment that the central bank is likely to exit negative rates by the end of the third quarter put a massive bid into the EUR overnight but the pair turned lower from 1.0700 with focus on Fed Chair Powell and PMIs due today. With Fed comments getting repetitive, there is room for ECB’s hawkishness to support the EUR even as Lagarde continues to downplay the possibility of a 50bps rate hike. Germany’s economy shows signs of unexpectedly strengthening in May. Germany’s IFO reading was out at 93.0 versus prior 91.9 in April. The increase is mostly explained by an improved current assessment. The expectations component is almost unchanged and close to levels last seen at the start of the pandemic. Several factors are pushing respondents to be careful regarding the future: supply chain frictions, the Shanghai lockdown, persistent inflationary pressures and lower real disposable incomes of households etc. The German economy will not plunge as it did at the start of the pandemic, of course. But we think that risks of a stagflation are clearly titled on the upside. We will watch closely the first estimate of the May PMIs this morning to have a better assessment of the economic situation in Germany and in the rest of the eurozone.  Potential trading ideas to consider? Singapore’s inflation pain is rising. Core CPI was at a decade high in April at 3.3%, and this is still not a peak. Singapore’s national lunch meal chicken rice is set to get expensive as Malaysia is halting exports of chicken. About 34% of Singapore's chicken imports come from Malaysia. While alternate sources of fresh chicken and options such as frozen chicken may be possible, this is not the last inflation shock to hit the island economy. Vegetable prices are also on the rise due to shortages of supply and the high fertilizer prices. In times like this, we would reiterate the possible inflation hedges remain gold, REITs and commodities. In summary, it is important to look for value investments or stocks that have a solid cash flow generation ability and pricing power but still priced below their fair value. The plot for investing in Lithium thickens.Lithium remains one of our preferred metal exposures for 2022 for upside. Albemarle Corp, the world’s largest lithium producer upgraded its outlook for the second time this month expecting higher lithium prices and demand to further boost their sales. We’ve seen many EV companies sell out of some of their electric vehicles, and this highlights the lack of supply in battery metals, which is also pushing up the lithium price. Albemarle Corp, expects sales to now be as high as $6.2 billion this year, up from its previous estimate of up to $5.6 billion. Read next: Altcoins: What Is Litecoin (LTC)? A Deeper Look Into The Litecoin Platform| FXMAG.COM If have a long time horizon for investing, you could consider dripping money into the market (this is called dollar cost averaging). Remember Shelby Davis said you can make most of your money in a bear market, you just don’t realize it at the time. But the key is to look at quality names that are in a position to return cash to shareholders. So if you want to be in tech for example, you could look at names like Apple, Microsoft and Google, who lead the S&P500 and Nasdaq indices and are growing their earnings and this is likely to continue over the next several years and longer term. The idea is that names like these, will likely lead a secular bull market, once the Market eventually begins to recover. And you ideally want to be in names with growing earnings, rather than throwing darts at some of those names with patchy results that are akin to Ark innovation ETF for example. China’s State Council announced 33 stimulus measures.  An additional VAT credit refund of RMB140 billion brings the overall target of tax refunds, tax cuts and fee reductions to RMB2.64 trillion in 2022.  China is also introducing a reduction of RMB60 billion (equivalent to about 17% of auto purchase tax last year) in tax on passenger car purchases.  The Government is increasing its supports to the aviation industry and railway construction via special bond issuance and loans and is rolling out a series of energy projects.  It is doubling the lending quota for banks to lend to SMEs and allow certain borrowers to postpone repayments.  The State Council also reiterates its support to promote legal and compliant listings of platform companies in domestic as well as overseas markets. Key company earnings to watch this week: Tuesday: Kuaishou Technology, Intuit, NetEase, AutoZone, Agilent Technologies Wednesday: Bank of Nova Scotia, Bank of Montreal, SSE, Acciona Energias Renovables, Nvidia, Snowflake, Splunk Thursday: Royal Bank of Canada, Canadian Imperial Bank of Commerce, Lenovo, Alibaba, Costco, Medtronic, Marvell Technology, Baidu, Autodesk, Workday, VMware, Dell Technologies, Dollar Tree, Zscaler, Farfetch Friday: Singapore Telecommunications   For a global look at markets – tune into our Podcast.  Follow FXMAG.COM on Google News Source: Saxo Bank
Britain's Rishi Sunak And EU's Ursula Von Der Leyen Will Meet Today To Finalize The Northern Ireland Drama

FOMC Meeting Minutes Offer Support To The US Dollar (EUR/USD), Improved Market Attitude Favoured The GBP On Thursday (EUR/GBP, GBP/USD), Market Awaits RBA Monetary Policy - Good Morning Forex!

Rebecca Duthie Rebecca Duthie 26.05.2022 11:58
Summary: Investor confidence in both the Euro and US Dollar causing mixed sentiment for the EUR/USD currency pair. GBP beats Euro and USD despite poor PMI data released on Tuesday. RBA June policy meeting will determine the AUD strength Read next: Hawkish ECB Bodes Well For The Euro, UK PMI Data Disappoints (EUR/GBP), Hawkish SNB Offers Swiss Franc Still Support (USD/CHF), AUD/JPY - Good Morning Forex!  Mixed sentiment for the EUR/USD The market is reflecting mixed market signals for this major currency pair. In the Wake of the FOMC meeting minutes, the US Dollar has found some stability. The market can expect a 50bp interest rate hike at the next two Fed meetings, with a possible pause in the hikes later on in the year. The Euro is also on an upward streak with the strong possibility of the European Central Bank (ECB) tightening monetary policy in July. EUR/USD Price Chart GBP strengthens The market is reflecting bearish market sentiment for this currency pair. On Thursday the GBP recovered some of its losses against the Euro after the UK PMI report on Tuesday. Improved market attitude acted in favour of the Pound Sterling against the Euro on Thursday. However, the outlook for the GBP still looks challenging going forward with an overly cautious Bank of England, high-inflation and global risk aversion. EUR/GBP Price Chart GBP/USD reflecting bullish sentiment Market sentiment for this currency pair is reflecting bullish signals. On Thursday the GBP recovered some of its losses against the US Dollar. Improved market attitude acted in favour of the Pound Sterling against the US Dollar on Thursday. GBP/USD Price Chart Future of the AUD waits the RBA monetary policy decision The market is reflecting bullish signals for this currency pair. The Reserve Bank of Australia (RBA) June policy meeting will likely see a future hike in interest rates. If the RBA tightens their monetary policy the Australian Dollar could strengthen. If the RBA chooses a dovish approach, the Aussie Dollar could struggle. AUD/USD Price Chart Read next: EUR Falls To US Dollar (EUR/USD), Pound Sterling Due To Weaken As UK Recession Looms (EUR/GBP), Market Awaits Fed Meeting Minutes (USD/CHF, GBP/USD)  Sources: finance.yahoo.com, dailyfx.com, poundtserlinglive.com
RBA Pauses Rates as Australian Dollar Slides; ISM Manufacturing PMI in Focus

USD May Continue Its Rally In The Near Future! How High Can Dollar Index (DXY) Jump After Next Anticipated 50bps Rate Hike!? What About Bank Of Korea Decision?| FOMC minutes settle nerves | Oanda

Jeffrey Halley Jeffrey Halley 26.05.2022 12:54
FOMC to stick to 50bps moves The FOMC Minutes, released overnight, settled a few nerves temporarily, signalling another couple of 50bps rate hikes in June and July before a pause in September. The dreaded 75bps hike threat was off the agenda and with some slowdowns in recent US data, notably in the housing market, it was enough to spur a relief rally of sorts in US equities and the US dollar. Once again, that is translating to an uneven response by Asian markets thanks to China nerves. Although Shanghai seems to be emerging from its covid zero restrictions at a faster pace, Chinese Premier Li warned of economic headwinds and that the economy, in some respects, is faring worse than in 2020. Bank Of Korea - Monetary Policy This morning, the Bank of Korea hiked policy rates by 0.25% as expected. There has been zero impact on either the Kospi or the Korean won, suggesting the move was well priced in already by markets. The Reserve Bank of New Zealand’s Governor Orr was also on the wires today testifying before a parliamentary committee. Governor Orr was very hawkish and suggested that policy rates would need to remain elevated for an extended time to tame inflation. It’s a pity he didn’t think the same thing 9 months ago when he had rates at zero and was quantitatively easing into a clearly overheating economy. Once again, the New Zealand dollar has barely reacted and has come off its highs since yesterday’s 0.50% rate hike. That implies that it is a US dollar story and not a New Zealand dollar story. Either that or markets are concerned New Zealand is heading for a recession. Australia And RBA, Will Australian Dollar (AUD) Exchange Rate Change? Australian data this morning was mixed. Building Capital Expenditure for Q1 QoQ fell by 1.70%, while Plant Machinery Expenditure rose by 1.20% for the same period. To a certain extent, it is old news with markets more focused on the RBA policy trajectory, the new government’s fiscal policy, and whether the employment of housing markets start to show cracks. Singapore releases Industrial Production for April this afternoon with the YOY number for April expected to slow to 3.40%. A softer number will increase slowdown fears in the city-state and weigh on local equities. Thailand’s Balance of Trade should continue to show a post-covid rebound as its borders reopen for tourism. Read next: Altcoins: Tether (USDT), What Is It? - A Deeper Look Into The Tether Blockchain| FXMAG.COM There are a number of holidays in Europe today for Ascension Day. Heavyweights Germany and France are closed, as is all of Scandinavia. Indonesia is closed today as well. That is likely to mute activity in Europe this afternoon with the data calendar understandably, strictly second-tier. In the US, Pending Home Sales will be closely watched given the weakness of recent existing and new home sales. That will overshadow second estimate of Q1 GDP and initial jobless claims. Another ugly number will put the recession word back on Wall Street’s lips and we could see another rush for the exit. Soft results from Gap and Dollar Tree could reinforce that sentiment. Overall, though, it looks as if today will be a day of consolidation for financial markets as they await fresh inputs, and ahead of personal income and expenditure data out of the US tomorrow evening. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Follow FXMAG.COM on Google News
FXStreet’s Dhwani Mehta Opinion About Gold Movements

Gold Price Analysis: XAU/USD holds above 200-DMA near $1,850 as focus turns to Friday’s US inflation data

FXStreet News FXStreet News 26.05.2022 16:43
Gold Price is holding above its 200-DMA in the $1,850 area and is back to nearly flat on the week. Traders are weighing the tailwinds of a softer USD and US yields versus strong US equities, as key Friday inflation data looms. How Fed And USD May Affect Gold? Gold Price (XAU/USD) is for now holding just above its 200-Day Moving Average at $1,839 and trading near the $1,850 level, though still with a slight downside bias on the day, despite Thursday’s worse-than-expected US GDP figures and Wednesday’s not as hawkish as feared Fed minutes release. Indeed, in wake of the weak data and modest paring back of hawkish Fed bets, the US dollar is a tad weaker and US yields are nudging lower, a combination that would normally be a tailwind for gold. Stronger Stocks - E.G. S&P 500 But US equities are rallying, with the S&P 500 last trading up around 1.4% on the day and eyeing a test of its 21-Day Moving Average for the first time since mid-April. On the week, the index is trading with gains of more than 3.0% and this appears to be weighing on the safe-haven precious metal. Traders are attributing stock market gains to weak GDP data reducing the need for aggressive Fed tightening and to strong earnings from a few US companies, including retail giant Macy’s. Read next: Altcoins: Tether (USDT), What Is It? - A Deeper Look Into The Tether Blockchain| FXMAG.COM Either way, the better tone to risk appetite is for now keeping XAU/USD on the back foot. Having been as high as the $1,870 level earlier in the week, spot gold’s gains on the week have been eroded back to only about 0.2% from around 1.2%. But the recent pullback towards the 200-DMA might prove a good opportunity for the gold bulls to add to long positions if they think that hawkish Fed bets will continue to be pared in the weeks ahead and, as a result, the buck and US yields continue softening. If it contributes to the strengthening narrative that US inflation has peaked, Friday’s US April Core PCE report could lead to a further reduction of Fed tightening bets and gold could well end the week back at highs in the $1,870 area. Follow FXMAG.COM on Google News
Gold Stocks Have Performed Very Well Under Pressure

Gold Price Has Increased! Dollar Index (DXY) May Rise Shortly As Inflation Is Still There In The USA, How Will Affect Precious Metals And XAU/USD Which Has Got Rid Of Friday's Levels | ICM.COM

ICM.COM Market Updates ICM.COM Market Updates 30.05.2022 09:35
Gold (XAU/USD) opens early Monday in Asia bouncing off Friday's low of $1948, despite the slight rebound in US Dollar Index (DXY). Dollar May Be Back Rising   The easing of US Dollar Index from the downward pressure may be linked to the market's passivity following the US bank holiday today as well as the anticipation for faster rate hikes considering the latest inflation data. US Holidays This week's soft calendar and bank holiday in the US may restrict gold's price actions. However, headlines from Russia and China will be tracked closely for any impulsive catalyst, aside from the US Nonfarm Payroll report this Friday. Read next: Altcoins: Tether (USDT), What Is It? - A Deeper Look Into The Tether Blockchain| FXMAG.COM
PLN Soars to Record Highs Ahead of NBP Decision

(USD) US Dollar - First Days Of June May Bring A New Stimulus, Forex Traders Keep An Eye On Mexican Peso (MXN), Hawkish ECB May Turn EUR/USD Upside Down! Looking Forward To Changes In PLN And HUF Exchange Rates | ING Economics

ING Economics ING Economics 30.05.2022 09:47
A holiday-shortened week starts with risk assets in demand as China marginally softens lockdown curbs and the pricing of a Fed pause allows interest to return to FX carry trades. That could see the dollar hand back a little more of its recent strength, although strong US data later in the week should limit the extent of the dollar's downside Source: Shutterstock USD: Interest in dollar-funded carry emerges The dollar is now about 3% off its highs in early May. Driving that correction has certainly been the view that the Fed could pause its tightening cycle after hiking 50bp in both June and July. The Fed funds rate for the 21 September meeting is now priced at 2.15%. At the start of May, it was priced at 2.35%. Clearly, US data and Fed speak will have a big say in the pricing of that Fed cycle. Today US markets are closed for the US Memorial Day public holiday, but the big data point of the week, Friday's release of May nonfarm payrolls, will have an important say for the Fed. Here James Knightley looks for another strong set of numbers, which should prove supportive for both US yields and the dollar. Until then, the dollar remains subject to corrective forces on the back of renewed interest in carry trades. Here, one month USD/JPY implied volatility has sunk back below 10% to signal calmer market conditions and for us, Friday's standout move was the huge rally in the Mexican peso. The peso is the big beast in the emerging market FX space and the USD/MXN drop to 19.50, the lowest level since early 2020, represents some confidence returning to the emerging market FX space. Indeed, some brave investors may be making the play that the dollar has topped and that putting money to work in EM local currency bonds can help cement the top in EM local rate cycles and trigger a virtuous cycle of gains in both the currency and the bond. For example, Mexican 10-year local currency bond yields have recently topped out at 9% and now trade at 8.50%. We think it is too early for those trades since both US yields and the dollar may well have another leg higher later this year, but this is a trend that certainly bears watching. US holiday-thinned trading should keep FX subdued today, but some modest reopening in China and some healthy equity gains should maintain the slightly softer dollar bias for the next few days. DXY is undertaking a slightly deeper correction than we thought and can continue to drift down to the 101.00 area. EUR: Another high German CPI to keep hawks in the ascendancy EUR/USD continues to nudge higher as the Fed pause, marginally better risk environment and ECB hawkishness all combine. Recent reports suggest the speculative community has been cutting its short euro positions. Yet we do not think there are strong arguments for EUR/USD to move back to and above 1.10. After all, the surge in energy prices is being more keenly felt in Europe and the deterioration in Europe's terms of trade has damaged the euro's medium-term fair value. Our preference would be for this EUR/USD correction to top out near 1.08. But for the short term, the external environment will keep EUR/USD supported. For today, we will get the first look at German inflation data for May. This is expected to push up to a new cycle high at 7.6% year-on-year and keep the hawks in the ascendancy at the ECB. That said, the recent narrowing in the two-year Germany-US sovereign spread seems to have run its course and unless one expects the ECB to sound even more hawkish (four to five ECB hikes are already priced this year) or the Fed to turn decisively less hawkish, EUR/USD looks unlikely to get too much more support from the yield spread side. GBP: Quiet week for the sterling story The UK data calendar is quite light this week. That leaves sterling mildly bid after last week's £15bn fiscal stimulus provided some support to otherwise fragile pricing of the BoE tightening cycle. The GBP/USD bounce has certainly been slightly stronger than we thought (we had thought 1.2600/2650 would be the corrective top) and a slightly negative dollar environment at the start of this week could see GBP/USD extend to 1.2730/2770. Longer term, we can still see GBP/USD heading back to the low 1.20s later this summer. EUR/GBP looks set to gravitate around 0.8500 for a while. CEE: Return of a hawkish tone to tame inflation In central and eastern Europe, the main event this week will be the Hungarian central bank meeting. This, in our view, will bring a 60bp hike in the base rate to 6% and a 30bp increase in the deposit rate to 6.75%. However, the weak forint may force the central bank to make a bolder move. Across the region, a breakdown of 1Q GDP growth will be released, which surprised positively in the flash estimate, so the market will be watching the reason behind this and indications for the second quarter. A piece to the puzzle will also come from the PMI for May, which like the eurozone should stagnate or fall just slightly. As always, Poland will be the first in the region to show the way for inflation. We expect it to rise from 11% to above 12.5% YoY, which should reignite the hawkish tone from the central bank, supporting higher rates and prompting the FX market to erase the losses of recent days. Of course, the biggest focus this week will be on forint, which is within reach of all-time lows following recent government decisions. A possible market disappointment would thus bring a move towards the magic level of 400 EUR/HUF, but we assume that this is not the central bank's intention. The zloty reached its strongest levels since the start of the Ukrainian conflict at the end of the last week and a strong CPI number and higher rates should ensure that it holds onto its gains at least. The koruna remains under central bank control and despite the currency's weakening last week, we do not expect the Czech National Bank to allow a move towards EUR 25/CZK territory. Read this article on THINK
Fed And US Dollar (USD) Are All About Mixed Feelings, Christine Lagarde And ECB In General May Support Euro Even In July. BoE's Bailey Also Teases A Rate Hike. XAU, XAG And Crude Oil Went Higher As USD Weakened | OneRoyal

Fed And US Dollar (USD) Are All About Mixed Feelings, Christine Lagarde And ECB In General May Support Euro Even In July. BoE's Bailey Also Teases A Rate Hike. XAU, XAG And Crude Oil Went Higher As USD Weakened | OneRoyal

OneRoyal Market Updates OneRoyal Market Updates 30.05.2022 10:14
Weekly Recap It was another bearish week for the US Dollar as the greenback continued to sell off from YTD highs. The FOMC meeting minutes, released mid-week, did little to inspire a fresh rally in the Dollar. While the minutes confirmed the Fed’s hawkish stance and reinforced expectations for further 50bps hikes in June and July, there was little in the way of exciting details to get bulls reinvigorated. Additionally, with the Fed having seemingly turned more hawkish since that meeting, the minutes felt a little outdated. Christine Lagarde, ECB And Rate Hikes On the data front, a string of weaker-than-expected indicators out of the eurozone heightened growth concerns. With ECB’s Lagarde essentially confirming a July rate-hike, recession fears weighed on European asset markets though EUR itself remained well bid. Elsewhere, equities markets generally saw a choppy week though most indices ended the week in the green, benefitting from the weaker US Dollar. Read next: Altcoins: What Is Polkadot (DOT)? Cross-Chain Transfers Of Any Type Of Asset Or Data. A Deeper Look Into Polkadot Protocol | FXMAG.COM BOE’s Bailey warned that further rate hikes will likely be necessary in the face of rising inflation. The new fiscal package announced by the UK government this week, aimed at helping households fight rising energy bills, has further increased the likelihood of BOE rate hikes in the near-term. Weaker Dollar, Stronger Crude, Gold And Silver Commodities prices were higher over the week also. Gold, silver and oil all rallied on the back of a weaker US Dollar. With monetary policy divergence between the Fed and other central banks drying up, USD pressure has helped commodities stay afloat recently. Coming Up This Week Australian GDP Australian GDP will be closely watched this week on the back of the recent RBA rate hike. With the bank lifting rates and sounding firmly hawkish in its outlook and assessment, this week’s data might further support growing RBA rate hike expectations. With the country having emerged from one of the longest lockdowns of the pandemic, the economy has been on the bounce-back. However, as we have seen elsewhere, the economy has still been rocked by rising inflation and supply constraints. Traders will be keen to see the extent to which these factors weighed on the economy over the last quarter. BOC Rate Decision The BOC is widely expected to raise rates when it convenes for this month’s meeting mid-week. All 30 economists polled by Reuters ahead of the event are looking for a .5% hike. With this in mind, the focus will be on the bank’s forward guidance. If the BOC gives a clear signal that further hikes are coming in the near future, this should drive CAD higher near-term. However, if there is any indication that the BOC might look to hold off on any further rate hikes near-term, this will likely see cad dragged lower. Read next: Altcoins: Cardano (ADA) What Is It? - A Deeper Look Into Cardano (ADA) | FXMAG.COM US Non-Farm Payrolls The latest set of US labour market indicators this week will be closely watched as we head to the June meeting. Recent Fed commentary has been decidedly hawkish and it would likely take a major downside shock to change this narrative. Even then, it certainly wouldn’t impact the June rate hike and would likely only factor in forward guidance issued by the Fed. Still, with slowdown fears building, any weakness would no doubt act as a headwind to risk sentiment in the short-term. Forex Heat Map Technical Analysis Our favourite chart this week is the Dollar Index (DXY) The DYX has pulled back from recent multi-year highs and is now sitting on a make-or-break level at 101.94. This level was the 2020 closing high price. While the level holds as support, DXY is likely to recover and continue the longer-term bull trend. Below here, however, there is room for the correction to develop further towards next support at 100.37 Economic Calendar Plenty of key data releases to keep an eye on this week including Australian GDP, BOC rate decision and US Non-Farm Payrolls to name a few. Please see full calendar below for the complete schedule . Follow FXMAG.COM on Google News
Investors Are Awaiting US CPI Print. Earnings Season Is Here! PepsiCo (PEP) And Delta Airlines (DAL) Earnings Are Released This Week!

Striking US Stocks Performance, Crude Oil (BRENT) Nearing $120, Chinese Covid-Zero Influences Markets And More Highlighted In Market Insights Podcast (Episode 335) | Oanda

Jeffrey Halley Jeffrey Halley 30.05.2022 10:37
Jonny Hart speaks to APAC Senior Market Analyst Jeffrey Halley about news impacting the market and the week ahead. It’s June already and a blockbuster week for data releases around the world. First of all, we take a look back at last Friday’s impressive US equity close. Jeff discusses its drivers, its threats, and potentially, its longevity. Then it’s over to Asian equity markets today which are also enjoying a banner day. US Stocks And China   The US Friday session and also covid-zero developments in China over the weekend are driving “most” stock markets higher. Potential banana skin is looming though, with Brent crude rising above $120.00 a barrel in Asia today. Jeff looks at the oil market, what’s driving the price increase, and its potential impact on market sentiment this week. Read next: Altcoins: What Is Monero? Explaining XMR. Untraceable Cryptocurrency!? | FXMAG.COM Holidays And US Non-farm Payrolls There are a number of holidays this week, starting with US markets today, then Greater China is dragon boating on Friday, and the UK has two days off at the end of the week. Happy Jubilee Your Majesty. We discuss how holidays can impact markets. Finally, it’s a wrap of the heavy-duty data calendar across Asia and the US this week, culminating in the US Non-Farm Payrolls. Jeff highlights also, something that markets have been ignoring up until now, the start this week, of Federal Reserve Quantitative tightening. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Follow FXMAG.COM on Google News
Crude Oil Prices Continue to Rise Amid Tight Supply and Economic Uncertainty

Banning Russian Crude Oil In Progress - Will Hungary Join The EU? Fed's Quantitative Tightening, Chinese PMI Is Released This Week. What Will Eurozone Inflation Bring On To The Markets? | Oanda

Jeffrey Halley Jeffrey Halley 30.05.2022 11:11
Asian markets are mostly positive this morning as Shanghai announced a raft of stimulus measures and both Shanghai and Beijing eased Covid-19 restrictions. The devil is in the detail of course, and corkers in both cities still face challenges either going to work, or even being allowed to leave the house. Nor has the reality that the virus only has to get lucky once, prompting the reimposition of tightened covid-zero restrictions, in the minds of investors. Such minutiae are usually ignored by markets when it doesn’t suit the preferred narrative, and so it is today. Asia is pricing in peak virus in China and a recovery in growth. Wall Street Another tailwind was the strong performance by Wall Street on Friday, which closed out a banner week prompting the usual “maybe this is the bottom” response from the financial press and FOMO investors. That was assisted by US data on Friday. Personal Income and Expenditure for April were still robust, but eased from March’s numbers, and Michigan Consumer Sentiment retreated from 65.2 in April to a still-healthy 58.4 for May. Lower data equalling reduced need for Fed tightening equals buy everything. Simple really. Although I must say, I’m struggling to see how a slowing US economy is good for equities, I don’t want to spoil the party though. Crude Oil - EU Banning Russian Crude Another negative headwind being completely ignored by markets is oil prices. Brent crude has edged above USD 120.00 a barrel this morning as the European Union continues its efforts to get Hungary on board for a proposed EU ban on Russian crude imports. The underlying driver though is the massive squeeze on refined products we are seeing around the world, which is lifting the base ingredient for all that diesel and petrol that has got very expensive. The world would have been flapping and wringing its hands about the end of days if we had said Brent crude was above USD 120.00 a barrel a month or two or three or four ago; now it is being ignored. By the way, if China recovers, oil prices will as well; just saying. Read next: Altcoins: Cardano (ADA) What Is It? - A Deeper Look Into Cardano (ADA) | FXMAG.COM Non-farm Payrolls - Fed's Sell-off Also being ignored by markets completely in Non-Farm Payroll week is that the Federal Reserve also starts quantitative tightening this week. The Fed will start to sell USD 47.50 billion of bonds and MBS’ per month, scaling up to USD 95 billion per month by September. Meanwhile, the ECB is still quantitatively easing while talking about hiking rates to errrr, zero per cent. And there is a war in Eastern Europe. Long EUR/USD above 1.0800 anybody? Despite being less than impressed with either the Fed’s guidance or overall performance over the past year or so, at least they’re not the Reserve Bank of New Zealand. I find it highly unlikely they will abruptly swing to less a hawkish stance between now and September, meaning three more 0.50% hikes into September and fewer jokes being made about their credibility. Additionally, the USD 8.5 trillion balance sheet needs to reduce is carb and saturated fat intake, so quantitative tightening it is. From my position as a pilot fish cleaning the teeth of the capital markets sharp on the periphery, none of this is being priced in, although I acknowledge that markets can remain irrational, longer than you can stay solvent. Read next: Altcoins: Tezos (XTZ) What Is It? - A Deeper Look Into The Tezos Platform | FXMAG.COM Chinese PMI Now that I have fulfilled my role as the voice of reason on a Monday, it is time to have a look at what the week ahead brings. Asia’s calendar is dead today with the week’s highlights being China’s Official and Caixin PMIs coming out tomorrow and Wednesday. Wednesday and Thursday also see a swath of manufacturing and services PMIs from the rest of Asia, while Australia releases its April Trade Balance on Thursday. China’s data will have a very binary impact this week if peak-covid is here. Soft data will likely ramp up fears of a slowdown, with a decent showing likely to see hot money flowing in looking for the bottom. Soft data from the rest of Asia will raise fears of spreading China contagion. Watch also for Indonesian Inflation on Wednesday. A high print will increase the pressure on Bank Indonesia to finally hike this month. Holidays Holidays will play their part this week. US markets are closed for Memorial Day today, although electronic trading is open in Asia. Indonesia is closed Wednesday while mainland China and Hong Kong and Taiwan are closed on Friday for the International Dragon Boat Festival. Thursday and Friday see United Kingdom markets closed for a bank holiday and Her Majesty’s Platinum Jubilee. Activity in Asia will likely be muted from Thursday. Follow FXMAG.COM on Google News Eurozone Inflation Today features German May Inflation with Eurozone, French and Italian Inflation tomorrow. High prints will likely increase the hiking noise around the ECB and could extend the euro’s recent gains. The ECB should probably stop quantitatively easing first though. Eurozone and US Manufacturing PMIs are released on Wednesday, along with US ADPO Employment that forecasters will pointlessly use to extrapolate Friday’s data. We also have a Bank of Canada policy decision which should feature a 0.50% hike. Falling NFP? Finally, on Friday, we will see May’s US Non-Farm Payrolls data. Market expectations are a moving target this week, but as of today, markets are expecting a fall from 428,000 in April to a still robust 320,000 for May. Trading the data in the hour after its release has always been a sure-fire way to lose money. But if pushed, I would say a lower number will have the market pricing in less Fed tightening, while a higher number might dish out a cold dose of reality to the bottom-fishers in equity, bond, and currency markets ahead of the mid-month FOMC meeting. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
So S&P 500 (SPX) Seems To Be Ready To Really, Can US Bond Yields And US Dollar (USD) Go Any Higher? | Monica Kingsley

So S&P 500 (SPX) Seems To Be Ready To Really, Can US Bond Yields And US Dollar (USD) Go Any Higher? | Monica Kingsley

Monica Kingsley Monica Kingsley 30.05.2022 15:13
S&P 500 turned the corner, yields peaked for now, and dollar likewise. Risk-on sentiment is ruling the day, with value outperforming tech – but at least the latter is also recovering. Stocks though haven‘t turned the corner in earnest, no matter the gains they‘re still about to clock in. Enjoy the rally while it lasts (long entry is a matter of individual trade‘s risk reward ratio – more than a few good percent are still ahead before the fresh downleg strikes. Fed You can look forward for tomorrow‘s extensive analysis, where I‘ll examine the Fed and macroeconomics in the weeks and months ahead vs. the turnaround sequence discussed three weeks ago – unfolding like clockwork. Here‘s a quote from tomorrow‘s article: (…) I don‘t think we‘re looking at a fresh uptrend, there is still much stress (to be reflected in stock prices) in the consumer arena. VIX For now, the key question is the degree to which VIX calms down – would it be able to keep below 23-24 to extend the shelf life of this rally? And for how long would the lull in volatility last? I think the answer is a few short weeks, before it becomes obvious that the fundamentals haven‘t changed. The consumer remains in poor shape, inflation would remain stubbornly high (even as it had indeed peaked), and the credit default swaps for quite a few (consumer sensitive) companies are rising relentlessly, which isn‘t yet reflected in underlying stock prices. I‘m talking financials too – this broad stock market rally has more than a couple of percent higher to go before the weight pulls it back down, and earnings estimates get downgraded again. Stayed tuned for more, enjoy and profit along! Read next: Altcoins: Tether (USDT), What Is It? - A Deeper Look Into The Tether Blockchain| FXMAG.COM Happy extended weekend. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals. Follow FXMAG.COM on Google News
S&P 500 Trades 10% Higher Than On May 20th, But Hawks Are About To Hunt Shortly, Probably Bringing Bear Market And People's Unwillingness To Spend Their Money | FxPro

S&P 500 Trades 10% Higher Than On May 20th, But Hawks Are About To Hunt Shortly, Probably Bringing Bear Market And People's Unwillingness To Spend Their Money | FxPro

Alex Kuptsikevich Alex Kuptsikevich 30.05.2022 15:18
US stock indices developed a strong rebound all last week. The S&P500 spot index reached 4200, gaining more than 10% from the lows of May 20. Such a rapid recovery has raised the question of whether we are seeing a brief bear market rally or whether the markets have passed the “bottom” of the correction. The situation looks like touching bear market territory was a red rag for the bulls, who have since turned to aggressive action. Fundamental factors are now on the side of the former, while technical analysis favours the latter scenario. Fighting With Inflation Or Supporting Economic Growth Monetary authorities in the USA and other developed economies are increasing the pace of monetary policy tightening, focusing on fighting inflation rather than supporting economic growth. We continue to get bearish signals from this perspective, as the economy and markets have yet to feel the brunt of rates not seen in over ten years. Meanwhile, inflation and a slowdown in consumer demand due to high rates promise to eat into real corporate profits in the coming months. The tipping point in consumer activity is unlikely to come before we hear from the Fed that there will be no further rate hikes. Read next: Altcoins: What Is Polkadot (DOT)? Cross-Chain Transfers Of Any Type Of Asset Or Data. A Deeper Look Into Polkadot Protocol | FXMAG.COM The S&P500 index has perfectly touched 61.8% of the rally from the lows of March 2020 to January 2022. We have seen some rallies in a falling market during the five-month decline. But so far, touching the formal bear market area (20% decline from the peak) in the S&P500 has attracted buyers. Moreover, by the time the lows were touched earlier this month, the market was already oversold, but there were also signs of divergence between the RSI on the daily timeframes and the index level. This is a clear indication that the selling was not as fierce as before. Read next: Altcoins: What Is Monero? Explaining XMR. Untraceable Cryptocurrency!? | FXMAG.COM S&P 500 The very fact that the S&P500 took a 7-week-long losing streak, one of the longest in history, and has now shown a sharp rebound, is setting a positive mood. The last time we saw such a bullish awakening was in November 2020, after which the stock market added for more than a year, even though there seemed to be no room for growth. Follow FXMAG.COM on Google News
Energy and Metals Decline, Wheat Rallies Amid Disappointing Chinese Growth

Supporting EUR, USD And Others - What Is Interest Rate? What Is A Negative Interest Rate | Binance Academy

Binance Academy Binance Academy 01.06.2022 16:55
TL;DR It doesn’t make much sense to lend money for free. If Alice wants to borrow $10,000 from Bob, Bob will need a financial incentive to loan it to her. That incentive comes in the form of interest – a kind of fee that gets added on top of the amount Alice borrows. Interest rates profoundly impact the broader economy, as raising or lowering them greatly affects people’s behavior. Broadly speaking: Higher interest rates make it attractive to save money because banks pay you more for storing your money with them. It’s less attractive to borrow money because you need to pay higher amounts on the credit you take out. Lower interest rates make it attractive to borrow and spend money – your money doesn’t make much by sitting idle. What’s more, you don’t need to pay huge amounts on top of what you borrow. Learn more on Binance.com Introduction As we’ve seen in How Does the Economy Work?, credit plays a vital role in the global economy. In essence, it’s a lubricant for financial transactions – individuals can leverage capital that they don’t have available and repay it at a later date. Businesses can use credit to purchase resources, use those resources to turn a profit, then pay the lender. A consumer can take out a loan to purchase goods, then return the loan in smaller increments over time. Of course, there needs to be a financial incentive for a lender to offer credit in the first place. Often, they’ll charge interest. In this article, we’ll take a dive into interest rates and how they work.   What is an interest rate? Interest is a payment owed to a lender by a borrower. If Alice borrows money from Bob, Bob might say you can have this $10,000, but it comes with 5% interest. What that means is that Alice will need to pay back the original $10,000 (the principal) plus 5% of that sum by the end of the period. Her total repayment to Bob is, therefore, $10,500. So, an interest rate is a percentage of interest owed per period. If it’s 5% per year, then Alice would owe $10,500 in the first year. From there, you might have: a simple interest rate – subsequent years incur 5% of the principal or  a compounded interest rate – 5% of the $10,500 in the first year, then 5% of $10,500 + $525 = $11,025 in the second year, and so on.   Why are interest rates important? Unless you transact exclusively in cryptocurrencies, cash, and gold coins, interest rates affect you, like most others. Even if you somehow found a way to pay for everything in Dogecoin, you’d still feel their effects because of their significance within the economy. Take a commercial bank – their whole business model (fractional reserve banking) revolves around borrowing and lending money. When you deposit money, you’re acting as a lender. You receive interest from the bank because they lend your funds to other people. In contrast, when you borrow money, you pay interest to the bank. Commercial banks don’t have much flexibility when it comes to setting the interest rates – that’s up to entities called central banks. Think of the US Federal Reserve, the People’s Bank of China, or the Bank of England. Their job is to tinker with the economy to keep it healthy. One function they perform to these ends is raising or lowering interest rates. Think about it: if interest rates are high, then you’ll receive more interest for loaning your money. On the flip side, it’ll be more expensive for you to borrow, since you’ll owe more. Conversely, it isn’t very profitable to lend when interest rates are low, but it becomes attractive to borrow. Ultimately, these measures control the behavior of consumers. Lowering interest rates is generally done to stimulate spending in times when it has slowed, as it encourages individuals and businesses to borrow. Then, with more credit available, they’ll hopefully go and spend it. Lowering interest rates might be a good short-term move to rejuvenate the economy, but it also causes inflation. There’s more credit available, but the amount of resources remains the same. In other words, the demand for goods increases, but the supply doesn’t. Naturally, prices begin to rise until an equilibrium is reached. At that point, high interest rates can serve as a countermeasure. Setting them high cuts the amount of circulating credit, since everyone begins to repay their debts. Because banks offer generous rates at this stage, individuals will instead save their money to earn interest. With less demand for goods, inflation decreases – but economic growth slows.   ➟ Looking to get started with cryptocurrency? Buy Bitcoin on Binance!   What is a negative interest rate? Often, economists and pundits speak of negative interest rates. As you can imagine, these are sub-zero rates that require you to pay to lend money – or even to store it at a bank. By extension, it makes it costly for banks to lend. Indeed, it even makes it costly to save. This may seem like an insane concept. After all, the lender is the one assuming the risk that the borrower may not repay the loan. Why should they pay?  This is perhaps why negative interest rates are something of a last resort to fix struggling economies. The idea comes from a fear that individuals may prefer to hold onto their money during an economic downturn, preferring to wait until it recovers to engage in any economic activity.  When rates are negative, this behavior doesn’t make sense – borrowing and spending appear to be the most sensible choices. This is why negative interest rates are considered to be a valid measure by some, under extraordinary economic conditions.   Closing thoughts On the surface, interest rates appear to be a relatively straightforward concept to grasp.  Nevertheless, they’re an integral part of modern economies – as we’ve seen, adjusting them can fundamentally alter the behavior of individuals and businesses. This is why central banks take such a proactive role in using them to keep nations’ economies on track. Do you have more questions about interest rates and the economy? Check out our Q&A platform, Ask Academy, where the Binance community will answer your questions.
Chart of the Week : An ECB rate hike is imminent

AUD/USD: Strong Trade Balance Of Australia Doesn't Seem To Be Supporting Australian Dollar At The Moment. Crude Oil (WTI/BRENT) Prices Decreased | ICM.COM

ICM.COM Market Updates ICM.COM Market Updates 02.06.2022 09:32
Currencies Australia Trade Balance data fails to lift AUD/USD AUD/USD remains pressured around 0.7162 on early Thursday in Asia despite Australia's Trade Balance for April released strong figures. Australia's Trade Balance printed at 10,495M versus the forecasted 9,300M. The downward pressure may be related to concerns on faster Fed rate hikes following recent solid US data and hawkish statements from the Fed. News on China as well as the US NFP this Friday may also weigh on the currency pair. Commodities Oil prices dropped amid expectations on OPEC+ policy Oil prices dropped today, ahead of a key producers meeting later in the day, with expectations of a boost in oil production by Saudi Arabia in response to urging by the United States.Brent crude down 1.8%, at $114.21U.S. (WTI) crude down 2.0%, to $113.01
Diesel Supply Concerns Grow as Russia Bans Exports: Impact on Middle Distillate Markets

Can Apple Stock Plunge Today!? Fed Decision May Affect US Dollar (USD), S&P 500, Gold (XAUUSD) And Crypto (e.g. Bitcoin Price & ETHUSD) | Swissquote

Swissquote Bank Swissquote Bank 15.06.2022 10:28
The Federal Reserve (Fed) will announce its latest rate decision today, but most of the wild ride is certainly done by now; the market fully prices in a 75bp hike at today’s decision. The aggressive rise in hawkish Fed expectations pushed the US 2-year yield to 3.45% on Tuesday. The 10-year yield flirted with 3.50%. The S&P500 lost another 0.38%, while Nasdaq eked out a small 0.20% gain, but after hitting a fresh low since November 2020. The US futures are in the positive this morning, but the market will likely remain tense until the Fed breaks the news that it hikes by 75bp. The updated economic projections and the dot plot have an important weight for future expectations. Bigger rate hikes from the Fed, and the soaring US dollar are certainly not a gift for other central banks. The US dollar is a base currency, and the rapid appreciation in the greenback increases the cost of the goods that the other countries negotiate in terms of US dollars on international markets, starting from oil and commodities. As a result, a stronger US dollar is a bigger inflation threat for the world. This is why, the hawkish Fed expectations have a bigger domino effect power on the rest of the world. The German 10-year yield continues pushing higher, and the EURUSD sees a decent support near the 1.04 threshold after the European Central Bank (ECB) announced an unscheduled meeting to discuss the market turmoil. Cable slipped below the 1.20 mark, and a 25bp hike from the Bank of England (BoE) may not suffice to compensate the hawkish Fed, and the renewed Brexit fears.   Watch the full episode to find out more! 0:00 Intro 0:27 The Fed decision 4:26 Market update 5:32 Gold, Bitcoin down 6:43 FedEx jumps & dividend paying stocks see higher interest 7:41 Expensive dollar threatens ECB, BoE 8:52 FTSE to feel the pinch of engdangered Brexit deal Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Fed #FOMC #decision #dotplot #ECB #unscheduled #meeting #BoE #USD #EUR #GBP #CHF #Bitcoin #MicroStrategy #crude #oil #gold #market #selloff #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH  
Central Bank Policies: Hawkish Fed vs. Dovish Others"

It smells like a peak in US market rates

ING Economics ING Economics 24.06.2022 16:07
When we hit 2% on the US 10yr we asked what next, and laid out a path to 3%. On hitting 3% we asked the same, and postulated the possiblilty of approaching 4%. A little over a week ago we hit 3.5%. Various signs suggest that could be the peak. That does not mean we can't get back there, as real rates are still too low and will rise. But if that was not it, we're not far off Real rates are still too low and will rise Real rates should still rise, and might just take the 10yr Treasury yield back towards the previous high We are at a point now where the peak seen at 3.5% in the 10yr US Treasury yield a little over a week ago is seeming more and more like a turning point. That does not mean we can’t get back there. But it does mean that indicators are pointing to a scenario where a dramatic break above that level is looking less likely. Nothing is impossible, but here’s the logic: First, the 5yr has been quietly decompressing on the curve over the past few days. It is now trading at 8.5bp cheap to an interpolated line between the 2yr and the 10yr, and so still in line with a bond bear market. But it is far less cheap than it was (15bp a few weeks back), and it looks like it's on a journey of decompression. It's an early call, but we're paying close attention to the journey it looks to be on. As it decompresses it typically signals a change in the cycle. Now that could change, for example should we see a surprisingly big inflation number and/or an outsized payrolls outcome in the coming weeks. But based on the developing discount, market expectations are pushing against that. Second, the 10yr breakeven inflation rate has fallen to 2.5%. That was at 3% only a month or so ago. That’s a big change in expectations. The real yield is still too low at 60bp. But even if that rises to the 1% area that we target, that would bring the 10yr Treasury yield back up to its previous high, without taking it out. For it to break above, inflation expectations would need to rise as well. It could happen of course. But then again that’s not the journey that inflation expectations are currently on. In fact, inflation expectations could even fall, muting the impact of higher real yields. As we’ve said countless times, turning points are difficult to predict, and we’ve identified the third quarter as when the turning point is likely to be. We still think we will have seen one by then, but we’d also note that it might just be from a level not too dissimilar from the 3.5% area seen on the 10yr a little over a week ago.  Watch the system risk. It's fine for now, but there are warning signs At the same time, it's important to note that price action in the past few days has been remarkable. In fact, it was astonishing in the week or so before that when 20bp moves in both directions were occurring. The move from 3.5% down to 3.1% in the 10yr must be contextualised against that, in the sense that we could journey back up again should we enter a period of "risk-on" in the weeks ahead, or on upsize data surprises. For the latter, we’d watch June payrolls on Friday week, and June CPI the following Thursday. And a final point on the system. It’s holding up fine here. Forget the elevation in the Ted spread (3mth bills spread to Libor), as that reflects a collapse in bills yields, in turn reflective of a repo market that is being strained to the downside (SOFR now at 6bp below the Fed funds floor as a record USD $2.3tr goes into the Fed's reverse repo window at 1.55%). More importantly, banks are printing 3mth commercial paper at just 15bp over the risk-free rate. This is still quite tight, compared to a long-term average at around 25bp. Hence the system is holding up quite well. But credit spreads are at stressed levels, signaling an elevation in default rates ahead of us, which is typical of recessionary periods. That in turn will result in a rise in system pressure, elevating bank funding rates relative to the risk-free rate. The market discount is no doubt factoring this, as is the Fed, which needs to get the tightening in before the system creaks. Another reason to suggest we're on the eve of a cycle change. Read this article on THINK TagsRates Federal Reserve Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Eurozone Bank Lending Under Strain as Higher Rates Bite

The US Inflation - What Are The Predicted Prints?

InstaForex Analysis InstaForex Analysis 12.07.2022 13:05
Relevance up to 10:00 2022-07-13 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Markets are currently focused on the US CPI report for June, which will be released on Wednesday, July 13. Forecasts show that inflation will continue to grow, where headline inflation, which includes changes in the cost of food and energy, will increase by 1.4% month-over-month and by 8.7% year-over-year. Seeing that prices have accelerated even more, inflation has every chance of reaching 8.7%. Statistics Austria reported that in addition to the increase in fuel and heating oil prices, there has also been significant growth in restaurant and food prices. If CPI turns out as expected, the Fed will most likely make another 75 basis point rate hike at the FOMC meeting later this month, especially given last week's employment report. They may also announce a fourth increase this year. The central bank began raising rates last March, the first time since 2018. The increase back then was 25 basis points, followed by a 50 bp increase in May and a 75 bp increase in June. The CME FedWatch tool sees the same scenario, indicating a 93% chance that the Fed will raise rates again by 75 basis points this month. This outlook weighs heavily on US equities, pushing the USD index up and lowering gold prices.   Read more: https://www.instaforex.eu/forex_analysis/315917
German Export Weakness In The Fourth Quarter Suggests That Recession Fears Are Real

Germany: Recession Caused By The Concerns Around Gas? ECB's Reponses To Others Have Been "Unhurried"

Walid Koudmani Walid Koudmani 12.07.2022 14:30
EURUSD is in the center of attention today since after a months-long drop, the euro is nearing parity with the US dollar. It was almost 20 years ago when the main currency pair traded at 1.00 for the last time. What are the reasons for the euro underperformance? On one hand, implications of the Russia-Ukraine war play a big role. Energy prices   Energy prices in Europe spiked as gas flows were being limited and now there is a real risk of complete halt to gas supply from Russia as tensions continue to escalate and after the "temporary" shutdown of Nordstream 1. This would most likely lead to a recession on the continent, especially in gas-dependent countries like Germany. Another reason for the weak performance of the common currency is the European Central Bank, which has been very slow compared to other major central banks when it comes to policy tightening and is yet to deliver its first rate hike. Fed Meanwhile, the Fed embarked on an aggressive rate hike cycle in an attempt to contain rampant inflation, providing support for the US dollar, which is also benefiting from safe haven flows. As a result, EURUSD keeps moving lower. However, traders should expect some support around the 1.00 area due to the psychological nature of this level which could lead to some efforts from buyers.  
EUR/USD Faces Pressure Amid PMI Releases: Is More Downside Ahead?

US Stocks: Walt Disney (DIS) Releases Its Earnings This Week! Record-Breaking Unemployment Rate And Possibility Of 75bps Rate Hike!

Saxo Bank Saxo Bank 08.08.2022 11:44
Summary:  Equity markets were churned by the July US jobs report on Friday, first falling sharply as treasury yields jolted higher on the day, but later rallying back to close the day only modestly lower. The US yield curve is about 10 basis points from its most dramatic inversion since 1982 as the market eyes an incoming recession despite the strong US jobs data and July ISM Services data last week. This week’s chief data focus is the Wednesday US July CPI data release.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I). US equity markets saw a very choppy session on Friday as interest-rate sensitive growth stocks dipped sharply on the strong July US jobs report. The broader market recovered most of the lost ground intra-day, but performance across themes was very mixed, with our Energy Storage basket the best performer among our “theme baskets”, likely on the passage of the climate bill by the US Senate (more below). Earnings season is winding down for the quarter, but a few prominent names are set to report this week, including Walt Disney on Wednesday. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) Alibaba (09988:xhkg) -4%, Tencent (00700:xhkg) -2% and Meituan (03690:xhkg) -2% dragged the Hang Seng Index 0.8% lower.  Semiconductors names retraced lower after three days of outperformance, SMIC (00981:xhkg) -2%.  Cathay Pacific (00293:xhkg) claimed 2% following Hong Kong’s announcement of cutting inbound travelers’ hotel quarantine to 3 days from 7 days.  In the mainland, the lockdown of Hainan, a southern resort island, triggered some buying of traditional Chinese medicine and Covid-treatment related names. CSI300 was flat in midday.  USD pairs after the strong US jobs data Friday. The USD was jolted higher by the strong July jobs report on Friday, taking EURUSD, for example, sharply back lower after its attempt the prior day to push up toward 1.0250+ resistance. That pair has traded in an impossibly constricted range for nearly three weeks between 1.0100 and 1.0300, perhaps waiting for a more determined signal from risk sentiment or the longer end of the US yield curve for a sustained directional move. The action is similar elsewhere, save for USDJPY, which has traded in a wider range on the swings in treasury yields and heavy positioning. The jobs data drove a sharp rally from 133.00 before the Friday US jobs data to close the day above 135.00. The 61.8% retracement of the sell-off from the 139.39 to comes in a 135.91. Gold reversed lower on Friday ... after the strong US job report brought the risk of another 75 basis-point rate hike back on the table. During the past couple of weeks, the metal sector, both precious and industrial, has managed to recoup some of the steep losses seen in recent months. However, investor participation remains weak with total holdings in bullion-backed ETFs seeing continued declines while speculators in the futures market holds the smallest long exposure since early 2019. Both signs that the market still believe central banks will be successful in bringing inflation under control without causing too much damage to the economic outlook. Resistance at $1795 and support at $1752. An attempted China-led recovery in industrial metals will be watched closely by silver which continues to find resistance at the 50-day moving average, today at $20.33. Crude oil steadying near six-month low (OILUKOCT22 & OILUSSEP22). Brent crude oil has started the week trading around $95/b while WTI remains below $90/b driven by expectations for softer demand into the autumn months and a general economic slowdown concern. Key crude oil spread differentials have narrowed in recent weeks, suggesting less tightness in the market while refinery margins have tumbled from the record levels seen in June. Overall, worries about the supply outlook from major producers are likely to keep prices supported at or near current levels. With the peak holiday season upon us liquidity will remain low, thereby raising the prospect of outsized market reactions to the news. Focus this week on monthly oil market reports from the EIA tomorrow followed by OPEC and the IEA on Thursday. US Treasuries (IEF, TLT) The July employment report was exceptionally strong with payroll, unemployment rate and hourly earnings all surprising to the upside and jolted US treasury yields sharply higher right after the data hit the wires.  The front-end sold off the most as 2-year yield soared 18 basis points to 3.23%. 10-year yields climbed 13 basis points to 2.83.  The 2-10 year yield curve inverted further inverted to negative 40 basis points. The front-end treasury curve and money market rates have repriced the September FOMC with a likely 75 basis point hike.   What is going on? US Senate passes large tax and spending bill on climate, health care and taxes. The original bill discussed all year was on the $3 trillion scale, but was too large for centrist Democrats, who helped to whittle down the bill to some $370 billion on new climate-related spending initiatives, new measures that allow the US government to negotiate with drug-makers on pricing, and 15% minimum tax on large corporations, and a 1% tax on stock buybacks. Among the climate-related initiatives are $10 billion in investment tax credits for manufacturers who build EV-production or renewable energy-production facilities, and tax credits of up to $7,500 for EV purchases and even $4,000 for the buying of used EV’s. The House will have to pass the bill and President Biden will then have to sign it for the bill to become law. A 75-basis point hike back to the table for the September FOMC following Friday’s job data. The nonfarm payroll report surprised to the upside and showed that the U.S. added 525k jobs in July, more than double the 250K consensus while the unemployment rate fell to 3.5% in July, the lowest level since 1965.  Average hourly earnings rose 0.5% in July, above market expectation of 0.3% and June average hourly earnings were revised up 0.1 percentage point to 0.44%.  The strong hourly earnings data rebuts the peak inflation thesis and points to upside risks in inflation. Over the weekend, Fed Governor Michelle Bowman reiterated the Fed’s duty to bring inflation down to the 2% target and said that “similarly-sized increases should be on the table until…inflation declining in a consistent, meaningful, and lasting way.” China’s trade surplus hit a record $101 billion last month... ... as exports grew a surprisingly robust 18% YoY. The data showed how exports have given a much-needed boost to an economy currently struggling with weak domestic demand amid a weak property sector and China’s zero Covid tolerance causing continued lockdowns. The jump in exports was broadly based: +18.5% with Japan, 32% with ASEAN, +22.9% with the EU and +10.9% with the US. In commodities, crude oil imports rose while soybeans, copper and natural gas declined on a monthly basis. France approved a €20bn inflation relief package The main measures are : an increase in pensions and welfare payments by 4 % (this is still lower than inflation, however), a cap on rent increases at 3.5 %, pay rise of 3.5 % for civil servants, private companies will be encouraged to offer employees an annual tax-free bonus of up to €6,000, raised from a previous limit of €1,000 and the state-funded fuel price rebate worth 18 cents a liter will be increased to 30 cents in September and October. In addition, French lawmakers approved an updated budget to pay for the renationalisation of the utility company EDF. Emerging markets update On Friday, the Reserve Bank of India hiked its repo rate by 50 basis points to 5.4 %. Expect more hikes to come. But the pace of tightening may be diminishing as inflation looks set to fall. There have been several signs indicating that inflation will likely moderate in the short-term: gasoline prices have been lowered by the state petroleum companies and global agricultural prices are much lower than a few months ago. In Egypt, the country’s funding problem is becoming more acute. By end-2023, the country will need to pay $41b covering both the current account deficit and maturing debt. International reserves can only partially cover these (currently standing at $33b). There are no real other sources of financing. Only a currency devaluation could be helpful. This would cut the trade deficit (making exports more competitive and imports more expensive). On the downside, it is likely to increase inflation. However, there is certainly no better option. What are we watching next? The U.S. July CPI report is out on Wednesday This should be a low energy report (due to the recent decrease in energy prices), but a strong upside surprise could generate a considerable reaction. The economist consensus looks for headline and core CPI to increase by 0.1 % month-over-month and 0.6 %, respectively. The retracement in energy prices should provide some relief, at least at the headline level. The first estimate of the U.S July PPI report is out on Thursday. Earnings to watch Q2 earnings have jumped to a new all-time high in the MSCI World Index highlighting how inflation is lifting all boats. The energy sector is the big winner with earnings jumping 279% y/y due to surging oil and gas prices. This week, the pace of earnings releases is set to slow, but the list below highlights the most important earnings to track. The names in bold are those that can move sentiment overall or in the company’s respective industry. Monday: Barrick Gold, Siemens Energy, Nippon Telegraph & Telephone, SoftBank Group, Tokyo Electron, Dominion Energy, BioNTech, AIG, Tyson Foods, Palantir Technologies, Take-Two Interactive Tuesday: Alcon, Globalfoundries, Roblox, Trade Desk, Coinbase Global, Akamai Technologies, Plug Power, Unity Wednesday: Commonwealth Bank of Australia, Vestas Wind Systems, Genmab, E.ON, Honda Motor, Prudential, Aviva, Walt Disney, Coupang, Illumina Thursday: KBC Group, Brookfield Asset Management, Orsted, Novozymes, Siemens, Hapag-Lloyd, RWE, China Mobile, Antofagasta, Zurich Insurance Group, NIO, Rivian Automotive Friday: Flutter Entertainment, Baidu Economic calendar highlights for today (times GMT) 0800 – Switzerland Weekly SNB Sight Deposits 0830 – Eurozone Aug. Sentix Investor Confidence 0030 – Australia Aug. Westpac Consumer Confidence 0030 – Australia Jul. NAB Business Conditions/Confidence Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – August 8, 2022 | Saxo Group (home.saxo)
USD/JPY Reaching 130-135? It Seems It Maybe Not Impossible

The US Inflation Is Lower Than Expected, But Does It Mean Fed Will Stop?

ING Economics ING Economics 11.08.2022 08:52
A rare pleasant surprise from the CPI report with headline inflation dropping to 8.5%YoY from 9.1% on lower fuel prices, airline fares, clothing and education costs. Ongoing falls in gasoline will mean the headline rate falls further in August, but core inflation is likely to be stickier due to labour costs and will keep the Fed firmly in tightening mode US food prices continue to rise but there's better news elsewhere on inflation 8.5% US inflation rate July Better than expected US inflation slows more than expected We don’t often get pleasant surprises surrounding the US inflation data so July’s numbers are something to be cherished. Both the headline and core (ex food & energy) rates reported monthly increases that were 0.2pp lower than expected. Headline CPI was flat on the month (consensus 0.2%), resulting in the YoY rate dropping to 8.5% from 9.1% while the core rate rose "just" 0.3%MoM (consensus 0.5%). The Year-on-Year rate, therefore, stays at 5.9%. Developments within core are primarily responsible for the surprise with the housing rental components within shelter posting more moderate increases than anticipated while airline fares fell 7.8%MoM and used cars fell 0.4%. Apparel prices dropped 0.1% with education and communication also experiencing a 0.2%MoM fall. Gasoline fell 7.1%, but bigger falls will occur next month. On the upside, food prices rose 1.1%MoM/10.5%YoY Contributions to annual CPI rate (YoY%) Source: Macrobond, ING Core inflation still subject to upside risks Today’s report should provide support to the notion that the US has now passed the peak for headline inflation with lower gasoline prices, down a dollar a gallon nationally on their June 13 peak, set to have a more substantial impact in the August inflation print. We are forecasting the YoY rate dropping to 8.3%. However, core inflation remains on an upward trajectory due to rising housing rental costs and service sector inflation pressures.  Wages are the biggest cost input for the service sector. The latest jobs report showed that they continue to push higher, but with productivity having fallen through the first half of the year, unit labour costs are surging. In an environment where decent demand means companies can pass higher costs onto consumers, we don’t see core inflation peaking until around September/October time with the core rate up at around 6.5%YoY by then Headline & core inflation with ING forecasts Source: Macrobond, ING Much more data to come ahead of September 21st Fed meeting It is important to remember that there is another jobs report and another inflation report ahead of the September 21st FOMC meeting. But inflation remains far from target, the economy has added more than half a million jobs last month and third-quarter GDP is set to rebound based on consumer movement data. Add to all that a positive contribution from net trade and a less negative drag from inventories then the case for a third consecutive 75bp Federal Reserve rate hike in September remains strong. Read this article on THINK TagsUS Inflation Federal Reserve Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Oanda Podcast: US Jobs Report, SVB Financial Fallout And More

US Inflation Data Brings Hope For A Growth, But Recession Fears May Be Back The Next Year

ING Economics ING Economics 11.08.2022 08:57
With today's surprisingly good news on US inflation - read all about it here - we're convinced we're going to see a big growth jump in the States next quarter. But with the Fed determined to raise interest rates still further, our James Knightley in New York says recessionary forces may start swirling again in early 2023   America’s non-recessionary recession US inflation's falling, not least because of lower oil prices, demand is strong as is the labour market. So even though America's in a technical recession, it certainly doesn't feel like it. ING's James Knightley is positive we're going to see a growth rebound later this year. But he says the Fed is still prepared to sacrifice growth to fight rising prices, so real recessionary forces may feel a little stronger in the new year.   Read this article on THINK TagsUS Inflation GDP Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Tokyo Raises Concerns Over Yen's Depreciation, Considers Intervention

USA: Fuel Is Cheaper! Forex: Get Ready! US Dollar May Skyrocket Shortly! Could Euro To British Pound (EUR/GBP) Reach 0.85!?

ING Economics ING Economics 12.08.2022 09:41
Softer-than-expected US price data this week has lifted risk assets around the world, especially in the emerging market space. The highlight of today's relatively quiet session will be US August consumer sentiment data, which is expected to pick up after the big drop in gasoline prices. This should be good for US growth and the dollar US gasoline has fallen from $5/gallon to $4 over the last month USD: Rising consumer confidence should be good news all round Softer-than-expected US July price data this week (both CPI and PPI) have been good news for risk assets around the world. Investors have read it as reducing the Fed's urgency to tighten policy. That said, Fed rhetoric has been consistent all week. Namely, the policy rate is heading toward 3.25/3.50% later this year (roughly priced by the markets) and then possibly 4% next year (not priced).   The latest US consumer sentiment readings from the University of Michigan – out today – will feed into this story. James Knightley looks for an upside surprise in consumer sentiment after US gasoline's fall to $4 from $5/gallon over the last month. We also get fresh inflation expectations data. Here the 5-10 year expectations peaked at 3.10% earlier this summer, were 2.9% in July and today are expected to fall to 2.8%.  How will markets read the data? A drop in inflation expectations may suggest the Fed can be more relaxed on inflation. But there are no signs of that coming through in its rhetoric. Instead, the bigger impact may be the bounce in consumer sentiment, reduced fears of a 2023 recession, and the pricing out of some of the 50bp of easing expected in 2H23. This should be a dollar-positive development. As we discussed yesterday, we like the dollar against the low yielders (euro and yen), but feel that declining levels of volatility will see renewed interest in the carry trade. Yesterday, we picked out long MXN/JPY as a pair that could rally in this environment. Mexico's central bank Banxico did hike 75bp yesterday to 8.50% and even though it omitted language talking about 'more forceful' rate hikes in the future, we think Banxico will match the Fed hike-for-hike. 6.80 remains our target for MXN/JPY. Heavily weighted to the low yielders, DXY should be able to edge a little higher today. A break above 105.50 would go a long way to stabilising it after the heavy losses suffered on Wednesday's US CPI release. Chris Turner EUR: Gas developments remain worrying European industry must be watching with growing concern as European natural gas prices continue to edge higher. Higher costs are a given, but winter rationing probably remains the bigger threat. For FX markets, 2022 has been the year of watching terms of trade developments – the price of exports over imports. These have moved very negatively for the eurozone this year and delivered a negative income shock. This week's move in gas prices has sent eurozone terms of trade towards the worst levels of the year and is a clean euro negative. Given that we are slightly bullish on the dollar today, we think that the recent EUR/USD correction has stalled in the 1.0350/0400 resistance area and would favour a move back to 1.0275 today. Elsewhere, some softer-than-expected July Swedish CPI data released today may pour cold water on calls for a massive Riksbank rate hike in September. After a good run in July, we doubt the Swedish krona pushes on too much further against the euro. Chris Turner GBP: 2Q22 UK GDP data not quite as bad as expected UK 2Q22 GDP data came in marginally better than expected, where the extra bank holiday in June did not have quite as large a negative impact as analysts thought. The data can probably keep expectations alive that the Bank of England (BoE) will hike 50bp on 15 September. And ever-rising expectations for how much higher the UK energy price cap will be adjusted (and what it means for the peak of UK inflation) will probably mean the BoE stays hawkish all year. EUR/GBP is slightly stronger than we thought and could edge up to the 0.8485 area. But given the challenges faced on the continent, we would not chase EUR/GBP higher. Chris Turner CEE: Hungary rating review tonight In the Central and Eastern Europe (CEE) region, industrial production in Romania, the final estimate of inflation in Poland, Czech National Bank (CNB) minutes, and current account data across the region will close the busy calendar this week. The final CPI reading in Poland is unlikely to differ markedly from the flash estimate of 15.5% year-on-year. However, given that gas prices at the pump continued to decline in the final week of July, we do not rule out a downward revision to 15.4% YoY. In the long term, we expect the summer months to be marked by relatively stable, albeit very high, inflation. Inflationary pressure is projected to re-emerge with the beginning of the heating season in autumn and at the beginning of 2023 due to the upswing in regulated prices. CNB minutes should reveal the details of the new board's discussion from the last meeting when the central bank left rates unchanged for the first time since May 2021. In addition to the minutes, the full forecast will be released, including alternative scenarios. Hungary's rating review by S&P will also be published later today. We do not expect a change in the rating outlook (BBB, stable), but a downgrade is in play, mainly due to energy dependence and uncertain access to EU money. For today, we do not see many impulses from the regional calendar and the main issue remains the current level of EUR/USD, which is playing positively into the hands of the CEE currencies for now. We see the Polish zloty and Hungarian forint fairly priced, but it is hard to be bullish in this part of the region given the energy risks and the escalating conflict with the European Commission over access to EU money. The koruna shook off another batch of short positions yesterday and we believe EUR/CZK should gradually start to return to higher levels, given that with the region's most dovish central bank on its back, it is hard to find justification for the current EUR/CZK levels. Frantisek Taborsky Read this article on THINK TagsGasoline FX Daily FX Dollar CEE region Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The EUR/USD Pair Showed Local Speculative Interest In Short Positions Yesterday

Forex Market May Surprise Us Today! EUR/GBP May Rally, What GBP/USD Traders Have To Do To Make The Pair Increase?

InstaForex Analysis InstaForex Analysis 12.08.2022 12:17
Relevance up to 09:00 2022-08-13 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Although the US inflation data has been very encouraging lately, Fed officials said the central bank is unlikely to change its stance on interest rates this year and the next. Minneapolis Fed President Neil Kashkari noted that the benchmark rate could reach 3.9% by the end of this year and rise to 4.4% by the end of 2023.   Chicago Fed President Charles Evans had the same view, mentioning that although inflation eased, it is still unacceptably high. He said they will ensure that inflation returns to 2%. At the moment, inflation has fallen below estimates, prompting investors to lower bets that the Fed will go for another three-quarters of a percentage point rate hike in September. But San Francisco Fed President Mary Daly said in a recent speech that it is too early to declare victory in the central bank's fight against inflation, so it is likely that the Fed will still implement another 75 basis point hike in the next policy meeting.     In another note, the US released the latest data on jobless claims, which showed an increase for the second week in a row. It remained at the highest level since November, indicating continued moderation in the labor market, which is what the Federal Reserve is trying to achieve. Initial jobless claims rose by 14,000 to 262,000, slightly lower than the expected 265,000. The reason why jobless claims is on the rise is the layoffs and suspended hiring in companies, especially in the technology sector. Demand for new workers is also declining as the Federal Reserve raises interest rates. The four-week moving average, smoothing out the fluctuations, rose to 252,000. Another important report was the US producer price data, which unexpectedly fell in July due to lower energy prices. It dipped 0.5% from the previous month, but rose 9.8% from last year. There was also data on producer prices, which rose 0.2% from June and 7.6% from a year earlier. The numbers suggest that inflationary pressures are beginning to ease, which could eventually lead to a slowdown in consumer price growth.     In terms of the forex market, EUR/USD is trading above 1.0300 and has good chances for further growth. Consolidating beyond 1.0320 will give buyers an excellent chance to return to 1.0370, then go to 1.0430 and 1.0500. But if pressure returns around 1.0270, the pair could fall to 1.0230 and 1.0200. In GBP/USD, buyers need to stay above 1.2180 because only that can push the quote to 1.2220, 1.2260 and 1.2345. If pressure return around 1.280, the pair will fall to 1.2130 and 1.2100.   Read more: https://www.instaforex.eu/forex_analysis/318788
Chinese Data Shakes Dollar, US Stocks Higher Amid Disinflation Concerns and Bank Earnings Awaited

Today (USD) US Dollar May Skyrocket And Stock Market May Do The Opposite! | What's Possibly Ahead Of EUR/USD And GBP/USD?

InstaForex Analysis InstaForex Analysis 12.08.2022 12:23
Relevance up to 09:00 2022-08-14 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. According to the latest data, Dow lost its previous gains, while the S&P 500 and Nasdaq moved into negative territory The rally in equity markets is beginning to slow down amid growing fears that the Fed may still take advantage of the situation and continue raising rates because of high inflation. According to the latest data, Dow lost its previous gains, while the S&P 500 and Nasdaq moved into negative territory. Positive sentiment is also decreasing in Europe and Asia, while dollar and Treasury yields show growth. The recently-released jobless claims data in the US, albeit lower than expected, indicated an increase against the previous value, which probably convinced market players that the Fed will not miss a chance to continue actively raising interest rates. San Francisco Fed President Mary Daly said it is still necessary to raise rates in September, not by 0.25%, but by 0.50% or even 0.75%. This is why market players should closely follow the economic statistics coming in today, as that could signal what can be expected next week. There is a huge chance that dollar will resume growth, while the stock markets will end their rally. Forecasts for today:         EUR/USD The pair is trading above 1.0300. Increased selling pressure will push the quote to 1.0210. GBP/USD Although the pair is trading above 0.7100, an increase in selling pressure will bring the quote to 1.2080.   Read more: https://www.instaforex.eu/forex_analysis/318790
RBA Pauses Rates as Australian Dollar Slides; ISM Manufacturing PMI in Focus

Dollar (USD) Became Stronger, Not Enough Yet. Fed Better Meet Expectations!

John Hardy John Hardy 12.08.2022 14:23
Summary:  US treasury yields at the long end of the yield curve jumped higher yesterday to multi-week highs, a challenge to widespread complacency across global markets. The USD found a modicum of support on the development, though this was insufficient to reverse the recent weakening trend. It will likely take a more determined rise in US yields and a tightening of financial conditions, possibly on further Fed pushback against market policy expectations, to spark a more significant USD comeback. FX Trading focus: US yields jump, not yet enough to reverse recent USD dip A very interesting shift in the US yield curve yesterday as long yields jumped aggressively higher, with the 30-year yield getting the most focus on a heavy block sale of US “ultra” futures and a softer than expected 30-year T-bond auction from the US treasury. The 30-year benchmark yield jumped as much as 15 basis points from the prior close, with the 10-year move a few basis points smaller. We shouldn’t over-interpret a single day’s action, but it is a technical significant development and if it extends, could be a sign of tightening liquidity as the Fed ups its sales of treasuries and even a sign that market concern is growing that the Fed will fail to get ahead of inflation. As for the market reaction, the USD found some support, but it was modest stuff – somewhat surprisingly in the case of the normally very long-US-yield-sensitive USDJPY. Overnight, a minor shuffle in Japanese PMI Kishida’s cabinet has observers figuring that there is no real determined pushback yet against the Kuroda BoJ’s YCC policy, with focus more on bringing relief to lower income households struggling with price rises for essentials. Indeed, BoJ policy is only likely to come under significant pressure again if global yields pull to new cycle highs and the JPY finds itself under siege again. As for USDJPY, it has likely only peaked if long US yields have also peaked for the cycle. Chart: EURUSD EURUSD caught in limbo here, having pulled up through the resistance in the 1.0275+ area after a long bought of tight range trading, but not yet challenging through the next key layer of resistance into 1.0350+. It wouldn’t take much of a further reversal here to freshen up the bearish interest – perhaps a dip and close below 1.0250 today, together with a bit of follow through higher in US yields and a further correction in risk sentiment. Eventually, we look for the pair to challenge down well through parity if USD yields retest their highs and beyond. Source: Saxo Group Elsewhere – watching sterling here as broader sentiment may be at risk of rolling over and as we wind our way to the conclusion of the battle to replace outgoing Boris Johnson, with Liz Truss all but crowned. Her looser stance on fiscal prudence looks a sterling negative given the risks from UK external deficits. Her instincts seem pro-supply side on taxation, but the populist drag of cost-of-living issues has shown her to be quick to change her stripes – as she has often been, having reversed her position on many issues, including Brexit (was a former remainer). Today’s reminder of the yawning trade deficit (a current run rate of around 10% of GDP) and the energy/power situation together with dire supply side restraints on the UK economy have us looking for sterling weakness – a start would be a dip below 1.2100 in GBPUSD, which would reverse the reaction earlier this week to the US July CPI release. The week ahead features an RBNZ on Wednesday (market nearly fully priced for another two meetings of 50 basis points each). NZDUSD has looked too ambitious off the lows – there is no strong external surplus angle for the kiwi like there is for the Aussie – might be a place to get contrarian to the recent price action if global risk sentiment is set to roll over again finally now that the VIX has pushed all the way to 20 (!).  A Norges Bank meeting on Thursday may see the bank hiking another 50 basis points as it continues to catch up to inflationary outcomes. The US FOMC minutes are up next Wednesday and may be a bit of a fizzle, given that the bulk of the easing financial conditions that the Fed would like to push back against came after the meeting. Table: FX Board of G10 and CNH trend evolution and strength. The US dollar hasn’t gotten much from the latest development in yields – watching the next couple of sessions closely for direction there, while also watching for the risk of more sterling downside, while NZD looks overambitious on the upside. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs. The EURGBP turn higher could follow through here – on the lookout for that development while also watching GBPUSD status in coming sessions and whether the EURUSD move higher also follows through as per comments on the chart above. Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights (all times GMT) 1400 – US Fed’s Barkin (non-voter) to speak 1400 – US Aug. Preliminary University of Michigan sentiment Share Source: FX Update: US yield jump brings USD resilience if not a reversal.
In The US Q3 GDP May Reach 3%, But The Question Is What To Expect From Q4

In The US Q3 GDP May Reach 3%, But The Question Is What To Expect From Q4

ING Economics ING Economics 17.08.2022 09:03
A rebound in manufacturing and industrial output, coupled with a decent performance from the consumer sector and net trade and inventories being less of a drag support our view of 3%+ GDP growth in 3Q. However, the housing market, a weaker external environment, higher rates and deteriorating business surveys suggest tougher times ahead US industrial production for July exceeded consensus Industrial output bounces back on strong manufacturing The US July industrial production report has posted a very respectable 0.6% month-on-month gain versus the 0.3% consensus. Manufacturing led the way with a 0.7% increase as auto output jumped 6.6%, but even excluding this key component output was up 0.3%. Mining also rose 0.7% with oil and gas output jumping 3.3% MoM as high prices spurred drilling activity. Meanwhile utilities were a surprise drag, falling 0.8% MoM. US industrial output levels Source: Macrobond, ING Strong 3Q, but outlook for 4Q looks tougher This report provides more evidence that 3Q GDP should be good. We strongly suspect that consumer spending will be lifted by the cash flow boost caused by the plunge in gasoline prices and decent employment gains, trade will be supportive too, inventories less of a drag and now we know that manufacturing is rebounding. Putting this altogether we think 3% annualised growth is firmly on the cards. The worry is what happens in 4Q. Yesterday’s NY Empire manufacturing survey was awful and points to much weaker orders and activity later in the year.  We will be closely looking to see if this is replicated in the Philly Fed (Thursday), Richmond Fed (August 23rd) and others later in the month. Even if it is seen as an aberration there are plenty of reasons to expect weaker activity towards year end. A China slowdown and recession in Europe will weigh heavily while ongoing increases in interest rates and a deteriorating outlook for the housing market will also act as a major headwind. Residential construction worries mount... In that regard, today’s other main macro report, US housing starts, fell 9.6% MoM in July to 1,446k annualised versus the 1,527k consensus. This is the weakest reading since February 2021 with yesterday's plunge in NAHB home builder confidence suggesting further falls in construction activity is likely. Housing starts and home builder sentiment Source: Macrobond, ING   We will get existing and new home sales numbers over the next seven days with further weakness expected in both due to high prices and a doubling of mortgage rates hurting affordability and crushing demand. We also expect supply to continue increasing, which will put downward pressure on prices at a time when home builders continue to struggle to find workers and the legacy of high material costs. Direct residential construction will provide a major headwind for economic growth over the next 6-12 months, but it will also have knock-on effects for key retail sectors such as furniture, furnishings and building supplies given the strong correlation with housing transactions. Read this article on THINK TagsUS Recession Manufacturing Housing Construction Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
German Business Confidence Dips, ECB's Lagarde Hosts Central Banking Conference in Portugal, EUR/USD Drifts Higher

FOMC Minutes And Retail Sales Are Released Today! US Dollar (USD) May Be Trading Sideways!

ING Economics ING Economics 17.08.2022 09:14
Bonds quickly reversed their gains and look under further pressure from the goldilocks state of play across financial markets. There are risks to these not too hot nor too cold markets, however. A more hawkish Fed in today’s minutes is one. Hard US economic data point to a healthy 3Q but things should worsen in 4Q Source: Shutterstock Banking on a dovish Fed carries risks Bunds have tested the 1% yield level again after a 9bp round trip in two days. This is the proof that market moves in illiquid summer months, even more so due to bank holidays in some parts of Europe on Monday, should be taken with a pinch of salt. Bonds more broadly continue to trade weak with a bias toward higher yields evident since the start of the month. We attribute some of the move to better risk sentiment across developed markets, but risks to these goldilocks, neither too hot that central banks need to keep hiking nor too cold that the economy falls off a cliff, state of play abound. Hawkish FOMC minutes and strong retail sales could bump up the US yield curve Source: Refinitiv, ING   Tonight’s Fed minutes might well jar with the upbeat tone evident in financial markets The first and most obvious challenge is that central banks can ill afford a loosening of financial conditions as they still grapple with record high inflation. The Fed is clearly one example but by no means an isolated one. Tonight’s Fed minutes might well jar with the upbeat tone evident in many financial markets. Even if investors might be tempted to discount any hawkish concerns as ‘pre-CPI peak’, the tone of Fed comments since the July FOMC meeting leaves no doubt about their mood. This in turn should result in higher treasury yields, reaching above 3% again, and a softer tone in risk assets. Both economic optimism and tighter spread look at risk The discrepancy between soft and hard data in the US continues to drive some of the whipsaw in bond yields. Industrial production yesterday cemented our expectations for a solid 3Q GDP growth, and July retail sales, to be published today, should look equally solid. The contrast with sentiment indicators might only be a matter of timing however, with 4Q growth prospects looking a lot less healthy. It is difficult to imagine markets extrapolating this good stint of positive US numbers for long, with other corners of the economy, most notably housing, heading south. Risk of profit-taking in fixed income into the September supply window are rising Source: Refinitiv, ING   There is a looming risk of a profit-taking into the September/October supply window Another risk is coming from the rise in government bonds themselves. Independent of the tone of central banks, rising core yields bring about wider sovereign spreads. This has been evident in the underperformance of peripheral bond markets this week with greater volatility in core yields also affecting demand for spread products. There is also a looming risk of a profit-taking into the September/October supply window after the gains registered over the summer months. This may not be the case yet but, in the case of sovereign spreads, some investors may well decide that they do not want to go into the last month of Italian election campaign with too much exposure. Today's events and market view Eurozone 2Q GDP sees its preliminary release today. Consensus is for a print in line with the advanced 0.7% MoM/4% YoY first reading but the focus in financial markets is much more on the energy crunch facing the eurozone economy over the winter months. The main item on the economic calendar in the US is the July retail sales report. A fall in gasoline prices will depress the headline figure but this should free up cash for other goods and services according to our economics team. This could add to upward pressure on bond yields into the FOMC minutes. The US Treasury will also sell $8bn worth of 20Y T-bonds. The main potential market-mover will be later in the session however, in the form of the July FOMC minutes. The majority view is that the Fed can ill afford a further easing of financial conditions if it is to get inflation under control. This argues in favour of an overall hawkish tone coming out of the minutes. Michelle Bowman will also be on the wires. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Liquidity at Stake: Exploring the Risks and Challenges for Non-Bank Financial Intermediaries

Sterling (GBP) And Dollar (USD) Are At The Top Of The World!!! What To Consider Next?

John Hardy John Hardy 17.08.2022 17:04
Summary:  The stronger US dollar is beginning to dominate across FX, and we haven’t even seen risk sentiment roll over badly yet, although this time it could be the US dollar itself that defines and drives financial conditions across markets. Elsewhere, we have seen an interesting fundamental test of sterling over the last couple of sessions, as sterling has begun rolling over today, even as a ripping increase in rate tightening bets in the wake of another hot CPI print out of the UK this morning. FX Trading focus: USD dominating again, GBP rate spike impact fading fast and indicating danger ahead for sterling. RBNZ hawkishness fails to impress the kiwi. The US dollar rally is broadening and intensifying, and US long yields are threatening back higher, which is finally pushing back against the recent melt-up in financial conditions/risk sentiment. The US July Retail Sales report looks solid, given the +0.7% advance in “ex Autos and Gas” sales after the June spike in average nationwide gasoline price to the unprecedented 5 dollar/gallon level. Yes, July gasoline prices were lower than June’s, but there wasn’t a huge delta on the average price for the month, and the impact of lower gas prices will likely be more in the August full month of vastly lower prices – presumably averaging closer to 4/gallon, together with the psychological relief that the spike seems in the rear view mirror, even if we can’t know whether a fresh spike awaits in the fall, after the draw on strategic reserves is halted. A strong US dollar, higher US yields and a fresh unease in risk sentiment are a potential triple whammy in which the US dollar itself is the lead character, as USDJPY has reversed back above 135.00 even before the US data, suggesting a threat back toward the cycle highs. AUDUSD has entirely reversed its upside sprint above 0.7000, refreshing its bearish trend after a squeeze nearly to the 200-day moving average there. Elsewhere, EURUSD and GBPUSD are a bit stuck in the mud, watching 1.0100 and 1.2000 respectively. The most important additional aggravator of this USD volatility in coming sessions would be a significant break higher in USDCNH if China decides it is tiring again of allowing the CNH to track USD direction at these levels. The pressure has to be building there after the PBOC’s rate cut at the start of the week. The UK July CPI release this morning raised eyebrows with another beat of expectations across the board, the day after strong earnings data. The 10.1% headline figure represents a new cycle and the month-on-month figure failed to moderate much, showing +0.6% vs. +0.4% expected. Core inflation also rose more than expected, posting a gain of 6.2% YoY and thus matching the cycle high from  April. The Retail Price Index rose 12.3% vs. 12.1% expected. The market reaction was easily the most interesting, as we have seek UK yields flying higher but failing to impress sterling much after a bit of a surge yesterday and into this morning. Now, sterling is rolling over despite a 40 basis point advance(!) in the 2-year swap rate from yesterday’ open, much of that unfolding in the wake of the CPI release today. Chart: GBPUSD Not that much drama at the moment in the GBPUSD chart, but that is remarkable in and of itself, as the soaring UK yields of yesterday and particularly today in the wake of a higher than expected CPI release are not doing much to support sterling. When rate moves don’t support a currency, it is starting to behave somewhat like an emerging market currency, a dangerous signal for the sterling, where we watch for a break of 1.2000 to usher in a test of the cycle lows below 1.1800, but possibly even the pandemic panic lows closer to 1.1500. The Bank of England hikes will only a accelerate the erosion of demand and slowdown in the UK economy that will lead to a harsh recession that the Bank of England itself knows is coming, but may have to prove slow to react to due to still elevated inflation levels, in part on a weak currency. Source: Saxo Group The RBNZ hiked fifty basis points as expected overnight and raised forward guidance for the Official Cash Rate path to indicate the expectation that the OCR will peak near 4%, a raising and bringing forward of the expected rate peak for the cycle. In the press conference, RBNZ Governor Orr spelled out the specific guidance that he would like to get the rate to 4% and take a significant pause to see if that is enough. “Our view is that sitting around that 4% official cash rate level buys the monetary policy committee right now significant comfort that we would have done enough to see inflation back to our remit.” NZ short rates were volatile, but hardly changed by the end of the day, meaning that NZD direction defaulted to risk sentiment, with a fresh dip in AUDNZD erased despite a weak AUD, and NZDUSD confirming a bearish reversal. Table: FX Board of G10 and CNH trend evolution and strength. Note the big shift in USD momentum, the most notable on the chart, although the absolute value of the SEK negative shift has been even larger over the last few days as EU woes and the growth outlook weigh even more heavily on SEK, which is often leveraged to the EU outlook, also as EURSEK has now failed to progress lower after a notable break below the 200-day moving average. Note the AUD negative shift as well, with sluggish wage growth data overnight for Q2 offering no helping hand. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs. USDJPY looks to flip back to a positive trend on a higher close today or tomorrow, the recent flip negative in GBPUSD looks confirmed on a hold below 1.2000, and AUDUSD looks a matter of time before flipping negative as well, while USDCAD has beaten it to the punch – although a more forceful upside trend signal there would be a close above 1.3000 again. Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights (all times GMT) 1800 – US FOMC Minutes 1820 – US Fed’s Bowman (Voter) to speak 2110 – New Zealand RBNZ Governor Orr before parliamentary committee 0130 – Australia Jul. Employment Change (Unemployment Rate)   Source: FX Update: GBP in danger as rate spike fails to support. USD dominating.
The US PCE Data Is Expected To Confirm Another Modest Slowdown

Fed Reptesentatives Are Committed To Holding Back Price Growing And Control The Inflation According To Expectations

Conotoxia Comments Conotoxia Comments 18.08.2022 13:17
Last night's publication of the minutes of the last Fed meeting, which took place at the end of July, may have affected the US dollar's trading. The policymakers touched on the regulation of the digital asset market for the first time at such a meeting. According to the published minutes, Fed officials remain very attentive to inflation risks and are committed to lowering price growth and keeping inflation expectations under control. A commitment to tightening monetary policy can take place, even if it comes at the expense of economic growth, the FOMC minutes show. The July discussion touched on the possible risks of too many and too large interest rate hikes. There was also talk that the Fed may be pursuing too much restrictive monetary policy than is necessary to restore price stability in the economy. The Fed, for the moment, seems unconcerned about GDP data and the risk of a sustained slowdown or official recession, as officials said the economy is stable for now, pointing to strong job growth, a low unemployment rate and elevated wage growth. Moreover, there was also discussion of the possibility of a later upward revision of earlier GDP readings, which are revised over time. There was also a statement regarding possible further action by the Federal Reserve. Policymakers discussed the possibility of slowing the pace of interest rate hikes at some point, but this will require data readings that can be considered satisfactory in terms of the impact of current hikes on slowing inflation. Meanwhile, for the moment, it may be crucial to maintain a restrictive stance to avoid a loosening of inflation expectations. Initially, after the release of the minutes, the EUR/USD exchange rate rose to 1.0200, before retreating to the region of 1.0150 this morning. The reaction thus appears to be mixed, without leading to a major impulse, and the exchange rate of the main currency pair has remained in consolidation since the morning of August 16. On Wall Street, on the other hand, indexes were down after the publication. The S&P500 fell 0.3 percent and the Nasdaq 100 fell 0.6 percent. The committee also turned its attention to the world of digital assets. Participants recognized the growing importance of digital assets and their increasing interconnectedness with other segments of the financial system, underscoring the need to establish a robust supervisory and regulatory framework for the sector to adequately mitigate potential systemic risks. Several participants mentioned the need to strengthen supervision and regulation of certain types of non-bank financial institutions, according to published minutes. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.   Source: Highlights from the Fed minutes
The Commodities Feed: China's 2023 growth target underwhelms markets

Apple Concentrated On Vietnam Productions As China Having Problems With Energy Supply

Marc Chandler Marc Chandler 18.08.2022 14:03
Overview: The sell-off in European bonds continues today. The 10-year German Bund yield is around four basis points higher to bring three-day increase to about 22 bp. The Italian premium over Germany has risen by almost 18 bp over these three sessions. Its two-year premium is widening for the fifth consecutive session and is above 90 bp for the first time in almost three weeks. The 10-year US Treasury yield is a little softer near 2.88%. Most of the large Asia Pacific equity markets fell, with India a notable exception. Europe’s Stoxx 600 snapped a five-day rally yesterday with a 0.9% loss. It is slightly firmer today, while US futures are hovering around yesterday’s closing levels. The greenback is firm against most of the major currencies. The Australian and Canadian dollars  and Norwegian krone and sterling are the most resilient today. The Philippines, like Norway hiked 50 bp but unlike Norway, the currency has not been bought. Most emerging market currencies are softer today. Gold is trying to break a three-day slide after approaching $1760. It settled last week at $1802. October WTI found a base a little below $85.50 and is around $88.50 near midday in Europe. The week’s high was set Monday by $91.50. US natgas is up 1.1% to recoup yesterday’s loss in full. Europe’s benchmark is extended this week’s run. It finished last week near 205.85 and now is around 232.00, a 12.7% gain after 6% last week. Iron ore ended a four-day 8% slide. September copper is recovering from the early drop to near two-week lows ($354.20) and is now near 362.00. A move above yesterday’s high (~$365) would be constructive. The sell-ff in September wheat has accelerated. It is off for the fifth consecutive session and is at its lowest level since January. After falling around 3% in three days from last Friday, it is off more than 5% between yesterday and today. Asia Pacific For good reasons, Beijing and Washington suspect the other of trying to change that status quo over Taiwan  The visits by US legislators may be only the initial efforts by Congress to force a more aggressive US position. It could come to a head in the fall when a bill that wants to recognize Taiwan as a major non-NATO ally and to foster Taiwan's membership in international forums will draw more attention. Meanwhile, US-Taiwan trade talks will begin later this year that was first aired a couple of months ago. At the same time, the Biden administration has been considering lifting some of the tariffs levied by the previous administration, but China's militaristic response to the visits makes it more difficult. Biden wants to lift the tariffs not to reward Beijing but to ease the costs to Americans. The Consumer Technology Association, an industry group, estimated that the tariffs have boosted the bill for American consumer technology companies by around $32 bln. The tariffs are paid to the US government. It seems that in lieu of lifting the tariffs, a broad exclusion process is possible. Related but separately, the Nikkei Asia reported that Apple is in talks to produce its watches and computers in Vietnam for the first time  Two suppliers have been producing Apple Watches in northern Vietnam. A couple of months ago, reports indicated that Apple would more some production of its tablets to Vietnam. Apple's ecosystem is establishing a presence in Vietnam, with nearly two dozen suppliers have factories now, almost doubling since 2018. As a result of these forces and the movement of capacity outside of China, Vietnam's trade surplus with the US is exploding. The $33 bln surplus in 2016 ballooned to $91 bln last year and was nearly $58 bln in the first half. For the past five years, the dollar has traded in a roughly 2% band around VND23000. The greenback is near the upper end of the range. Australia's July jobs report was disappointing  It lost almost 87k full-time positions after gaining nearly 53k in June. Part-time positions increased (46k), leading to a 40.9k loss of overall jobs. The median forecast (Bloomberg survey) was for a gain of 25k jobs. The unemployment rate slipped to a new record low of 3.4% (from 3.5%) but this was due to a sharp drop in the participation rate (66.4% from 66.8%). Ostensibly, this could give the central bank space to be more flexible at its September 6 meeting. However, the futures market as taken it in stride that has left the odds of a 50 bp hike next month essentially unchanged around 57%. This is essentially where it was at the end of last week and the week before. Many are now familiar with China's rolling lockdowns to combat Covid and the implosion of property market, a key engine of growth and accumulation  A new threat has emerged. The extreme weather has seen water levels in Sichuan's hydropower reserves as much as 50% this month, according to report, prompting the shuttering of factories (hub for solar panels, cement, and urea). Dazhou, a city of nearly 3.5 mln people, imposed a 2 1/2-hour power cuts this week that were expanded to three hours yesterday. Office buildings in Chengdu, the provincial capital, were barred from using air conditioning. Many areas in central and northern China imposed emergency measures to ensure the availability of drinking water. The heat and drought threaten summer crops and risk greater food-driven inflation. At the same time, Shanxi, which provides about a quarter of China's coal is worried about floods, it has suspended the operation of more than 100 mines since June. The government-imposed measures to boost output and Shanxi coal output rose by around 16% in H1.  The dollar is confined to a narrow range, straddling the JPY135 area  It has held `below last week's high around JPY135.60 and above the JPY134.55, where options for $700 mln expire today. The Australian dollar has been sold aggressively this week. It began near $0.7115 and tested $0.6900 today, meeting the (50%) retracement objective of the rally from the mid-July low (~$0.6880). It was only able to make a marginal new low today, suggesting that the selling pressure has abated. The next retracement (61.8%) is closer to $0.6855. Initial resistance is seen around $0.6950. After slipping a little yesterday, the greenback returned to its recent highs against the Chinese yuan around CNY6.7960. This year's high was set in May near CNY6.8125. Between Covid lockdowns, the weather disruptions, and the continued unwinding of the property bubble, a weaker yuan may the path of least resistance. The PBOC set the dollar's reference rate at CNY6.7802 compared with expectations from Bloomberg's survey of CNY6.7806. The yuan is falling for the sixth consecutive month against the dollar. Europe The eurozone may not have completed its banking and monetary union, but the ECB said that it would harmonize how banks offer crypto assets and have sufficient capital and expertise  Crypto companies have negotiated with national authorities in several EMU member countries, but common EU licensing rules are unlikely any time soon. There is a patchwork of differing national rules, and in some countries, some types of crypto activity may require a banking license, for example. Norway's central bank hiked its deposit rate by 50 bp and indicated it would "most likely" lift rates again next month What makes today's move somewhat more aggressive that it may appear is that the hike took place at a meeting that did not include an economic update and projections for the future path of policy. Norges Bank acknowledged that the policy rate trajectory would be faster than projected in June and the inflation risks being higher for longer. The deposit rate now sits at 1.75%. Another 50 bp hike next month (September 22) seems likely followed by a 25 bp move in November, the last meeting of the year. The euro briefly popped a little above $1.02 on what was initially seen as dovish FOMC minutes in the North American afternoon yesterday  However, it returned to yesterday's lows low near $1.0145 before finding a bid. The week's low was set Tuesday slightly below $1.0125, which is ahead of the retracement objective we identified near $1.0110. The euro is consolidating as the US two-year premium over Germany falls to its lowest level in a nearly a month (2.54%), and almost 25 bp below the peak seen after the US jobs data on August 5. Labor disputes are crippling UK trains, buses, subways, and a key container port today. Sterling slipped to $1.1995, its lowest level since July 26. The nicking of the neckline of a possible double top was not a convincing violation and sterling has recovered to the $1.2060 area in the London morning. If this is not the peak in sterling, it seems close. Tomorrow, the UK is expected to report a decline in July retail sales, excluding gasoline. This measure of retail sales rose by 0.4% in June, the first increase since last October. The median forecast (Bloomberg survey) is for a 0.3% fall. The swaps market is pricing in a 50 bp hike at the mid-September BOE meeting and about a 1-in-5 chance of a 75 bp move. America US interest rates softened and dragged the dollar lower following the release of the FOMC minutes  The market seems to have focused on the concern of "many" members that it could over-tighten but there was no sign that this was going to prevent them for raising rates further. Indeed, it suggest that the risk of inflation expectations becoming embedded was greater. More hikes were appropriate, the minutes said, and a restrictive stance may be required for "some time". The minutes also played the recent pullback in commodity prices as an indicator of lower inflation, which it still says the evidence is lacking. When everything was said and done the September Fed funds futures were unchanged for the fourth consecutive session. Autos and gasoline held by retail sales in July, but excluding them, retail sales rose by 0.7%, matching the June increase  The core measure, which also excludes building materials and food services rose a solid 0.8%. Retail sales account for around 40% of personal consumption expenditures. The July PCE is due next week (August 26) and picks up service consumption too. The early call is for it to rise by 0.5%. However, it too is a nominal report, and in real terms, a 0.3%-0.4% gain would be a strong showing. The retail sales report lent credence to anecdotal stories about department stores discounting prices to move inventory. Amazon's Prime Day (July 12-13) was claimed to be the biggest so far. Online sales overall surged 2.7%. Today's data includes weekly jobless claims, the Philadelphia Fed survey, existing home sale, and the index of Leading Economic Indicators  Th four-week average of weekly jobless claims rose to 252k in the week ending August 5. Recall the four-week moving average, used to smooth out some of the noise bottomed in the week ending April 1 at 170.5k. They averaged around 238k in December 2019, which was the highest since the first half of January 2018. Continuing claims have edged higher in recent weeks, but at 1.428 mln, they are roughly 20% below the peak at the start of this year. The Philadelphia Fed survey is particularly interesting today because of the disastrous Empire State survey. The median forecast in Bloomberg's survey is for a -5 reading after -12.3 in July. Meanwhile, existing home sales have fallen for five months through June. In fact, new home sales have been fallen every quarter since the end of 2020, with the exception of Q3 21. They fell by an average of 1.7% in Q1 22 and 3.8% in Q2 22. The median forecast is for a nearly 5% decline in July. The market tends not to get excited about the leading economic index series. Economists expected the fifth consecutive decline. The only month it rose this year was February. The US dollar extended its recovery against the Canadian dollar to reach almost CAD1.2950, its highest level since August 8 today  It was pressed lower by new offers in the European morning that drove it back to almost CAD1.2900. The market may take its cues from the S&P 500 and the general risk appetites in the North American session. With the intraday momentum indicators stretched, yesterday's post-FOMC minutes low near CAD1.2880 may offer sufficient support. The greenback rose to a five-day high against the Mexican peso yesterday around MXN20.09. It is consolidating and straddling the MXN20.00 area. Our reading of the technical condition favors the dollar's upside, and the first important target is near MXN20.20. The US dollar gapped higher against the Brazilian real yesterday and approached the BRL5.22 area, where the 20-day and 200-day moving averages converge. The opening gap was closed late on the pullback spurred by the reading of FOMC minute headlines. The price action is similar to the peso, where the dollar has traded heavily since last month but appears to have found a bottom. A break above BRL5.22 would target the month's high near BRL5.3150.       Disclaimer   Source: Fed Minutes were Not as Dovish as Initially Read
West Texas Intermediate (WTI) Price Analysis: The Oil Price Has Corrected And Dropped

Crude Oil Price Probably Not Reach 100$(USD) Shortly

Swissquote Bank Swissquote Bank 18.08.2022 15:56
The equity rally in the US didn’t pick up momentum after the Federal Reserve (Fed) released its latest meeting minutes, which sounded more hawkish-than-expected, or more hawkish-than-what-was-needed-to-give-another-boost to the US stock markets. The biggest take was that the Fed will continue tightening its policy until it sees that inflation is ‘firmly on path back to 2%’. The S&P500 fell 0.72% as Nasdaq gave back 1.20%, although the jump in the US 2-year yield was relatively soft, and the Fed funds futures scaled back the expectation of a 75 bp hike in the next meeting. Crude price completed an ABCD pattern, and it is more likely than not we see the price rebound to the $100 level in the medium run. In China, Tencent announced its first ever revenue drop as government crackdown continued taking a toll on its sales, and the pound couldn’t gain even after the above 10% inflation data boosted the Bank of England (BoE) hawks and the call fall steeper rate hikes to tame inflation in the UK. Watch the full episode to find out more! 0:00 Intro 0:28 As expected, Fed minutes were more hawkish-than-expected 3:39 Crude oil has more chance to rebound than to fall 6:02 Tencent posts first-ever revenue drop 7:14 Apple extends gains, but technicals warn of correction 8:38 Pound unable to extend gains despite rising Fed hawks’ voices Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Fed #FOMC #minutes #USD #GBP #inflation #Tencent #Alibaba #earnings #crude #oil #natural #gas #coal #futures #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH
Rates Surge: US Service Sector Strengthens Yields

Sterling (GBP) And Euro (EUR) Can Barely Stand On Their Feet. Strong Dollar (USD)

Kim Cramer Larsson Kim Cramer Larsson 19.08.2022 09:12
EURUSD was rejected at key resistance at around 1.0360 and the falling upper trendline and is now close to test key support at around 1.01. If EURUSD closes below the support, parity is likely to be tested shortly after.RSI is still showing negative sentiment after failing to break above 60 threshold supporting the bearish picture. If RSI closes below 40 threshold combined with a EURUSD close below 1.01 down trend is confirmed., At the time of writing Bollinger bands are expanding indicating the initial stage of a (down)trend. IF EURUSD closes outside of the lower Bollinger band it is further a strong indication of a down trend.   Source: Saxo Group GBPUSD has formed a Double Top like pattern on the very short term. If GBPUSD closes below 1.20 it is confirmed and GBPUSD is likely to test July lows at around 1.1760 . If GBPUSD is to move the same distance as the difference between the peak and low of the Double Top formation after breaking 1.20 it could reach 1.1729 illustrated by the two vertical arrows. However, there could be more downside in store for GBPUSD. If it takes out 1.1760 there is not support before around 1.14. See weekly chart Source: Saxo Group     Source: Saxo Group Source: Technical Update - EURUSD and GBPUSD testing key supports. Will they hold or will EURUSD test parity again and GBPUSD drop to 1.14?
German Business Confidence Dips, ECB's Lagarde Hosts Central Banking Conference in Portugal, EUR/USD Drifts Higher

Fed's Plan Is To Push For More Rate Hikes To Boost Dollar (USD)!?

Saxo Strategy Team Saxo Strategy Team 19.08.2022 10:37
Summary:  Better than expected economic data continued to support sentiment in US in contrast to Europe, where ECB’s Schnabel's warning on the growth/inflation picture aggravated concerns. Fed speakers meanwhile continued to push for more rate hikes this year, aiding dollar strength despite lack of a clear direction in long end yields. EUR and GBP broke below key support levels, but oil prices climbed higher amid improving demand outlook but sustained supply issues. Focus now on Jackson Hole next week. What is happening in markets? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)  In its second lightest volume session of the year, U.S. equities edged modestly higher, S&P 500 +0.23%, Nasdaq 100 +0.26%. As WTI crude climbed 2.7%, rebounding back above $90, the energy space was a top gainer aside from technology. Exxon Mobil (XOM:xnys) gained 2.4%.  Cisco (CSCO:xnas) surged 5.8% after reporting better-than-expected revenues. Nvidia (NVDA:xnas), +2.4% was another top contributor to the gain of the S&P 500 on Wednesday.  95% of S&P 500 companies have reported Q2 results, with about three-quarters of them managing to beat analyst estimates. On Friday there is a large number of options set to expire.  The U.S. treasury yield curve bull steepened on goldilocks hope The U.S. 2-10-year curve steepened 7bps to -32bps, driven by a 9bp decline in the 2-year yield.  In spite of hawkish Fed official comments and the August Philadelphia Fed Index bouncing back to positive territory, the market took note of the falls in the prices paid diffusion index and the prices received index from the survey and sent the short-end yields lower.  Hong Kong’s Hang Seng (HSIQ2) and China’s CSI300 (03188:xhkg) Both Hang Seng Index and CSI300 declined about 0.8%.  Tencent (00700:xhkg) rose 3.1% after reporting results that beat estimates as a result of better cost control and adverting revenues. Other China internet stocks traded lower, Bilibili (09626:xhkg) -4.2%, Baidu (09888:xhkg) -4.5%, Alibaba (09988:xhkg) -2.1%, JD.COM (09618:xhkg) -2.5%. The surge of Covid cases in China to a three-month high and the Hainan outbreak unabated after a 2-week lockdown, pressured consumer stocks.  Great Wall Motor (02333:xhkg) led the charge lower in autos, plunging near 6%.  Other automakers fell 2% to 4%.  Geely (00175:xhkg) fell 3.1% after reporting 1H earnings missing estimates.  A share Chinese liquor names declined, Kweichow Moutai (600519:xssc) -1.2%, Wuliangye Yibin (000858:xsec) -1.6%. Chinese brewers were outliner gainers in the consumer space, China Resources Beer (00291:xhkg) +4.8%, Tsingtao Brewery (00168:xhkg) +1.9%. Chinese property developers traded lower with Country Garden (02007:xhkg) losing the most, -5.2% , after warning that 1H earnings may have been down as much as 70%. The China Banking and Insurance Regulatory Commission (CBIRC) is looking at the quality of real estate loan portfolios at some financial institutions.  EURUSD and GBPUSD break through key support levels Dollar strength prevailed into the end of the week with upbeat US economic data and a continued hawkish Fedspeak which continued to suggest more Fed rate hikes remain in the pipeline compared to what the market is currently pricing in. EUR and GBP were the biggest loser, with both of them breaking below key support levels. EURUSD slid below 1.0100 handle while GBPUSD broke below 1.2000 despite a selling in EGBs and Gilts. USDJPY also broke above 136 in early Asian trading hours despite lack of a clear direction in US 10-year yields and a slide in 2-year yields. AUDUSD testing a break below 0.6900 as NZDUSD drops below 0.6240. Crude oil prices (CLU2 & LCOV2) Oil prices reversed their drop with WTI futures back above $90/barrel and Brent futures above $96. Upbeat US economic data has supported the demand side sentiment in recent days. Moreover, President Xi’s comment that China will continue to open up the domestic economy also aided the demand equation. Supply concerns, meanwhile, were aggravated by geopolitical tension around a potential incident at the Zaporizhzhia nuclear plant in Ukraine. Meanwhile, Shell hinted at reducing the capacity of Rhineland oil refinery due to the lower water level on the Rhine river and said the situation regarding supply is challenging but carefully managed. Gold (XAUUSD) still facing mixed signals The fate of gold has been turned lower again this week with the yellow metal facing decline of 2.5% so far in the week and breaking below the $1759 support, the 38.2% retracement of the July to August bounce. Stronger dollar, along with Fed’s continued hawkish rhetoric, weighed. Silver (XAGUSD) is also below the key support at $19.50, retracing half of its recent gains. The short-term direction has been driven by speculators reducing bullish bets, but with inflation remaining higher-for-longer, the precious metals can continue to see upside in the long run. What to consider? Existing home sales flags another red for the US housing market US existing home sales fell in July for a sixth straight month to 4.81 mn from 5.11 mn, now at the slowest pace since May 2020, and beneath the expected 4.89 mn. Inventory levels again continued to be a big concern, with supply rising to 3.3 months equivalent from 2.9 in June. This continues to suggest that the weakening demand momentum and high inventory levels may weigh on construction activity. US economic data continues to be upbeat The Philly Fed survey outperformed expectations, with the headline index rising to +6.2 (exp. -5.0, prev. -12.3), while prices paid fell to 43.6 (prev. 52.2) and prices received dropped to 23.3 (prev. 30.3). new orders were still negative at -5.1, but considerably better than last month’s -24.8 and employment came in at 24.1 from 19.4 previously. While this may be a good signal, survey data tends to be volatile and a long-term trend is key to make any reasonable conclusions. Jobless claims also slid to 250k still suggesting that the labor market remains tight. Fed speakers push for more rate hikes St. Louis Federal Reserve President James Bullard flagged another 75 basis point rate hike at the September meeting and hinted at 3.75-4% Fed funds rate by the end of the year with more front-loading in 2022. Fed’s George, much like Fed’s Daly, said that last month’s inflation is not a victory and hardly comforting. Bullard and George vote in 2022. Fed’s Kahskari said that he is not sure if the Fed can avoid a recession and that there is more work to be done to bring inflation down, but noted economic fundamentals are strong. Overall, all messages remain old and eyes remain on Fed Chair Powell speaking at the Jackson Hole conference on August 25. Japan’s inflation came in as-expected Japan’s nationwide CPI for July accelerated to 2.6% y/y, as expected, from 2.4% y/y in June. The core measure was up 2.4% y/y from 2.2% previously, staying above the Bank of Japan’s 2% target and coming in at the strongest levels since 2008. Upside pressures remain as Japan continues to face a deeper energy crisis threat into the winter with LNG supplies possibly getting diverted to Europe for better prices. Still, Bank of Japan may continue to hold its dovish yield curve control policy unless wage inflation surprises consistently to the upside. Cisco’s revenues came in flat, beating a previously feared decline Cisco Systems reports July 2022 quarter revenues of USD13.1 billion, down 0.2% YoY but better than the consensus of a 3% decline.  Net income came in at USD3.4 billion, -3.2% YoY but more than 1 percentage point above consensus.  The fall in product order was also smaller than feared.  The company guided the fiscal year 2023 revenue growth of +4% to +6%, ahead of the 3% expected and FY23 EPS of USD3.49 to USD3.56, in line with expectations as gross margin pressures are expected to offset the impact of higher sales.  NetEase’s Q2 results beat NetEase (09999:xhkg/NTES:xnas) reported above-consensus Q2 revenues, +13% YoY, and net profit from continuing operations, +28%.  PC online game revenues were above expectations, driven by Naraka Bladepoint content updates and the launch of Xbox version.  Mobile game segment performance was in line.  Geely Automobile 1H earnings missed estimates on higher costs Chinese automaker Geely reported higher-than-expected revenue growth of 29%YoY in 1H22 but a 35% YoY decline in net profit which was worse than analyst estimates.  The weakness in profit was mainly a result of a 2.6 percentage point compression of gross margin to 14.6% due to higher material costs and production disruption, higher research and development costs, and the initial ramping-up of production of the Zeekr model.  The company maintains its sales volume target of 1.65 million units, an growth of 24% YoY, for the full year of 2022.    For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: APAC Daily Digest: What is happening in markets and what to consider next – August 19, 2022
Ukraine Saves The Day For The World As The Corridor Shipping Crops Is Opened. Other Countries Harvest Is Quite Low Therefore To Weather Issues

Ukraine Saves The Day For The World As The Corridor Shipping Crops Is Opened. Other Countries Harvest Is Quite Low Therefore To Weather Issues

Saxo Strategy Team Saxo Strategy Team 19.08.2022 11:33
Summary:  Equity markets managed a quiet session yesterday, a day when the focus is elsewhere, especially on the surging US dollar as EURUSD is on its way to threatening parity once again, GBPUSD plunged well below 1.2000 and the Chinese renminbi is perched at its weakest levels against the US dollar for the cycle. Also in play are the range highs in longer US treasury yields, with any significant pull to the upside in yields likely to spell the end to the recent extended bout of market complacency.   What is our trading focus?   Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures bounced back a bit yesterday potentially impacted by the July US retail sales showing that the consumer is holding up in nominal terms. The key market to watch for equity investors is the US Treasury market as the US 10-year yield seems to be on a trajectory to hit 3%. In this case we would expect a drop in S&P 500 futures to test the 4,200 level and if we get pushed higher in VIX above the 20 level then US equities could accelerate to the downside. Fed’s Bullard comments that he is leaning towards a 75 basis point rate hike at the September meeting should also negatively equities here relative to the expectations. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) Hang Seng Index edged up by 0.4% and CSI300 was little changed. As WTI Crude bounced back above $90/brl, energy stocks outperformed, rising 2-4%. Technology names in Hong Kong gained with Hang Seng Tech Index (HSTECH.I) up 0.6%. Investors are expecting Chinese banks to cut loan prime rates on Monday, following the central bank’s rate cut earlier this week. The China Banking and Insurance Regulatory Commission (CBIRC) is looking at the quality of real estate loan portfolios and reviewing lending practices at some Chinese banks. The shares of NetEase (09999:xhkg/NTES:xnas) dropped more than 3% despite reporting above-consensus Q2 revenue up 13% y/y, and net profit from continuing operations up 28%.  PC online game revenue was above expectations, driven by Naraka Bladepoint content updates and the launch of Xbox version. Mobile game segment performance was in line. USD pairs as the USD rally intensifies The US dollar rally is finding its legs after follow up action yesterday that took EURUSD below the key range low of 1.0100, setting up a run at the psychologically pivotal parity, while GBPUSD slipped well south of the key 1.2000 and USDJPY ripped up through 135.50 resistance. An accelerator of that move may be applied if US long treasury yields pull come further unmoored from the recent range and pull toward 3.00%+. A complete sweep of USD strength would arrive with a significant USDCNH move as discussed below, and the US dollar “wrecking ball” will likely become a key focus and driver of risk sentiment as it is the premiere measure of global liquidity. The next key event risk for the US dollar arrives with next Friday’s Jackson Hole symposium speech from Fed Chair Powell. USDCNH The exchange rate is trading at the highs of the cycle this morning, and all traders should keep an eye out here for whether China allows a significant move in the exchange rate toward 7.00, and particularly whether CNH weakness more than mirrors USD strength (in other words, if CNH is trading lower versus a basket of currencies), which would point to a more determined devaluation move that could spook risk sentiment globally, something we have seen in the past when China shows signs of shifting its exchange rate regime from passive management versus the USD. Crude oil Crude oil (CLU2 & LCOV2) remains on track for a weekly loss with talks of an Iran nuclear deal and global demand concerns being partly offset by signs of robust demand for fuel products. Not least diesel which is seeing increasing demand from energy consumers switching from punitively expensive gas. Earlier in the week Dutch TTF benchmark gas at one point traded above $400 per barrel crude oil equivalent. So far this month the EU diesel crack spread, the margin refineries achieve when turning crude into diesel, has jumped by more than 40% while stateside, the equivalent spread is up around 25%, both pointing to a crude-supportive strength in demand. US natural gas US natural gas (NGU2) ended a touch lower on Thursday after trading within a 7% range. It almost reached a fresh multi-year high at $9.66/MMBtu after spiking on a lower-than-expected stock build before attention turned to production which is currently up 4.8% y/y and cooler temperatures across the country lowering what until recently had driven very strong demand from utilities. LNG shipments out of Freeport, the stricken export plant may suffer further delays, thereby keeping more gas at home. Stockpiles trail the 5-yr avg. by 13%. US Treasuries (TLT, IEF) The focus on US Treasury yields may be set to intensify if the 10-year treasury benchmark yield, trading near 2.90% this morning, comes unmoored from its recent range and trades toward 3.00%, possibly on the Fed’s increase in the pace of its quantitative tightening and/or on US economic data in the coming week(s). Yesterday’s US jobless claims data was better than expected and the August Philadelphia Fed’s business survey was far more positive than expected, suggesting expansion after the volatile Empire Fed survey a few days earlier posted a negative reading.   What is going on?   Global wheat prices continue to tumble ... with a record Russian crop, continued flows of Ukrainian grain and the stronger dollar pushing down prices. The recently opened corridor from Ukraine has so far this month seen more than 500,000 tons of crops being shipped, and while it's still far below the normal pace it has nevertheless provided some relief at a time where troubled weather has created a mixed picture elsewhere. The Chicago wheat (ZWZ2) futures contract touch a January on Thursday after breaking $7.75/bu support while the Paris Milling (EBMZ2) wheat traded near the lowest since March. Existing home sales flags another red for the US housing market while other US economic data continues to be upbeat US existing home sales fell in July for a sixth straight month to 4.81 mn from 5.11 mn, now at the slowest pace since May 2020, and beneath the expected 4.89 mn. Inventory levels again continued to be a big concern, with supply rising to 3.3 months equivalent from 2.9 in June. This continues to suggest that the weakening demand momentum and high inventory levels may weigh on construction activity. The Philly Fed survey meanwhile outperformed expectations, with the headline index rising to +6.2 (exp. -5.0, prev. -12.3), while prices paid fell to 43.6 (prev. 52.2) and prices received dropped to 23.3 (prev. 30.3). New orders were still negative at -5.1, but considerably better than last month’s -24.8 and employment came in at 24.1 from 19.4 previously Fed speakers push for more rate hikes St. Louis Federal Reserve President James Bullard 2.6% with more front-loading in 2022. Fed’s George, much like Fed’s Daly, said that last month’s inflation is not a victory and hardly comforting. Bullard and George vote in 2022. Fed’s Kashkari said that he is not sure if the Fed can avoid a recession and that there is more work to be done to bring inflation down, but noted economic fundamentals are strong. Overall, all messages remain old and eyes remain on Fed Chair Powell speaking at the Jackson Hole conference on August 26, next Friday.  Japan’s inflation came in as expected Japan’s nationwide CPI for July accelerated to 2.6% y/y, as expected, from 2.4% y/y in June. The core measure was up 2.4% y/y from 2.2% previously, staying above the Bank of Japan’s 2% target and coming in at the strongest levels since 2008. Upside pressures remain as Japan continues to face a deeper energy crisis threat into the winter with LNG supplies possibly getting diverted to Europe for better prices. Still, Bank of Japan may continue to hold its dovish yield curve control policy unless wage inflation surprises consistently to the upside.   What are we watching next?   Strong US dollar to unsettle markets – and Jackson Hole Fed conference next week? The US dollar continues to pull higher here, threatening the cycle highs versus sterling, the euro and on the comeback trail against the Japanese yen as well. The US dollar is a barometer of global liquidity, and a continued rise would eventually snuff out the improvement in financial conditions we have seen since the June lows in equity markets, particularly if longer US treasury yields are also unmoored from their recent range and rise back to 3.00% or higher.  The focus on the strong US dollar will intensify should the USDCNH exchange rate, which has pulled to the highs of the cycle above 6.80, lurch toward 7.00 in coming sessions as it would indicate that China is unwilling to allow its currency to track USD direction. As well, the Fed seems bent on pushing back against market expectations for Fed rate cuts next year and may have to spell this out a bit more forcefully at next week’s Jackson Hole conference starting on Thursday (Fed Chair Powell to speak Friday). Earnings to watch The two earnings releases to watch today are from Xiaomi and Deere. The Chinese consumer is challenged over falling real estate prices and input cost pressures on food and energy, and as a result consumer stocks have been doing bad this year. Xiaomi is one the biggest sellers of smartphones in China and is expected to report a 20% drop in revenue compared to last year. Deere sits in the booming agricultural sector, being one of the biggest manufacturers of farming equipment, and analysts expect a 12% gain in revenue in FY22 Q3 (ending 31 July).   Today: China Merchants Bank, CNOOC, Shenzhen Mindray, Xiaomi, Deere Economic calendar highlights for today (times GMT) 1230 – Canada Jun. Retail Sales 1300 – US Fed’s Barkin (Non-voter) to speak Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: Financial Markets Today: Quick Take – August 19, 2022
The Euro To US Dollar Instrument Did Not Change In Value

The Peak Of Inflation May Be Yet To Come? ECB Takes Steps

Conotoxia Comments Conotoxia Comments 19.08.2022 12:38
Inflation in the Eurozone appears to be rising steadily, which may be influenced by the rising cost of electricity and energy carriers. Today's release of producer prices in Germany suggests that the peak of inflation in the Eurozone may be yet to come. Germany is the eurozone's largest economy, so published readings for that economy could heavily influence data for the community as a whole. Energy for businesses rose by 105 percent. Today we learned that in July producer prices (PPI inflation) rose in Germany at the fastest pace on record. PPI inflation on an annualized basis was as high as 37.2 percent. A month earlier, price growth stood at 32.7 percent, while the market consensus was for inflation of 32 percent. Energy prices still seem to remain the main driver of producer costs. The cost of the aforementioned energy for businesses rose 105 percent compared to July 2021. Had it not been for this factor, producer prices could have risen much more slowly, by only 14.6 percent. - according to the published data. Entrepreneurs could translate such a significant increase in costs into their products, which could also raise consumer CPI inflation as a result. Hence, it is not impossible that a possible peak in inflation in the eurozone is yet to come. It could fall in the last quarter of this year, or early next year, assuming that energy prices begin to stabilize or fall. Otherwise, the eurozone economy could plunge into a deep crisis. EUR/USD near parity again The rate of the EUR/USD pair fell today to 1.0084 (yesterday it was around 1.0200) and again approached parity at 1.0000. Concerns about the eurozone economy may be reflected in the exchange rate. However, it seems that the reaction to negative data is becoming less and less, as if the market has to some extent already discounted some of the bad news that may come in the near future. The European Central Bank's forthcoming actions may put the brakes on the euro's sell-off. According to the interest rate market, the ECB may opt for two rate hikes of 50 basis points each this fall. The market assumes that the ECB will raise the main interest rate to 1.5 percent throughout the cycle. Unlike the Fed, which may reduce the pace of hikes at the end of the year, the ECB may only move with a rapid increase in interest rates. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Source: PPI inflation in Germany highest on record. Euro under pressure
USD/JPY Eyes Psychological Level of 150.00 Amidst BoJ's Monetary Policy and Fed's Rate Hike Expectations

The Bank Of England (BoE) Chasing The Inflation. Forex: GBPUSD, CNHJPY, EURUSD And Others

John Hardy John Hardy 19.08.2022 13:41
Summary:  The USD is breaking higher still, with important levels falling versus the Euro and yen yesterday. But the pain in sterling is most intense as presaged by the lack of a response to surging UK rates. Can the Bank of England do anything but continue to chase inflation from behind, caught between the Scylla of inflation and the Charybdis of a vicious recession? Also, USDCNH lurks at the top of the range ahead of another PBOC rate announcement on Monday. FX Trading focus: USD wrecking ball swinging again. UK faced with classic ugly choice between taking the pain via inflation or a severe recession The US dollar strength has picked up further after yesterday saw the breakdown in EURUSD below 1.0100 and a shot through 135.50 in USDJPY as longer US yields pushed to local highs. GBPUSD has been a bigger move on sterling weakness as discussed below.  A bit of resilient US data (especially the lower jobless claims than expected and a sharp revision lower of the prior week’s data taking the momentum out of the rising trend) has helped support the USD higher as longer US yields rose a bit further, taking the 10-year US treasury yield benchmark to new local highs, although we really need to see 3.00% achieved there after a few recent teases higher with no follow through higher. Looking forward to next week, the market will have to mull whether it has been too aggressive in pricing the Fed to pivot policy next year on disinflation and an easy-landing for the economy. The steady drumbeat of Fed pushback against the market’s complacency, together with a few of the recent data points (ISM Services, nonfarm payrolls, yesterday’s claims, etc.) has seen some of the conviction easing. But the key test will come next Friday, when Fed Chair Powell is set to speak on the same day we get the July PCE inflation data. Keep USDCNH on the radar through the end of today on the risk of an upside break above the range and Monday as the PBOC is set for a rate announcement (consensus expectations or another 10 bps of easing).   Chart: GBPUSD Lots at stake for sterling as discussed below, as it is a bit scary to see a currency weaken sharply despite a massive ratcheting higher in rate expectations from the central bank. The fall of 1.2000 has set in motion a focus on the 1.1760 cycle low, with an aggravated USD rise here and tightening of global financial conditions possibly quickly bringing the spike low toward 1.1500 from the early 2020 pandemic outbreak panic into focus. It is worth noting that the lowest monthly closing level for GBPUSD since the mid-1980’s is 1.2156. Without something dramatic to push back against USD strength next week from Jackson Hole, it is hard to see how this month may set the new low water mark for monthly closes. Source: Saxo Group GBPUSD slipped below 1.1900 this morning after breaking below the psychologically important 1.2000 level yesterday. As noted in the prior update, it’s remarkable to see the marked weakness in sterling despite the marking taking UK short rates sharply higher – with 2-year UK swaps over 100 basis points higher from the lows early this month. The Bank of England has expressed a determination to get ahead of the inflation spike and the market has priced in a bit more than a 50-basis-points-per-meeting pace for the three remaining BoE meetings of 2022. But is that sufficient given the UK’s structural short-comings and external deficits? Currency weakness risks adding further to spike in inflation this year. The BoE can take a couple of approaches in response: continue with the 50 bps hikes while bemoaning the backdrop and trotting out the expectation that eventually, economic weakness and easing commodity prices will feed through to drop inflation back into the range. Or, the BoE can actually get serious and super-size hikes even beyond the acceleration the market has priced, at the risk of bringing forward and increasing the severity of the coming recession. Until this week, the BoE’s anticipated tightening trajectory had prevented an aggravated weakness in sterling in broader terms, but the currency’s weakness despite a massive mark-up of BoE expectations has ratcheted the pressure on sterling and the BoE’s response to an entirely new level. Turkey shocked with a fresh rate cut yesterday of 100 basis points to take the policy rate to 13.00%. This with year-on-year inflation in Turkey at 79.6% and PPI at 144.6%, and housing measured at 160.6%. The move took USDTRY above 18.00, though it was a modest move relative to the size of the surprise. Turkish central bank chief Kavcioglu said that the bank would also look to “further strengthen macroprudential policy” by addressing the yawning difference between the policy rate and the rate commercial banks are charging for loans (more than double the official policy rate), as the push is to continue a credit-stimulated approach, inflation-be-darned.   Table: FX Board of G10 and CNH trend evolution and strength Note: a new color scheme for the FX Board! Besides changing the green for positive readings to a more pleasant blue, I have altered the settings such that trend readings don’t receive a more intense red or blue coloring until they have reached more significant levels – starting at an absolute value of 4 or higher. So far, most of the drama in sterling is the lack of a response to shifts in the UK yield curve, the broad negative momentum has only shifted a bit here, but watching for the risk of more. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs AUDNZD is crossing back higher, AUDCAD back lower, so NZDCAD….yep. Note the CNHJPY – if CNH is to make more waves, need to see more CNH weakness in an isolated sense, not just v. a strong USD. And speaking of a strong USD, the last holdouts in reversing, USDNOK and USDCHF, are on the cusp of a reversal. Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights (all times GMT) 1230 – Canada Jun. Retail Sales 1300 – US Fed’s Barkin (Non-voter) to speak   Source: FX Update: USD surging again, GBP spinning into abyss
Latam FX Outlook 2023: Brazil's Local Currency Bonds Can Be Very Attractive

Mexican Gold - Peso Is Climbing High. Russia Is Building Nuclear Plant In Turkey!?

Marc Chandler Marc Chandler 19.08.2022 14:26
Overview:  The dollar is on fire. It is rising against all the major currencies and cutting through key technical levels like a hot knife in butter. The Canadian dollar is the strongest of the majors this week, which often outperforms on the crosses in a strong US dollar environment. It is off 1.5% this week. The New Zealand dollar, where the RBNZ hiked rates this week by 50 bp, is off the most with a 3.5% drop. Emerging market currencies are mostly lower on the day and week as well. The JP Morgan Emerging Market Currency Index is off for the fifth consecutive session, and ahead of the Latam open, it is off 2.1% this week. Asia Pacific equities were mostly lower, and Europe’s is off around 0.4%. It was flat for the week coming into today. US futures are lower, and the S&P and NASDAQ look poised to snap its four-week advance. Gold, which began the week near $1800 is testing support near $1750 now. Next support is seen around $1744.50. October WTI is consolidating in the upper end of yesterday’s range, which briefly poked above $91. Initial support is pegged near $88. US natgas is softer for the third successive session, but near $9.04 is up about 3.2% for the week. Europe’s benchmark is up 1.7% and brings this week’s gain to almost 20%. Demand concerns weigh on iron ore. It was off marginally today, its fifth loss in six sessions. It tumbled 8.8% this week after a 1.15% gain last week. Copper is up fractionally after rising 1.3% yesterday. September wheat is trying to stabilize. It fell more than 4% yesterday, its fifth loss in a row. It is off around 8.5% this week. Asia Pacific Japan's July CPI continued to rise  Th headline now stands at 2.6%, up from 2.4% in June, up from 0.8% at the start of the year and -0.3% a year ago. The core measure that excludes fresh food accelerated from 2.2% to 2.4%. It is the fourth consecutive month above the 2% target. Excluding both fresh food and energy, Japan's inflation is less than half the headline rate at 1.2%. It was at -0.7% at the end of last year and did not turn positive until April. The BOJ's next meeting is September 22, and despite the uptick in inflation, Governor Kuroda is unlikely to be impressed. Without wage growth, he argues, inflation will prove transitory. With global bond yields rising again, the 10-year, the market may be gearing up to re-challenge the BOJ's 0.25% cap. The yield is finishing the week near 0.20%, its highest since late July. Separately, we note that after divesting foreign bonds in recent months, Japanese investors have returned to the buy side. They have bought foreign bonds for the past four weeks, according to Ministry of Finance data. Last week's JPY1.15 trillion purchases (~$8.5 bln) were the most since last September.  China surprised the markets to begin the week with a 10 bp reduction in the benchmark 1-year medium-term lending facility rate  It now stands at 2.75%. It was the first cut since January, which itself was the first reduction since April 2020. Before markets open Monday, China is expected to announce a 10 bp decline in the 1- and 5-year loan prime rates. That would bring them to 3.60% and 4.35%, respectively. These rates are seen closer to market rates, but the large banks that contribute the quotes are state-owned. There is some speculation that a larger cut in the 5-year rate. The one-year rate was cut in January, but the 5-year rate was cut by 15 bp in May. The dollar is rising against the yen for the fourth consecutive session  It has now surpassed the JPY137.00 area that marks the (61.8%) retracement of the decline from the 24-year high set-in mid-July near JPY139.40. There may be some resistance in the JPY137.00-25 area, but a retest on the previous high looks likely in the period ahead. The Australian dollar is off for the fifth consecutive session and this week's loss of 3% offset last week's gain of as similar magnitude and, if sustained, would be the largest weekly decline since September 2020. The Aussie began the week near $0.7125 and recorded a low today slightly below $0.6890. The $0.6855-70 area is seen as the next that may offer technical support. The PBOC set the dollar's reference rate at CNY6.8065 (median in Bloomberg's survey was CNY6.9856). The fix was the lowest for the yuan (strongest for the dollar) since September 2020. Yesterday's high was almost CNY6.7960 and today's low was a little above CNY6.8030. To put the price action in perspective, note that the dollar is approaching the (61.8%) retracement of the yuan's rise from mid-2020 (~CNY7.1780) to this year's low set in March (~CNY6.3065). The retracement is found around CNY6.8250. Europe UK retail sales surprised to the upside but are offering sterling little support  Retail sales including gasoline rose by 0.3% in July. It is the second gain of the year and the most since last October. Excluding auto fuel, retail sales rose by 0.4%, following a 0.2% gain in June. It is the first back-to-back gain since March and April 2021. Sales online surged 4.8% as discounts and promotions drew demand, and internet retailers accounted for 26.3% of all retail sales. Separately, consumer confidence, measured by GfK, slipped lower (-44 from -41), a new record low. Sterling is lower for the third consecutive session and six of the past seven sessions. The swaps market continues to price in a 50 bp rate hike next month and about a 1-in-5 chance of a 75 bp move. Nearly every press report discussing next month's Italian elections cited the fascist roots of the Brothers of Italy, which looks likely to lead the next government  Meloni, who heads up the Brothers of Italy and has outmaneuvered many of her rivals, and may be Italy's next prime minister, plays the roots down. She compares the Brothers of Italy to the Tory Party in the UK, the Likud in Israel, and the Republican Party in the US. The party has evolved, and the center-right alliance she leads no longer wants to leave the EU, it is pro-NATO, and condemns Russia's invasion of Ukraine. The center-right alliance may come close to having a sufficient majority in both chambers to make possible constitutional reform. High on that agenda appears to transform the presidency into a directly elected office. The Italian presidency has limited power under the current configuration, but it has been an important stabilizing factor in crisis. Ironically, the president, picked by parliament, stepped in during the European debt crisis and gave Monti the opportunity to form a technocrat government after Berlusconi was forced to resign in 2011. Fast-forward a decade, a government led by the Conte and the Five Star Movement collapsed and a different Italian president gave Draghi a chance to put together a government. It almost last a year-and-half. Its collapse set the stage for next month's election. The center-left is in disarray and its inability to forge a broad coalition greases the path for Meloni and Co. Italy's 10-year premium over German is at 2.25%, a new high for the month. Last month, it peaked near 2.40%. The two-year premium is wider for the sixth consecutive session. It is near 0.93%, more than twice what it was before the Draghi government collapsed. Some critics argue against the social sciences being science because of the difficulty in conducting experiments  Still an experiment is unfolding front of us. What happens when a central bank completely loses its independence and follows dubious economic logic?  With inflation at more than two decades highs and the currency near record lows, Turkey's central bank surprised everyone by cutting its benchmark rate 100 bp to 13% yesterday. Governor Kavcioglu hinted this was a one-off as it was preempting a possible slowdown in manufacturing. Even though President Erdogan promised in June rates would fall, some observers link the rate cut to the increase in reserves (~$15 bln) recently from Russia, who is building a nuclear plant in Turkey. The decline in oil prices may also help ease pressure on Turkey's inflation and trade deficit. The lira fell to new record-lows against the dollar. The lira is off about 7.5% this quarter and about 26.4% year-to-date. Significant technical damage has been inflicted on the euro and sterling  The euro was sold through the (61.8%) retracement objective of the runup since the mid-July two-decade low near $0.9950. That retracement area (~$1.0110) now offers resistance, and the single currency has not been above $1.01 today. We had suspected the upside correction was over, but the pace of the euro's retreat surprises. There is little from a technical perspective preventing a test on the previous lows. Yesterday, sterling took out the neckline of a potential double top we have been monitoring at $1.20. It is being sold in the European morning and has clipped the $1.1870 area. The low set-in mid-July was near $1.1760, and this is the next obvious target and roughly corresponds to the measuring objective of the double top.  America With no dissents at the Fed to last month's 75 bp hike, one might be forgiven for thinking that there are no more doves  Yet, as we argued even before Minneapolis Fed President Kashkari, once regarded as a leading dove, admitted that his dot in June was the most aggressive at 3.90% for year-end, hawk and dove are more meaningful within a context. Kashkari may be more an activist that either a hawk or dove. Daly, the San Francisco Fed President does not vote this year, suggested that a Fed funds target "a little" over 3% this year would be appropriate. She said she favored a 50 bp or a 75 bp move. The current target range is 2.25%-2.50%. and the median dot in June saw a 3.25%-3.50% year-end target. St. Louis Fed President Bullard says he favors another 75 bp hike next month. No surprise there. George, the Kansas, Fed President, dissented against the 75 bp hike in June seemingly because of the messaging around it, but it's tough to call her vote for a 50 bp hike dovish. She voted for the 75 bp move in July. She recognizes the need for additional hikes, and the issue is about the pace. George did not rule out a 75 bp hike while cautioning that policy operates on a lag. Barkin, the Richmond Fed President, also does not vote this year. He is the only scheduled Fed speaker today.  The odds of a 75 bp in September is virtually unchanged from the end of last week around a 50/50 proposition.  The October Fed funds implies a 2.945% average effective Fed funds rate. The actual effective rate has been rocksteady this month at 2.33%. So, the October contract is pricing in 61 bp, which is the 50 bp (done deal) and 11 of the next 25 bp or 44% chance of a 75 hike instead of a half-point move. Next week's Jackson Hole conference will give Fed officials, and especially Chair Powell an opportunity to push back against the premature easing of financial conditions  The better-than-expected Philadelphia Fed survey helps neutralize the dismal Empire State manufacturing survey. The median from Bloomberg's survey looked for improvement to -5 from -12.3. Instead, it was reported at 6.2. Orders jumped almost 20 points to -5.1 and the improvement in delivery times points to the continued normalization of supply chains. Disappointingly, however, the measure of six-month expectations remained negative for the third consecutive month. Still, the plans for hiring and capex improved and the news on prices were encouraging. Prices paid fell to their lowest since the end of 2020 (energy?) and prices received were the lowest since February 2021. The Fed also asked about the CPI outlook. The median sees it at 6% next year down from 6.5% in May. The projected rate over the next 10-years slipped to 3%. Canada and Mexico report June retail sales today  Lift by rising prices, Canada's retail sales have posted an average monthly gain this year of 1.5%. However, after a dramatic 2.2% increase in May, Canadian retail sales are expected (median in Bloomberg' survey) to rise by a modest 0.4%. Excluding autos, retail sales may have held up better. Economists look for a 0.9% increase after a 1.9% rise in May. Through the first five months of the year, Mexico's retail sales have risen by a little more than 0.5% a month. They have risen by a 5.2% year-over-year. Economists expected retail sales to have slowed to a crawl in June and see the year-over-year pace easing to 5.0%. The greenback rose the CAD1.2935 area that had capped it in the first half of the week. It settled near CAD1.2950 yesterday and is pushing closer to CAD 1.2980 now. Above here, immediate potential extends toward CAD1.3035. The US dollar is gaining for the third consecutive session against the Canadian dollar, the longest advancing streak in a couple of months. Support is seen in the CAD1.2940-50 area. The Mexican peso is on its backfoot, and is falling for the fourth session, which ended a six-day rally. The dollar has met out first target near MXN20.20 and is approaching the 20-day moving average (~MXN20.2375). Above there, the next technical target is MXN20.32. The broader dollar gains suggest it may rise above the 200-day moving average against the Brazilian real (~BRL5.2040) and the (38.2%) of the slide since the late July high (~BRL5.5140) that is found near BRL5.2185.    Disclaimer   Source: The Dollar is on Fire
Credit squeezing into central banks – what next?

Everyone Is Dissapointed In Euro (EUR). Japanese Officials Have To Face Discontests From Yields Rise

Marc Chandler Marc Chandler 21.08.2022 23:14
For many, this will be the last week of the summer. However, in an unusual twist of the calendar, the US August employment report will be released on September 2, the end of the following week, rather than after the US Labor Day holiday (September 5).   The main economic report of the week ahead will be the preliminary estimate of the August PMI  The policy implications are not as obvious as they may seem. For example, in July, the eurozone composite PMI slipped below the 50 boom/bust level for the first time since February 2021. It was the third consecutive decline. Bloomberg's monthly survey of economists picked up a cut in Q3 GDP forecasts to 0.1% from 0.2% and a contraction of 0.2% in Q4 (previously 0.2% growth). Over the past week, the swaps market has moved from around 80% sure of a 50 bp hike next month to a nearly 20% chance it will lift the deposit rate by 75 bp.  The UK's composite PMI fell in three of the four months through July  However, at 52.1, it remains above the boom/bust level, though it is the weakest since February 2021. The Bank of England's latest forecasts are more pessimistic than the market. It projects the economy will contract by 1.5% next year and another 0.3% in 2024. It has CPI peaking later this year at around 13% before falling to 5.5% in 2023 and 1.5% in 2024. Market expectations have turned more hawkish for the BOE too. A week ago, the swap market was pricing in a nearly 90% chance of another 50 bp hike. After the CPI jump reported in the middle of last week, the market fully priced in the 50 bp move and a nearly 30% chance of a 75 bp hike.   Japanese officials have successfully turned back market pressure that had driven the benchmark three-month implied volatility to 14% in mid-June, more than twice as high as it was at the start of the year  It slipped below 10% in recent days. The BOJ was forced to vigorously defend its 0.25% cap on the 10-year bond. It has spent the better part of the past three weeks below 0.20%. The BOJ has not had to spend a single yen on its defense since the end of June. However, with the jump in global yields (US 10-year yield rose 20 bp last week, the German Bund 33 bp, and the 10-year UK Gilt nearly 40 bp) and the weakness of the yen, the BOJ is likely to be challenged again.   The economy remains challenging  The composite PMI fell to 50.2 in July from 53.2 in June. It is the weakest reading since February. It has averaged 50.4 through July this year. The average for the first seven months last year was 49.0. The government is working on some support measures aimed at extending the efforts to cushion the blow of higher energy and food prices. Japan's Q2 GDP deflator was minus 0.4%, which was half of the median forecast in Bloomberg's survey, but it shows the tough bind of policy. Consider that the July CPI rose to 2.6%, and the core measure, which the BOJ targets, excludes fresh food, rose to 2.4% from 2.2%. The target is 2%, and it was the third month above it. Tokyo will report its August CPI figures at the end of the week.   Australia's flash PMI may be more influential as the futures market is nearly evenly split between a 25 bp hike and a 50 bp move at the September 6 central bank meeting  The minutes from the RBA's meeting earlier this month underscored its data dependency. However, this is about the pace of the move. The target rate is currently at 1.85%, and the futures market is near 3.15% for the end of the year, well beyond the 2.5% that the central bank sees as neutral. The weakness of China's economy may dent the positive terms-of-trade shock. The Melbourne Institute measure of consumer inflation expectations fell in August for the second month but at 5.9%, is still too high.  Through the statistical quirkiness of GDP-math, the US economy contracted in the first two quarters of the year  A larger trade deficit did not help, but the real problem was inventories. In fairness, more of the nominal growth resulted from higher prices than economists expected rather than underlying activity. Still, it does appear that the US economy is expanding this quarter, and the high-frequency data will help investors and economists assess the magnitude. While surveys are helpful, the upcoming real sector data include durable goods orders (and shipments, which feed into GDP models), July personal income and consumption figures, the July goods trade balance, and wholesale and retail inventories.   Consumption still drives more than 2/3 of the economy, and like retail sales, personal consumption expenditures are reported in nominal terms, which means that they are inflated by rising prices  However, the PCE deflator is expected to slow dramatically. After jumping 1% in June, the headline deflator is expected to increase by 0.1%. This will allow the year-over-year rate to slow slightly (~6.5% from 6.8%). The core deflator is forecast (median, Bloomberg's survey) to rise by 0.4%, which given the base effect, could see the smallest of declines in the year-over-year rate that stood at 4.8% in June. Given the Fed's revealed preferences when it cited the CPI rise in the decision in June to hike by 75 bp instead of 50 bp, the CPI has stolen the PCE deflator's thunder, even though the Fed targets the PCE deflator. Real consumption was flat in Q2, and Q3 is likely to have begun on firmer footing.   The softer than expected CPI, PPI, and import/export prices spurred the market into downgrading the chances of a 75 bp hike by the Fed next month  After the stronger than expected jobs growth, the Fed funds futures priced in a little better than a 75% chance of a 75 bp hike. It has been mostly hovering in the 40%-45% range most of last week but finished near 55%. It is becoming a habit for the market to read the Fed dovishly even though it is engaged in a more aggressive course than the markets anticipated. This market bias warns of the risk of a market reversal after Powell speaks on August 26.   At the end of last year, the Fed funds futures anticipated a target rate of about 0.80% at the end of this year. Now it says 3.50%. The pace of quantitative tightening is more than expected and will double starting next month. There is also the tightening provided by the dollar's appreciation. For example, at the end of 2021, the median forecast in Bloomberg's survey saw the euro finishing this year at $1.15. Now the median sees the euro at $1.04 at the end of December. And even this may prove too high.    The FOMC minutes from last month's meeting recognized two risks. The first was that the Fed would tighten too much. Monetary policy impacts with a lag, which also acknowledges that soft-landing is difficult to achieve. The market initially focused on this risk as is its wont. However, the Fed also recognized the risk of inflation becoming entrenched and characterized this risk as "significant." The Jackson Hole confab (August 25-27) will allow the Fed to help steer investors and businesses between Scylla and Charybdis.  Critics jumped all over Fed Chair Powell's claim that the Fed funds target is now in the area the officials regard as neutral. This was not a forecast by the Chair, but merely a description of the long-term target rate understood as neither stimulating nor restricting the economy. In June, all but three Fed officials saw the long-term rate between 2.25% and 2.50%. To put that in perspective, recall that in December 2019, the median view of the long-term target was 2.50%. Eleven of the 18 Fed officials put their "dot" between 2.25% and 2.50%. The FOMC minutes were clear that a restrictive stance is necessary, and the Fed clearly signaled additional rate hikes are required. The discussions at Jackson Hole may clarify what the neutral rate means.  Barring a significant downside surprise, we expect the Fed will deliver its third consecutive 75 bp increase next month. The strength and breadth of the jobs growth while price pressures remain too high and financial conditions have eased encourages the Fed to move as fast as the market allows. However, before it meets, several important high-frequency data points will be revealed, including a few employment measures, the August nonfarm payroll report, and CPI.   The market is also having second thoughts about a rate cut next year  At the end of July, the implied yield of the December 2023 Fed funds futures was 50 bp below the implied yield of the December 2022 contract. It settled last week at near an 8 bp discount. This reflects a growing belief that the Fed will hike rates in Q1 23. The March 2023 contract's implied yield has risen from less than five basis points more than the December 2022 contract to more than  20 bp above it at the end of last week.   Let's turn to the individual currency pairs, put last week's price action into the larger context, and assess the dollar's technical condition  We correctly anticipated the end of the dollar's pullback that began in mid-July, but the power for the bounce surprises. Key technical levels have been surpassed, warning that the greenback will likely retest the July highs.   Dollar Index: DXY surged by more than 2.3% last week, its biggest weekly advance since March 2020. The momentum indicators are constructive and not over-extended. However, it closed well above the upper Bollinger Band (two standard deviations above the 20-day moving average), found near 107.70. Little stands in the way of a test on the mid-July high set around 109.30. Above there, the 110-111.30 area beckons. While the 107.50 area may offer some support now, a stronger floor may be found closer to 107.00.   Euro:  The euro was turned back from the $1.0365-70 area on August 10-11 and put in a low near $1.0030 ahead of the weekend. The five-day moving average slipped below the 20-day moving average for the first time in around 3.5 weeks. The MACD is trending lower, while the Slow Stochastic did not confirm the recent high, leaving a bearish divergence in its wake. The only caution comes from the euro's push through the lower Bollinger Band (~$1.0070). Initially, parity may hold, but the risk is a retest on the mid-July $0.9950 low. A convincing break could target the $0.96-$0.97 area. As the euro has retreated, the US two-year premium over Germany has trended lower. It has fallen more than 30 bp since peaking on August 5. We find that the rate differential often peaks before the dollar.   Japanese Yen: The dollar will begin the new week with a four-day advance against the yen in tow. It has surpassed the (61.8%) retracement objective of the pullback since the mid-July high (~JPY139.40) found near JPY136.00. The momentum indicators are constructive, and the five-day moving average has crossed above the 20-day for the first time since late July. It tested the lower band of the next resistance bans seen in the JPY137.25-50 area at the end of last week. But it appears poised to re-challenge the highs. As volatility increases and yields rise, Japanese officials return to their first line of defense: verbal intervention.  British Pound: Sterling took out the neckline of a possible double top we have been monitoring that came in at $1.20. It projects toward the two-year lows set in mid-July near $1.1760, dipping below $1.18 ahead of the weekend. As one would expect, the momentum indicators are headed lower, and the five-day moving average has fallen below the 20-day moving average for the first time in four weeks. It has closed below its lower Bollinger Band (~$1.1910) in the last two sessions. A convincing break of the $1.1760 low clears the way to the March 2020 low, about 3.5-cents lower. Initial resistance is now seen around $1.1860 and, if paid, could signal scope for another 3/4 to a full-cent squeeze.  Canadian Dollar:  The Canadian dollar was no match for the greenback, which moved above CAD1.30 ahead of the weekend for the first time in a month. The momentum indicators suggest the US dollar has more scope to advance, and the next target is the CAD1.3035 area. Above there, the CAD1.3100-35 band is next. The high since November 2020 was recorded in the middle of July around CAD1.3225. After whipsawing in Q1, the five- and 20-day moving averages have caught the big moves. The shorter average crossed above the longer moving average last week for the first time since July 21. Initial support will likely be encountered near CAD1.2935.   Australian Dollar:  The Aussie was sold every day last week. It is the first time in a year, and its 3.4% drop is the largest since September 2020.   The rally from the mid-July low (~$0.6680) to the recent high (~$0.7135) looks corrective in nature. Before the weekend, it tested the rally's (61.8%) retracement objective. The momentum indicators are falling, and the Slow Stochastic did not confirm this month's high, creating a bearish divergence. A break of the $0.6850-60 area may signal follow-through selling into the $0.6790-$0.6800 band, but a retest on the July low is looking increasingly likely. Initial resistance is now seen near $0.6920.   Mexican Peso:  The peso's four-day slide ended a six-day run. The peso lost about 1.6% last week, slightly better than the 2.25% slide of the JP Morgan Emerging Market Currency Index. This month, the US dollar peaked around MXN20.8335 and proceeded to fall and forged a base near MXN19.81. It has met the (38.2%) retracement objective around MXN20.20 before the weekend. The next (50%) retracement is near MXN20.3230. The 200-day moving average is closer to MXN20.41. The dollar is probing the 20-day moving average seen a little below MXN20.24. The momentum indicators have only just turned up for the greenback. We suspect there may be potential to around MXN20.50 in the coming days.   Chinese Yuan:  The yuan was tagged with more than a 1% loss against the dollar last week, its biggest decline in three months. A combination of poor Chinese data, its small rate cut, and a resurgent US dollar spurred the exchange rate adjustment. At the end of July, China's 10-year yield was about 11 bp on top of the US. However, it switched to a discount after the US jobs data (August 5), and the discount grew every day last week, reaching 35 bp, the most since late June. After gapping higher before the weekend, the greenback reached nearly CNY6.8190, its highest level since September 2020. The next target is around CNY6.85, but given the divergence of policy, a move back toward CNY7.00, last seen in July 2020, maybe a reasonable medium-term target. The PBOC's dollar fix ahead of the weekend showed no protest of the weaker exchange rate.     Disclaimer   Source: Flash PMI, Jackson Hole, and the Price Action
Dollar (USD) Waits For The Jackson Hole Symposium Results. Nvidia With Good Earnings

Dollar (USD) Waits For The Jackson Hole Symposium Results. Nvidia With Good Earnings

Saxo Strategy Team Saxo Strategy Team 22.08.2022 11:41
Summary:  The dollar story will face a fresh test this week as the central bankers gather for the Jackson Hole symposium from August 25 to 27. We can expect some more push back on the 2023 easing expectations, and this could also mean some upside in US Treasury yields. July PCE due at the end of the week will likely be side-lined by the event, and any gasoline-driven easing should have little relevance. In Europe, the gas situation remains on watch and the July PMIs will likely spell more caution. China’s LPR cuts this morning have signalled a stronger support to the property markets, but the Covid situation and the power curbs continue to cloud the outlook. Earnings pipeline remains robust, key ones being Palo Alto, Nvidia and Intuit, followed by a few discount retailers like Dollar General and Dollar Tree in the U.S., and China Internet companies, JD.COM, and Meituan.   US dollar awaiting its next signals from the Jackson Hole There is a considerable tension between the market’s forecast for the economy and the resulting expected path of Fed policy for the rest of this year and particularly next year, as the market believes that a cooling economy and inflation will allow the Fed to reverse course and cut rates in a “soft landing” environment (the latter presumably because financial conditions have eased aggressively since June, suggesting that markets are not fearing a hard landing/recession). Some Fed members have tried to push back against the market’s expectations for Fed rate cuts next year it was likely never the Fed’s intention to allow financial conditions to ease so swiftly and deeply as they have in recent weeks. The risks, therefore, point to a Fed that may mount a more determined pushback at the Jackson Hole forum, the Fed’s yearly gathering at Jackson Hole, Wyoming that is often used to air longer term policy guidance. This will have further implications for the US dollar, which is threatening the cycle highs versus sterling, the euro and on the comeback trail against the Japanese yen as well. The US dollar is a barometer of global liquidity, and a continued rise would eventually snuff out the improvement in financial conditions we have seen since the June lows in equity markets, particularly if longer US treasury yields are also unmoored from their recent range and rise back to 3.00% or higher. Europe and UK PMIs may spell further caution The Euro-area flash composite PMI and the UK flash PMI for August are both due to be released on Tuesday. Following a slide in ZEW and Sentix indicators for July, the stage is set for a weaker outcome on the PMIs too. July composite PMI for the Euro-area dipped into contractionary territory at 49.9, while the UK measure held up at 52.1. The surge in gas and electricity prices continue to weigh on GDP growth outlook, with recession likely to hit by the end of the year. More price pressures to come to Asia Singapore's inflation likely nudged higher in July, coming in close proximity to 7% levels from 6.7% y/y in June. While both food and fuel costs continue to create upside pressures on inflation, demand-side pressures are also increasing as the region moves away from virus curbs. House rentals are also running high due to high demand and delayed construction limiting supplies. The Monetary Authority of Singapore has tightened monetary policy but more tightening moves can be expected in H2 even as the growth outlook has been downwardly revised. We also get Japan's Tokyo CPI for August, which is likely to suggest further gains above the Bank of Japan's 2% target. Consensus expectations point toward another higher print of 2.7% y/y for the headline measure and 2.5% y/y on the core measure, signalling inflationary pressures will continue to question the Bank of Japan's resolve on the ultra-easy policy stance. Malaysia’s July inflation is also due at the end of the week, and likely to go above the 4%-mark from 3.4% previously. Softer July US PCE print would not derail Fed’s tightening After a softer CPI report in July, focus will turn to the PCE measure – the version of the CPI that is tracked by the Fed to gauge price pressures. Lower gasoline prices mean that PCE prints could also see some relief, although we still upside pressures to inflation given that energy shortages will likely persist and easing financial conditions mean that inflation could return. We would suggest not to read too much into a softer PCE print this week, as the stickier shelter and services prices mean that the 2% inflation target of the Fed remains unachievable into then next year. This suggests that the aggressive tightening by the Fed will likely continue, despite any likely softness in the PCE this week. Housing markets, Covid-19 cases, and power curbs are key things to watch in China this week The data calendar is light in China this week with only July industrial profits data scheduled to release on Saturday.  This morning, China’s National Interbank Fund Center, based on quotes from banks and under the supervision of the PBoC, fixed the 1-year loan prime rate (“LPR”) 5 bps lower at 3.60% and the 5-year loan prime rates (“LPR”) 15 basis points lower at 4.30%.  The larger reduction in the 5-year LPR, which is the benchmark against which mortgage loan rates in China are set, may signal stronger support from the PBoC to the housing market.  Last Friday the Housing Ministry, the Ministry of Finance, and the PBoC, according to Xinhua News, jointly rolled out a program to make special loans through policy banks to support the delivery of presold residential housing projects which are facing difficulties in completion due to lack of funding.  Investors will monitor closely this week to gauge if there is additional information about the size of the program and if the PBoC will print money to fund it.  As daily locally transmitted new cases of Covid-19 in China persistently surged and stayed above 2,000 since August 12, 2022, the market will watch the development closely and how it will affect the economy.   In addition to the pandemic, power shortage in the Sichuan province and some other areas in China due to unusually high temperature (higher power consumption for air-conditioning) and drought (which affects hydropower output), investors are assessing the impact of the government-imposed power rationing for industrial users on production, in particular the auto industry and consumer electronics industry in the affected areas. Key earnings this week On Monday, investors will scrutinize the results from Palo Alto Networks (PANW:xnas) in the U.S. to gauge the latest business development in the security software industry, which has drawn much attention this year as cybersecurity has become a focus. Intuit (INTU:xnas) is scheduled to report on Tuesday and its results may provide information about the small and medium-sized businesses that the company focuses in it business.  After a disappointing preannouncement earlier in the month, the bar for Nvidia (NVDA:xnas)’s earnings release this Wednesday may be low.  In HK/China, the results from the Postal Savings Bank of China may provide the market with some insights into the state of the Chinese banking system, especially situations outside the top-tier cities. JD.COM (09618:xhkg/JD:xnas) on Tuesday and Meituan (03690:xhkg) on Friday will be the focus of investors monitoring the business trend of eCommerce and delivery platforms in China.  Key economic releases & central bank meetings this week Monday, Aug 22 South Korea: Exports (Aug, first 20 days)Hong Kong: CPI (Jul)   Tuesday, Aug 23 United States: S&P Global US Manufacturing PMI (Aug, preliminary)United States: S&P Global US Services PMI (Aug, preliminary)Eurozone: PMI Manufacturing (Aug)Eurozone: Consumer Confidence (Aug)United Kingdom: PMI Manufacturing (Aug), PMI Services (Aug)Japan: PMI Manufacturing (Aug)Singapore: CPI (Jul) Wednesday, Aug 24 United States: Durable Goods Orders (Jul, preliminary)United States: Pending Home Sales (Jul) Thursday, Aug 25 United States: GDP (Q2, second)United States: Initial Jobless Claims (Aug)United States: Kansas City Fed Manufacturing Activity (Aug)United States: Jackson Hole Symposium (Aug 25 to 27)Germany: IFO Survey (Aug)France: Business Confidence (Aug)South Korea: Bank of Korea Policy Meeting Friday, Aug 26 United States: Personal Income, Personal Spending, PCE Deflator & PCE Core Deflator (Jul)United States: U of Michigan Sentiment Survey (Aug, final)United States: Fed Chair Powell’s speech at the Jackson Hole SymposiumFrance: Consumer Confidence (Aug)Eurozone: M3 (Jul)Italy: Consumer Confidence (Aug)Italy: Economic Sentiment (Aug)Tokyo: Tokyo-area CPI (Aug)Singapore: Industrial Production (Jul) Saturday, Aug 27 China: Industrial Profits (Jul) Key earnings releases this week Monday: Postal Savings Bank of China (01658:xhkg), Palo Alto Networks (PANW:xnas) Tuesday: Medtronic (MDT:xnys), Intuit (INTU:xnas), JD.COM (09618:xhkg/JD:xnas), JD Logistics (02615:xhkg), Kingsoft (03888:xhkg), Kuaishou (01024:xhkg) Wednesday: PetroChina (00857:xhkg), Ping An Insurance (02318:xhkg), Nongfu Spring (09633:xhkg), LONGi Green Energy Technology (601012:xssc), Pinduooduo (PDD:xnas), Nvidia (NVDA:xnas), Salesforce (CRM:xnys), JD Health (06618:xhkg) Thursday: AIA (01299:hkgs), Wulinagye Yibin (000858:xsec), China Life Insurance (02628:xhkg), CNOOC (00883:xhkg), Dollar General (DG:xnys), NIO (09866:xhkg/NIO:xnas) Friday: Meituan (03690:xhkg), China Shenhua (01088:xhkg), Sinopec (00386:xhkg)    Source: Saxo Spotlight: What’s on investors and traders radars this week?
Oil Price Surges Above $91 as Double Bottom Support Holds

All Eyes On Fed Chair Powell's Speech. Latest Natural Gas Developments

Saxo Bank Saxo Bank 22.08.2022 12:52
Summary:  The US dollar wrecking ball is in full swing, taking even USDCNH to new highs for the cycle after another rate cut in China overnight. Longer US treasury yields are also pressuring financial conditions and risk sentiment as the 10-year benchmark yield threatens 3.00% again. The chief event risk for the week will be the Jackson Hole, Wyoming speech from Fed Chair Powell. We also discuss the latest natural gas developments in Europe, speculative positioning in the commodities markets, the long term perspective for tangible vs. intangible stock returns over the last couple of decades, upcoming earnings, & more. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are found via the link Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: USD and US yields brewing up trouble ahead of Jackson Hole
Rising Tensions in Japan Amid Currency Market Concerns and BOJ Insights

What's On Asian Market? Find Out Now! Samsung, Hyundai, Covid And More...

InstaForex Analysis InstaForex Analysis 22.08.2022 20:07
Company does not offer investment advice and the analysis performed does not guarantee results. Asian stock markets were mixed on Monday. The Shanghai Composite and the Shenzhen Composite gained 0.57% and 0.64% respectively, while the Hang Seng Index went up by 0.12%. The Nikkei 225 decreased by 0.55%, the S&P/ASX 200 fell by 0.96%, and the KOSPI lost 1.15%. Investors are awaiting new information from Fed chairman Jerome Powell regarding the further monetary policy course of the US central bank. Powell is set to give a speech this week. Furthermore, market players took note of the Chinese central bank decreasing two of its key interest rates. The People's Bank of China cut its one-year loan prime rate to 3.65% from 3.7%. The five-year rate was cut to 4.3% from 4.45%. The move was not unexpected – earlier, the PBoC decreased its medium-term lending facility loan rate by 10 basis points to 2.75%. The Chinese central bank's rate cuts are aimed at boosting the country's economic growth, which has slowed down due to rising energy prices, weak property market, and COVID-19 lockdowns. On the Hang Seng Index, the biggest movers were Agile Group Holdings, Ltd. (+6%), CIFI Holdings (Group), Co. (+7%), Country Garden Holdings, Co., Ltd. (+3%), and China Resources Land, Ltd. (+2%) Shares of Sinopec Engineering (Group), Co. gained 4% after the company reported that its net profit increased by 0.6% in the first half of 2022. In Japan, the worst-performing stocks on the Nikkei 225 were Hino Motors, Ltd. (-3.5%), CyberAgent, Inc. (-3.1%), and Nippon Sheet Glass Co., Ltd. (-2,9%). The share price of Ai Holdings, Corp. advanced by 5%, thanks to the company's net profit jumping by 32% in the previous fiscal year. In South Korea, Samsung Electronics, Co. and Hyundai Motor, Co. lost 1.6% and 0.5% respectively. In Australia, BHP shed 0.2%, while Rio Tinto declined by 0.53%. Shares of NIB, Ltd. gained 6.6% thanks to the company's operating profit exceeding market expectations. Source: Forex Analysis & Reviews: Asian markets close mixed on Monday
iPhones Banned in Chinese Offices: Tech Tensions Escalate

China's Plan For Dying Property Markets. Nasdaq 100 And S&P 500

Saxo Strategy Team Saxo Strategy Team 23.08.2022 08:37
Summary:  Equities were sold off on Monday, continuing a slide from their summer rally high, in the midst of position adjustments ahead of the Jackson Hole central banker event later this week. U.S. 10-year yields returned to above 3%. China cut its 5-year loan prime rates and plans to extend special loans to boost the ailing property markets. What is happening in markets?   Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)  U.S. equities lost ground and continued to retrace from the high of the latest rally since mid-June.  The market sentiment has become more cautious ahead of Fed Chair Powell’s speech this Friday at the Jackson Hole symposium and a heavy economic data calendar, S&P 500 – 2.1%, Nasdaq 100 -2.7%.  The rise of U.S. 10-year bond yield back to above 3% added to the selling pressures in equities.  Zoom Video (ZM:xnas) fell 8% in after-hours trading as the company reported Q2 revenues and earnings missing estimates and cut its full year revenues guidance. U.S. treasuries (TLT:xnas, IEF:xnas, SHY:xnas) Bonds were sold off as traders adjusted positions ahead of the Jackson Hole.  The treasury yield curve bear flattened with 2-year yields surging 8bps to 3.30% and 10-year yields climbing 4bps to 3.01%, above the closely watched 3% handle.  Hong Kong’s Hang Seng (HSIQ2) and China’s CSI300 (03188:xhkg) Hang Seng fell 0.6% while CSI300 climbed 0.7% on Monday. Chinese developers gained on today’s larger-than-expected cut in the 5-year loan prime rate and the Chinese authorities plan to provide special loans through policy banks to support the delivery of stalled residential housing projects, CIFI (00883:xhkg) +11.5%, Country Garden (02007:xhkg) +3.2%.  China extended EV waivers from vehicle purchase tax and other fees to the end of 2023, but the share price reactions of Chinese EV makers traded in Hong Kong were mixed.  Great Wall Motor (02333:xhkg) soared 11%, benefiting from launching a new model that has a 1,000km per charge battery while Nio (09866:xhkg) and Li Auto(02015:xhkg) fell 4.2% and 1.4% respectively. Xiaomi (01810:xhkg) dropped 3.3% after Q2 revenues -20% YoY and net profit -67% YoY, on lower smartphone shipments (-26% YoY).  Smartphone parts suppliers, AAC Technologies (02018:xhkg) and Sunny Optical (02382:xhkg) declined 5.6% and 4.2% respectively.  The share price performance of the four companies that will be added to the Hang Seng Index was mixed, Baidu (09888:xhkg) +0.9%, China Shenhua Energy (01088:xhkg) +2.1%, Hansoh Pharmaceutical (03692:xhkg) +3.2% but Chow Tai Fook Jewellery (01929:xhkg) -0.6%.  SenseTime (00020:xhkg) gained 4.2% as the company will replace China Pacific Insurance (02601:xhkg) -2.8% as a constituent company of the Hang Seng China Enterprises Index.  ENN Energy (02688:xhkg) plunged more than 14% after reporting H1 results below market expectations.  China retailer Gome (00493) collapsed 20% after resuming trading from suspension and a plan t buy from the controlling shareholder a stake in China property assets.  EURUSD falls below parity, eyes on 0.9500 The latest concerns on the European energy crisis weighed on the Euro which was seen sipping below parity to the US dollar. Higher US yields and gains in the US dollar also underpinned, taking EURUSD to lows of 0.9926. The European recession is coming hard and fast, and the PMIs today will likely signal increasing pressure on the region. Also on the radar will be Fed Chair Powell’s speech at the Jackson Hole later this week, with a fresh selloff in the pair likely to target 0.9500 next. USDCNH heading to further highs After PBOC’s easing measures on Monday, the scope for further yuan weakness has increased. USDCNH broke above 6.8600 overnight and potentially more US dollar strength this week on the back of a pushback from Fed officials on easing expectations for next year could mean a test of 7.00 for USDCNH. Still, the move in yuan is isolated, coming from China moving to prevent the yuan from tracking aggravated USD strength rather than showing signs of desiring a broader weakening. EURCNH has plunged to over 1-month lows of 6.8216 on the back of broader EUR weakness. Crude oil prices (CLU2 & LCOV2) Crude oil prices made a recovery overnight despite the strength in the US dollar. A global shift from gas to oil, from Europe to Asia, has taken a deeper hold amid gas shortage fears accelerating in the wake of another upcoming maintenance of the Nordstream pipeline. Diesel and refinery margins have also been supported as a result, with Asia diesel crack rising to its previous high of $63 amid low inventory levels. WTI futures reversed back to the $90/barrel levels and Brent were back above $96. Comments from Saudi Energy Minister threatening to dial back supply also lifted prices, but these were mis-read and in fact, focused more on the mismatch between the tightness in the futures and the physical market. Gold (XAUUSD) and Silver (XAGUSD) Gold broke below the key $1744 support and is now eying $1729, the 61.8% retracement of the July to August bounce. Dollar strength and a run higher in US yields weighed on the shine of the yellow metal, which has seen downside pressures since last week after touching the critical $1800-level. Hawkish Fed talk this week could further weigh on the short-term prospects for Gold. Silver also dipped below the key 19 handle, erasing most of the gains seen since late July.   What to consider?   German year-ahead power prices hit a fresh record high German year-ahead power prices surged to EUR 700/MWh with Dutch TTF gas prices close to EUR 300/MWh. The surge came on the back of another leg higher in natural gas prices which rose over 8% in Europe amid concerns around the next scheduled 3-day maintenance of the Nordstream pipeline. It appears that demand destruction remains the most obvious but painful cure right now, along with a longer-term focus on ensuring a broad-based supply of energy from coal, gas, nuclear, solar, hydrogen, and more.  Australia and Japan services PMIs plunged into contraction Australia saw its services PMI drop to 49.6 in August in a flash print, from 50.9 in July. Manufacturing PMI, however, held up at 54.5, just weakening slightly from last month’s 55.7. The spate of rate hikes seen from Reserve Bank of Australia is likely taking its toll on demand and manufacturing. Meanwhile, prices remain elevated amid the persistent supply chain issues, and more rate hikes are still on the cards. Japan’s flash manufacturing PMI for August came in lower at 51.0 from 52.1 previously, nut stayed in expansion territory. Services PMI however plunged into the contraction zone below 50, coming in at 49.2 for a flash August print from 50.3 in July. The fresh COVID wave in Japan, although comes without any broad-based new restrictions, is impeding the services demand and will likely weigh on Q3 GDP growth. Europe and UK PMIs may spell further caution The Euro-area flash composite PMI and the UK flash PMI for August are both due to be released on Tuesday. Following a slide in ZEW and Sentix indicators for July, the stage is set for a weaker outcome on the PMIs too. July composite PMI for the Euro-area dipped into contractionary territory at 49.9, while the UK measure held up at 52.1. The surge in gas and electricity prices continue to weigh on GDP growth outlook, with recession likely to hit by the end of the year. China’s plan to provide loans to ensure delivery of presold residential projects is said to be of the size of RMB 200 billion Last Friday, Xinhua News reported that the PBoC, jointly with the Housing Ministry and the Ministry of Finance rolled out a program to make special loans through policy banks to support the delivery of stalled residential housing projects but the size of the program was not mentioned.   A Bloomberg report yesterday, citing “people familiar with the matter”, suggested the size of the support lending program could be as large as RMB 200 billion.  Beijing municipal government rolled out initiatives to promote hydrogen vehicles The municipal government of Beijing announced support for the construction of hydrogen vehicle refueling stations with RMB500 million for each station, aiming at building 37 new stations by 2023 and bringing the adoption of fuel-cell cars to over 10,000 units in the capital. Earlier in the month, the Guangdong province released a plan to build 200 hydrogen vehicle refueling stations by 2025. Since last year, there have been 13 provinces and municipalities rolling out policies to promote the development of the hydrogen vehicle industry.  Earnings on tap Reportedly there have been shorts being built up in Dollar Tree (DLTR:xnys) as traders are expecting that discount retailer missing when reporting this Thursday.   On the other hand, investors are expecting Dollar General (DG:xnys) results to come in more favourably, , which also reports this Thursday.  Key earnings scheduled to release today including Medtronic (MDT:xnys), Intuit (INTU:xnas), JD.COM (09618.xhkg/JD.xnas), JD Logistics (02615:xhkg), Kingsoft (02888:xhkg), and Kuishaou (01023:xhkg). Singapore reports July inflation figures today Singapore's inflation likely nudged higher in July, coming in close proximity to 7% levels from 6.7% y/y in June. While both food and fuel costs continue to create upside pressures on inflation, demand-side pressures are also increasing as the region moves away from virus curbs. House rentals are also running high due to high demand and delayed construction limiting supplies. The Monetary Authority of Singapore has tightened monetary policy but more tightening moves can be expected in H2 even as the growth outlook has been downwardly revised.     For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast   Source: APAC Daily Digest: What is happening in markets and what to consider next – August 23, 2022
What Should We Expect Before Winter? Will Energy Crisis Come?

What Should We Expect Before Winter? Will Energy Crisis Come?

Peter Garnry Peter Garnry 22.08.2022 18:44
Summary:  Financial conditions loosening over the past six weeks were a natural evolution of the US economy improving in July, but the Fed is poised to hike potentially 75 basis points at the September meeting to tighten financial conditions even more as the nominal economy is still running too hot to get inflation meaningfully lower. The most likely scenario is weaker equities as winter approaching as the energy crisis will hurt. Financial conditions will soon begin tightening again S&P 500 futures are trading 3.4% lower from their high last week touching the 200-day moving average before rolling over again. Sentiment has shifted as the market is slowly pricing less rate cuts for next year with Fed Funds futures curve on Friday (the blue line) has shifted lower compared to a week ago (the purple line) as inflationary pressures are expected to ease as much as betted on by the market over the past month. Fed member Bullard recently said that he was leaning towards 75 basis points rate cut at the September FOMC meeting to cool the economy further. If the Fed goes with 75 basis points while the real economy is seeing lower activity it will mean that financial conditions will begin tightening more relative to the economic backdrop. Financial conditions have been loosening since June but expectation is that we will see another leg of tightening to levels eclipsing the prior high and with that US equities will likely roll over. S&P 500 futures are now well below the 4,200 level and currently in the congestion zone from before the last leg higher. The next gravitational point to the downside is the 4,100 and below that just above 4,000. December put options on the S&P 500 are currently bid around $208 which roughly a 5% premium for getting three-month downside protection at-the-money. S&P 500 futures | Source: Saxo Group   Fed Funds futures forward curve | Source: Bloomberg   US financial conditions | Source: Bloomberg The US is headed for a recession, but when? US financial conditions eased in July lifting equities and with good reasons we can see. The Chicago Fed National Activity Index (the broadest measure of economic activity) rose to 0.27 in July from -0.25 in June suggesting a significant rebound in economic activity. The rebound was broad-based across all the four major sub categories in the index with the production index rising the most. The three-month average is still -0.09 with -0.7 being the statistical threshold for when this indicator suggests that the US economy is in a recession. The probability is therefore still elevated for a recession but the slowdown in the US economy has eased which is positive factor for US equity markets. Predicting the economy is difficult but our thesis going into the winter months on the Northern hemisphere is that it is very difficult to avoid a recession, at least in real terms, when the economy is facing an energy crisis. The most likely scenario is that the US economy will slide into a nominal recession but continue at a fast clip in nominal terms.          China is facing a 2008-style rescue of its real estate sector We have written earlier this year about the downfall of Evergrande and the other Chinese real estate developers. The stress in China’s real estate sector was a big theme earlier this year but has since faded, but recently the Chinese central bank has eased rates and today the government is planning a $29bn rescue package of special loans for troubled developers. Tensions in Chinese real estate are weighing down on the economy through lower consumer confidence and investors are increasingly reducing exposure to China has we have highlighted in our daily podcast. The PBoC (central bank) is urging banks to maintain steady growth of lending, but with the market value of banks relative to assets having declined for many years the market is no longer viewing the credit extension as driven by sound credit analysis, but more as an extended policy tool of the government with unknown but likely less good credit quality.   Source: Equities are rolling over as conditions are set to tighten
RBA Pauses Rates as Australian Dollar Slides; ISM Manufacturing PMI in Focus

Fears About The Imminent Recession In The US Economy Will Force The Fed To Put On The Brakes

InstaForex Analysis InstaForex Analysis 24.08.2022 23:55
Relevance up to 12:00 2022-08-29 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. A bad example is contagious. In the first half of August, gold rose following the US stock market, which required the Fed to slow down the pace of tightening monetary policy in response to the slowdown in US inflation. Thus, stock indices put spokes in the wheels of the Fed, weakening financial conditions. This could not continue indefinitely, and the S&P 500 began to plummet, fearing Jerome Powell's hawkish rhetoric at Jackson Hole. Following this, the precious metal closed in the red zone for the first time in the last five weeks. Weekly dynamics of gold What difference does it make to XAUUSD if China increased its gold imports from Switzerland to 80 tonnes in July, which is twice as much as in June and eight times as much as in May, if the fate of the precious metal is in the hands of the Fed? For a long time, it ignored comments from FOMC officials about the continuation of the monetary restriction cycle, including calls from St. Louis Fed President James Bullard to raise the federal funds rate by 75 bps in September, but this could not continue indefinitely. It is unlikely that Powell's speech at Jackson Hole will be radically different from his colleagues. The same as Minneapolis Fed President Neel Kashkari, who, against the backdrop of low unemployment and high inflation, sees only one way for rates—up. Another thing is that the chairman of the Fed is the chairman of the Fed. A figure of a different scale, whose speech is more expensive not to react to. To fight inflation, the Fed needs higher Treasury yields and a strong dollar to slow wage and import price increases, and it will get them. With consumer prices at 8.5% and the federal funds rate at 2.5%, there is little doubt that the cycle of monetary tightening is not over. The Central Bank is far from doing its job. Borrowing costs can rise to 4–4.5%, and this is a completely different story for all financial markets, as well as for the US dollar and gold. Dynamics of gold and US dollar Should we expect a decrease in XAUUSD quotes to 1600 or 1500 against such a background? In my opinion, the last figure is difficult to achieve. Recent business activity statistics show a slowdown in indicators around the world, from Australia to North America. Some countries have seen Purchasing Managers' Indices drop below the critical 50 mark, signaling that a recession is near. Under such conditions, the old scheme may start to work: fears about the imminent recession in the US economy will force the Fed to put on the brakes, which will reduce the yield of Treasury bonds and weaken the US dollar. The question is, when exactly will this happen? Technically, on the daily chart, gold is trying to return to the limits of the fair value range of $1740–1800 per ounce. If it works out, we will sell it on the rebound from resistance at $1775–1780. No—let's increase the short positions formed from $1765 with targets at $1695 and $1665 per ounce.   Source: Forex Analysis & Reviews: Gold flees from the Fed's wrath  
EUR/USD Downtrend Continues: Factors Driving the Euro's Decline and Outlook

US President Cancels Up To $20,000 Student Debt (Before The Elections). It Will Cost ~$300 Bilion Over 10 Years!

Saxo Strategy Team Saxo Strategy Team 25.08.2022 10:22
Summary:  A quiet session yesterday for equities, even as US treasury yields jumped higher once again ahead of a highly anticipated speech tomorrow from US Fed Chair Jerome Powell at the Fed’s annual Jackson Hole conference. In Europe, the focus remains on the dire natural gas and power prices as prices seem to ratchet perilously higher every day. That taken into consideration, EURUSD trading near parity doesn’t rate as such a weak performance from the single currency.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) Despite a shocking low PMI services figures for August, signs that financial conditions are beginning to tighten again, and surging US 10-year yield closing at 3.1%, S&P 500 futures pushed higher after initially trading to new lows in yesterday’s session. S&P 500 futures are extending their short-term momentum this morning trading around the 4,158 level which is still in the heart of the trading range of 4,100-4,170 which was established earlier this month. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) After having been closed in the morning due to a typhoon, Hong Kong resumed trading in the afternoon and the Hang Seng Index rallied 1.5% on new incremental stimulus measures from the Chinese Government to boost the economy. A-shares fluctuated between gains and losses and edged up as much as 0.2%. Coal miners, oil and gas, and crude tankers stocks gained. China internet stocks rallied, Alibaba (09988:xhkg) +4.3%, JD.COM (09618:xhkg) +5.1%, Baidu (09888:xhkg) +5.4%, Bilibili (09626:xhkg) +4.3%. US dollar edges back lower ahead of Jackson Hole After a feint higher yesterday, the US dollar generally closed lower yesterday across the board despite a solid new surge higher in US treasury yields as traders eye the Jackson Hole conference speech tomorrow from Fed Chair Powell. EURUSD continues to bob back toward the obvious psychological pivot level at parity, teasing that level this morning, while China played its part in helping the USD lower overnight with a surprisingly strong fixing for USDCNY after it hit a two-year high yesterday amidst reports from Reuters (citing unnamed sources) that dealers in China were warned from official sources against aggressively selling the yuan. JPY crosses Global bond yields are pulling back higher, with the Japanese government bond yields from 10 years and shorter on the yield curve frozen in their tracks due to the Bank of Japan’s yield-curve-control (YCC) policy, meaning that further upside in yields may be absorbed by the yen itself. USDJPY trades sideways as the USD is a bit softer, but other JPY crosses have pulled back higher, as AUDJPY threatens the top of the range soon (high in Jul. Near 95.70 vs. 95.05 this morning) and EURJPY bounced strongly after threatening a look at local support yesterday. The reaction in the US treasury market and Friday close after Fed Chair Powell’s speech at Jackson Hole will prove critical for whether a fresh aggravated rise in yields once again challenges the BoJ commitment to its YCC policy. Crude oil prices (CLV2 & LCOV2) Crude oil prices extended their gains following a volatile Wednesday that initially saw prices dip after the EIA reported a smaller than expected drop in US crude stockpiles. However, the report also showed a second week of lower production together with record exports of crude oil and products to energy-starved economies looking for alternative supplies to those from Russia. Diesel exports hit a record with an increased amount of gas-to-fuel switching underpinning demand. Not least from Europe where Dutch TTF gas touched $500 per barrel of crude oil equivalent (€300/MWh), and German power $1,100 per barrel (€646/MWh). In our latest update we highlighted the increased risk of short covering from funds who in anticipation of an economic slowdown had cut their net long exposure in WTI and Brent to a 28-month low. In Brent, the next level of upside interest can be found at $102.50. U.S. corn (CORNDEC22) U.S. corn trades higher for a seventh day, hitting a two-month high, supported by concerns that hot and dry weather in the Midwest during the final crop development period may limit the production outcome. A poor US harvest will likely exacerbate the food inflation that’s already been gripping the world this year with dwindling global grain stockpiles being driven by war, drought and the overall impact of climate change. The US is the biggest producer and exporter of corn which is used in everything from animal feed to biofuels and sweeteners. Above $6.64/bu, the December contract may take aim at $6.88/bu next. US Treasuries (TLT, IEF) US treasury yields rose again yesterday as demand at the 5-year US treasury auction was at the weak end of the range. The 10-year benchmark closed above 3.10% for the first time since late June. A 7-year auction is up today ahead of Fed Chair Powell’s Jackson Hole conference speech tomorrow, the most significant event risk for the treasury market until the next CPI release in September and then the September 21 FOMC meeting. What is going on? Emerging countries dominate in terms of nuclear capacity under construction According to the latest data released by the World Nuclear Association, the countries with highest nuclear capacity under construction are: China (23.3K MG), India (6.6K MG), Turkey (4.8K MG) and South Korea (4.2K MG). The United Kingdom is the first developed country in the list with 3.4K MG. France lags with only 1.6K MG, for instance. Nuclear energy is the subject of intense debate in several European countries. In our view, this is certainly one of the best options to support green transition and avoid a surge in the energy bill which will lead to lower purchasing power for longer. China’s State Council rolled out 19 new supportive measures to boost the economy The crux of the new stimulus package consists of an incremental RMB300 billion financing from policy banks to provide equity-like capital for infrastructure projects and urges issued to local governments to utilize unused quota balances carried over from previous years to issue RMB500 billion special bonds by the end of October this year.  The package includes a plan to facilitate state-owned electricity generating companies to issue RMB200 billion bonds.  Nvidia provides a weak outlook Investors already knew that Q2 would be a weak quarter given the profit warning earlier this month, but underlying demand continues below estimates with Q3 revenue guidance of $5.9bn +/- 2% is well below estimates of $6.9bn, but on a positive note the chipmaker is guiding gross margin of 65% which means that it expects profitability to remain in line with recent history. On the conference call management says that China has been the disappointment in terms of demand. Shares fell 4% in extended trading. US President Biden cancels up to $20,000 student debt ... with $10k in forgiveness for any borrower making less than $125k/year and $20k for holders of Federal Pell grants. The move affects tens of millions of Americans (and possible voters in the mid-term elections) and will cost an estimated $300 billion over 10 years. Salesforce growth is slowing down Q2 operating income was better than expected while revenue of $7.7bn up 22% y/y was in line with estimates. The FY revenue outlook of $30.9-31bn was below estimates of $31.7-31.8bn suggesting IT spending is slowing down amid uncertainty over the economy with July seeing a particular shift in customer attitude. Shares were down 4% in extended trading. Snowflake post strong guidance Q2 revenue was $497mn vs est. $468mn and updated its fiscal year operating margin guidance to 2% from previously 1% suggesting the company is able to maintain high growth while lowering its spending growth. The revenue beat was driven by an inflow of new customers. Shares were up 17% in extended trading. Coffee prices surge on Brazil and Vietnam supply worries Both Arabica (KCZ2) and Robusta (RCX2) coffee futures extended their three-day surge on signs of a deteriorating supply outlook. Stockpiles in Vietnam, the world’s top supplier of the Robusta variety, are expected to halve by the end of September from a year earlier while stocks of the Arabica bean monitored by the ICE exchange has slumped to a 23-year low. Freak weather in South America during the past year has decimated the production outlook for Brazil, Colombia and Central America, while recent dryness has already started to raise concerns about next year’s crop. The June high at $2.42 in Arabica being the only level standing in the way for a push towards the 11-year high at $2.605 reached in February. Natural gas has become the biggest component in the Bloomberg Commodity Index (BCOM) The index tracks the performance of 23 major commodity futures targeting a one-third exposure in energy, metals and agriculture. The target weights are set once a year every January and if prices shift significantly during the year, a reweighting will occur the following January. The 160% year-to-date surge in US natural gas futures has more than doubled its weight to 17% from 8%, and in the process made it the biggest component in the BCOM index, more than double that of WTI and Brent combined. What it means? The index has become more volatile and if maintained throughout the year a major rebalancing (selling of natural gas) will occur this January. What are we watching next? The Kansas City Fed hosts its annual symposium in Jackson Hole This year’s theme is “Reassessing Constraints on the Economy and Policy”. The symposium will last until 27 August. Fed Chair Jerome Powell will speak tomorrow. Given the loosening of financial conditions since the June FOMC meeting, the market has been concerned that Powell will echo the pushback against the notion that the Fed knows that it is set to materially slow its pace of policy tightening after the September 21 FOMC rate decision (majority looking for another 75 basis points). Data dependency will likely be underlined in his speech, but any guidance on the Fed’s approach to QT could also garner considerable attention as longer treasury yields pull back higher toward the cycle highs from June. Japan’s Tokyo CPI for August to show more price pressures Japan's Tokyo CPI for August is due on Friday morning, and it is likely to suggest further price pressures above the Bank of Japan's 2% target. Consensus expectations point toward another higher print of 2.7% y/y for the headline measure and 2.5% y/y on the core measure, signalling inflationary pressures will continue to question the Bank of Japan's resolve on the ultra-easy policy stance. Earnings to watch Today’s earnings focus is Fortum, Delivery Hero, and NIO. Europe’s energy crisis is putting immense pressure on utility companies and consumers. Fortum is not normally a company we find interesting but given the current crisis management’s assessment of the outlook is important to read. Delivery Hero sits inside the consumer economy and especially on the discretionary spending side with delivery of take-away orders; 1H revenue growth is expected at 76% y/y. NIO is in focus following the weaker than expected result from XPeng. Today: South32, Toronto-Dominion Bank, Fortum, Delivery Hero, AIA Group, China Life Insurance, CNOOC, CRH, Dollar General, Vmware, Marvell Technology, Workday, Dollar Tree, Dell Technologies, NIO Friday: Meituan, China Shenhua Energy, China Petroleum & Chemical Economic calendar highlights for today (times GMT) 0800 – Germany Aug. IFO Business Climate Survey 1130 – ECB Meeting Minutes 1230 – US Weekly Initial Jobless Claims 1230 – US Q2 GDP Revision 1430 – EIA Natural Gas Storage Change 1500 – US Aug. Kansas City Fed Manufacturing survey 2200 – New Zealand Aug. ANZ Consumer Confidence 2230 – New Zealand RBNZ Governor Orr to speak 2330 – Japan Aug. Tokyo CPI Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: Financial Markets Today: Quick Take – August 25, 2022
Oil Price Surges Above $91 as Double Bottom Support Holds

Is Fed Chair Powell Speech At Jackson Hole Going To Change Something?

Saxo Bank Saxo Bank 25.08.2022 13:20
Summary:  As we wait for the Fed Chair Powell speech at Jackson Hole and whether he can really bring anything new to the table, we look at the latest pressure on the already dire energy situation in Europe, the surprise indication from Japan of a strategic move in favor of nuclear, the latest earnings reports from Nvidia, Salesforce and Snowflake, and earnings reports ahead. In FX, we focus on the possible current account focus and possible repricing of AUDNZD significantly above its range of the last many years. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are found via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: Going nuclear
Nuclear Power Emerges as Top Theme for 2023, Bubble Stocks Under Pressure

Green Transformation Being Inflationary In The Years To Come

Peter Garnry Peter Garnry 25.08.2022 13:44
Summary:  Central banks have been very late to the inflation game as the they have underestimated the effects from the stimulus during the pandemic. Supply chains and generally the supply side of the economy were expected to normalise much faster than what has been the case and our main thesis now is that if central banks focus too much on the core inflation a big mistake might be the outcome. Food and energy will be at the center of our crisis years with climate change and the green transformation being inflationary in the years to come. Investors should increasingly invest in the tangible world to offset these inflationary risks. The energy crisis will drive everything Around 30 central banks around the world have adopted inflation targeting using the headline inflation indices which in the US is the US Personal Consumption Expenditures Index and was officially announced in January 2012. The official targeting is the headline inflation indices, but many central banks and economist are often putting more weight on the core inflation indices. These indices remove energy and food from the price index. This practice is likely what made central banks react to slowly to current inflation impulse; remember, at Jackson Hole one year ago Jerome Powell said: “We have much ground to cover to reach maximum employment, and time will tell whether we have reached 2% inflation on a sustainable basis”. At that point US CPI and core CPI stood at 5.4% y/y and 4.3% y/y respectively. Core inflation indices remove the energy and food items because they are seen as volatile and mainly not driven by the trend change in overall prices, and the key assumption is also that they have temporary factors behind that will reverse later on (see quote below from Federal Reserve Bank of San Francisco). This argument was the same for our disrupted supply chains although in reality it has taken much longer than expected. “However, although the prices of those goods may frequently increase or decrease at rapid rates, the price disturbances may not be related to a trend change in the economy’s overall price level. Instead, changes in food and energy prices often are more likely related to temporary factors that may reverse themselves later.” Food and energy will add to inflation going forward Our team has written a lot about the physical world and lately we introduced indices of tangibles- vs intangibles-driven industry groups. We have shown many times how the world underinvested in the global energy and mining industry, and why this will haunt the world for years. Food and energy are also intertwined and connected which we have seen today with Yara International reducing its ammonia production in Europe to just 35% of potential production due to elevated natural gas prices. Lower ammonia production will lead to less fertilizer for farmers and thus lower food production, which again can lead to higher food prices. It should be clear by now, that ignore food and energy could be a grave mistake by central banks. Climate change will make global food production more volatile and push up prices, and the green transformation will for years keep energy prices elevated. Our main thesis is that the coming decade will in many ways be a replay of the 1970s as politicians will intervene in the economy to mitigate the pain from higher prices, but these decisions will only keep the nominal economy growing fast and thus keeping inflation and the readjustments going for longer. The Fed’s core inflation measure is currently at 0.4% m/m measured over six months suggesting a core inflation rate annualized at around 5% which means that short-term interest rates must be set much higher to tame inflation. The headline inflation is currently twice as high as the core inflation. PCE core CPI m/m | Source: Bloomberg Nominal wages will underpin inflation for a lot longer In this ECB paper from August 2002, the authors conclude that central banks should give substantial weight to the growth in nominal wages when monitoring inflation. If we look at nominal wage growth in the US the chart below shows the three-staged acceleration we have observed in the US economy since 2009. The first phase during 2009-2015 saw only 2% annualized wage growth as the economy was suffering from low demand in the subsequent years after the Great Financial Crisis. The second phase was the period 2015 to early 2020 where years of loose monetary policy and slowly healing economies lifted US nominal wage growth to 2.9% annualized. The third phase is the period from early 2020 until today and is driven by the extraordinary monetary and fiscal stimulus that were put in place after the global Covid pandemic broke out. The combined stimulus was on par with the post-WWII years and were unleashed into a global economy that in hindsight was much closer to a hard physical supply limit than understood at the time. Subsequently demand has been running much stronger than trend growth and as a result nominal wages have accelerated to 5.2% annualized growth rate. Indeed, it seems we have a serious problem on our hands where inflation become unanchored from 2%. US hourly earnings index | Source: Bloomberg Invest in the tangible world In an inflationary environment the tangible world must increase dramatically, so investors should invest in the tangible world to offset the inflation risk in order to preserve wealth in real terms. In our note from yesterday about the Tangible world is fighting back we highlight the industry groups that are part of the tangible world, but our theme basket performance overview also show which tangible parts are doing well which this year has been commodities, defence, renewable energy, logistics, and energy storage. Saxo clients can find the companies in each of these theme baskets on our trading platforms. Source: Core inflation is unofficially dead
RBA Minutes Reveal Consideration of Rate Hike Amid Economic Uncertainty

Fed: Action Will Have Already Begun At The Beginning Of The Symposium

InstaForex Analysis InstaForex Analysis 25.08.2022 15:32
Relevance up to 10:00 2022-08-26 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. Today the dollar began to weaken its position around the entire perimeter of the market. The question arises, what happened: a small respite before the storm, or was Federal Reserve Chairman Jerome Powell's hawkish rhetoric completely invested in the US currency these days as part of the Jackson Hole symposium? If so, then it turns out that the dollar index has exhausted its growth, at least for the current moment. Now traders are hiding and will not make large bets until the event itself.The reaction will already be on the symposium factor itself. Further dynamics of the dollar will depend on Powell's statements. If they remain within expectations, the dollar will remain within the current range. In order for the indicator to touch again or break through the high of the current year above 109.00, new factors or unexpected announcements are needed that will push the rate up. However, there is a risk that the speech will not be considered hawkish enough. With such a development of the scenario, the US currency will lose positions earned in recent sessions. Part of the points scored will go if the head of the Fed expresses concern about the consequences of tightening monetary policy. Traders will carefully study Powell's speech for signs of further rate hikes. The federal funds rate is expected to peak at 3.80% in March 2023, up from 3.62% two weeks ago. Interest rate futures suggest a 60% chance of a 75 basis point Fed rate hike in September. Today, dollar traders will focus on data on the country's GDP, which may well increase pressure on the dollar, as market players' attitude to the expected recession has become aggravated. Most market players are still betting on the strengthening of the US currency against the hawkish message of the Fed. The upward trend should continue until the end of the year. Since the peak of inflation and rate hikes are just around the corner, so is the reversal of the dollar index. The US dollar may peak in the fourth quarter of 2022, after which a period of cyclical weakness against most currencies will begin next year, when the economy enters a recession and the Fed stops the process of raising rates. The euro certainly took advantage of the current pause in the growth of the dollar, but the single currency has nothing to count on. EUR/USD is at risk of further losses in the next few weeks, according to UOB FX strategists. For now, the downward pressure has eased, with the quote expected to trade between 0.9920 and 1.0010. This is what the short term looks like. On the horizon of two to three weeks, UOB sees an opportunity for further weakening. Only a breakthrough of 1.0035 would indicate that the euro's decline that began last week is over. However, one important nuance must be taken into account here. Oversold conditions can result in there being several days of consolidation first. Support levels in the future are at 0.9870 and 0.9830. The German IFO and the ECB minutes are in focus on Thursday. The 1.0015 area is a key intraday resistance. On a break higher, there is a risk of a short squeeze up to 1.0135. Whether it happens will depend on the incoming data. Notably, yield spreads have moved in favor of EUR/USD this week. But whether they will play any role is a big question. Serious gas related problems and the Fed's continued hawkish stance suggest that this month one should not count on the recovery of EUR/USD, whose growth may stall around 1.0100-1.0200. The German business climate index from the IFO Institute fell slightly in August to 88.5 against 88.7 in July and the market forecast of 86.8. The index for assessing the current economic situation dipped to 97.5 compared to the July value of 97.7 and the forecast of 96.0. The IFO expectations index, which reflects the forecasts of companies for the next six months, fell to 80.3 from 80.4, but turned out to be much better than the 78.6 expected by the market. Following the release of IFO's German Business Activity Survey, market players concluded that a recession is still on the agenda. The euro was not inspired by the results, the growth of 0.3% is solely due to the declining dollar. Source: Forex Analysis & Reviews: Euro fights windmills
The US Dollar Index Is Producing A Reasonable Bullish Divergence

How Do Most Influential Banks In The World Perform? JPMorgan Chase (JPM), Bank of America (BAC) And Goldman Sachs (GS)

Conotoxia Comments Conotoxia Comments 25.08.2022 16:45
Leading investment and commercial banks are vital to the international financial system. They are responsible for money transfers, investments, currency exchange, hedging corporate exposures, etc. Banks may be exposed to potential risks in an environment of changing interest rates, or it may be a potential opportunity for them to improve their profits. Given the volume of lending activities, commercial banks' performance seems most sensitive to a change in interest rates. Investment banks, meanwhile, through their handling of investment projects and trading activities, have the potential to profit when interest rates change significantly. How did the banks perform? JPMorgan Chase (JPM), Bank of America (BAC) and Goldman Sachs (GS) are among the largest and most influential banks in the world. In the second quarter, they generated revenues of $31.6 bln, $22.8 bln and $11.9 bln, respectively. Out of them, only JPM failed to beat Wall Street analysts' expectations in terms of revenue. JPM and BAC expect some borrowers to default through the difficult economic situation in the US. As a result, the former has set aside reserves of  $428 million to cover non-performing loans. Figures from leading banks seem to indicate that, after a record 2021, the number of mergers and acquisitions (M&A) and IPOs is declining significantly. BAC reported a decline in investment banking deal volumes in Q2 after last year's historic highs of a whopping 47%. However, the impact on books was offset by a 22% growth in net interest income, most likely driven by rapidly rising interest rates.  Moreover, rising interest rates due to the popularity of fixed-rate lending in the US do not seem to translate as strongly as one would expect into corporate profits. Irresponsible credit policies seem to be hitting the sector's performance hard, as can be seen in the share prices of JPM and BAC. They have already fallen 28.4 and 25.3% respectively this year. However, the announcement of the suspension of buybacks is also not a good sign and may indicate that management might consider the current share price too high. Goldman Sachs, which shares have lost 13.5% this year and surprised positively relative to expectations on Wall Street, appears to be a peculiar exception. Historically, GS has been relatively immune to periods of crisis, in which the company has taken advantage of high volatility to boost earnings. Nonetheless, the current situation is probably unsuitable due to its high vulnerability to declining transaction revenues (M&A) and share issues.  In contrast to the mixed and less-than-ideal performance of JPMorgan Chase and Bank of America, Goldman surprised the market with a significant increase in high-margin sales of securities to companies (especially those looking to hedge in a challenging macro environment). Income from these rose by a staggering 55% to $3.61 bln against the $2.89 bln estimated by Wall Street. Income from the sale of shares also rose more than estimated to 2.86 bln against a forecast of $2.67 bln. Finally, JPM, BAC and GS profits were 8.6 bln (-28% year-on-year), 6.25 bln (-32% year-on-year) and $2.79 bln (-48% year-on-year) respectively. This significant decline may shatter the stereotype that a high-interest rate environment can only be beneficial for banks.   Rafał Tworkowski, Junior Market Analyst, Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.   Source: Banks' earnings summary - do rising interest rates benefit financial institutions?
Oanda Podcast: US Jobs Report, SVB Financial Fallout And More

USA: Altough Jackson Hole Matters, CPI And Jobs Data Released Next Week Are Crucial As Well

ING Economics ING Economics 26.08.2022 09:19
Jerome Powell's in the spotlight, but equally important for the immediate Fed outlook will be the upcoming job report next week and the CPI print that follows. He may strive to endorse the market's recently rediscovered hawkishness, but also needs confirmation in the data. The ECB minutes pointed to more tightening ahead, with a hint at the balance sheet   Jerome Powell's speech at Jackson Hole today is the main event Powell to speak against an already hawkish-leaning backdrop Many will have marked Fed Chair Jerome Powell’s speech today as the highlight of the week. Whether he will prove as market-moving as some expect is still to be seen. A likely scenario is that he will endorse the retightening of financial market conditions and thus also the trend towards higher market rates of late, given that the Fed still is a stretch away from getting inflation under control. Emphasis on the terminal rate may be an attempt to shift the focus away from a slowing hiking pace Recent Fed speakers have indeed provided a more hawkish backdrop, confirming the market leaning toward such an outcome. The Fed’s Esther George assessed that the Fed still needed to raise rates further to slow demand and bring inflation down, highlighting the importance of clear communication of the destination the Fed is headed – and that could even be above 4%. She pushed back against the notion of cuts following on the heels of the tightening cycle, where the market is currently seeing the peak in the Fed funds rate at close to 3.8% in the first quarter of next year, before pricing in first rate cuts again. Putting the emphasis on the terminal rate may be seen as an attempt to shift the focus away from the Fed slowing its hiking pace soon. Whether that happens already in September will be determined by the data – 300k, as is currently the consensus for next week’s payrolls increase, would leave a 75bp hike still on the table. We suspect that the next CPI release and whether it can confirm the notion of peak inflation will be more relevant. Here our economists see the risk of the core inflation reading still heading higher. The Fed has European markets to thank for a tightening of financial conditions Source: Refinitiv, ING ECB still has more tightening to do – could the balance sheet be next? The main takeaway from the European Central Bank minutes was the signalling of more hikes to come as the outlook for inflation worsened. The larger increase of 50bp in July should be understood as a frontloading of the normalisation process, but not as a change of the end-point of the cycle. This end-point will only crystallise once interest rates get closer to it, and – as also our economists have noted – it probably remains a moving target.       While data continues to point lower, even if not as bad as feared as was the case with yesterday’s German Ifo, the ECB appears reluctant to use the word recession. The ECB minutes suggested the central bank continues to hold on to a more optimistic view of the economy, at least at the last July meeting. Abandoning the rates guidance has provided much-needed flexibility, but balance sheet guidance remains The minutes also foreshadowed a discussion that could add upward pressure to longer-dated rates. Abandoning the rates forward guidance has provided much-needed flexibility in setting monetary policy. But there still remains guidance in place for the balance sheet, or more precisely the reinvestment of the QE portfolios. For now, the ECB intends to reinvest maturities of the Asset Purchase Programme portfolio “for an extended period of time past the date when it started raising the key interest rates”. Pandemic Emergency Purchase Programme maturities will be reinvested at least until the end of 2024. No direct conclusions were drawn just yet in the minutes, but already earlier, the ECB’s Isabel Schnabel and Bundesbank’s Joachim Nagel hinted that the balance sheet would have to be considered at some point. Next week the ECB will have to contemplate another CPI print, and given the underlying rise in energy (gas) prices the trend continues to point higher – our economists do not exclude a peak in the double digits. Adjusting the reinvestment guidance may offer the ECB another lever on monetary policy, though we would caution that at a time where flexible reinvestments are used to contain sovereign spreads, talking about reducing reinvestments could prove counterproductive. Today's events and market view Powell's Jackson Hole speech is the day's highlight. Although rates have eased a little lower with the 10Y UST almost touching the 3% mark again, the market is leaning hawkish into this event. Other Fed speakers have already sounded hawkish tones, such as Esther George just yesterday, setting the backdrop for Powell. In these turbulent markets, investors will also have to contend with a resurgence in supply as September draws near. We're expecting €25bn of European government bond supply next week, to which the EU will add a €4bn tap. Other releases of note today are the personal income and spending data. Consumer spending should be OK with lower gasoline prices boosting household spending power, supporting consumption elsewhere. The PCE deflator, the Fed's preferred inflation measure, will reflect the earlier flat CPI release. The University of Michigan Consumer sentiment release is a final reading but might be revised a tad higher given a further slide in gasoline prices.  Read this article on THINK TagsRates Daily Jerome Powell Jackson Hole Federal Reserve Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Market Trends and Currency Positioning: USD Net Short Position, Euro and Pound Analysis - 22.08.2023

Forex: USD/JPY Has Risen By Almost 3% In August | US Dollar (USD) To Japanese Yen (JPY)

Kenny Fisher Kenny Fisher 26.08.2022 14:25
The Japanese yen is in negative territory today. USD/JPY is trading at 136.90 in the European session, up 0.34%. It has been a relatively quiet week for the yen, which is trading exactly where it started the week, around the 137 line. The month of August has not been kind to the yen, with USD/JPY soaring 2.75%. The US dollar is again in favor as the markets have tapered down their excitement that the Fed plans a dovish pivot. Does the Fed plan to let up or remain aggressive in its fight against inflation? We will certainly be smarter after Jerome Powell’s speech at Jackson Hole later today. A hawkish message from Powell should boost the US dollar unless investors zero in on any dovish remarks or projections, which could reignite speculation that the Fed will ease up on rate hikes. Tokyo Core CPI rises The Tokyo Core CPI index rose 2.6% in August, above the forecast of 2.5% and higher than the 2.3% gain in July. This marked the highest gain since October 2014. Policy makers in other major economies can only dream about inflation below 3%, but for Japan, rising inflation is a new phenomenon after decades of deflation. Inflation has exceeded the Bank of Japan’s target of 2% for four successive months and inflation is finally on the Bank’s agenda. Still, it is very unlikely that the BoJ will do anything more than tweak monetary policy, as its number one goal is to stimulate Japan’s fragile economy. The rise in inflation and the BoJ’s rigorous control of its yield curve has caused a steep deprecation of the yen, and an exchange rate of 140 may not be far off. There has been speculation in recent months that the Ministry of Finance could intervene to support the yen, but this has not happened until now and there is no indication that the 140 level is a magical ‘line in the sand’ that would trigger intervention.  For now, the main driver of USD/JPY remains the US/Japan rate differential, leaving the yen at the mercy of the movement of US Treasury yields. USD/JPY Technical USD/JPY is testing resistance at 137.03. Above, there is resistance at 137.03 1.3615 and 1.3504 are providing support This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. USD/JPY hits 137, Powell speech eyed - MarketPulseMarketPulse
Navigating the New Normal: Central Banks Grapple with Policy Dilemmas

Bitcoin And Crypto Market In General Most Probably Some Dovish Signs

Craig Erlam Craig Erlam 26.08.2022 14:30
The day we’ve all been waiting for has finally arrived as Jerome Powell prepares for his keynote speech at Jackson Hole. I have no doubt Powell will have chosen his words very carefully today, all too aware of the consequences of even the smallest deviation in his intended message. It’s a little ridiculous that markets put so much weight on such things but that is the situation we are in and I expect the Fed Chair will be very clear in the message he wants to send. The difficulty for Powell stems from the fact that there’s the message investors desperately want to hear and the one they’ve repeatedly ignored since the July Fed meeting. The “dovish pivot” played nicely into the hands of the perma-bulls that have waited impatiently for the stock market to recover this year. Despite policymakers’ best efforts, attempts to correct this narrative have been brushed aside and the view today is that Powell may try to address this in a more forceful and convincing way. If he fails or gives the slightest impression that there is any substance to the dovish pivot narrative, we could see yields slip and stock markets end the week on a high. That could come intentionally, or otherwise, but investors will be clinging to his every word for even the slightest hint. Especially in light of the recent inflation reading. No pressure. Plenty of US economic data ahead of Powell’s speech While I’m sure that would be enough excitement for one day, there’s plenty of economic data due from the US later that will have a big role to play as well. Ahead of the speech, we’ll get income, spending and core PCE price index data, the latter of which is the Fed’s preferred inflation measure. The timing couldn’t be better. The UoM consumer sentiment survey is also released around the time his speech starts which will also be interesting, given that it’s languishing near its lowest level in decades even as actual spending remains strong. Sterling slips after eye-watering energy price cap rise and forecasts The pound fell this morning after it was confirmed by Ofgem that the energy price cap will rise by 80% in October, taking the average annual household energy bill to £3,549. It’s the moment many have feared for months and to make matters worse, the eye-watering hike was accompanied by a warning that prices are continuing to rise ahead of the next revision in January, with Cornwall Insight suggesting the cap could hit £6,616.37 next year. While looking that far ahead leaves enormous room for error if this year is anything to go by, that is devastating for so many and will require immense government support. It will also make the job of the Bank of England horrifically hard, with its previous projection of inflation this year peaking at 13.3% now looking unrealistically optimistic. Five quarters of contraction may also start to look like the optimistic scenario at this rate. Japanese inflation rises but BoJ to remain calm Contrast that with inflation in Japan, where the Tokyo CPI rose to 2.9% y/y in August and only 1.4% ex-fresh food and energy. It’s no surprise the central bank is pushing back against the need to tighten monetary policy at this point in time. Of course, it’s easy to say that when the pressure on the currency and bond yields have eased to the extent they have over the last six weeks. That could well change if Powell strikes a hawkish tone today and triggers another jump in yields and the dollar. Crypto hoping for dovish Powell Everything I write about at the minute seems to require the need to reference back to Jackson Hole and Fed Chair Powell and bitcoin is no different. Last Friday’s sell-off has left bitcoin vulnerable ahead of today’s speech and crypto bulls will be hoping for anything dovish that could help it get back on its feet. The opposite could see $20,000 come under pressure. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. All eyes on Jackson Hole - MarketPulseMarketPulse
The US Dollar Weakens as Chinese and Japanese Intervention Threats Rise, While US CPI and UK Jobs Data Await: A Preview

S&P 500 And Nasdaq Plunged, Stocks Linked With Commodities Catch Wind In The Sails

InstaForex Analysis InstaForex Analysis 26.08.2022 16:09
Futures on US stock indices were trading in the red on Friday. Treasury bonds retreated from their highs as many US politicians from the Federal Reserve System have already begun preparing the ground for the long-awaited speech by Chairman Jerome Powell. The statements of the Fed's head will help form an opinion on the pace of tightening monetary policy. Futures for the S&P 500 and Nasdaq 100 declined 0.2% and 0.3%, respectively. The yield on 10-year Treasury bonds rose by about five basis points to 3.08%. In addition to Powell's speech later on Friday, traders will get acquainted with various fundamental statistics, including personal expenses of citizens and the Fed's preferred inflation indicator, where a decrease in price pressure is expected to be recorded.   Mining stocks continued to rise on Friday as prices of iron ore, copper, and other industrial metals rose following China's latest efforts to boost its flagging economy. Returning to Powell, who can confirm the Fed's determination to continue raising interest rates to combat high inflation, the desire to raise them and the pace of further tightening should be noted. Many experts have already announced the development of a hawkish scenario, rejecting expectations of moderate tightening. Against this background, there is a rebound in stocks and a decline in bonds. Another question is whether Powell will try to reset market expectations to ensure a further slowdown in economic activity. A dovish reversal would play well into the hands of buyers of risky assets looking forward to further stock market recovery. But if the Fed now departs from the set goals, the fight against inflation may drag on for many years. Then the economy has a chance not only to plunge into recession, but everything will flow into a full-fledged crisis, starting with the housing market and ending with the labor market and the stagnation of the manufacturing and service sectors. If Powell gives up the hope of a dovish reversal, we may see yields fall, and stock markets end the week at a high. Imagine other central banks have already stressed the need for further rate hikes. The president of the Federal Reserve Bank of Kansas City, Esther George, said that it is impossible to exclude the level of interest rates even above 4%.   Relevance up to 13:00 2022-08-27 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/320028
📈 Tech Giants Soar, 💵 Dollar Plummets! Disney-Charter Truce, Wall Street's AI Warning!

What A Drop! S&P 500 (SPX) And Nasdaq Almost Crashed!

ING Economics ING Economics 29.08.2022 08:03
Powell's tough message on inflation upsets equities - bonds more resilient  Source: shutterstock Macro outlook Global Markets: Fed Chair, Jerome Powell did what he needed to do last Friday at Jackson Hole, and that was to make it clear that the Fed’s over-riding priority was to get inflation down…not give assurances that they would be gentle with markets, not hint that rates might come quickly down once they’d peaked. All these things might be true, but he would have been shooting himself and the economy in the foot if he had undermined his comments on inflation fighting, with remarks that would have loosened, not tightened financial conditions. So at least as far as this author is concerned, he gets full marks for the message. Equities were less impressed. The S&P500 fell 3.37%, and the NASDAQ came off 3.94%. Their gains last week look ill-judged through the prism of history. Further sharp losses look likely at the start of trading today judging by equity futures. The rise in US Treasury yields was less dramatic, but the bond market has, as is often the case, had a more realistic assessment of the economy and the Fed than the equity markets for some time. 2Y US Treasury yields went up only 3.1bp, though they were up closer to 6bp at one point before easing back.  10Y yields rose only 1.5bp to take them to 3.041%. Despite a spike to 1.009, EURUSD went with higher UST yields and falling risk sentiment and declined to 0.9937 and looks to be heading lower in early Asian trading. The AUD has followed the EUR lower and is 0.6863 now, down from about 0.6970 this time on Friday. Cable has plunged to 1.1691, and the JPY has pushed up above 138. There were some small gains from the KRW and MYR on Friday, but on the whole, the rest of the Asia pack was softer against the USD and the CNY still seems as if it is headed higher over the short-term despite some defensive-looking fixings last week. G-7 Macro: A quick backcast to last Friday, when the US released personal income and spending figures for July, both of which came in weaker than market expectations. However, the price measures of PCE inflation and core PCE were also weaker. Both came in 0.1pp below expectations. That resulted in a 0.2pp decline in core PCE inflation taking it to 4.6%YoY. Headline PCE inflation fell to 6.3% from 6.8% in June. There’s nothing of note on today’s G-7 calendar. Australia: July retail sales are expected to post a slight increase on the 0.2%MoM reading for June. An online retail sales survey for July released at the end of last week showed sales declining, though at the same pace as June, so we could be looking at a similar figure for overall sales growth in July What to look out for: Regional manufacturing and US non-farm payrolls Australia retail sales (29 August) Malaysia CPI inflation (29August) Japan labour data (30 August) Australia building approvals (30 August) US Conference board consumer confidence (30 August) South Korea industrial production (31 August) Japan industrial production (31 August) China manufacturing and non-manufacturing PMI (31 August) Hong Kong retail sales (31 August) South Korea GDP and trade (1 September) Regional PMI manufacturing (1 September) China Caixin PMI manufacturing (1 September) Indonesia CPI inflation (1 September) US initial jobless claims and ISM manufacturing (1 September) South Korea CPI inflation (2 September) US non-farm payrolls and factory orders (2 September) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
USDA's WASDE Update: Wheat Tightens, Corn Loosens

The US 2-year Treasury Yield Reached The Highest Since 2007!

Saxo Strategy Team Saxo Strategy Team 29.08.2022 10:20
Summary:  Equity markets plunged on Friday in the wake of Fed Chair Powell’s speech, in which he invoked famed Fed inflation fighter Volcker and warned against a premature easing of policy. While US yields are only modestly higher in the wake of the speech, the US dollar is soaring, bringing a new unwelcome tightening on global liquidity. Particularly intense focus on USDJPY as the Bank of Japan faces a new challenge from JPY weakness as it insists on maintaining its maximum easing policy.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities posted their worst session since at least June in the wake of Fed Chair Powell’s Jackson Hole speech on Friday, with the S&P 500 losing over 3% on the session and trading lower still overnight to start the week, with the psychologically key 4,000 level looming into view. The Nasdaq sliced over 4% lower and traded near its 55-day moving average overnight, in the 12,400 area. Sentiment looks fragile, with any further rise in treasury yields and the US dollar the key risk for driving a possible worsening of sentiment this week. Hong Kong’s Hang Seng (HSIQ2) and China’s CSI300 (03188:xhkg) After having staged an impressive bounce from the trough of a 2-month losing streak last week on the back of reports that the U.S. and China regulators were reaching a deal to avoid the delisting of Chinese companies from U.S. bourses, Hang Seng Index fell nearly 1% on Monday following the post-Jackson Hole selloff in U.S. equities. In addition, in statements from the U.S. and China regulators last Friday regarding access to audit work papers, the interpretations looked rather different in some key aspects. According to the Public Company Accounting Oversight Board (PCAOB), the agreement gives the U.S. regulator, “complete access to the audit work papers, audit personnel, and other information”. On the other hand, in its announcement and Q&As with reporters, China Securities Regulatory Commission emphasized that audit work papers and other information will be “obtained by and transferred through Chinese regulators”. Meituan (03690:xhkg) outperformed, +3.7% after reporting a solid Q2 and continuous order growth in June and August. CSI 300 dropped 0.7%.  US dollar and especially USDCNH in the wake of Fed Chair Powell’s speech A forceful new USD rally was set in motion in reaction to Fed Chair Powell’s speech on Friday, with more aggravated strength versus Asian currencies on Monday as yields rose and the JPY weakened (more on USDJPY below), but also as China allowed its currency to drop versus the US dollar, a key development in cementing the impact of this USD move globally. The most salient potential driver for further USD strength this week would be strong US data (especially on Friday’s August US jobs and earnings report) that drives Treasury yields higher. USDJPY While the focus is generally on the US dollar this week already and the broader fallout should the greenback continue its aggravated ascent, the stakes are very high for USDJPY, which risks a new upward spiral that will challenge the Kuroda-led Bank of Japan as it insists on maintaining it accommodative policy in the face of rising yields elsewhere.  A massive bout of volatility may lie ahead if market participants decide to take on the BoJ, which will eventually likely cave at some unknown level higher, perhaps 150 in USDJPY if it rises that far? Crude oil prices (CLV2 & LCOV2) Crude oil trades higher extending last week’s gain with supply concerns more than offsetting the potential negative growth/demand impact of Powell’s higher-for-longer interest rate speech on Friday at Jackson Hole. An Iran nuclear deal has yet to be reached with a breakthrough unlikely to add much in terms of additional barrels before next year. Libya, one of OPEC’s most volatile producers saw deadly clashes in the capital over the weekend sparking fears over supply to an energy starved Europe. In a addition high gas prices in Europe and Asia will continue to underpin demand and prices for diesel and heating oil. Brent is currently stuck in a range around $100 with resistance around $103 and support at $98. Gold (XAUUSD), silver (XAGUSD), platinum (XPTUSD) and copper (COPPERUSDED22) ... have tumbled the most since Friday after Fed’s Powell signaled that interest rates would keep rising and remain elevated for longer. The US 2-year Treasury yield reached the highest since 2007 with additional headwinds seen from the stronger dollar. The markets belief in the Fed’s ability to combat inflation helped drive the one-year inflation swap down to 3.06%, a one-year low. We maintain the view of gold being a hedge against the belief the Fed will be successful in lowering inflation without hurting economic growth to the point where the focus returns to central bank support but given the renewed breakdown on Friday and continuation today, the price may in the short term once again look at critical support below $1700. US Treasuries (TLT, IEF) US treasury yields rose across the board on Friday, actually quite modestly relative to the attention given to Fed Chair Powell’s speech, but the move followed through further in the Asian session Monday as the US dollar also rose, a toxic combination for risk sentiment. The US 10-year benchmark yields trades near the highs last week above 3.10% this morning, with the chief focus on the 3.50% area high established in mid-June if yields continue to rise. This week features important US data through Friday’s US jobs report. What is going on? Powell’s message at Jackson Hole gets serious While Powell still stayed away from clearly defining a rate path or the expected terminal rates for the Fed, his strong message did suggest that the fight against inflation is far from over. Powell reiterated that the decision on September 21st on whether the Fed will lift rates by 50bps or 75bps will be driven by the “totality” of data since the July meeting. That puts a great deal of emphasis on the US jobs report due on September 2nd, and the US CPI report due September 13th. There was also some emphasis on rates being held at the peak rate for some time, but there isn’t a substantial change to the market’s expectation of the Fed path yet, with cuts still seen for next year by the money markets. Other Fed speakers still see higher terminal rates Inflation remains the overarching theme in all the Fed talk, and no comfort is being taken from the softening in July inflation. Mester (2022 voter) accepted that the Fed hasn’t reached neutral rates yet and said that rates need to go above 4% and held there for some time. Bostic (2024 voter) also suggested a higher terminal rate of 3.5-4.75% compared to what was reflected in the June dot plot, and said rates need to be held there for some time and rate cut talks are premature. Soft US July PCE inflation confirms the dip in the CPI data Lower petrol prices cooled price pressures in July, and this has been re-confirmed by the PCE print on Friday. The headline came in at 6.3% YoY (vs. 6.8% expected) while core was at 4.6% YoY (vs. 4.7% expected). The market reaction to these softer numbers was however restrained as the hawkish message from Powell at Jackson Hole took the limelight. The magnitude of the September rate hike still remains a coinflip, but the Fed members have refused to take comfort with the softer CPI print and continue to push for an aggressive fight against inflation. ECB speakers remain committed to inflation fight despite recession risks A host of ECB speakers at the weekend continued to push for aggressive rate hikes to fight inflation. Schnabel, speaking at Jackson Hole, said rates must be raised, even into a recession. Kazaks also emphasised the need for further front-loading of rate hikes after the 50bps rate hike announced by the central bank in July. In fact, there were hints of a 75bps rate hike. There were also some concerns on a weaker EUR, as that fuels further inflationary pressures and the benefit of cheaper exports is diminished by supply chain disruption. Villeroy said that the neutral rate should be reached before the end of the year while Kazaks said he would get there in the first quarter of next year. Energy prices continue to climb in France Last Friday, the French 1-year electricity forward was close to €1,000 per MWh (versus €900 per MWh for Germany). This represents an increase of +1000 % compared with the long-term average of 2010-2020. Since Autumn 2021, the French government has capped electricity and gas prices (electricity price increase was capped at +4 % this year). But this is very costly for public finances (about €20bn so far this year). The cap on energy prices will expire at the end of the year for gas and in February 2023 for electricity. The government is not planning to extend it further. More targeted measures to help the poorest part of the population to cope with higher energy prices is the most likely scenario. The risk of electricity shortage is real in France this winter. During the summer, electricity demand is around 45 GWh. During the winter, higher consumption will push electricity demand around 80-90 GWh. This will put under tension all the electricity infrastructure, thus increasing the risk of shortage. We think that France is certainly in a worse position than Germany when it comes to energy supply (in the short-term). The world's fourth largest iron ore miner, Fortescue releases 2nd highest profit on record Fortuecue Metals (FMG) posted a 40% drop in full-year profits, mirroring the steep declines in iron ore prices. Despite iron ore shipments hitting a record, Fortescue posted a A$6.2 billion profit, down from the A$10.35 billion last year. So what’s next? It’s pledged another record year of iron ore shipments (187-192mt) and wants to accelerate its push into clean energy, aiming to produce an initial 15 million tons a year of green hydrogen by 2030, to help its heavy industry and long-distance transport decarbonize. It will spend $600-$700 million to do so this financial year. As we covered last week in our BHP interview, iron ore demand is likely to slow over the coming 30 years (that’s where Fortescue’s income comes from). Meanwhile, the world requires double the amount of green metals. So the question remains; can Fortescue diversify its business in time? Fortescue’s shares are up 21% from their July low, with investors hoping China infrastructure stimulus will support iron ore demand and boost the company’s earnings.  What are we watching next? The US dollar is the wrecking ball here for risk sentiment – any rise in US yields would make things worse The rising US dollar is bad enough for global markets as the greenback is a financial condition unto itself, but if US treasury yields continue to rise this week, this could prove double trouble for global markets and potentially aggravate the sudden downside momentum tilt set in motion on Friday by Fed Chair Powell’s speech at the Jackson Hole conference.   China manufacturing PMIs, scheduled to release this week, are expected to decelerate in the midst of power curbs The median forecasts of economists surveyed by Bloomberg expect China’s official NBS manufacturing PMI to edge up to 49.3 in August from 49.0 in July but remains firmly in the contractionary territory and the Caixin manufacturing PMI to slide to 50.1 in August from 50.4 in July, approaching the threshold between expansion and contraction. The heatwaves and drought-induced power curbs caused Sichuan and Chongqing to shut-down manufacturing activities for six days and eight days in August, respectively. The median forecast for the August official NBS non-manufacturing PMI is 52.2, down from last month’s 53.8 but remains in the expansionary territory.  Earnings to watch This week’s earnings will tilt towards a Chinese focus, but from a macro perspective we are watching Lululemon on Thursday to get an update on the US consumer. Expectations are still looking for a +20% y/y revenue growth in the current quarter so the bar is set high on the outlook. Monday: Haier Smart Home, Foshan Haitian Flavouring, Agricultural Bank of China, BYD, Pinduoduo, Trip.com, DiDi Global, CITIC Securities Tuesday: Woodside Energy, ICBC, China Yangtze Power, Muyuan Foods, SF Holdings, Shaanxi Coal, Midea Group, Tianqi Lithium, Ganfeng Lithium, Bank of Montreal, China Construction Bank, Bank of China, Great Wall Motor, COSCO Shipping, Partners Group, Baidu, Crowdstrike, HP Wednesday: MongoDB, Brown-Forman, Veeva Systems Thursday: Pernod Ricard, Broadcom, Lululemon Athletica, Hormel Foods Friday: BNP Paribas Fortis Economic calendar highlights for today (times GMT) 0800 – Switzerland SNB Weekly Sight Deposits 1300 – ECB Chief Economist Lane to speak 1430 – US Aug. Dallas Fed Manufacturing survey 1815 – US Fed Vice Chair Brainard to speak 2330 – Japan Jul. Jobless Rate 0130 – Australia Jul. Building Approvals Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: Financial Markets Today: Quick Take – August 29, 2022
Speech At Jackson Hole Triggered Masacric Slide In Equities! US Treasury Yields Reaction

Speech At Jackson Hole Triggered Masacric Slide In Equities! US Treasury Yields Reaction

Saxo Bank Saxo Bank 29.08.2022 10:46
Summary:  Fed Chair Powell's Jackson Hole speech was credited with triggering the ugly slide in equities and broader risk sentiment on Friday, but the modest reaction in US treasury yields suggests that the Fed was only moderately more hawkish than anticipated. Regardless, the market slide has already developed ugly momentum and could test next supports if US data this week continues to support higher yields and a stronger US dollar, an important financial condition in its own right. We also discuss the latest commodity price developments and weak precious metals on the stronger US dollar and remarkably persistent view that hefty disinflation is just around the corner. Today's pod features Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are found via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: Markets stumble after Powell's Jackson Hole speech
US Dollar Index (DXY) Is Expected To Fall Further

Dollar Reaches 20 Years High And Still Gaining! Cryptocurrency Market's Reaction

Conotoxia Comments Conotoxia Comments 29.08.2022 11:04
The speech by Fed Chairman Jerome Powell, expected by investors, may have shaken the markets. During his address, markets could have seen more volatility, leading to a sell-off in risky assets and another wave of dollar appreciation. On Friday afternoon, when the Fed Chairman spoke in Jackson Hole, the U.S. dollar seemed to strengthen, and again to levels last seen 20 years ago. The U.S. Dollar Index is also attempting today to continue its rise from Friday, surpassing the 109-point level, which could result in the establishment of a new peak in the recent uptrend. Jerome Powell, in his speech, indicated that the Fed is committed to lowering inflation by raising interest rates and keeping them higher for a longer period of time. This, in turn, may have influenced the market's valuation of the Fed's actions on September 21, where investors seem to assume a rate hike of 75 basis points to 3.00-3.25 percent with a 70 percent probability. Before Jackson Hole, this probability was around 50 percent. In Powell's view, the right thing for the Fed to do is to continue the monetary tightening cycle until inflation is within the 2 percent target. The Fed seems to be looking more broadly at the data than a horizon of one or two months, and a possible peak in inflation may not change anything here for the moment. The Federal Reserve chairman also warned against loosening monetary policy prematurely. This may have dashed the market's hopes for a so-called Fed pivot, a 180-degree change in attitude. According to Jerome Powell, fighting inflation may be "painful" for the economy to some extent, but it is better than letting inflation get even more out of control. Such statements may have been followed by a retreat from risky assets in the financial markets. On Friday, major U.S. stock indexes took a dive and erased all potential gains from August. The Dow and S&P 500 lost 3.03 percent and 3.37 percent, respectively, while the Nasdaq Composite lost 3.94 percent, its biggest drop since mid-June. This morning, futures also seemed to show potential losses, dropping between 0.7 percent and 1.3 percent. The cryptocurrency market was also not indifferent to the Fed chairman's words. Bitcoin, which cost $25,000 as recently as mid-August, slipped below the $20,000 level at the end of the month and appears to be approaching its June low. Ethereum, which recently cost $2,000, is now priced below $1,500. Thus, one can see that the market has begun to depend on events in the real economy and on the actions of the Fed, much like the traditional financial markets, to which, after all, it was supposed to be an alternative. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.   Source: Dollar hits 20 years high. Stock market tumbled
bybit-news1

Jerome Powell (Fed) Introduces Bank's Strategy. Elizabeth Warren Speaks Its Mind

InstaForex Analysis InstaForex Analysis 29.08.2022 11:04
Fed's Jerome Powell's testimony The US Federal Reserve will remain hawkish and focus on inflation, Chairman Powell said on Friday, adding that US economic growth will slow down and unemployment will rise. It comes as no surprise as rate hikes have always triggered a cooling effect on the economy. Still, not all US officials agree with such an approach. In the European Union, they are trying to balance between maintaining economic growth and fighting inflation. In the United States, however, their primary concern is to bring inflation to the 2% target, with little attention paid to economic growth. The Federal Reserve reckons that a decrease in GDP is not a recession because the latter is always followed by a wave of bankruptcies, rising unemployment, contraction in the jobs market, and other sad events. Right now, there is just a fall in GDP, which could be interpreted as a correction after strong growth. Nevertheless, business activity is slowing down as well as industrial production, and things are only getting worse. Elizabeth Warren Senator Elizabeth Warren said on Sunday that she is concerned about the regulator's plans to further tighten monetary policy as recession risks are increasing. In her view, high prices and millions of unemployed are worse than high prices and a strong economy. She believes, the Federal Reserve's actions are likely to lead to high unemployment and negative economic growth rather than to low inflation. "I just want to translate what Jerome Powell just said. What he calls 'some pain' means putting people out of work, shutting down small businesses, because the cost of money goes up, because the interest rates go up," Warren said on Sunday. Elizabeth Warren may be partially right. The Bank of England, for example, has raised the benchmark rate six times in a row but inflation is still on the rise. Of course, the situation in the UK is somewhat different because the country has recently been through Brexit. Governor Andrew Bailey sees the United Kingdom sliding into a recession in the last six months of the year. Meanwhile, US inflation might be declining rather slowly, not in line with the central bank's expectations. Moreover, consumer prices have so far fallen just once. There is no guarantee that the slowdown will continue. It might be a drop of as much as 0.1-0.2% a month, taking the Federal Reserve several years to bring inflation to the 2% target. All this time, the American economy would be under tremendous pressure. The inflation report due on September 14 will clear things out. It will be released a week before the next rate hike and show whether Mr. Powell and the Committee are right in their pledge to forcefully and rapidly act against inflation. Relevance up to 06:00 2022-08-30 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/320117
German Business Confidence Dips, ECB's Lagarde Hosts Central Banking Conference in Portugal, EUR/USD Drifts Higher

Powell Signals Goals Of Fed, Dollar Index Nears 110 Level, Bitcoin And Gold Trade Lower

Swissquote Bank Swissquote Bank 29.08.2022 11:23
Federal Reserve (Fed) Chair Jerome Powell’s speech at the Jackson Hole meeting wreaked havoc across the equity markets on Friday. His message was crystal clear: inflation must come down even if it means pain for households and businesses in the process. Major US indices tumbled, the US yields advanced, and the US dollar gained. What about Bitcoin and Gold? Gold and Bitcoin were sold. In energy, European gas futures continue their spike and crude oil kicked off the week higher. Due this week, the European flash CPI and the US jobs data will be in focus. For the US, another strong jobs data would further back the Fed hawks, whereas in Europe, even a scary inflation figure, and revived ECB hawks, may not suffice to throw the single currency above parity against the US dollar.   Watch the full episode to find out more! 0:00 Intro 0:27 Powell shows no pity, says the Fed will fight inflation despite costs 2:04 US indices tumble 3:10 Another strong jobs read could further revive Fed hawks 6:35 USD rallies, euro retreats 8:20 Energy prices push higher 9:13 XAU and Bitcoin cheaper post-Powell Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Jackson #Hole #Powell #speech #inflation #hawkish #energy #crisis #crude #oil #natural #gas #USD #EUR #XAU #Gold #Bitcoin #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH  
Fed is expected to hike the rate by 50bp, but weaker greenback and Treasury yields don't play in favour of the bank

Fed Is Determined To Fight Inflation! Forecasts For USD/JPY And AUD/USD - 29/08/22

InstaForex Analysis InstaForex Analysis 29.08.2022 11:48
Federal Chairman Jerome Powell, speaking at a symposium in Jackson Hole, did everything to make the market finally realize that the central bank will stop at nothing in its plan to curb inflation in America. In the last article, we suggested that if the head of the Fed did not throw a surprise at the markets, then it would be possible to observe another local rally in the stock and other asset markets with a simultaneous increase in demand for government bonds and a weakening of the US dollar. And that would very likely have been the case if Powell hadn't made a targeted statement pointing out that while controlling inflation through higher interest rates, slower growth and softer labor market conditions would hurt households and businesses , "failure to restore price stability will mean much more pain" in the long run. It seems that weak hopes have finally collapsed, and this largely confirms the recovery in the growth of treasury yields amid falling demand for them. The yield of the 10-year T-Bond benchmark is already confidently staying above the 3% level and, after a slight downward correction, resumed growth. It is likely that a further sell-off in the government debt market will push it up to an immediate high of 3.5%. How will the US dollar behave in the context of continued aggressive rate hikes and growth in Treasury yields? We believe that it will have to further strengthen against major currencies, despite the fact that rates will also rise in other economically developed countries of Europe, Canada, Australia, and so on. Here it will be supported by the growth of Treasury yields and the flight of capital from Europe, as well as from countries with emerging economies, with the exception of Russia and China. In this case, we can expect the growth of the dollar index ICE to the mark first at 110, and then to 111 points. In fact, it will be possible to say that the dollar exchange rate against major currencies will linger for a long time at the level of the beginning of this century. As for the possible dynamics of the markets this week, the release of data on inflation in the eurozone, which is expected to rise again, and, of course, the latest figures on unemployment in America, will play a leading role here. Considering the Fed's general position regarding rates, we believe that if the data on the number of new jobs comes out no worse than expected, the US central bank will once again be confident that it is on the right course, fighting inflation and using the still strong labor market for this, trying to bring down the economy before serious problems arise, like a high temperature with aspirin, by aggressively raising interest rates. It is likely that after local consolidation, the smooth strengthening of the dollar will continue, and the markets will remain between the hammer of Fed rates and the anvil of inflation. Forecast of the day:     AUDUSD pair The pair is trading below 0.6865. Consolidation below this mark may be the basis for the pair's fall to 0.6800. USD/JPY pair The pair is at the level of 138.90. If it does not settle above it, it may correct down to 138.45, and then again rush to 139.40. Relevance up to 09:00 2022-08-31 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/320143
Analyst Favorites: Sunrun, Block, and Nvidia Lead the Pack Among Saxo's Top Traded Stocks with 17% Upside Potential

Global Recession Is Coming. Central Banks Want To Rein In Prices

Marc Chandler Marc Chandler 29.08.2022 12:26
The poor preliminary PMI readings, the ongoing European energy crisis, and the recognized commitment of most major central banks to rein in prices through tighter financial conditions are risking a broad recession. These considerations are weighing on sentiment and shaping the investment climate. Most high-frequency data due in the days ahead will not change this, even if they pose some headline risk.   What we have seen among some central bankers applies to market participants too  It is not so much that these central bankers are congenitally doves or hawks, but they are simply activists. Whether conditions warrant tighter or easier monetary policy, the activists lead the charge and are more aggressive than most of their colleagues in both directions. Similarly, some market participants are just extreme in their views. On the one hand, given that market returns are often characterized by fat tails, it makes sense that market views are not normally distributed. Hugging the median (there is rarely truly a consensus, despite the market jargon) draws little attention and is unlikely to promote sales of research products and newsletters.   On the other hand, depending on the corporate culture, there may be little incentive to take the risk of standing out from the crowd  It is as if some take Keynes to heart: "Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally." Sometimes, corporate culture is broad enough to accept either approach, allowing the idiosyncrasies of the economist/analyst wider latitude. However, some are conditioned to fear being wrong that they do not let themselves be right. For them, being part of the crowd is safe. Being part of the consensus nearly always gets less pushback than being an outlier.   II Three high-frequency economic prints next week will likely move the markets whether they meet expectations or not: China's PMI, the eurozone's CPI, and the US employment report  These are the three biggest economies, and each is struggling to put it mildly. The data are unlikely to change this view but could impact the policy outlook. In addition, extreme weather aggravates existing challenges, including the energy crisis, supply chain disruptions, and inflation pressures.   The US, Japan, the eurozone, and Australia's preliminary composite PMIs fell below the 50 boom/bust level  Ironically, the UK's held slightly above, though the Bank of England of a recession that will extend into 2024. Where is China?   Its July composite stood at 52.5. It had been below 50 due to the lockdowns associated with its zero-Covid policy from March through May. It reached a 15-month high in June of 54.1.    In the US, we argued that back-to-back quarterly declines in output were a bit of a statistical quirk stemming from the challenge of managing inventories in the current economic environment and trade, to a lesser extent  While recognizing that a sustained economic contraction was likely, we did not think it actually had begun and expected policymakers to act accordingly.   In China's case, the economic data is consistent with growth  The median forecast in Bloomberg's survey sees the world's second-largest economy expanding by 3.4% quarter-over-quarter after a 2.6% contraction in Q2. However, Chinese officials are acting as if it were in a recession or will be shortly. It unexpectedly shaved its benchmark one-year medium-term lending facility rate and allowed lending prime rates to be cut. The larger (15 bp) cut in the five-year rate clearly reflected the ongoing concerns about the housing market. Beijing is using command functions and coordinating capabilities to push lending from banks to the property sector and new local government borrowing for infrastructure projects. It has accepted a weaker yuan against the US dollar. It fell to a new two-year low last week. The softer the PMI, the more the market will look for further easing, including reducing required reserves.   On August 31, the eurozone publishes its preliminary estimate of the month's CPI  Headline inflation accelerated to 8.9% in July, surpassing the US 8.5% pace. The median forecast in Bloomberg's survey is for the pace to tick up slightly to 9.0%. In addition, the core rate is seen edging up to 4.1% from 4.0%.  Many EMU members are helping struggling households by cutting the VAT on energy or other subsidies, but the price of energy is rising even quicker  While there is some debate over whether US inflation has peaked, there is less debate in Europe. Prices are still rising. Seasonal patterns may be distorted, but July's monthly change has been less than June since 2003. August's monthly CPI has increased more than July's since 2000, with the one exception of 2020 when it matched July's 0.4% decline. This month's inflation is expected to rise by 0.4% after the 0.1% increase in July. The weakness of the euro also risks boosting prices. The single currency is off about 2.5% this month after falling roughly 4.8% in the previous two months.  The European Central Bank meets on September 8  The swaps market is confident that even though the flash PMI warns that output is contracting, the ECB will continue to hike rates. Following the half-point increase in July, the market expects another 50 bp hike next month. More than that, the swaps market has about a 50% chance of a 75 bp move. Press reports confirmed that several ECB officials want to discuss a three-quarter point hike. That said, they do not appear in the majority. Not to get too far ahead of the game, but the market is pricing in around 85 bp of tightening in Q4 (two meetings, October 27 and December 15). The latest Bloomberg survey found a median forecast for the euro to finish the year at $1.02. This seems increasingly optimistic. A one-standard-deviation band around the year-end forward suggests a mathematical range of about $0.9430 to $1.0675. While the median is in the upper third of the range, our subjective idea would put it in the bottom third.  That brings us to the US August employment report on September 3, just before the long holiday weekend (Labor Day, US markets closed)  Recall that nonfarm payrolls rose about twice as much as expected in July, 528k. That the average growth in the first seven months was slightly above 470k. In the Jan-July period last year, the US grew about 555k jobs a month on average. However, that appears to have underestimated US job growth. In the benchmark revisions announced last week. The US added 571k more private sector jobs in the year through March, which translates into around 47.6k more a month.   The median forecast in Bloomberg's survey has crept up in recent days to 300k  The unemployment rate, which slipped to a new low of 3.5%, is expected to remain unchanged, while a 0.4% rise in average hourly earnings could see the year-over-year pace ticked back to 5.3% year-over-year. It was at 5.2% in June and July. By nearly any reckoning, that would still be a solid report and one that will likely encourage the Fed to deliver another 75 bp hike when it meets in late September.    Market sentiment has swung back and forth a bit over the likelihood of a third consecutive 75 bp hike  Despite the poor housing sector data and the dismal PMI, the Fed funds futures market finished last week discounting a little more than a 2/3 chance of a 75 bp instead of 50 bp. Such a move would lift the target to 3.00%-3.25%. The pricing suggests that Fed will likely slow the hikes going forward. The market is pricing in a year-end rate between 3.50% and 3.75%. The market is pricing in a strong probability of a hike in Q1 23 (~80% chance). This was unchanged from before Powell's speech at Jackson Hole. In the middle of last month, the Fed funds futures market had priced in 60 bp of cuts next year. That was the gap between the implied yield of the December 2022 Fed funds futures and the December 2023 contract. It finished last week near seven basis points., about two basis points less than before Powell's speech. III The dollar's two-week rally that began August 10-11 may not be over despite the volatility spurred by position adjusting around Powell's Jackson Hole speech Powell specifically warned that some pain will be associated with efforts to rein in inflation, which the Fed is committed to doing. That seems to suggest some economic weakness will not interfere with its course until inflation convincingly moves back towards its target. Other major central banks, but the Bank of Japan, have implied pretty much the same thing.   Dollar Index:  DXY rallied from a six-week low near 104.65 on August 10 to slightly above 109.25 on August 23. However, it stopped short of the mid-July high of almost 109.30. The sell-off before the weekend took it briefly through 107.60 to set a new low for the week before recovering to almost 108.90. The MACD is rising albeit more gently, but the Slow Stochastic is overextended and suggests that this leg up is getting long in the tooth. Still, the prospect of another healthy job report at the end of next week may deter a significant retreat. The pre-weekend low approached the minimum (38.2%) retracement of the leg up (~107.50).  Euro:  The euro recorded a new 20-year low near $0.9900 on August 23, seeming to complete the leg down that began on August 10 at around $1.0370. However, the Jackson Hole-related position adjustment saw it recover to $1.0090, which marginally surpassed the (38.2%) retracement objective (~$1.0080). The next retracement (50%) and the 20-day moving average are found in the $1.0135-40 area. Yet, the euro continues to struggle and settled nearly cent off its session highs before the weekend. The MACD descent has slowed, and the Slow Stochastic is moving sideways in oversold territory. Selling into upticks continues to be the preferred strategy. A significant low does not appear to be in place. Potential next week to toward $0.9800, maybe.   Japanese Yen:  The greenback reached JPY137.70 on August 23 and settled into a narrow range in dull dealing for the remainder of the week. Although the dollar traded on both sides of Thursday's range ahead of the weekend, it remained mired in the range established on August 23 (~JPY135.80-JPY137.70). The MACD looks constructive, but the Slow Stochastic is poised to turn lower. The US 2- and 10-year yields reached their highest level in two months, which underpins the dollar. Above the JPY137.70 area, the next resistance may be encountered near JPY138.20-40, but there is little standing in the way of another run at the JPY140 area.   British Pound:  Sterling posted a bearish outside down the day before the weekend by trading on both sides of Thursday's range and settling below Thursday's low. The Jackson Hole-related position adjustment stalled at $1.19, shy of the $1.1930 (38.2%) retracement target. It reversed low and fell to $1.1735, just above the two-year low on August 23 (~$1.1720). The MACD is trending lower, but the Slow Stochastic is moving sideways in oversold territory. The 2020 low slightly above $1.14 beckons, and there is little on the charts to prevent it. Sterling cannot sustain upticks even though its discount to the US on two-year yields has fallen from around 135 bp on August 9 to 45 bp in the middle of last week before finishing around 60 bp.   Canadian Dollar:  The US dollar had given back about half of the gains scored since August 11 (~CAD1.2730 to almost CAD1.3065) before Powell spoke at Jackson Hole. That retracement and the 20-day moving average converged around CAD1.2895. The sharp sell-off of US equities ahead of the weekend saw the greenback jump to almost CAD1.3045. The MACD is rising gently, while the Slow Stochastic has begun moving sideways near its highest level in two months near overbought. The poor price action in the S&P 500, with the upside gap on the weekly charts left unfilled before the breakdown to the lowest level since August 2, warns that the US dollar could challenge the CAD1.31 area in the coming days. The nearly two-year high was set on July 14 at around CAD1.3225. That may be the next important chart area.   Australian Dollar:  Like the Canadian dollar, the Australian dollar has recovered half of the losses seen in the latest leg down that began from the August 11 high near $0.7135 and bottomed on August 23 around $0.6855. The Aussie staged a key reversal from that low and closed above the previous day's high. That retracement objective was near $0.7000 and the next (61.8%), and it was briefly surpassed before the weekend and Aussie's reversal back to $0.6900 to take out the previous session's low.   The MACD is not generating a strong signal, while the Slow Stochastic is curling higher after dipping into oversold territory. A return to the $0.6855 area looks likely, and below that could see $0.6800, though a return to the two-year low set in mid-July near $0.6680 cannot be ruled out.   Mexican Peso:  The dollar forged a bottom against the peso in mid-August around MXN19.81-82. That is also roughly where the dollar bottomed in late June. The greenback bounced to MXN20.2665 and retreated last week to around MXN19.85. The momentum indicators are not generating strong signals, but the floor looks strong. In the face of the sharp US equity losses, and the broader risk-off mood, the peso was surprisingly resilient.  It rose by about 0.65% last week. Initial resistance may be near MXN20.06 and then MXN20.11-13. Latam currencies generally outperformed within the emerging market space last week. Four of the top five emerging market currencies were from Latam, led by the Chilean peso's 5.9% rally. The current intervention program runs out on September 30 but could be extended. The intervention to support the Chilean peso after it fell to record lows last month has given the currency a reprieve but could exacerbate the current account deficit, which reached 8.5% of GDP in Q2.   Chinese Yuan: The Chinese yuan slumped to two-year lows last week as policy divergence grew more acute with the latest Chinese rate cuts. More easing of monetary policy is expected, and there is some speculation that another cut in required reserves could materialize in early Q4. China's discount to the US on 10-year bonds rose for the fourth consecutive week, and at 37 bp, was the largest weekly close since June. The PBOC has fixed the dollar weaker than expected over the last few sessions, and the magnitude seems sufficient to suggest a warning from Chinese officials not to get too carried away. That seems similar in spirit to the reports that the State Administration of Foreign Exchange called a few banks last week and warned them about large speculative yuan sales. We suspect the message is that while a weaker yuan is acceptable, the current pace is not. The next objective is around CNY6.90, but the risk of a move to CNY7.0, which did not seem so likely a couple weeks ago, seems more so now.      Disclaimer   Source: The Week Ahead: Dollar Bulls Still in Charge
At The Close On The New York Stock Exchange Indices Closed Mixed

US Stock Market Strongly Recovers Without Any Predispositions!

InstaForex Analysis InstaForex Analysis 29.08.2022 12:46
Relevance up to 05:00 2022-08-30 UTC+2 Key US stock market indexes, the Dow Jones, the NASDAQ, and the S&P 500, dropped sharply on Friday and closed in negative territory. Over the past month, the US stock market strongly recovered from its decline of the previous several months. This was a rather paradoxical recovery, as there was nothing that could have triggered it. Now, everything falls into place. Friday's only key event on the economic calendar was a speech by Fed chairman Jerome Powell at the meeting in Jackson Hole. The US personal spending and income data, which was slightly below expectations, could not have caused Friday's slump. Powell assured the market that monetary tightening would continue and that a period of high interest rates would be longer than previously expected. He did not give any new information, and it was clear that one single monthly decrease of inflation could not indicate a downtrend. For example, the CPI decreased in May, only to surge in the following months. It remains unclear why investors went long on US stocks. It might have been a capital outflow from the EU to the US - the EU is also expected to enter a recession. However, the recession has already begun in the US - investors might have found the US economy to be more stable amid the difficult geopolitical situation in the EU. In addition, the Federal Reserve is actually taking steps to fight inflation, unlike the ECB. Jerome Powell noted on Friday that the regulator would be closely following macroeconomic data, indicating that the pace of interest rate increase could be slowed down in the near future. However, interest rates would still be hiked from the current level of 2.5%. The Fed funds rate is expected to reach 3.5% at the very least, which would weigh down on US risky assets. The strange upsurge in the US stock market could have possibly been a bull trap, deliberately triggered by major market players to sell their stocks at higher prices. Now, equities and US stock indexes are likely to drop once again and hit new yearly lows. In the meantime, the Fed is likely to increase interest rates at least until the end of 2022. Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Source: Forex Analysis & Reviews: Jerome Powell triggers slump in US stock market  
bybit-news1

A Quick Look At Jerome Powell's (Fed) Key Statements At Jackson Hole Meeting

InstaForex Analysis InstaForex Analysis 29.08.2022 12:54
Details of the economic calendar of August 26 Last week ended with a triumphant speech by Federal Reserve Chairman Jerome Powell at the annual economic symposium in Jackson Hole. What was said? Jerome Powell did not say anything new, but only confirmed everything that was said at the July meeting. Main theses: - The central bank will keep the interest rate at high levels, despite a possible recession. - Lowering the inflation rate is good. But not enough to change its monetary policy (MP) now, or give hints about a rate cut in 2023. - History warns against premature easing of policy. - The longer the current period of high inflation continues, the more likely it is that higher inflation expectations will take hold. - We must continue until the job is done. - At the upcoming Fed meeting Fed meeting (21.09.22), the decision will depend on inflation data for August. - Slowing down the pace of rate hikes literally - at some point. Also, Powell did not deny hints that in September there will be a significant increase in interest rates, it all depends on the statistics and the situation. The rhetoric has not changed here. Conclusion Based on the material, it becomes clear that the bearish mood in the US stock market, as well as the bullish mood for the dollar. Analysis of trading charts from August 26 The EURUSD currency pair during Friday's speculations locally jumped above the control mark of 1.0050, but the market participants failed to hold on to the given level. Almost immediately, a reversal occurred, where speculators began to actively increase the volume of dollar positions throughout the Forex market. The GBPUSD currency pair fell by more than 200 points during the inertial downward movement. As a result, the medium-term trend was prolonged, where the quote fell below 1.1650. Such an intense speculative move is caused by the general market mood.     Economic calendar for August 29 Monday is traditionally accompanied by a blank macroeconomic calendar. Important statistics in Europe, the UK and the United States are not expected. It is also worth considering that today is a public holiday in the UK. In this regard, investors and traders will be guided by the information flow of last Friday. Trading plan - EUR/USD August 29 Further weakening of the euro, which will lead to a continuation of the trend, is expected after keeping the price below 0.9900 in a four-hour period. Until then, the risk of a price rebound remains, following the example of August 23 and 24.     Trading plan - GBP/USD August 29 In this situation, there is a characteristic signal that the pound is oversold in short-term time periods. This may lead to a technical rollback towards the previously passed level of 1.1750. At the same time, we cannot rule out a scenario of a further decline in the quote, where technical signals are ignored by speculators. In this case, the inertial course will continue to form in the direction of the local low of 2020.     What is shown on trading charts? The candlestick chart type is white and black graphic rectangles with lines at the top and bottom. With a detailed analysis of each individual candle, you can see its characteristics relative to a particular time period: opening price, closing price, high and lowest price; Horizontal levels are price coordinates, relative to which a stop or a price reversal can occur. In the market, these levels are called support and resistance; Circles and rectangles are highlighted examples where the price of the story unfolded. This color selection indicates horizontal lines that may put pressure on the quote in the future; The up/down arrows are landmarks of the possible price direction in the future. Relevance up to 09:00 2022-08-30 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/320153
Oil Price Surges Above $91 as Double Bottom Support Holds

What Happened In Jackson Hole Besides The Fed's Powell Speech?

John Hardy John Hardy 29.08.2022 14:14
Summary:  Rates markets suggested that there was little new in the way of guidance from Fed Chair Powell’s speech at Jackson Hole, but the US dollar ripped higher as the backdrop remains the same: this Fed has confirmed that it will continue tightening until something breaks, so what we are seeing is the further progress toward that breaking point. In an interesting twist, a paper delivered on Saturday at Jackson Hole suggests that the Fed may have a hard time executing shrinking its balance sheet as intended. FX Trading focus: Jackson Hole wasn’t just Powell’s speech… If we have a look at the reaction in Fed expectations from Friday’s Fed Chair Powell speech at Jackson Hole, there was no major market takeaway. During the speech, there was a trivial marking down of expectations as Chair Powell emphasized the “totality” of data in setting the appropriate rate at the September meeting. (And 90 minutes before his speech, the July PCE inflation data was out a tad softer than expected, while the final University of Michigan sentiment survey for August saw longer inflation expectations 0.1% lower). But for that September 21 FOMC rate decision, the payrolls and earnings data this Friday and the Sep 13th CPI release will weigh more heavily. Somewhat more importantly, Powell underlined the importance of ensuring that The Fed’s policy remains persistent enough to ensure that the inflationary cycle has abated. One of the key passages worth highlighting is “Restoring price stability will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening policy.” Powell then went on to invoke Paul Volcker and his fight with recurring bouts of high inflation in the 1970’s and early 1980’s. This did see the market adjusting Fed rate expectations higher for mid next year and later, although that was largely reversed by the end of the day Friday on a (suggesting a difficult to manage reflexivity dissonance: more Fed tightening means worse financial conditions, which means the Fed might back off, which is supportive of financial conditions/sentiment? Argh…). One very important factor to note is that Fed rate expectations were marked sharply higher from the outset overnight, perhaps as a paper delivered at Jackson Hole on Saturday that suggests that any Fed attempt to go full force with quantitative tightening will prove difficult (requiring an emphasis on using the Fed funds rate as the primary mechanism for policy adjustments?). A Bloomberg article discusses the paper. If the Fed has to soft-pedal balance sheet management from here, could we suddenly find that peak anticipated Fed tightening (QT and rate hikes taken in aggregate) is already in the rear view mirror? Intriguing proposition, but way too early hours/days to make any determination, as the Fed may try forging ahead on QT, paper or none. Chart: USDJPYWatching USDJPY closely this week to see if US data takes US treasury yields higher still – especially at the longer end of the US yield curve, which could serve to renew the pressure on the Bank of Japan as it insists on maintaining the yield-curve-control policy. Arguably, as long as the longer end of the US yield curve is anchored below the June highs, the pair doesn’t have particularly cause to run higher unless there is a USD liquidity problem not connected to yield volatility. And if we get weak US data this week through Friday’s jobs and earnings report, we might be instead looking at a “double top” scenario. The 139-140.00 zone looks important this week. Source: Saxo Group For Europe, any little helps, and we have natural gas prices backing off sharply today, with Germany ahead of target in rebuilding its storage and the German economy minister called for an overhaul of the EU power market to drop prices (meaning rationing and price fixing?? In the first instance, helps to ease the shock, but not in the longer run if investment in the capacity needed to bring long term real energy prices down is scared away by the risk of public interference.) Elsewhere, besides natural gas prices coming off, we have also seen a few ECB officials talking tough enough to pull ECB yield expectations sharply higher since Friday, with the ECB’s Isabel Schnabel speaking at the Fed’s Jackson Hole conference at the weekend, exhorting her colleagues “to signal their strong determination to bring inflation back to target quickly.” The meeting next Thursday is priced for over 60 basis points, with almost another 100 basis points (!) on top of that priced through the December ECB meeting. ECB Chief Economist Lane, usually one of the more cautious voices on the ECB, will speak this afternoon. Table: FX Board of G10 and CNH trend evolution and strength.USD strongest among G-10 currencies – no surprise there, but really needs to stick this move to remain so across the board (below parity in EURUSD, above 137.50 in USDJPY, above 1.3000 in USDCAD, below perhaps 0.6900 in AUDUSD, etc… Note the big swing higher in EUR momentum, with a few thoughts on individual EUR pairs below. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs.EURCAD and EURAUD are two euro crosses that have turned sharply higher as risk sentiment wears harder on the smaller currencies – too early to tell if this is the beginning of something, but the moves come at interesting levels. Note Also EURGBP following through higher Friday and following through today. Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights (all times GMT) 1300 – ECB Chief Economist Lane to speak 1430 – US Aug. Dallas Fed Manufacturing survey 1815 – US Fed Vice Chair Brainard to speak 2330 – Japan Jul. Jobless Rate 0130 – Australia Jul. Building Approvals Source: FX Update: Jackson Hole was more than Powell’s speech.
NatWest Group Reports Strong H1 2023 Profits Amid Rising Economic Concerns

How Powell's Speech Affected On Euro (EUR) And Pound Sterling (GBP). Let's See!

InstaForex Analysis InstaForex Analysis 29.08.2022 16:40
Relevance up to 10:00 2022-08-30 UTC+2 Both the euro and the pound sterling dropped after Jerome Powell announced that the Fed would continue raising the key interest rate. What is more, the US regulator is planning to keep interest rates high for some time in order to combat inflation. Jerome Powell is absolutely sure that the Fed will not change its monetary policy in the near future. "Restoring price stability will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening policy," Powell stated. It is obvious that the Fed's key aim is to lower inflation to the targeted level of 2% regardless of the negative influence on consumers and enterprises and a possible recession. The US dollar began actively gaining in value amid the possibility of another significant rate hike in the next month. It is obvious that traders take decisions amid expectations, trying to price in the event before it takes place. "Our decision at the September meeting will depend on the totality of the incoming data and the evolving outlook," Powell pinpointed. Against the backdrop, the yield of two-year Treasury bonds increased to 3.44%. Investors foresaw such announcements and priced in the hike of at least 0.5% at the meeting on September 20-21. The highest possible raise was seen at 0.75%. After the speech, the likelihood of both variants remained the same. In other words, the regulator's zero intention to cut the key interest rate in 2023 considerably supported the greenback.After such confident statements, Jerome Powell will have to prove his intention by another hike of 75 basis points. Otherwise, traders may think that the Fed is gradually switching to a looser policy, which may make it more challenging to return inflation to 2.0%. "Restoring price stability will take some time and requires using our tools forcefully to bring demand and supply into better balance," Fed's chair said. "Reducing inflation is likely to require a sustained period of below-trend growth. Moreover, there will very likely be some softening of labor market conditions. While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses," he added. Notably, according to the Fed's forecasts, the key interest rate will be hiked to 3.4% by the end of the year and to 3.8% by the end of 2023. Jerome Powell also reminded us that in September, the regulator would hardly change its plans. Some other Fed representatives are also backing up the monetary policy tightening. Federal Reserve Bank of Kansas City President Esther George emphasized that the key interest rate could be higher than markets expected. "We have to get interest rates higher to slow down demand and bring inflation back to our target," she said. She neither excludes a jump to 4.0%. From the technical point of view, the euro/dollar has every chance to slump even deeper. Bulls should protect 0.9949. Otherwise, the trading instrument will hardly recover. If the price goes above 0.9949, buyers will become more confident, thus allowing the pair to return to the parity level and then climb to 1.0030. The farthest target is located at 1.0070. If the euro continues falling, buyers are likely to become active near 0.9900. However, if they fail to protect this level, the upward correction will hardly become possible. Since whispers about the continuation of the downtrend may push the price to 0.9860 or even to 0.9820. The pound sterling continues losing value against the US dollar very rapidly. It does not have reasons for an upward correction. Buyers should do their best to consolidate above 1.1630, the nearest support level. Otherwise, we will see a new massive sell-off that will push the price to 1.1570 and 1.1490. A breakout of these levels will allow the pair to slide to 1.1420. A correction will become possible if the price settles above 1.1680 to jump to 1.1730 and 1.1790. Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Source: Forex Analysis & Reviews: Fed may raise benchmark rate to 4.0%
Unraveling the Resilience: US Growth, Corporate Debt, and Market Surprises in 2023

Bullish And Bearish Experts Voted. The Result Is Here!

InstaForex Analysis InstaForex Analysis 29.08.2022 16:54
Relevance up to 09:00 2022-08-31 UTC+2 The Fed's monetary policy remains aggressive, putting pressure on gold following the long-anticipated speech by Fed chairman Jerome Powell at the central bank symposium in Jackson Hole, Wyoming. Powell reiterated that interest rates hikes must continue as inflation remains the biggest threat to the economy. However, some analysts believe that falling inflationary pressure could prompt markets to price in less aggressive moves from the Federal Reserve, which would weaken the US dollar and give support to gold. According to the data released by the US Commerce Department on Friday, its core Personal Consumption Expenditures Index (PCE) increased by 4.6% in July, down from June's annual increase of 4.8%. The CME FedWatch Tool is showing that markets are currently split 50/50 on whether the Federal Reserve would increase interest rates by 50 or 75 basis points in September. A weekly survey by Kitco indicates that Wall Street is largely mixed on gold. Out of 16 surveyed experts, 6 (38%) were bullish, 6 were bearish, and 4 (25%) were neutral. Retail investors were more optimistic, with 53% of respondents seeing gold prices rise. 27% expected gold to drop, while 20% were neutral. In total, 561 votes were cast. Although market sentiment doesn't create a clear path for gold, US interest rates remain the most important factor for the precious metal. If inflation continues to decline, the Federal Reserve will begin to slow down the pace of interest rates hikes. Falling gold prices at the end of last week have led to mixed sentiment in the market. Colin Cieszynski, chief market strategist at SIA Wealth Management Inc, said he is bullish on gold next week as Powell's comments didn't add anything new to the current outlook. "He didn't really say much that was new and noteworthy enough to push treasury yields or USD higher in the short term," Cieszynski said. "The US dollar is looking exhausted technically as it is and due for a correction, which could take some of the recent pressure off of gold." Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.   Source: Forex Analysis & Reviews: Gold faces difficulties after Jerome Powell's remarks in Jackson Hole
What's Potentially Ahead Of US Dollar Index (DXY)?

What's Potentially Ahead Of US Dollar Index (DXY)?

Jing Ren Jing Ren 29.08.2022 10:21
The 1H timeframe of the DXY index suggests the completion of a global corrective trend, which has taken the form of a triple zigzag consisting of five cycle waves w-x-y-x-z. Thus, the market is currently at the stage of reversal, that is, the formation of the initial part of a new bearish trend may soon begin. It is assumed that the bears are starting to build the first impulse sub-wave of the potential standard zigzag â’¶-â’·-â’¸. The end of the impulse â’¶ is possible just below the minimum of 104.63, which is marked by a minute fourth correction. An approximate scheme of possible future movement is shown on the chart. Alternative scenario... In an alternative scenario, the formation of a cycle triple zigzag is not yet fully completed. Most likely, at the level of 104.69, the bearish cycle wave x was completed, which took the form of a standard zigzag â’¶-â’·-â’¸ of the primary degree. Then the market turned around, and an upward impulse price movement began in the initial part of the wave z. The wave z can take the form of a zigzag â’¶-â’·-â’¸, and now a sub-wave â’¶ is being formed. The entire wave z may complete its pattern near 116.80. At that level, it will be at the 61.8% Fibonacci extension of wave y.
The Japanese Yen Retreats as USD/JPY Gains Momentum

After The Speech Global Equity Markets Are Not Risking Anymore! Nasdaq 100 Below Its 50-day Average!

Saxo Strategy Team Saxo Strategy Team 30.08.2022 09:06
Summary:  The rise in U.S. treasury yields pressured growth stocks with the Nasdaq 100 falling below its 50-day average, which puts it back in a precarious position. Fed Kashkari said he was glad to see the markets fell after Chair Powell’s Jackson Hole speech to tighten financial conditions. Global equity markets have certainly got the message and are in a risk-off mood. What is happening in markets?   Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)  US Stocks fell for the second day, but modestly compared to Friday’s sell-off that was triggered by Fed Chair Powell vowing rates will stay higher for longer to cool runaway inflation while suggesting there will be no pivot to cutting rates in 2023, S&P 500 -0.7%, Nasdaq 100 -1%.  Minneapolis Fed president Kashkari said that “he certainly was not exited to see the stock market rallying” after the last FOMC meeting and “people now understand the seriousness of our commitment to getting inflation back down to 2%.” Tech stocks dragged the markets lower, Nvidia -2.8%, Tesla -1.1%.  Twitter (TWTR:xnys) dropped 1.1% after Elon Musk ad subpoenaed a Twitter whistleblower to share information.  Meanwhile, gains in value stocks somewhat held up the market last night, with the oil, gas, and agricultural sectors rising 1-2%. It comes as Oil prices rose 4% on Monday as potential OPEC+ output cuts and conflict in Libya helped to offset a strong U.S. dollar. While the Ag sectors were supported higher after the wheat price jumped 4.9% and corn rose 2.2% (at its highest level in 2 months) after heat damage worsened US crops more than expected. As such it appears markets are back to their risk off modus operandi, selling down growth names (which are based on future earnings which gets diminished amid higher rates), and instead, buying value (commodities), with rising cashflows. U.S. treasuries (TLT:xnas, IEF:xnas, SHY:xnas) US treasury yield rose across the curve.  The 2-year yield rose to as high as 3.48% during the day, the highest level since November 2007, before paring the rise to settle 3bps higher at 3.42%.  The 10-year yield rose 7bps to 3.11%,  taking the 2-10 year curve steepened by 3bps to -32bps.  Hong Kong’s Hang Seng (HSIQ2) and China’s CSI300 (03188:xhkg) Hong Kong and mainland China equities traded relatively calm in the midst of a large post-Jackson Hole selloff in the U.S., Hang Seng Index -0.7%, CSI 300 -0.4%.  The deal made between the U.S. and China regulators last Friday regarding access to audit work papers did not trigger much new buying in China internet stocks on Monday as it had already been well wired before the official announcement.  Further, there is much remained to be seen if the agreement will be implemented to the satisfaction of both sides as the U.S. and China regulators seem to differ in their interpretation.  Meituan (03690:xhkg) gained 2.6% after reporting solid Q2 results, which Hang Seng Tech Index dropped 1.2%. China’s industrial profits slumped to contracting 14.5% YoY from (v.s. +1.1% in June) and a fall of 11.3% sequentially from June.  The weakness was mainly driven by upstream sectors.  Coal mining stocks initially slumped but rallied later in the days and finished higher in Hong Kong and mainland bourses.   Geely (00175:xhkg) rose 1.7% as the automaker’s Zeekr line of EVs will be the first to use a new battery from CATL that provides over 1,000km range per charge.  SMIC (00981:xhkg), -2.1%, announced spending USD7.5 billion to build a plant in Tianjin to make 12-inch wafers. Chinese banks traded weak as Reuters reported that China’s central bank and bank regulators had been making calls to banks to push them to make more lending to support the real economy than put their funds in financial investments.  USDJPY weakness to bring back pressure on Bank of Japan USDJPY is back to testing its record July highs despite little change in money market pricing of the Fed rate path following Powell’s hawkish speech at Jackson Hole. The peak Fed funds rate is still priced in at 3.8%, while some of the Fed speakers have started to suggest 4%+ levels that may be needed to combat inflation. This brings the September dot plot in focus, but we get the jobs and CPI data before that as well. Any further upward re-pricing of the Fed path, if resulting in gains in US 10-year yields, could very well take USDJPY to new highs with Japanese yields still remaining capped due to the Bank of Japan’s yield curve control policy. If however, US data underwhelms, the room on the downside for USDJPY is tremendous. USDCNH made a new high at 6.9327 Wider interest rate differentials between the U.S. dollar and the renminbi and a weaker economic outlook in China continued to pressure the renminbi weaker. USDCNH surged to as high as 6.9327 on Monday during Asian hours before paring it as the greenback fell against most of the G10 and emerging market currencies in London hours.  In Asia this morning, USDCNH is trading at 6.9066. Crude oil prices (CLU2 & LCOV2) Crude oil prices saw their best day in a month amid threats of a decline in supply from OPEC cuts and production outages in Libya. Brent futures rose above $105/barrel although some softening was seen in the Asian morning, while WTI rose to $97/barrel. This follows news from last week that Kazakhstan’s exports of crude may be impacted for months because of damage to its port facility. Meanwhile, negotiations between Iran and the US over the revival of the 2015 nuclear deal could drag on for weeks, easing fears of an imminent surge in supply. What to consider? The volatility index rises to its highest level in 9 weeks, suggesting more volatility is coming. And the fundamentals back this up with US yields spiking After the Fed’s 8-minute Jackson Hole speech, the volatility index surged to its highest level in 9-weeks, forming an uptrend pattern, suggesting more market volatility is ahead. We believe the market is only just beginning to price in higher for longer interest rates and inflation. The bond market is affirming this with yields spiking again. But what is also alarming, is that the futures market is still pricing in that the Fed will cut rates in 2023. This is despite the Fed suggesting it won’t pivot to cutting rates. The other issue is keeping markets on notice is that; if the Fed makes more hawkish remarks and hikes rates more than expected, then the market will face further volatility, and selling in growth sectors and names that are interest rate sensitive, are likely to come under pressure. Shell CEO cautions against a prolonged European gas crisis Shell CEO Ben van Beurden gave comments from Norway’s ONS conference, suggesting that Europe could face gas shortages for a number of winters. This disproves reports suggesting that Europe has already built reserves for the winter demand, and reaffirms our belief that a move to broad-based energy supply will continue to be top of mind in the long run. In the near term, demand destruction appears to be the only possible solution, and Van Beurden stressed need for efficiency savings as well as rationing. Eurozone inflation and Nord Stream maintenance will be key for the ECB There is no question on the direction in Eurozone inflation, given the extensive reports on gas prices and power costs in the region over the last few days. However, some softening may be warranted after an all-time high of 8.9% was reached on the Eurozone inflation print in July, given the easing in pump prices in August. Still, gas supply concerns continue to remain top-of-mind for Germany with Gazprom announcing another leg of maintenance for the Nord Stream pipeline this week. Food prices are also seeing another pickup, and further gains in the headline print in Q4 cannot be ruled out. Calls for a 75 basis points rate hike by the European Central Bank have already picked up, and these could gain further traction if we see a strong CPI print this week. However, if Nord Stream supply comes back on time after its 3-day scheduled maintenance, and with some potential increases in capacity as has been hinted, that could mean a substantial decline in European gas prices and relief in utility costs in the months to come. ECB Lane tones dials back on jumbo rate hike expectations ECB chief economist Lane was on the wires on Monday, and hinted at a more steady pace of rate hikes in a “step-by-step” manner rather than jumbo rate hikes. This appears to be a pushback against calls for a 75bps rate hike at the September meeting, as he made the case to allow the financial system to absorb the rate changes. Moreover, on inflation, Lane said long-term inflation expectations remain close to the two per cent target, while near-term inflation expectations are quite elevated. BYD reported 1H earnings at the high end of the preannounced range Chinse auto maker BYD (01211) reported 1H revenues growing 66% YoY to RMB 151 billion.  In terms of segments, auto revenues surged 130% YoY while mobile handset revenues contracted 4.8% YoY. Net profits jumped 206% to rMB3.595 billion, at the top end of the preannounced range of CNY2.8-3.6 billion. Volume growth (353K new energy passenger vehicles in 2Q, +265% YoY) beat market expectations despite two rounds of price increases in 2022 and supply chain disruptions.  The company’s EV market share rose to 29% (vs 17% in 2021).  Pinduoduo delivered Q2 results showing stronger than peer sales growth Pinduoduo (PDD:xnas), a leading eCommerce platform with strong penetration into agricultural products and online shoppers from rural areas., reported 1H total revenue growing at 36% YoY, far exceeding the 3% YoY consensus estimate.  The company attributed the revenue growth to a recovery in consumption since mid-May, successful promotion campaigns, and 48-hour daily necessity supply packs for people facing lockdown.  The company’s strong market position in rural areas and agriculture-related products also help it stand out from its rivals.  In Q2, the company achieved a 20 percentage point improvement in margins, reaching 33.5%, but the management cautioned investors that the margin compression was attributed to temporary cost savings early in the quarter and spending had increased since mid-May.  Non-GAAP EPS came in at Rmb7.54, +161% Uranium companies and other nuclear-related companies are back in the spotlight  Elon Musk said countries should not shut down existing nuclear power plants as Europe grapples with an energy crisis “If you have a well-designed nuclear plant, you should not shut it down - especially right now”, said Musk during an energy conference in Norway. That resulted in the Global X Uranium ETF climbing 7.4% on Monday to its highest level since June 8, supported by US uranium stocks rising. Uranium stocks in the Asia-Pacific region to watch include Australia’s Paladin, Deep Yellow and Boss Energy, as well Japan’s Kansai Electric Power and Tokyo Electric Power, as well as Mitsubishi Heavy Industries. In South Korea watch Doosan Enerbility, Kepco. And in Europe, monitor Yellow Cake and Kazatomprom.      For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: APAC Daily Digest: What is happening in markets and what to consider next – August 30, 2022
Navigating the New Normal: Central Banks Grapple with Policy Dilemmas

Euro (EUR) May Be Skyrocketing Soon! Jackson Hole Meeting Wasn't Only About Fed's Hawks

ING Economics ING Economics 30.08.2022 12:57
We will remember Jackson Hole not just for Powell's hawkish speech, but also for the ECB gearing up its own hawkishness – 75bp hikes are not just for the Fed. Even if just an attempt to invoke the market's help to do the heavy lifting of tightening financial conditions, near term it means more curve flattening. Accelerating inflation still justifies the means  Hawkish ECB communications shift bear flattens the curve... EUR money markets have clearly set their sights on a 75bp hike at the September meeting after the string of hawkish comments over the weekend. The ESTR OIS (euro short-term rate overnight indexed swap) forward for the September reserve period is now at 65bp, implying a 60% probability for a larger move. It was the European Central Bank’s Robert Holzman, Martins Kazaks and Klaas Knot who all hinted more-or-less explicitly at a 75bp hike being on the table while others have called for more forceful action. France’s François Villeroy appears to suggest more frontloading with a call for showing determination now to avoid “unnecessarily brutal” hikes at a later stage. The significance of that hawkish communications shift was underscored by the ECB’s Isabel Schnabel who warned that greater sacrifices may be needed to bring inflation under control. And indeed the ECB’s current official economic outlook certainly still looks overly optimistic against the backdrop of a deepening energy crunch. This all spells further yield curve flattening as the ECB looks more prepared to hike even into a downturn.    The barrage of hawkish ECB comments means more EUR curve flattening is on the cards Source: Refinitiv, ING ...but may signal more reliance on the market to do the heavy lifting While acknowledging further normalisation is appropriate, the ECB’s chief economist Philip Lane struck a more balanced tone. In light of high uncertainty, he argued for a steady pace of hikes to the terminal rate. Smaller hikes would be less likely to cause adverse side effects and make it easier to correct course. Under the current circumstances, we suspect that 50bp would fit his idea of “steady” and “small”. He also notes that policy works through its influence on the entire yield curve. After the July rate hike, higher market rates have meant that the monetary tightening that has already occurred is far greater than just the first policy rate increase. In particular, he notes that mid and longer-end segments of the yield curve are most important for determining financing conditions in the economy and that these are more sensitive to expectations of the terminal rate than the precise path of policy rates towards it. That insight leads us back to one possible aim of the more hawkish communications twist: let the market do the heavy lifting of tightening financing conditions. As long as inflation risks are skewed to the upside, hawkish talk is likely to persist. And as long as the market plays ball, it may not necessarily translate into an even larger 75bp hike. However, one can also argue that when relying on hawkish talk it is even easier to eventually correct course than it is with a strategy of “smaller hikes". At this point, we still think that the ECB will significantly underdeliver compared to what markets are pricing. The crucial question is just when this notion will dawn on markets. The EUR swap curve prices front-loaded hikes in 2022 Source: Refinitiv, ING ECB quantitative tightening on the back burner? It appears that a discussion on quantitative tightening might not be as imminent, which should also come as a relief for periphery bonds. Accelerated ECB rate hikes and political uncertainty in Italy have already brought the benchmark 10Y spread of Italian bonds over German Bunds back towards 230bp. Bringing quantitative tightening to the table could tip the fragile balance towards more widening, even after the introduction of the Transmission Protection Mechanism. But it is quite notable that amid the latest hawkish push on rates, Italy's spreads have actually managed to eke out a small tightening versus Bunds. The Council's views on quantitative tightening seem not quite as aligned as their view on rates. After being brought up last week by the Bundesbank's Nagel and also by subtle hints in the ECB meeting minutes, the ECB’s Olli Rehn now said it was too early to publicly discuss quantitative tightening. While Kazaks said it could be discussed, he added it was too early to implement. Today's events and market view The reason for the ECB's hawkish turn will become more obvious today. As markets are looking for a further acceleration in inflation, all eyes are on the German and Spanish readings today ahead of tomorrow's eurozone flash CPI release which the consensus sees heading to 9%. The core rate is seen accelerating to 4.1%. Also to watch are the business climate indicators today, economic sentiment and consumer confidence, all of which are expected to come in softer. The 1y1y ESTR forward is back to 2.13%, though that is still short of the peak seen in June when it topped 2.5%. It might still push higher from here, but the long end should increasingly lag. In primary markets, Italy will reopen the 5Y, 8Y and 10Y sectors as well as a floating rate bond for a total of up to €8bn. Read this article on THINK TagsRates Daily Federal Reserve ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Hawkish Fed Minutes Spark US Market Decline to One-Month Lows on August 17, 2023

Fed Announced It Will Have No Pity For The Markets!

Swissquote Bank Swissquote Bank 30.08.2022 12:58
The US futures look better after the post-Powell selloff, but the market sentiment will likely remain morose after Powell’s clear declaration that the Federal Reserve (Fed) will have no pity for the markets, and continue tightening its policy until it puts inflation on a sustainable path toward its 2% policy target. At this point, it’s difficult to get a pricing that goes against the Fed. Happily for oil bulls, the Fed drama doesn’t concern the energy stocks, which had a good session yesterday thanks to firmer oil prices. The barrel of US crude advanced past the 200-DMA. The European nat gas futures however slumped 20% yesterday, as Germany said its gas stores are filling up faster than planned. But energy prices remain exorbitantly high, and governments are increasingly frustrated with the skyrocketing energy prices that hammer economies and households, while putting a lot of money in energy companies’ pockets. As a result, the European policymakers are now cooking new measures to stop the excessive rise in energy prices and decouple the price of gas from electricity. Investors will be watching how the energy companies will react to the measures. On the data front, Germany and Spain will release the latest inflation update today. The euro is making a great effort to throw itself above parity against the US dollar, and stronger than expected inflation figures could help boosting the European Central Bank (ECB) hawks, but the topside should remain limited. Special focus on Uber: is the company a good play in the long run, what are the short-term risks? Watch the full episode to find out more!   0:00 Intro 0:27 Equities under pressure 1:37 But energy stocks do well 2:17 European nat gas drops 20% on encouraging German news 2:48 European leaders will step in to bring energy prices lower 5:00 Eurozone inflation data in focus 7:59 Focus: Uber Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Energy #crisis #natural #gas #prices #crude #oil #energy #stocks #Exxon #OccidentalPetroleum #USD #EUR #inflation #ECB #hawks #Uber #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH   Source: Europeans preparing to intervene in energy markets! | MarketTalk: What’s up today? | Swissquote
Canadian Dollar Falters as USD/CAD Tests Key Support Amidst Rising Oil Prices and Economic Data

"Fight Against Inflation Is Our Primary Concern..." Central Banks Predicate

Craig Erlam Craig Erlam 30.08.2022 16:05
Stock markets are bouncing back on Tuesday following a rocky couple of weeks as investors grew nervous about the economic impact of tightening. Fed Chair Jerome Powell could not have been more clear on Friday on the central bank’s tightening stance and unlike the warnings from his colleagues, the message appeared to have finally gotten through. Which makes today’s move all the more curious. It’s not the fact that we’re seeing a rebound as equity markets don’t move in straight lines, rather it’s the strength of it that is interesting. Prior to Friday’s speech, investors appeared determined to cast aside warnings in favour of the dovish pivot narrative and today’s moves may suggest the same could still be true after a brief pullback. With a 75 basis point rate hike now viewed as the more likely outcome from the Fed in a few weeks and ECB officials putting a similar move on the table ahead of its meeting next week, how strong of a recovery can we really expect in equity markets? Central banks have made it perfectly clear now that the fight against inflation is their primary concern and a hard landing may just be the price to pay. While that may change if we see any significant improvement on the inflation front over the coming months, the risks still appear more tilted to the downside for the economy. A big moment for bitcoin Bitcoin is enjoying a slight recovery today after surviving a brief dip below $20,000 over the weekend. The hawkish sentiment by Powell took its toll at the end of the week but crypto bulls are fighting back to defend what could be a key level. We may need to see more of the resilience displayed in recent months as a failure to do so could quickly see bitcoin retesting the June lows. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.   Source: A curious rebound
The USD/CHF Pair Is All Set To Revisit The Monthly Low

Forex: USD/CHF Is Growing For The Third Day In A Row!

Kenny Fisher Kenny Fisher 30.08.2022 16:22
USD/CHF is up for a third straight day. In the European session, the pair is trading at 0.9717, up 0.36%. The US dollar continues to show strength against most of the majors. The Swiss franc has fallen sharply, with USD/CHF climbing 360 points since August 16th. KOF Economic Barometer falls again The KOF Economic Barometer continued its downward trend, declining for a fourth straight month in August. The index dropped to 86.5, down from 90.1 in July and shy of the estimate of 89.0. Much of the August decline was related to consumer consumption, but the manufacturing sector is also showing weakness. Similar to the situation in other major economies, manufacturing activity has been hurt by supply chain disruptions and a lack of employees. Switzerland will release the August inflation report on Thursday. The estimate for August CPI is 0.2% MoM, after a 0.0% reading in July. The Swiss central bank (SNB), which is not shy about intervening in currency markets, will be watching carefully. Higher inflation means the Swissie has less purchasing power, which suits the SNB as it has a paramount interest in the Swiss currency remaining weak so that Swiss exports are competitive. In the US, the markets continue to digest Fed Chair Powell’s hawkish speech on Friday. The “read my lips” speech in which Powell firmly stated that there would be no pivot in policy appeared to have hit its mark, as equity markets took a tumble on Friday and again on Monday, although we are seeing a rebound today. The Federal Reserve holds its next policy meeting on September 21st and we can expect plenty of discussions as to whether the Fed will hike by 50 or 75 basis points. CME’s FedWatch has pegged the likelihood of a 75bp move at 66.5%, with a 33.5% likelihood of a 50bp move. These numbers are sure to change in the coming weeks, as the markets hunt for clues as to the Fed’s plans. . USD/CHF Technical USD/CHF is testing resistance at 0.9720. Next, there is resistance at 0.9760 There is support at 0.9642 and 0.9524 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.   Source: Swiss franc falls to 5-week low
Navigating the New Normal: Central Banks Grapple with Policy Dilemmas

Risk Appetite Across Markets Taking A Hit After Fed Chair Powell's Hawkish Speech

Ole Hansen Ole Hansen 31.08.2022 14:10
Summary:  Crude oil’s bounce from a six-month low has faded fast with risk appetite across markets taking a hit after Fed chair Powell's hawkish speech once again raised concerns that the central banks aggressive stance towards combatting runaway inflation will drive down growth and demand for crude oil and fuel products. In addition, the energy market has to deal with long liquidation into a low liquidity market, reduce gas-to-fuel focus as EU gas prices drop as well as Iraq, Libya and Iran developments. Crude oil’s bounce from a six-month low has faded fast following Friday’s hawkish message from Jerome Powell, the Federal Reserve Chairman, which once again raised concerns that the central banks aggressive stance towards combatting runaway inflation would mean lower growth and with that lower demand for crude oil and fuel products. The battle between these macro concerns continues to battle with micro developments, the majority of which still point to tightness during the coming months. In Europe, the gas and power crisis continue with punitively high prices attracting substitution demand into fuel products like diesel and heating oil. In the short-term the price of gas into the autumn month will continue to be dictated by Russian flows, and not least whether Gazprom (and Putin) as announced will resume flows on the Nord Stream 1 pipeline following the three-day maintenance shutdown that ends at 0100 GMT on September 3. Other developments currently impacting the market: China’s continued battle with Covid infections which is currently found in 31 provinces, and which has led to fresh curbs being implemented, among others in two of southern China’s most economically vibrant areas. Deadly turmoil in Baghdad after Moqtada Al-Sadr, a prominent cleric, decided to resign from politics, thereby deepening a political crisis that has left the country without a government since last October’s election. For now, the clashes have not spread to oil-rich area and exports from one of OPEC’s biggest producers remain uninterrupted. Clashes in Libya’s capital Tripoli over the weekend which left at least 32 people dead have raised risks of a civil war in Libya, a very volatile producer which has seen its output swing between 0.7 and 1.2 million barrels per day during the past year. On the supply side, the market will be watching the impact of the EU embargo on Russian oil which will begin impacting supply from December and the 180-million-barrel release, at a rate of one million barrel per day, from US Strategic Reserves that look set to run until October 21. In the following months the US government plans to buy back 60 million barrels, a decision that is likely to be delayed given the prolonged war in Ukraine. Finally, an Iran nuclear deal has yet to be reached, but if successful it could lead to millions of barrels of on and offshore stored oil being released into the market. WTI Crude Oil: Following Monday’s short squeeze the subsequent sell-off has forced recently established longs to reduce their exposure. Developments that from a technical perspective have opened the risk of a return towards key support around the mid-August low at $85.5/b. Source: Saxo Group Lack of liquidity and speculative positions being wrongfooted have both added to the latest gyration which saw the biggest jump in six weeks on Monday being  followed by a near 9% two-day drop. In the week to August 23, hedge funds added 80k lots of crude oil and fuel exposure, the biggest weekly increase since January, and the latest tumble may have forced many too hastily exit those recently established and now loss-making positions.            With the summer holiday driving season winding up we are seeing gasoline refinery margins trading sharply lower while demand for diesel as a substitute for expensive gas has supported diesel margins, both in the US and especially in Europe. However, since Friday’s peak in EU gas prices we have seen softer but still elevated margins there as well.              The weekly oil and fuel stock report from the US Energy Information Administration will be watched closely given its frequency and with that the ability to provide an up-to-date snapshot of the current supply and demand situation across crude oil and fuel. Last night the API reported a 600k barrels increase in oil stocks and a combined 5.1 million barrels drop in gasoline and distillates stocks. The report will also provide the EIA’s assessment of production, which has been adjusted lower for the past two weeks to 12 million barrels a day, and somewhat short of the EIA’s latest end of year forecast of 12.45 million. Crude and distillates exports will also be watched after the combined figure hit a record last week. As per usual I will post the charts and tables on Twitter once the report has been released at 14:30 GMT.               Source: Oil drops as hawkish Fed drives fresh demand concerns
Oanda Podcast: US Jobs Report, SVB Financial Fallout And More

There Are Some Reasons Why The US GDP May Reach Ca. 3% | ISM Manufacturing Index Reached 52.8

ING Economics ING Economics 01.09.2022 20:22
Decent manufacturing activity, improved trade and inventory contributions and the cashflow boost from falling gasoline prices mean the US is set for a strong third-quarter GDP reading of around 3%, but another decline in residential construction reinforces the worries about what might happen later in the year The ISM manufacturing index held up better than expected in August, which should give a boost to strong third quarter GDP ISM holds up as rising orders and falling prices offer hope for the sector The ISM manufacturing index held up better than expected in August, coming in at 52.8, unchanged from July and better than the 51.9 consensus. Mixed regional indicators and a softer China PMI had raised warning flags, but instead new orders moved back into positive territory at 51.3 from 48 while employment rose to a five-month high of 54.2, boosting hopes of a decent manufacturing contribution to Friday's jobs number. Regarding jobs, the ISM reported that “companies continued to hire at strong rates in August, with few indications of layoffs, hiring freezes or head-count reductions through attrition. Panelists reported lower rates of quits, a positive trend”. US and Chinese manufacturing purchasing managers' indices Source: Macrobond, ING   There was also a rise in the backlog of orders which suggests that the dip in the production component to 50.4 from 53.5 is just a temporary blip and that manufacturing output can continue growing at a firm pace over coming months. Indeed, the ISM cite the better lead time for supplier deliveries and the falling prices paid component as factors that “should bring buyers back into the market, improving new order levels” The Fed will also take some comfort from the prices paid component declining to 52.5. This index was above 80 as recently as May and reflects the steep falls in energy and key commodity prices. Putting it together, with the better trade and inventory numbers and the massive support to consumer spending power and confidence from the falls in gasoline prices we look for 3% annualised GDP growth in the third quarter after the technical recession in the first half of the year. This should be supportive of our Fed funds call of 3.75-4% rates for year end. Construction highlights the weakening medium-term outlook There was less positive news in the construction data, which fell 0.4% month-on-month  in July after a 0.5% fall in June. Residential construction was the main reason with the slowdown in housing activity set to translate into falling home building over at least the next six months. Annualised US residential and non-residential construction spending ($bn) Source: Macrobond, ING   Declining housing transactions implies big declines in residential construction and weakness in some retail sales components such as building supplies, furniture and home furnishings. Falling house prices would compound the downside risk for confidence and spending so while 3Q activity overall looks pretty good, 4Q will be much more challenging, especially with China under pressure and Europe facing an energy catastrophe. Read this article on THINK TagsUS Orders Manufacturing Construction Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Gold Price: The Tendency May Be Caused By Hawkish Fed

Gold Price: The Tendency May Be Caused By Hawkish Fed

Alex Kuptsikevich Alex Kuptsikevich 01.09.2022 20:24
The gold price dipped below $1700 on Thursday, approaching the lower boundary of its trading range since May 2020. Gold has been finding buyers after emotional dips towards the lower boundary throughout this period. Perhaps the main reason for the long-term bearish sentiment is the hawkish US monetary policy. A sharp tightening of policy and the Fed's promises to raise interest rates have pushed 2-year government bond yields to levels last seen in 2007. High short-term bond yields push investors away from alternatives such as gold, equities and emerging market currencies, raising the risk-free interest rate level - an informal benchmark for risk assessment. So far, gold has behaved in a frighteningly similar way to the dynamics of 2010-2013, when we saw a comparable bump at the top after a multi-year rally. Now, this period of consolidation after the rally has been longer. However, we should be prepared for a "dam break" if we see a decisive move down from the established corridor over the next few weeks. If the price breaks below $1680 this week or next, the market could see an absolute surrender of position traders, who have been betting on another bounce from the lower boundary. In that case, we should be prepared for gold to go into the same multi-year bearish trend as it did in 2012-2015. Just below, through $1670 passes the 200-week moving average, a fixing under which could trigger the capitulation of the most resilient long-term betting bulls. In that case, a decline towards $1300 would be a working scenario until the end of 2023. If the gold finds support, as it has done so many times in the past two-plus years, we could see a new upside surge after a two-year consolidation, and the 200-week average retains the long-term support it has enjoyed for the past five years.
German Business Confidence Dips, ECB's Lagarde Hosts Central Banking Conference in Portugal, EUR/USD Drifts Higher

The US NFP (Non-Farm Payrolls) - There Are Two Sides Of The Same Coin

Craig Erlam Craig Erlam 02.09.2022 22:06
Investors appear relatively pleased with the jobs report despite some initial choppy trade following the release. Nonfarm payrolls nudges above forecast The headline NFP figure was a little larger than expected at 315,000 which may have created that initial unease as a knockout report could have effectively paved the way for a 75 basis point rate hike this month. But once you dig a little deeper, there are aspects of the report that will please the Fed and support the case for easing off the brake. While we can’t put too much weight on one report, a surprise spike in participation from 62.1% to 62.4% will undoubtedly be welcomed, lifting unemployment to 3.7% from 3.5% along with it. As will hourly earnings rising by 5.2% against expectations of a small increase to 5.3%. All of this will be a relief to policymakers but I’m not sure it will be enough to change their minds at this point. There’s been such an effort to put 75 basis points on the table in recent weeks, to change their mind on the back of this would seriously undermine their guidance in future. If paired with another decent drop in inflation in a couple of weeks, more may be convinced. We’re seeing some relief in equity markets after what has been a pretty dire week until now. US futures have added half a percent since the release while the dollar and US yields are slightly lower, albeit after some very choppy trade initially. Gold is breathing a huge sigh of relief, up around 0.75% on the day, with $1,680 support potentially safe for now. This is a really significant area of support for the yellow metal and while it didn’t get too close on this occasion, a move below could see gold trading at two-year lows which could be a major blow. Bitcoin is another instrument that is displaying some relief having spent the week desperately defending $20,000 support. The report isn’t enough in itself to overly excite traders, not even the crypto crowd I would have thought, but it could reinforce that support which is important. A break of $20,000 could be painful for bitcoin and today’s data may enable it to hold above here for a while longer yet. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. A welcome US jobs report - MarketPulseMarketPulse
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Fed's Jerome Powell Speaks On Thursday, Apple Presents iPhone 14 Soon! Wow! There Are A Lot Of Events Next Week!

Craig Erlam Craig Erlam 02.09.2022 22:09
US The countdown to the September 13 inflation report begins as investors fixate over a wrath of Fed speak, with special attention going towards Chair Powell’s Thursday discussion on monetary policy. It is a slow start to the trading week as US markets are closed on Monday for Labor Day. Tuesday contains the release of the August ISM services index. Service sector activity is expected to show a modest decline but remain in expansion territory. US trade data will be released on Wednesday, but most of the attention will fall on Lael Brainard’s speech on the economic outlook and the release of the Fed’s Beige Book. Michael Barr will also speak on financial system fairness.  Powell’s speech on Thursday could be massive as it will be his first time speaking since the Jackson Hole Symposium.  Wall Street is keeping a close eye on initial jobless claims as we still have yet to see any signs of trouble with the labor market as layoffs remain low.  Friday’s Fed speak contains appearances by Charles Evans and Christopher Waller.   Earnings season is finishing up, but stocks will definitely remain in focus as more investors are becoming bearish.  Apple’s launch event could be huge as they will unveil the iPhone 14 lineup and the next round of smartwatches.    EU  There’s no doubt about what the focus next week will be; the only question on everyone’s mind is will it be 50 basis points or 75? Markets are increasingly favouring the latter despite the ECB previously hinting at the former. That said, prior to the July meeting they effectively told everyone the first hike would be 25 basis points before opting for 50 so we can probably take things with a pinch of salt for now. Other than that, there’s a selection of tier two and three data including final services PMIs, retail sales and revised GDP. UK  The UK is heading for a recession, one the Bank of England has seen coming for a long time. When it released its forecasts in August, they looked quite shocking. Since then, expectations have lowered further which will make the Monetary Policy Report Hearing on Wednesday all the more interesting. That aside, we’ll hear from Catherine Mann on Monday and then it’s mostly tier two and three data including final services PMI, construction PMI and consumer inflation expectations. Russia Swift action by the CBR after the invasion meant that not only is inflation not the problem many expected it to be, but the central bank has actually been able to cut interest rates below where they were before in order to try and support the economy. CPI data next week could tell us how much further room the central bank has to cut and ease pressure on the currency. South Africa A relatively quiet week with GDP data on Tuesday the only major release. Regardless of the number, a large rate hike, perhaps 75 basis points, is likely on the cards in a few weeks. Turkey Inflation is expected to surpass 80% shortly after the CBRT decided to continue its easing cycle with a 1% rate cut to 13%. With the central bank refusing to accept responsibility for soaring inflation, the sky’s the limit. Switzerland Data last week showed inflation accelerating faster than expected, increasing pressure on the SNB to hike more forcefully. Barring an inter-meeting hike, the focus next week will be on the GDP and unemployment data. China This will be a busy week in China as investors keep a close eye on the Chengdu shutdowns and a wrath of economic data that could confirm the trend of weakening economic activity.  FX traders are also closely monitoring the yuan and the possible breach of the 7-handle.  China’s trade data could provide more information on how quickly demand is weakening. Both imports and exports are expected to soften, while government stimulus should provide a boost for aggregate social financing.   India Next week brings the services PMI reading for August. Strong economic data releases will allow the RBI to hike rates even further.     Australia & New Zealand The greenback’s relentless rally has taken the Australian dollar and kiwi to seven-week lows. The global bond market selloff is being led by a surge in Treasury yields and that’s kept the interest rate differential widely in the greenback’s favour. This week a wrath of economic releases will take a backseat to the RBA rate decision. The RBA may downshift to a slower pace of tightening with only a 25 basis point rate increase.  The bank has raised rates by 175 basis points over the last four meetings, but given the grim outlook, a smaller rate hike could be justified. At the beginning of the week, Australia will release services PMI data, inflation readings, ANZ job advertisements, and current account data.  Second quarter GDP is expected to show a slight improvement and will be released after the RBA decision.   Economic releases and speeches will be limited for New Zealand.  RBNZ Assistant Governor Silk will speak on Wednesday. The ANZ commodity price index for August will be released on Monday.  A few other third-tier economic releases will also come out in the latter part of the week.     Japan The divergence in monetary policy between the Fed and the Bank of Japan may continue to drive the yen’s depreciation against the dollar.  The Japanese yen has been struggling as central banks globally remain very hawkish in fighting inflation.  The BOJ may need a slight change to their policy which could eventually lead to the abandoning of Yield Curve Control (YCC), but that would require a major reversal of BOJ Gov Kuroda’s decade-long stance of super loose policy.   Several important economic indicators will be released over the next week including the services PMI, household spending, the final reading of second-quarter GDP, current account, bank lending, and the eco watchers survey.   Singapore There are no major data or risk events in Singapore next week. The Singapore dollar is gaining a lot of attention on Wall Street as many big banks anticipate that Singapore’s central bank (MAS) will extend policy tightening.   Economic Calendar Saturday, Sept. 3 Economic Events Global energy crisis in focus as the Nord Stream 1 gas pipeline is scheduled to reopen after Russia’s unscheduled maintenance Sunday, Sept. 4 No major economic events scheduled Monday, Sept. 5 Economic Data/Events US markets closed for Labor Day New UK PM is announced Thailand CPI  Singapore global PMI, retail sales India services PMI Australia inflation gauge, job advertisements, inventories, services PMI China Caixin services PMI Eurozone retail sales, services PMI Japan PMI New Zealand commodity prices Switzerland GDP Taiwan foreign reserves OPEC+ meeting on output Ukrainian PM Shmyhal attends the EU-Ukraine Association Council meeting in Brussels BOE Monetary Policy Committee member Mann speaks UK Finance publishes its quarterly household finance review of activity Tuesday, Sept. 6 Economic Data/Events RBA rate decision: Expected to raise interest rates by 50bp to 2.35% Australia BoP Germany factory orders Japan household spending Mexico international reserves South Africa GDP US primary elections scheduled in Massachusetts Wednesday, Sept. 7 Economic Data/Events US trade Fed Vice Chair for Supervision Barr speaks at an event hosted by the Brookings Institution Cleveland Fed President Loretta Mester speaks on Market News International webcast The Fed releases its Beige Book of regional economic activity Eurozone GDP Australia GDP, foreign reserves Canada rate decision: Expected to raise interest rates by 75bps to 3.25% Poland rate decision: Expected to raise interest rates by 25bps to 6.75% Germany industrial production China trade, foreign reserves Singapore reserves Japan leading index, coincident index Apple event, dubbed “Far Out” is expected to feature new iPhones and Apple watches BOE Governor Bailey appears before the Treasury Committee Thursday, Sept. 8 Economic Data/Events ECB rate decision: Expected to raise rates by 50bps to 1.00% US initial jobless claims Fed’s Powell speaks at Cato Institute Mexico CPI  Australia trade France trade Japan GDP, BoP New Zealand manufacturing activity South Africa current account, manufacturing production Thailand consumer confidence Chicago Fed President Evans President speak at College of DuPage economic forum Federal Reserve Bank of Minneapolis President Kashkari speaks at the “Toward an Inclusive Recovery” virtual event RBA Governor Lowe speaks at the annual Anika Foundation lunch in Sydney EIA crude oil inventory report Friday, Sept. 9 Economic Data/Events US wholesale inventories Russia CPI, GDP  France industrial production Mexico industrial production Canada unemployment China CPI, PPI, aggregate financing, money supply, new yuan loans Japan money stock New Zealand truckometer heavy traffic index, card spending Thailand foreign reserves, forward contracts EU energy ministers extraordinary meeting to tackle energy crisis in Brussels President Biden travels to the new Intel facility in Ohio to discuss the Chips Act Sovereign Rating Updates Finland (Fitch) Netherlands (Fitch) Norway (S&P) Portugal (S&P) Ukraine (S&P) This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Week Ahead - Rate Hikes Keep Coming - MarketPulseMarketPulse
Crypto Market Buzzes with Potential Launch of US Bitcoin ETFs

Plenty Of Things To Discuss In The Market Insights Podcast By Oanda

Craig Erlam Craig Erlam 02.09.2022 22:11
OANDA Senior Market Analyst Craig Erlam reviews the latest market news with Jonny Hart. They discuss the US jobs report, 24-year high in USDJPY, oil ahead of the OPEC+ meeting and Nord Stream 1. https://itunes.apple.com/us/podcast/oanda-market-insights/id1358715867?mt=2 https://subscribeonandroid.com/audioboom.com/channels/4947364.rss This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Market Insights Podcast (Episode 371) - MarketPulseMarketPulse
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ING Economics Team Expects Fed And ECB To Change Their Strategy A Bit As Recession Could Be More Acute Than Forecasted

ING Economics ING Economics 04.09.2022 10:43
Different shades of recession are spreading across the globe at record speed as soaring inflation, geopolitical tensions, and astronomical gas prices show no signs of abating. As central banks grapple with working out how to balance inflation and growth, there's one thing we're sure of: tough times lie ahead In this article A return to reality for Europe The colours of recession Out with the old, in with the new Looking ahead Recession’s coat of many colours ING's Carsten Brzeski on the different shades of recession spreading across the globe.   A return to reality for Europe Returning from the summer break always helps when looking at the bright side of the world's economic prospects. An often heard truism is that relaxed economists make fewer pessimistic forecasts. But when you're tracking the European and, specifically, German economies, no summer break is long enough to make short-term economic forecasts more optimistic. On the contrary, returning to Europe’s economic reality after the summer means returning to a recessionary environment, as gas prices are moving from one astronomic high to the other and will lead to unprecedentedly high energy bills over the winter. Even without a complete stop to Russian gas, high energy and food prices will weigh heavily on consumers and industry, making a technical recession – at least – inevitable. The colours of recession No two recessions, however, are the same. In fact, we are currently seeing different colours of recession across the world. The US economy has actually been in a technical recession – defined as two consecutive quarters of negative growth – but it feels nowhere close to a recession. Our chief international economist in New York, James Knightley, says weaker global growth, the strong dollar and the slowdown in the housing market on the back of higher interest rates, will make it feel like a ‘real’ recession at the turn of the year, however. In other regions of the world, we are not currently seeing fully-fledged recessions, but given that China and emerging markets need higher growth rates than the Western hemisphere, the expected sub-potential growth rates can easily feel recessionary. As a consequence, even if Europe currently remains the epicentre of geopolitical tensions, it almost looks as if recession and recessionary trends are a new export item. Out with the old, in with the new With different shades of recession spreading across the global economy, but inflation still stubbornly high as a result of post-pandemic mismatches of demand and supply as well as energy price shocks, the dilemma for major central banks is worsening: how to balance inflation and growth. In the past, the answer would have been clear: most central banks would have shifted towards an easing bias. Not this time around. We are currently witnessing a paradigm shift, recently illustrated at the Jackson Hole conference. A paradigm shift that is characterised by central banks trying to break inflation, accepting the potential costs of pushing economies further into recession. This is similar to what we had in the early 1980s. Back then, higher inflation was also mainly a supply-side phenomenon but eventually led to price-wage spirals and central banks had to hike policy rates to double-digit levels in order to bring inflation down. With the current paradigm shift, central banks are trying to get ahead of the curve. At least ahead of the curve of the 1970s and 1980s. Whether the paradigm shift of central bankers is the right one or simply too much of a good thing is a different question. What strikes me is that central bankers have implicitly moved away from measuring the impact of their policies by medium-term variables and expectations towards measuring it by current and actual inflation outcomes. This could definitely lead to some overshooting of policy rates and post-policy mistakes. Looking ahead We still think that the paradigm shift will not last that long and looming recessions will bring new pivots, forcing the Fed to stop hiking rates at the end of the year and eventually cutting rates again in 2023, and stopping the ECB from engaging in a longer series of rate hikes. Reasons for this out-of-consensus view are that we expect a more severe recession than the Fed and ECB do, and a faster drop in US inflation, in particular, than the Fed expects. Also, in a recession, any neutral interest rate is lower than in a strong growth environment. Finally (and a bit meanly), central banks have not had a good track record with their inflation predictions over the past few years. In any case, we are back from the summer break and looking ahead to a very exciting autumn. Enjoy reading and stay tuned. TagsMonthly Update   Source: ING Monthly: Recession’s coat of many colours | Article | ING Think   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Tokyo Raises Concerns Over Yen's Depreciation, Considers Intervention

US Dollar's (USD) And Stock Market's Reaction To The US Labour Market Data | EUR/USD After The Release

Conotoxia Comments Conotoxia Comments 04.09.2022 20:02
After 2:30 pm, the long-awaited US labor market report came out, showing mixed readings. The market in the first moment seems to have reacted to the publication with a weakening of the dollar and a rise in stock index contracts. Non-farm Payrolls hits 315K The U.S. Labor Department reported that non-farm sectors added 315,000 new jobs in August against a market consensus of 300,000 the smallest increase in new jobs in the U.S. economy since April 2021. The data for July, on the other hand, was revised slightly downward from 528,000 to 526,000. Last month's significant job gains were noted in professional and business services (68,000), which includes computer systems design and related services, healthcare (48,000) and retail trade (44,000). Manufacturing added 22,000 jobs, and leisure and hospitality added 31,000. Unemployment rate reaches 3.7% The BLS report shows that the U.S. unemployment rate rose to 3.7% in August 2022, the highest since February. The market consensus was for an unemployment rate of 3.5%. It seems that it was the rise in the unemployment rate to its highest level since March 2022 that the market may have reacted to. Investors in the interest rate market, according to Bloomberg, reduced bets on a quick interest rate hike by the Fed, which could have been reflected in the dollar, gold, stock indexes or cryptocurrencies. The U.S. labor market saw a slowdown in hourly earnings growth, to 0.3% for the month, from 0.5% in July, which may be the right direction for the Fed, but wages could still grow faster than policymakers would like. Wage growth is still a possible inflationary pressure, hence it seems that the next important publication may be the one on the change in price level, and it will be announced on September 13th. EUR/USD Following the release of the US data, the rate of the main EUR/USD pair seems to have risen above parity. Gold, on the other hand, is trying to turn back from under the $1,700 level to $1,705, and bitcoin is oscillating in the $203 region. ETH, on the other hand, is holding in the region of $1,600 before 15:00 GMT+3. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Source: Mixed labor market data. EUR/USD above parity? (conotoxia.com)
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EUR/USD Is Vigilant To The Highly Awaited Jerome Powell's (Fed) Speech. Rise Of Monthly Bond Sales Could Make Stock Market Decrease By Over 20%!

Alexander Boltyan Alexander Boltyan 06.09.2022 14:21
The head of the Federal Reserve (Fed) Jerome Powell is expected to deliver a speech on Friday at Jackson Hole annual symposium. Investors are completely focused on Powell’s testimony mostly ignoring incoming macroeconomic data. However, some economic data was a matter of concern. Shocking PMI Prints PMI indexes in the United States and in some other countries came out shocking as Services PMI in the U.S. dropped in august to 44.1 points, while Production PMI in the United Kingdom fell to 46.0 points. The3se are worst reading since 2020. PMI’s in other countries with a minor exclusion are pointing to a global economic slowdown. Some positive tunes were brought by the Q2 2022 second GDP estimate in the U.S. and Germany. Estimates were upgraded to -0.6% from the previous -0.8% in America and to 0.1% from 0.0% in Germany. This could hardly comfort investors, but together with lower Initial Jobless Claims in the U.S. it leveled up the market before the weekend. Read next: Interest rates hiked. The most important indicators continue their downward trend| FXMAG.COM Stock Market Could Plunge! S&P broad market index lost around 2% this week. Major investment houses are warning its clients that a rise of monthly bond sales by the Fed to $95 billion in September would plunge the stock market by another 25-30%. Technical picture of the S&P 500 index demonstrates a downside patter of the index with primary target at 3900-4000 point. The U.S. stock market benchmark fell below the support at 4220 points close to the gap of the beginning of this week. It is quite possible this gap could be closed after Powell’s testimony. . During two previous week short positions for the 70% of targeted amount for S&P 500 index were opened at the average price at 4285-4290 points. The rest of the targeted volume would be used once new technical signals would emerge. The target area is located at 2100-2300 points that is expected to be reached by the end of 2022. Technical Analysis Suggest Brent Crude Oil Could Even Hit $50-60 Oil market is short of time to active an upside scenario with targets at $135-145 per barrel of Brent crude benchmark. There are no triggers for such a scenario to become real at the moment. Moreover, if Brent prices would close this week below $106 per barrel an aggressive downside formation could pressure prices to $75-85 per barrel, and even to the extreme targets at $50-60 per barrel by the end of November. So, the Powell’s speech at Jackson Hole could be the last chance for bulls to avoid this scenario. What Are Gold's Downisde Targets? Gold prices slightly rebounded from the support at $1700-1730 per troy ounce to $1760. However, it does not change much as the decision to open short positions has to be made in the first half of September either from $1800-1820 per ounce, or after prices drop below the support at $1700-1730. Both scenarios have downside targets at $1350-1450 per ounce.  Powell's Can Make EUR/USD Go Much Below Parity! EURUSD met its primary target at 0.99500-1.00500, and has missed a chance for a rebound. The pair is likely to continue diving deep below after it tested 0.99500 support level several times this week. Next week the euro may fell to 0.98500 is Powell’s speech would be disappointing. GBP/USD - It Seems It's Not The Best Moment To Start GBPUSD continues aggressive downside with the completed primary target at 1.18000-1.19000 with the remaining secondary targets at 1.15000-1.16000 that are becoming more as the Euro goes down. However, there are no good entry points to open any trade positions so far. Read next: ECB Will Continue To Hike Rates To Slow Inflation? | FXMAG.COM
German Business Confidence Dips, ECB's Lagarde Hosts Central Banking Conference in Portugal, EUR/USD Drifts Higher

US Dollar (USD) May Rise Further As The Labour Market Data Shows It's Strong Enough To Withstand Fed's tightening

Alexander Boltyan Alexander Boltyan 06.09.2022 14:43
The U.S. dollar, measured by the DXY index, retreated on Friday following the August nonfarm payrolls report. The greenback weakened as a knee-jerk reaction to a mixed employment report. Still, the bigger picture supports the bullish case for the dollar once the dust settles as the labor market keeps showing resilience to Fed’s aggressive tightening policy. Non-farm Payrolls Exceeded Forecast Hitting 315K At the time of writing, the DXY trades at the 109.50 area, 0.1% below its opening price, having bottomed in at a daily low of 108.93 after posting on Thursday a fresh cycle high just a couple of pips shy from the 110 level. The US Bureau of Labor Statistics reported the US economy added 315,000 jobs in August, beating the market's consensus of 300,000 but down from the stunning July reading of 526,000. On the other hand, wage inflation, measured by the average hourly earnings, slowed to 0.3% MoM, below the market's expectations of 0.4%. In addition, the unemployment rate jumped to 3.7% from its previous reading of 3.5%, coming higher than expected. The Fed’s tightening plan probably won’t change as Chair Powell made it clear at Jackson Hole that the committee needed to see “substantial” evidence that inflation is slowing down and that they are willing to see some economic pain. Robust Labour Market Data Supports Idea Of Potential Further Tightening In contrast, the jobs report shows that the labor market can handle tighter financial conditions as it beat the market’s expectations for a fifth consecutive month. As an immediate reaction, for the Sept. 20-21 meeting, markets are betting on higher odds of a 75 bps hike of 64% and 36% probabilities of a 50 bps increase. According to the weekly chart, the technical outlook for the DXY remains bullish as the index posts the third weekly gain in a row. Read next: Interest rates hiked. The most important indicators continue their downward trend| FXMAG.COM DXY weekly chart.   What Do We Learn From US Dollar Index (DXY) Daily Chart? The positive outlook is also seen in the daily charts, although indicators suggest a deceleration of the bullish momentum. The daily RSI pulled back from overbought territory, while the MACD printed a lower green bar. On the upside, the next resistances are seen at the cycle high of 109.97, followed by the 2003 highs at the 112.00 and 115.00 levels. On the other hand, supports could be faced at the 109.00 zone, followed by the 108.80 area, and then the weekly lows at the 108.30 regions. DXY daily chart.
USD/JPY Weekly Review: Strong Dollar and Yen's Resilience in G10 Currencies

The US Stock Market Has Been Bearish For Three Weeks Now

InstaForex Analysis InstaForex Analysis 07.09.2022 09:24
The main US stock indices – DOW Jones, NASDAQ, and S&P 500 – closed lower on Tuesday. Overall, the US stock market has been bearish for three weeks now, in line with our expectations. The upward correction of stock indices a month ago raised a lot of questions. The current movement, however, makes sense. The Fed will remain hawkish and will be hiking rates for a longer period of time than expected previously. It remains to be seen whether inflation slows down further. Under the QT program, almost $100 billion will be withdrawn from the US economy every month. Naturally, in light of all these factors, demand for risk assets decreases but increases for safe havens. That is why bitcoin and other cryptocurrencies cannot show any growth. In our view, the latest macro reports were quite strong. Thus, the ISM Services PMI and NonFarm Payrolls exceeded market forecasts. Meanwhile, unemployment somewhat increased, but the overall situation remains quite stable to sound the alarm. Although a recession in the United States seems inevitable, the state of the economy is not as bad as it might seem. Anyway, positive macro results are not enough to keep the stock market from falling. We see the main US indices hitting yearly lows by the end of 2022. What happens afterward will depend solely on the FOMC's rhetoric. US inflation for August is due on September 14. In case of a significant slowdown, monetary pressure on the economy could be eased. The Fed does not want the economy to slide into a recession but its main priority now is fighting inflation. If recession risks could be minimized, the regulator would not miss a chance to do that. If inflation keeps going down, there will be no need for 0.75% rate hikes as well as for more aggressive actions. For the stock market, inflation results for August mean almost nothing because the Fed still remains hawkish. We suggest that the bear market will stop when the regulator starts to hint at the end of the rate hike cycle, that is as early as December 2022. As for the tightening cycle itself, it may end in the first six months of next year. In other words, indices still have plenty of time to fall.       Relevance up to 06:00 2022-09-08 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/321003
Hawkish Fed Minutes Spark US Market Decline to One-Month Lows on August 17, 2023

Can The Fed Funds Rate Peak At a 4% Range By The End Of The Year?

ING Economics ING Economics 04.09.2022 09:11
The Federal Reserve looks set to raise interest rates to 4% by year-end as officials signal a clear intent to deal with inflation. But with the global backdrop deteriorating and higher interest rates and a strong dollar set to weigh on an economy already experiencing a housing market downturn, we expect rate cuts will come next year In this article A recession that isn't a recession Fed pushes back against market pricing Real recession risks are rising with inflation set to fall sharply Odds continue to favour 2023 rate cuts   A recession that isn't a recession The trade and inventory-induced technical recession in the first half of the year failed to dent the Federal Reserve’s appetite for hiking interest rates. After all, it wasn’t what we might term a “proper” recession given rising consumer spending and the fact that 3.3mn jobs were created between January and July. Moreover, third-quarter GDP should bounce back nicely with trade and inventories moving much more favourably while the recent decline in gasoline prices has boosted consumer spending power. At the same time, core inflation is likely to rise back above 6% Year-on-Year on September 13th, while the upcoming August jobs employment should be decent given the surprise rise in job vacancies. Fed pushes back against market pricing Despite 225bp of interest rate hikes so far and the strong dollar, financial conditions have actually loosened in recent months. This came via tightening credit spreads and falling longer-dated yields as markets increasingly doubted the Fed’s intentions and predicted a pivot to rate cuts next year. The Fed fought back at the recent Jackson Hole symposium as officials ratcheted up the hawkishness, affirming that policy will be tightened further - and kept tight - to ensure inflation comes down.  The robustness of the Fed’s language seems to have changed perceptions somewhat and it now appears likely it will implement a third consecutive 75bp interest rate increase on September 21st. With more rate hikes at the November and December policy meetings we now see the Fed funds rate peaking at a 3.75-4% range by the end of the year. Another key message from Chair Powell’s Jackson Hole speech was that the market shouldn’t get carried away with the pricing of rate cuts next year, which we suspect was part of the push intended to get longer-dated yields higher to tighten financial conditions to get inflation lower. Unfortunately, we have far less conviction than Powell that there won’t be the need for a loosening of policy in 2023. Real recession risks are rising with inflation set to fall sharply Residential investment is already a drag on growth due to the rapid downturn in the housing market while the global backdrop is deteriorating due to Europe’s energy crisis and China’s apparent slowdown. A strong dollar and higher-for-longer interest rates will only intensify the downside risks for growth in 2023 with the potential for what might be termed a “real recession” with rising unemployment and falling spending looking increasingly likely for late 2022/early 2023. Inflation will stay high through the rest of this year. However, we remain hopeful that inflation can get back to 2% by the end of 2023. Housing and cars account for nearly half of the core CPI basket of goods and services, and the downturn in demand and rising supply will weigh on prices and be a major driver of lower CPI from April onwards. We also expect the weaker growth environment to result in a squeeze on corporate profit margins which will help depress inflationary pressures while a weaker growth environment translating into stagnant payrolls will take the heat out of wage inflation. Housing demand and transactions continue to fall, prices will follow     Odds continue to favour 2023 rate cuts Our base case for next year is a broad downturn in economic activity with the labour market losing jobs and inflation falling more quickly than the market and the Fed anticipate. This will open the door to rate cuts in summer 2023. In order for the Fed not to cut rates, we need to see an environment where inflation stays stickier and the economy doesn’t experience as much of a slowdown as we expect. This most likely scenario would be via ongoing falls in gasoline prices (and perhaps food prices on top) spurring consumer demand with inflation pressures rising in other areas in what is a continually supply-constrained world. Additionally, while worker demand slows there continues to be worker shortages and the fight for talent remains strong, particularly in leisure and hospitality.  We would also probably need to see financial conditions remaining loose, which could come via the dollar weakening and longer dates' yield declining, dragging borrowing costs lower more broadly - basically, the market not believing the Fed. In the topsy turvy world of market behaviour, we would also need credit spreads to stay narrow with equities proving resilient. While not implausible, we do not see this as the most likely path ahead, hence our forecast for rate cuts.   US Interest rates Federal Reserve   Source: https://think.ing.com/articles/monthly-us-the-harder-you-push-the-worse-it-gets/?utm_campaign=September-01_monthly-us-the-harder-you-push-the-worse-it-gets&utm_medium=email&utm_source=emailing_article&M_BT=1124162492 Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
ECB press conference brings more fog than clarity

More Rate Hikes Are Coming. The Increase In The USD/JPY Will Not Change The Political Position Of The Bank Of Japan

ING Economics ING Economics 03.09.2022 09:39
Expect more big rate hikes in September from the major central banks, even if many of them are closing in on the end of their respective tightening cycles In this article Federal Reserve European Central Bank Bank of England Bank of Japan   Federal Reserve Our call: A third consecutive 75bp rate hike in September with Fed funds hitting 3.75-4% in December. Rate cuts from summer 2023. Quantitative tightening (QT) to continue until rate cuts begin. Rationale: While there was a technical recession in the first half of the year this was attributed to volatility in trade and inventories. Consumer spending, business capex and job creation are firm, and with inflation remaining stubbornly high and financial conditions not tightening as much as the Fed would like, more rate hikes are coming. But the 2023 global outlook is deteriorating while higher interest rates and the strong dollar are set to weigh on domestic activity, which is already facing a steep downturn in the housing market. We expect rate cuts next summer. Risk to our call: Two-way. If the labour market remains tight and inflation doesn't fall as quickly as we expect then rate hikes will continue for longer.  Conversely, if the economy reacts badly to rate hikes a deep recession will likely prompt a more rapid reversal in Fed policy. James Knightley European Central Bank Our call: A 50bp rate hike in September and another 25bp in October, followed by a long pause.  Rationale: The eurozone is facing a longer recession and financing conditions have already tightened significantly in recent weeks. The ECB will try to bring its policy rate to the lower end of the range for neutral rates as quickly as possible. However, we think that the ECB is still underestimating the risk and severity of a recession. As soon as the recession becomes more evident, the ECB will also turn more dovish. Any neutral policy rate is much lower in a recession than in a strong growth environment.  Risk to our call: The paradigm shift in many central banks and a high acceptance of a worsening recession is the price to pay to fight inflation. The risk is that the ECB will continue hiking way into the recession and would deliver a total of 150bp rate hikes until Spring 2023. Carsten Brzeski Bank of England Our call: A 50bp rate hike in September and November Rationale: For the same reasons as the ECB, we think the Bank of England is closer to the end of its tightening cycle than the beginning. That said, there is scope for further aggressive action in the near term. While core inflation should fall throughout next year, the jobs market remains tight and the Bank is worried about the risk of persistent wage inflation. We also think a large government energy support package looks increasingly inevitable, and we think that could provide further impetus for the BoE to keep hiking in the near term. The recent weakness in sterling will bolster the hawks' case, even if in practice this isn’t likely to move the needle for inflation all that much. Risk to our call: Two-way. A lack of government support could force the Bank to stop hiking sooner. Equally a 75bp rate hike in September shouldn’t be totally ruled out given other central banks' actions, and neither should the risk of Bank Rate hitting 3% later this year. However, that would make rate cuts more likely in 2023 James Smith Bank of Japan Our call: Bank of Japan will maintain an accommodative policy stance. Rationale: CPI will likely stay above 2.5% till the end of 2022, but the BoJ will downplay it as 'cost-push' driven inflation that will prove to be temporary. Labour conditions are expected to become tighter as labour shortages persist, but it is still questionable that this will lead to meaningful wage increases over the coming months. Even if USD/JPY rises above 140, it won’t be a reason for the BoJ to change its policy stance. Risk to our call: If signs of wage growth are detected then the BoJ may reconsider its policy stance, but that will become more likely when Governor Haruhiko Kuroda retires next April. Min Joo Kang    Source: https://think.ing.com/articles/monthly-central-banks-our-main-calls/?utm_campaign=September-01_monthly-central-banks-our-main-calls&utm_medium=email&utm_source=emailing_article&M_BT=1124162492 Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Hawkish Fed Minutes Spark US Market Decline to One-Month Lows on August 17, 2023

The US Jobs Report Could Be A Negative Catalyst

Kenny Fisher Kenny Fisher 02.09.2022 13:35
Stock markets in Europe opened positively on Friday after what has been an otherwise rotten week, while Asia was fairly mixed ahead of the US jobs report. It will be interesting to see whether Europe can maintain the rebound today considering we’re heading into the weekend not certain that gas will start flowing through Nord Stream 1 again tomorrow. Grid data suggests it will but until the gas starts actually flowing, it remains a risk. That weekend risk may make investors a little nervous as we progress through the session and could lead to more caution as we approach the close. The US jobs report could also be a negative catalyst later in the session if it’s deemed strong enough to warrant more aggressive tightening from the Fed. We’ve seen a lot more risk aversion in the markets recently as Fed commentary has finally gotten through to investors. We’re still seeing remarkable resilience in the US data, particularly the labour market, even if some cracks are appearing elsewhere. While the NFP and unemployment will naturally attract the most attention initially, it’s the wages that could tip the balance at the central bank, with policymakers concerned about inflation becoming entrenched. Will Japan intervene as the yen hits a 24-year low? The yen has been back in focus in recent days, having fallen to a 24-year low against the dollar on Thursday, breaking above 140 in the process. This level has been speculated a lot about in recent months as being the point at which Japanese officials may be tempted to intervene in the markets and comments overnight could further fuel that, with one spokesperson warning moves are being watched with a high sense of urgency. That doesn’t appear to have happened yet and we’re not likely to see any shift from the Bank of Japan either if recent commentary is anything to go by. While inflation is currently above its target, that’s not expected to last and there’s seemingly little appetite to change course. That could mean further declines in the yen until intervention is deemed necessary, although the threat of such action could slow the decline as we’ve already seen. Treading water ahead of the jobs report Bitcoin has been treading water around $20,000 over the past week, perhaps with one eye on today’s jobs report. This is clearly a major level of support and a significant break of it could see further losses, with $17,500 the next major test being the level it bottomed at in June. Risk appetite in the markets has not been positive recently which has weighed heavily on bitcoin and other risk assets. The jobs report today could compound that if it feeds inflation fears and raises the odds of another 75 basis point Fed hike this month. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
EUR: Range-bound Outlook Amid Tightened Swap Rate Gap

The AUD/USD Lost After RBA Governor Remarks, The End Of An Era For The UK

Saxo Bank Saxo Bank 09.09.2022 09:11
Summary:  U.S. Treasury yields rose 6-7bps after the ECB hiked 75bps and Fed Chari Powell’s speech. U.S. equity markets were quiet and managed to finish the session moderately higher. Reserve Bank of Australia Governor Lowe said interest rates were not on a “pre-set path” as the economic outlook was uncertain. Crude oil bounced by 1%. In Japan, a meeting between the MOF, BoJ, and FSA sent signals that FX intervention remains on the cards. The European Union is holding an emergency meeting to discuss measures to tackle the energy crisis in Europe and China is scheduled to release CPI and PPI today. What is happening in markets?   Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)  U.S. stock markets closed higher in a choppy session, S&P 500 +0.7%, Nasdaq 100 +0.5%.  Trading was quiet after the well-anticipated ECB 75bp hike and Powell’s now consistent hawkish script.  The 6-7bp rise in bond yield did not move stocks.  VIX edged down further to 23.6. On the corporate front, T-Mobile (TMUS:xnas) announced a buyback program authorization for 7.5% of the company’s market cap and expected to complete the buyback by Sep 2023. U.S. treasuries (TLT:xnas, IEF:xnas, SHY:xnas) Following a 75bp hike by the ECB and Fed Chair Powell sticking to his hawkish stance in a speech yesterday, U.S. treasury yield jumped 6 to 7 bps across the curve.  Money market rates are pricing in a 85% chance of a 75bp hike on September 22.  Chicago Fed President Evans said the Fed “could very well do 75 in September” but his mind “is not made up” yet. The Treasury Department announced the size of next week’s 3/10/30-year auction at a total size of USD91 billon.  Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) Hang Seng Index underperformed its major Asian peers which advanced more than 1% across the board to continue its multi-session decline since the beginning of September and finished the day 1% lower.  The weakness in Tencent (00700.xhkg), -3.1%, Chinese developers, and energy stocks dragged down the benchmark index in Hong Kong.  According to filings to the stock exchange, about USD7.6 billion worth, or 2% of the market cap, of Tencent shares have been transferred to CCASS, the Stock Exchange of Hong Kong’s clearing and settlement system.  Prosus, Tencent’s largest shareholder holding 27.99% of shares outstanding, confirmed that it has transferred 192 million shares of Tencent to CCASS and is selling Tencent shares.  In June, Prosus (PRX:xams) announced that the company was going to offload its stake in Tencent to raise cash to buy back its own shares and Naspers’ (NPN:xjse) shares (Prosus’ parent) at a discount to NAV. The Chinese developer space was once again under selling pressure.  CIFI (00884:xhkg) tumbled 13.6% following credit agency S&P downgraded the long-term rating of the company’s senior unsecured debts by 1 notch to BB- from BB. Country Garden (02007:xhkg) plunged by 6.8%.  Energy stocks declined on sharp fall in crude oil price, CNOOC (00883:xhkg) -3.6%, PetroChina (00857:xhkg) -1.9%.  The Chinese automaker space was sold, Great Wall Motor (02333:xhkg) -4.7%, Geely (00175:xhkg) -3.1%, BYD (01211:xhkg) -3.0%, Li Auto (02015:xhkg) -3.0%, XPeng (09868:xhkg) -2.6%. After the Hong Kong market close, Bilibili (09626:xhkg/BILI:xnas) reported a larger than expected loss in 2Q2022 on the deterioration of gross and operating margins.  The company’s ADR plunged 15%.     USDJPY paid little heed to Japan’s three-party meeting USDJPY stuck close to 144-levels on Thursday despite stronger signs of concern from the Japanese authorities. The meeting between Japan’s MOF, central bank and FSA ended with some strong verbal signals that direct intervention remains on the cards, but even if that was to happen, it will only increase the volatility in the yen and cannot possibly reverse the move as long as the monetary policies of the US and Japan continue to diverge. EURUSD gained some bids in early Asian morning to rise to 1.002, but the move remains fragile especially with the emergency meeting scheduled for today. GBPUSD reversed the overnight weakness to rise to 1.1540 with dollar losing some momentum in early Asian trading hours.  Crude oil prices (CLU2 & LCOV2)  A slight recovery was seen in crude oil prices overnight despite the hawkish Fed rhetoric and a further surge in the dollar. Supply side dynamics remained in focus, with the EIA saying that crude inventories rose by 8.85 million barrels last week, while supplies dropped in the largest storage hub of Cushing. Gasoline inventories also gained, but there was no change to oil production. Putin warned that Russia will not supply energy to any nation that backs a US-led price cap on its crude oil sales. However, with WTI futures now priced at ~$83/barrel and Brent futures below $90, eyes are again on OPEC+ which hinted earlier this week the intention was to keep crude oil prices around the $100-mark. Demand concerns have picked up since the OPEC meeting due to widening China lockdowns and more aggressive central bank rate hikes.   Copper (HGc1) Copper is showing signs of stabilizing despite demand concerns from China as Covid restrictions continue to be tightened. Copper rose above $3.50 per pound overnight, as supply concerns remain top-of-mind with mining companies continued to struggle to meet their production targets with top producer Chile has seen its exports slump to a 19-month low due to water restrictions and lower ore quality - while demand from China, surprisingly is showing signs of strengthening as infrastructure push ramps up. Having found support last week at $3.36/lb, after retracing 61.8% retracement of the July to August rally, copper is currently staring at resistance in the $3.54 area where recent lows and the 55-day moving average merges. For a real upside and trend reversal to occur the price needs to break above $3.78/lb while a break below $3.36/lb could see the metal take aim at $3/lb.  What to consider? The Queen of England has passed away and Charles has taken the throne  It’s the end of an era for the UK with the passing of Queen Elizabeth, age 96. Some of the Queen’s key moments since reigning from the 1980s to today include: in 1986 Elizabeth became the first monarch to visit China. It was an important piece of Britain’s diplomatic effort as it prepared to return Hong Kong to Chinese control. In 2011, The Queen became the first British monarch to set food in Ireland in 100 years, with the trip being widely praised as a historic moment of reconciliation. In 2012 the Queen celebrated 60 years on the throne and in 2022 Elizabeth became the first and only British monarch to reach 70 years on the throne. Politicians from the Commonwealth and across the world paid tribute to the Queen. UK Parliament will pay tribute to Queen Elizabeth on Friday and Saturday. Australian Parliament will not sit next week.   ECB’s 75bps rate hike As was generally expected, the European Central Bank went ahead with a 75bps rate hike on Thursday, taking the deposit rate to 0.75%. President Lagarde said risks to inflation are on the upside and growth are on the downside, but did not rule out further tightening. The ECB raised projections for inflation (5.5% in 2023 now vs 3.5% earlier), lowered growth for 2023 (0.9% vs 2.1%), and 2024 (1.9% vs 2.1%) while raising growth for 2022 by a notch. Lagarde said that 75 bps was not the norm, but “moves will not necessarily get smaller” as policy was dependent on data and on a meeting by meeting basis, echoing Lane’s comments from last week. ECB’s Lane was however noted to be more hawkish yesterday than what his previous comments suggested. This keeps the door for another 75bps rate hike still open.  Fed Chair Powell stays in the chorus Fed Chair Jerome Powell stuck to the tune that the Federal Reserve members have been singing, suggesting a 75bps rate hike at the September meeting as inflation reins. He noted that the labor market is “very, very strong” and wages are elevated, while also signaling that growth will likely fall below trend. On inflation expectations, a key concern for Fed officials, the Fed chair said that today they are well anchored over the long-term, but the clock is ticking and the Fed has more concerns that the public will incorporate higher inflation expectations in the short-term. Fed’s Evans also hinted at a 75bps rate hike for September. With the chorus on inflation getting louder and market pricing for September being very close to a 75bps rate hike, a softer headline inflation print next week likely has the potential to usher in a relief rally. If, however, inflation remains high, we could see another leg down in equities.   Australia’s trade surplus halves as coal and iron ore exports fall from record highs. What next? Australia’s trade surplus almost halved in July, plunging from A$17.1b to an A$8.7b surplus, when the market expected the surplus balance to fall to just A$14.5b. It comes as exports of coal and iron ore fell from their record highs, dragging down total exports by 10%. Coal export earnings fell 17% with the northern hemisphere in peak summer, while iron ore export earnings fell 15% tarnished by China’s slowdown. Australian imports (covering outbound tourists) rose 5% with Aussies escaping the record cold winter to enjoy the European sun. The market responded to the drop in exports, with the Coal futures price falling to a 3-day low, losing 1.7%, taking the two-day loss to 7%, which pulls the price away from its record. For investors it’s a timely reminder, energy commodity prices are seasonally impacted, and could remain volatile before picking up later this year when we think peak buying is expected. Australian bonds and equities price in the RBA will be less aggressive, so it’s risk-on again RBA Governor Phillip Lowe sees a slower pace of rate hikes while conceding a sharp slowdown in global growth will make it hard to avoid a soft landing. The AUDUSD lost 0.4% after his remarks. While short-term rates as measured by the 3-year Australian bond yield fell 0.17% - supporting the risk assets rally. As such, the Australian Technology Sector surged to its highest level in a week. But sophisticated Australian investors seem skeptical that the RBA will slow the pace of hikes. Australian interest rate futures suggest rates could peak at 3.6% by mid-next year. We think the market would also be especially rate rises will slow as Australia’s Resources Minster was tapped for the second time to restrict Australian energy exports, as the nation is tipped to run out of energy in 2023. EU proposes five measures to curb gas demand and prices Ahead of Friday’s emergency energy meeting, European Commission President Ursula von der Leyen proposed five radical steps to curb costs and demand: 1) Smart savings of electricity by mandatory targets to reduce peak hour demand for electricity; 2) Cap on revenues of companies producing electricity with from low-cost sources such as wind and solar with profits being re-channeled to vulnerable people and companies; 3) Solidarity contribution from fossil fuel companies; 4) Liquidity support for energy utility companies in order for them to cope with elevated market volatility; 5) Cap on Russian gas revenues on the remaining 9% Russia supplies to Europe, down from a pre-war level around 40%. China’s PPI is expected to have risen as CPI remained stable in August PPI is expected to fall sharply to 3.2% (Bloomberg consensus) in August from 4.2% in July.  Base effect and a decline in coal prices in August could be factors contributing to the deceleration in producer price inflation.  CPI, however, is expected to edge up to 2.8% in August from 2.7% in July.  Analysts suggest that favourable base effect was offset by vegetable price increases amidst the heatwave. Bilibili reported below expectation earnings on margin compression   Bilibili (09626:xhkg/BILI:xnas) reported a worse than expected adjusted loss per share of RMB4.98 (Bloomberg consensus: loss per share RMB4.37, 2Q2021: loss per share RMB2.23). Revenue came in at RMB4.91 billion, largely in line with analyst estimates. The larger-than-expected loss came from disappointing margins.  Gross margin contracted to 15.3% from 16.4% in 1Q2022 and 22.4% in 2Q2021 due to the weak performance of the mobile game business (segment revenue -15% YoY).  Operating margin deteriorated to -39.4% in 2Q2022 from -33.9% in 1Q2022 and -20.9% in 2Q2021 which are attributable to higher general and administrative expenses +44% YoY) as well as research and development expenses +68% YoY).   The company’s revenue guidance of RMB5.6bn-5.8bn for 3Q was below market expectations.  A lender appointed receivers to siege Evergrande’s Hong Kong headquarters premises The Financial Times said that a lender had appointed receivers to siege the headquarters building of China Evergrande (03333:xhkg, suspended) and looked to force a sale of the premises.  The distressed developer’s Hong Kong headquarter has been pledged to secure a loan from a syndicate of lenders led by China Citic Bank International.  Evergrande has previously been served a winding-up petition and is scheduled to have a hearing on the petition at the High Court on 28 Nov 2022. Separately, the Wall Street Journal reports that a consortium of Chinese state-owned banks and private enterprises agreed to pay USD1.05 billion in a court-arranged auction for Evergrande’s 14.6% in Shengjing Bank, a regional bank based in Shenyang, Liaoning province. For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast.     Source: APAC Daily Digest: What is happening in markets and what to consider next – September 9, 2022 | Saxo Group (home.saxo)
Construction Activity in Poland Contracts in May: Focus on Building Decline and Infrastructure Investment

USD (US Dollar): According To ING Economics It Seems To Be No Signs Of Fed Changing Its Approach

ING Economics ING Economics 09.09.2022 10:01
There is nothing in Fed Chair Jerome Powell's comments to suggest an imminent moderation in the pace of rate hikes. The need to 'act now' to get a grip on inflation in an environment where the economy is experiencing decent growth, strong job creation, and a likely rise in core inflation next week points to a third 75bp hike on 21 September Jerome Powell's comments clearly support a third consecutive 75bp interest rate hike Another 75bp in an environment of strong growth and rising core price pressures Federal Reserve Chair Jerome Powell’s comments to the Cato institute’s conference today on monetary policy are clearly supportive of a third consecutive 75bp interest rate hike on 21 September. There is no hint that he supports moderation, arguing that “we need to act now, forthrightly, strongly as we have been doing and we have to keep at it until the job is done”. There is also the usual mention of inflation expectations and the need to anchor them in order to ensure inflation doesn’t become ingrained. The latest data certainly backs the case for 75bp with business surveys looking robust, the labour market continuing to create jobs in significant numbers, and next week’s inflation numbers set to show core CPI accelerating to 6.1% from 5.9%. Moreover, the third quarter is shaping up to be quite a strong one, fully reversing the declines seen in GDP in the first half of the year. Inventories and net trade are swinging back and set to make decent positive contributions to headline growth. Meanwhile, consumer spending is being boosted by the lift in spending power from lower gasoline prices. High-frequency data over the Labor Day holiday show restaurant dining at record levels, while air passenger travel over the past weekend exceeded that of 2019 for the first time, so 3% growth looks to be on the cards. High-frequency data point to strong 3Q consumer spending Source: Macrobond, ING   Nonetheless, the deteriorating global outlook and weakening domestic housing market combined with the cumulative impact of policy tightening and the strong dollar means we think the Fed will moderate its hiking to 50bp in November and 25bp in December. Weaker wage pressure and more limited month-on-month increases in CPI thanks to lower import and other input costs would certainly help this argument. Rate cut chances remain high for 2023 Chair Powell has also reiterated the view that the market shouldn’t get too excited about pricing rate cuts next year, saying “history cautions strongly against prematurely loosening policy”. However, as the chart below shows, over the past 50 years, there is typically only a six-month gap between the last rate hike in a cycle and the first rate cut – not exactly a long gap. It seems to us to be more of an effort to nudge the longer end of the Treasury yield curve higher to ensure financial conditions remain tight. Fed funds rate: timeframe between last rate hike and first rate cut Source: Macrobond, ING   With recessionary forces intensifying, we expect inflation to fall relatively swiftly next year thanks to lower gasoline prices feeding through more broadly, weaker wage pressures and declining input costs combined with falling house prices depressing the rental components of CPI. We are currently pencilling in a rate cut in June with further easing through the second half of 2023. Read this article on THINK TagsUS Interest rates Federal Reserve Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
In The Coming Days Will Be The Final Consolidation Of Bitcoin

Bitcoin: What's Next For The Leader Of The Cryptocurrency?

InstaForex Analysis InstaForex Analysis 09.09.2022 13:02
The calm in the financial markets is deceptive. Those who lost interest in bitcoin because it fell into the 5.4% trading range, the narrowest since October 2020, can eat their hearts out. The nature of the market is such that consolidations are replaced by trends, and vice versa. And the longer this or that asset is traded in a narrow range, the more explosive its further rally promises to be. Or, conversely, collapse. In the case of BTCUSD, the pendulum could have swung either way, but the fall in the US dollar inspired the token to surge. Looking at the peak of the leader of the cryptocurrency sector to the very bottom since mid-June, the "bears" rubbed their hands. In their opinion, the decline in miners' incomes to the lowest level in the last two years due to increased competition, increased electricity costs, and the crypto winter should have forced them to sell tokens to cover the costs. On the contrary, BTCUSD bulls pointed to the rise in the ratio of open interest in perpetual swap contracts for crypto assets to the number of coins held in reserves on exchanges, or the so-called leverage ratio, to record peaks. Despite bitcoin's 70% drop from its November highs, interest in it is still high. So, prices will rise, you just need to wait for the right moment. Dynamics of Bitcoin and Leverage Ratio The problem is that no matter how much the fans of crypto assets would like to live an independent life, it will not work. Big money has long entered the market, which perceive bitcoin as a risky instrument, and the fate of such assets depends on the Fed and its monetary policy. In this regard, the fall of BTCUSD against the backdrop of Jerome Powell's hawkish rhetoric in Jackson Hole and the growth of the pair's quotes on expectations of a slowdown in US inflation look logical. Comments from FOMC officials, determined to fight the highest prices in decades and willing to sacrifice the labor market and the economy to do so, raised the chances of a federal funds rate hike by 75 bps in September to 86%. Large banks added fuel to the fire. Goldman Sachs and Nomura have changed their forecasts for the trajectory of borrowing costs. They see them up 75 bps in September and by 50 bps in November, up 25 bps higher than previous ratings. The cycle of monetary restriction will certainly not end there. However, according to the market, the figure of 86% is too high. It will certainly fall if US inflation continues to slow down in August from 8.5% to 8.1%, as Bloomberg experts predict. This circumstance makes it possible to sell the US dollar and buy risky assets, including US stocks and bitcoin. The markets are again going against the Fed, which they managed to do momentarily in the summer. I believe that history will repeat itself, so the potential for a BTCUSD rally seems limited. Technically, on the daily chart, consolidation above fair value at 20,000 amplifies the risks of a pullback. Start selling the token on the rebound from resistances at 21,500, 22,300 and 23,150.       Relevance up to 10:00 2022-09-14 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/321276
The Gold Rally Is Continuing To Stall, This Could Be A Good Year For Crude Oil

Crude Prices Are Rallying On Supply Risks, Gold Is Higher

Kenny Fisher Kenny Fisher 10.09.2022 15:00
As the world mourns the death of Her Majesty Queen Elizabeth II, world leaders pay tribute for her incredible service and leadership. The UK enters a 10-day mourning period that will see some events delayed or suspended. ​ The BOE announced they will push back their interest rate decision to September 22nd. UK train strikes will be delayed as three British trade unions will suspend their scheduled strike action. ​ The Office of National Statistics confirmed the upcoming economic publications are due to go ahead. ​ That includes UK trade, GDP, unemployment, inflation, housing, and retail sales data. Wall Street is finishing the week on a positive note as the dollar’s rally has run out of steam as optimism grows for inflation to continue to come down. Economists are slightly lowering their inflation forecasts and that could mean the Fed won’t have to take rates above 4%. Another round of hawkish speak from both the Fed’s Bullard and Waller was not able to derail today’s stock market rally. ​ ​ It is looking like traders are growing confident they will soon see the end of the Fed’s interest rate hiking cycle. ​ Supporting the risk-on narrative was softer-than-expected Chinese consumer and producer inflation data that could pave the way for more easing by the PBOC. Oil Crude prices are rallying on supply risks and as the dollar has tentatively peaked. Lately it has been mostly bad news for oil prices as demand concerns worsened given China’s deteriorating COVID situation, a surprise jump in stockpiles, and on expectations world leaders will continue to exhaust emergency measures to send energy prices lower. Energy Secretary Granholm said President Biden is considering the new releases from the US Strategic Petroleum Reserve (SPR). Russia President Putin’s threat to cut off all energy supplies is a growing risk as Ukraine recaptures territory. ​ The risk of some supply disruptions over the next few months remains elevated and that should help oil prices stay above the $90 a barrel level. Gold Gold is higher as the historic run higher in the dollar appears to have run out of steam. It seems Wall Street is getting comfortable with the idea of another 75-basis point rate hike by the Fed. ​ Fed’s Bullard supports a third straight 75-bp interest rate hike even if next week’s inflation reports show price pressures continued to ease. ​ Fed’s Waller also supports another significant rate hike this month. Gold is finding a home above the $1700 level and that could continue if investors continue to look beyond hawkish central bank speak. Gold’s fate could be determined after this next inflation report. ​ If consumer prices come in hotter-than-expected, gold might see selling pressure target the $1680 region. ​ A sharp deceleration with pricing pressures might only provide a modest boost higher for gold as policy makers. Bitcoin Bitcoin is welcoming the return of risk appetite and a falling US dollar. ​ The broad market rally has rejuvenated cryptos and that could continue if investors continue to look beyond hawkish central bank overtures and lingering recession risks. ​ ​ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Summary Of The Week On Financial Markets

Summary Of The Week On Financial Markets

Ed Moya Ed Moya 11.09.2022 09:18
This week suddenly ends on a positive note as the S&P 500 broad market index, which started to climb on Wednesday, has lead the major stock market indicator to 4032 points, the highest since August 30. This is very strange considering all the negative news that could have affected the stock market this week. The European Central Bank (ECB) raised all interest rates by 75 basis points. This is the second time in the history of the single currency that such a move has been performed. The Federal Reserve’s (Fed) Chairman Jerome Powell confirmed the central bank will continue to do everything needed to bring inflation down to the 2.0% target. This kind of rhetoric is also being echoes by ECB President Christine Lagarde who has assured markets that the Bank is likely to take further bold steps to raise interest rates over the coming months. The message from these two bank leaders may enforce stocks to continue to move down.  However, investors found a reason to pull on the breaks and stop markets from another sell-off. Chicago Fed Bank President Charles Evans supported investors by saying that the next inflation report next week may point to how much the Fed could raise its interest rates this month. "If I saw inflation maybe cooling a little bit that's not going to change the fact that I still think we are going to need to top out at something like 3.5% to 4%, it's just that maybe we don't have to do it that soon," Evans said. Some investors were flooded with euphoria after crude prices fell by 16% over the last two month. It is clear that inflation may slow down significantly in August and perhaps prompt a less-than-expected Fed interest rate move.  It sounds more like wishful thinking as inflation is considerably above the existing level of interest rates for the Fed to pull the breaks on, even if prices slowed down in August. However, many investors are seen to support the idea and hope for stocks to recover. Even though some investors are holding onto hope, we should not exclude the possibility that a downside path of stock indexes could be a bit bumpy. The technical picture for the S&P 500 index is still negative as it is moving within an aggressive downside formation after it failed to climb above 4020 points on Thursday. This has now become a strong resistance level that may send the index back to the downside targets at 3850-3950 points. More negative drivers may send the index further down to the extreme secondary targets at 3600-3700 points, and even further down to heartbreaking 3000-3100 points.  In recent weeks, short positions at 70% of the targeted volume were opened at the average price of 4285-4290 points. The rest of the 30% could be opened once strong reliable downside signals emerge. The final downside target in the long-term is located at 2100-2300 points that could be reached by the end of 2022. The oil market made a huge step to the downside towards $75-85 per barrel of the Brent crude benchmark. Crude prices dipped down amid new anti-covid measures in China, unwinding global recession fears and a sharp rise of oil inventories in the United States. Brent prices slipped down to $87-88 per barrel, the lowest since January 2022, and are likely to continue down to the extreme targets at $50-65 per barrel that could be hit by November. In the short-term crude prices are less predictable making any entry points unreliable at the moment.  Gold prices are on a downside slide and they may last until the end of October. The primary scenario suggests prices may reach $1350-1450 per ounce by November. So, it would be reasonable to open short or small-short positions considering the current price movement at $1730 per ounce. The Euro was cheered on by the ECB’s decision to sharpen its interest rates hike, changing its formation to the aggressive upside with a primary target at 1.02500-1.03500. A reasonable correction to 1.00500-1.00800 is needed to open long positions. Once this correction is made the EURUSD could be interesting for long trades. GBPUSD also changed its formation to the aggressive upside with a target at 1.18000-1.18500. The pair needs to step back to 1.15300-1.15800 to be interesting to open long positions.
The Commodities Feed: China's 2023 growth target underwhelms markets

Power Producers Need To Buy Carbon Permits, In China Loans To Households Remained Sluggish

Saxo Bank Saxo Bank 12.09.2022 10:01
Summary:  Ukrainian success in taking back significant territory from Russia over the weekend has driven a cautious further recovery in the euro and sterling at the open of trade this week. Elsewhere, yields have jumped higher, helping drive new yen weakness and taming risk sentiment as the US 10-year treasury benchmark trades near the cycle highs since June. Focus this week is on tomorrow's US August CPI release, the most important data point ahead of next week’s FOMC meeting.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities Friday on a strong note up 1.5% and S&P 500 futures have extended their gains overnight touching the 4,100 level because before receding to around the 4,085 level in early European trading hours. The US 10-year yield continues to move higher trading at 3.34% and if it sets a new high for the recent cycle it will probably cause headwinds for US equities so watch the US bond market. Next big macro event is tomorrow’s US August CPI report which is expected to print –0.1% m/m suggesting inflation is beginning to cool. Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) Hong Kong, Shanghai, and Shenzhen are closed today for the mid-autumn festival holiday. Last Friday, Hang Seng Index soared 2.7%, snapping a six-day losing streak following China’s August inflation data surprising to the downside and raising hope for more monetary easing to come from the Chinese policymakers. Chinese property names rallied on market chatters about unconfirmed stimulus measures from policymakers to boost the ailing property sector. Ahead of the mid-autumn festival, catering stocks gained. CSI 300 climbed 1.4%, led by property, dental services, infrastructure, and digital currency.  Northbound inflows into A-shares reached USD2.1billion equivalent last Friday, the largest inflow in a single day since the beginning of the year. Ukrainian success on the battlefield drives EUR and GBP strength The surprise offensive and the re-capture of a key transport hub in the northeastern sector of the front after recent focus on operations in the south caught the market by surprise and has seen the euro and sterling rebounding versus the US dollar in early trading this week, with EURUSD trading to new local highs well clear of 1.0100 briefly overnight before edging back lower. Likewise, GBPUSD pulled north of 1.1650 before treading water back toward 1.1600. It will take some time and further developments to assess whether Ukraine can capitalize on its gains and this in turn triggers a new stance from Russia on its energy policy. JPY crosses back higher as yields rise The USDJPY correction on Friday inspired by somewhat stern language from Bank of Japan Governor Kuroda has mostly faded, as USDJPY bobs back above 143.00 overnight on US treasury yields challenging cycle highs. EURJPY pulled back close to the cycle high well above 144.00 overnight on hopes that the war in Ukraine is turning in the Ukrainians favour. New highs in USDJPY may bring more two-way volatility again if Japanese officialdom backs up its concern on the situation with market intervention (buying JPY). Crude oil (CLV2 & LCOX2) Crude oil starts the week in defensive mode with the focus staying with demand concerns amid continued lockdowns in China hurting demand from the world's top importer and a rapid succession of interest rates from major central banks negatively impacting the global economic outlook. Into the mix a US-backed plan to cap prices on Russian oil sales from December 5, a stranded Iran nuclear deal, strong demand for fuel products such as diesel at the expense of punitively high gas prices and a softer dollar. In addition, the collapse of Russian defenses in Ukraine and the response from Moscow will be watched closely. Monthly oil market reports from OPEC tomorrow and IEA on Wednesday should provide some further guidance on the supply/demand outlook. Brent’s current range: $92.75 and $87.25 US Treasuries (TLT, IEF) The 10-year US Treasury benchmark edged higher toward the local range high north of 3.3% overnight, with only the June peak at 3.50% remaining as the focus to the upside (this was the highest yield for the cycle since early 2011 and the run higher in yields in June coincided with the major low of the equity bear market this year. Tomorrow’s US August CPI number is the next key test for sentiment and yield direction, while the US Treasury will also auction both 3-year and 10-year treasury notes today and will auction 30-year t-bonds tomorrow. What is going on? France’s manufacturing production contracted in July According to the latest estimate released by the French Institute of National Statistics (INSEE), the manufacturing production decreased by a stunning 1.6 % month-over-month in July. It remains in expansion on a yearly basis (+0.2 %). Without much surprise, the drop is mostly explained by higher prices, especially higher energy prices. The INSEE does not forecast a recession in France this year. Nonetheless, growth is likely to decelerate very sharply in the coming quarters. The institute forecasts that growth will be around 0.2 % in Q3 and will be stagnant in Q4 2022. India’s rice export ban risk aggravating global food crisis After a ban on wheat exports earlier this year, India has now announced restrictions on rice exports, aggravating concerns of a global food crisis. Bloomberg reported India imposed a 20% duty on white and brown rice exports and banned shipments of broke rice. The new curbs apply to about 60% of India's rice exports and go into effect Friday. India’s rice output has been depressed due to the severe heatwaves, but also possibly to cap domestic price pressures. If these measures are duplicated by other key rice exporting countries like Thailand and Vietnam, there could potentially be a severe grain shortage globally, especially weighing on poor rice importing nations. We continue to see a threat of climate change to global agricultural output, which along with a prolonged energy crisis, suggested price pressure will stay in the medium-to-long term despite some cooling off from the recent highs. European carbon price drops as EU considers sale of permits from reserves The December ECX emissions contract (EMISSIONSDEC22) has fallen by around one-third since hitting a record high last month above €99 per tons. Given the current energy crisis, EU energy ministers are moving towards a deal to sell surplus permits from its Market Stability Reserve (MSR) in order to support a reduction in the cost of producing power and heating within the region. Power producers need to buy carbon permits to offset the polluting impact of using coal and gas over renewables. Occidental Petroleum shares rise on Berkshire accumulation In a filing on Friday, Berkshire Hathaway announced that it has lifted its stake to 26.8% in Occidental Petroleum. The move comes after the investment firm got regulatory approval for increasing the stake to over 50%. Berkshire’s move in Occidental Petroleum shares is seen as a move of confidence in the oil and gas industry as a much-needed industry for bridging the gap during the green transformation. Semiconductors are in focus as the US is expected to announce more curbs on exports The US Commerce Department is expected to publish new regulations curbing exports of semiconductors to China with companies such as KLA, Lam Research, and Applied Materials likely being impacted by the upcoming regulation. The move by the US further confirms the deglobalisation under the rule of self-reliance applied by increasingly more countries. China’s medium to long-term corporate loans picked up in growth  Over the past months, Chinese policymakers instructed policy banks and gave window guidance to commercial banks to extend credits to support infrastructure construction and key industries of the economy. Some results showed up in the August loan data which recorded a growth of 16% m/m annualized in the outstanding medium to long-term loans to the corporate sector. The amount of new medium to long-term loans to corporate was RMB 735bn in August versus RMB 346bn in July and RMB 522bn in August 2021. Loans to households remained sluggish. PBoC issues a list of 19 systemically important banks The People’s Bank of China and the China Banking and Insurance Regulatory Commission issued a list of 19 systematically important banks.  These 19 banks will face between 0.25% and 1% higher minimum capital requirements and additional leverage requirements. They are also asked to prepare contingency plans for major risk events. These 19 banks are Industrial and Commercial Bank of China, Bank of China, China Construction Bank, Agricultural Bank of China, China Minsheng Bank, China Everbright Bank, Ping An Bank, Hua Xia Bank, Ningbo Bank, China Guangfa Bank, Jiangsu Bank, Bank of Shanghai, Bank of Beijing; China CITIC Bank, China Postal Savings Bank, Shanghai Pudong Development Bank, Bank of Communications, China Merchants Bank, and Industrial Bank. The CPC is set to amend the party constitution at its upcoming national congress The Political Bureau of CPC Central Committee said in a readout last Friday that the Communist Party of China (CPC) is set to “work out an amendment to the Party Constitution that facilitates the innovative development of Party theories and practices and meets the need of advancing the great new project of Party building in the new era” at the CCP’s national congress to convene starting on October 16.  It further elaborates that “the latest adaption of Marxism to China's context and new circumstances will be fully epitomized and so will the new ideas, new thinking and new strategies of governance developed by the CPC Central Committee since the Party's 19th National Congress in 2017. What are we watching next? The Bank of England (BoE) will need to go big on 22 September The meeting initially scheduled for this week is postponed following the Queen Elizabeth II. Last week, both the Bank of Canada and the European Central Bank hiked their benchmark interest rate by 75 basis points. All eyes are turning to the BoE now. Pressure is mounting for the BoE to go big this week – meaning a 75-basis points hike. In August, the central bank hiked rates by 50 basis points to 1.75 %. Despite prime minister Liz Truss’s new anti-inflation plan (which will likely lower the peak in inflation), we think the BoE will need to show its commitment to fight inflation. The Bank forecasts that UK CPI will increase to 13.3 % year-over-year in Q4 2022. But the peak in inflation is only expected in 2023. This means that the cost of living will continue increasing in the short term, anyhow. Fed speakers stay hawkish before the blackout period begins and ahead of US CPI release tomorrow Fed rate hike expectations have picked up strongly since Jackson Hole, and we have heard an extremely unanimous voice from the Fed speakers since then. Some of them have clearly made the case for a 75bps rate hike in September, with Bullard on Friday even saying that Tuesday’s CPI report is unlikely to alter the incoming 75bps rate hike in September. Governor Waller leaned hawkish as well, but did not specify the size for September’s decision, but a “significant” hike still points to that. Esther George stayed away from guiding for individual meetings but made the case for sustained rate hikes. Ethereum merge The second-largest cryptocurrency, Ethereum, is scheduled to undergo a major upgrade this week (estimated on Thursday) which, if successful, will fundamentally change the way the cryptocurrency is working. It will go from the computationally intensive proof-of-work consensus to the more energy-friendly proof-of-stake, as well as introducing a mechanism to limit the inflation in Ethereum. The crypto community is looking very much forward to this upgrade, although some are concerned about the security in the new framework. Earnings to watch Today’s key earnings release is Oracle which a better-than-expected earnings result on 13 June surprising the market on EPS by 12% as the legacy database and software maker is gaining momentum in its cloud offering. Analysts expect FY23 Q3 (ending 31 August) revenue growth to accelerate to 18% y/y, which includes its recent acquisition of Cerner in the health care sector, which is impressive for the previously low growth company despite some of the growth being driven by acquisitions. If the outlook remains strong a longer-term repricing of the company’s valuation could be in the making. Today: Oracle Tuesday: DiDi Global Wednesday: Inditex Thursday: Polestar Automotive, Adobe Economic calendar highlights for today (times GMT) 0730 – ECB's Guindos to speak 0800 – Switzerland Weekly SNB Sight Deposits 1200 – ECB’s Schnabel to speak 1530 – US 3-year Treasury auction 1700 – US 10-year Treasury auction 2100 – New Zealand Aug. REINZ House Sales 0030 – Australia Sep. Westpac Consumer Confidence 0130 – Australia Aug. NAB Business Conditions/Confidence Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean engraver Source: https://www.home.saxo/content/articles/macro/market-quick-take-sep-12-2022-12092022
The US PCE Data Is Expected To Confirm Another Modest Slowdown

The US Economic Data Has Been Holding Up Strongly, Risk Of Stagflation In Europe And UK

Saxo Bank Saxo Bank 12.09.2022 10:10
Summary:  While the USD momentum has ruptured in the last few days due to increasing hawkishness of the European Central Bank and a strong verbal intervention by the Japanese authorities, there is potentially more room for the US dollar to run higher as Fed’s hawkishness can still outpace other global central banks. We need risks on Europe and China become more manageable, or a stronger opposition from non-US officials, or the Fed’s acceptable of a higher inflation target to really call it a top in the US dollar. It is no surprise that the US dollar hit a fresh record high on the back of aggressive tightening by the Fed as well as safe-haven flows from global economic deceleration concerns. The greenback reached post-Plaza highs, with the DXY index rising above 110, the highest levels since June 2002. However, the tide turned at the end of last week, possibly as other major global central banks upped the ante on rate hikes as well. The European Central Bank (ECB) raised rates by 75bps despite clear risks of a recession, and there was also chatter that the ECB could consider quantitative tightening by year-end. Meanwhile, Japanese authorities grew concerned about the weakness in the yen, and gave out stronger verbal guidance in yen’s defence. On the geopolitics as well, there were reports that Ukraine surprisingly recaptured a key northeastern city from Russia and is also making advances in the south, so there are talks that this could be a turning point in the war. That potentially reduced safe-haven flows to the dollar, and boosted the EUR and GBP. This week, however, brings the focus back on the US and the Fed. Tuesday’s US CPI data is the last data point of note before the Fed meets next week. A 75bps rate hike is baked in for the decision due on September 22. A positive surprise on US CPI may mean further upward repricing of Fed’s expectations with the terminal rate pushing above the 4% mark next year and easing expectations being pushed out further to late next year or 2024. That will support further gains in the dollar, with US yields running higher. But a strong USD is not always favourable. Corporate earnings take a direct hit from the rising dollar, given that most US companies generate a substantial part of their earnings outside the US. While most companies apply some FX hedging strategies, historically large upward swings in the USD have led to negative earnings revisions with a 9-12 months lag. The US also has a broader strategic objective to expand its manufacturing sector, and a strong US dollar could bite into the competitiveness of the sector. But for now, we do not see enough reasons for the dollar rally to cease or turn. The macro environment where the Fed acknowledges and is ready to take action further to slow US demand and bring inflationary pressures into balance suggests further gains for the dollar remain in store, atleast into the end of 2022 or into early 2023. A few things need to change before we can call it a top in US dollar: Fed has to slow down the pace of rate hikes, with possible recession on the cards or a capitulation in equities. The US economic data has been holding up strongly and there is no sign yet of a capitulation in equities even as the sentiment turned overly bearish last week. On a relative basis, there is still more reasons to believe that the tightening cycles for ECB and BOE may be repriced lower, while the Fed will need some more upward repricing. Risk of stagflation in Europe and UK needs to ease. The EU emergency summit did not see consensus build on securing energy supplies and a tough winter is still ahead. There has been some respite on the military front, but that can remain volatile and likely to result in further pressure from Russia on European gas supplies. Meanwhile, China needs to part with its zero covid policies, which is unlikely to happen before next year at least. In addition to the covid policies, China’s property sector overhang and resultant confidence deficit suggests more CNY pressures in the pipeline that defers to a further bullish USD trend. The People’s Bank of China seems to be happy with a controlled CNY depreciation. Other non-US officials need to start getting concerned about the weakness in their currencies. The biggest loser on the G10 board this year has been the Japanese yen. Japanese authorities have shown some concern about the weakness in the yen, but we only saw a mild recovery in the Japanese yen. The yield differentials between US and Japan will continue to underpin further gains in USDJPY. Even if the Japanese authorities were to directly intervene, it will only increase the volatility. The only catalysts for the yen to reverse its losses is lower US yields or Bank of Japan tweaking its yield curve control policy. A change in Fed’s inflation target to 2-3% in the medium-term. That could make the USD turn stick better without the need for quantitative easing. How to get exposure to the US dollar? To get exposure to the US dollar, one can consider the following instruments: Directly getting exposure to the Dollar Index through futures (DXU2) or CFDs (USDINDEXSEP22) Through ETFs such as WisdomTree Bloomberg U.S. Dollar Bullish Fund (USDU:arcx) or Invesco DB USD Index Bullish Fund (UUP:arcx) or BetaShares US Dollar (USD:xasx)     Source:https://www.home.saxo/content/articles/forex/us-dollar-is-it-time-to-call-a-top-12092022
Hawkish Fed Minutes Spark US Market Decline to One-Month Lows on August 17, 2023

Expectations Of Fed Actions And Their Impact On The Currency Market

InstaForex Analysis InstaForex Analysis 12.09.2022 10:59
World markets closed higher last week, indicating that sellers are inactive ahead of incoming US news and Fed meeting next week. The main reason was the ECB meeting, at which the key interest rate was raised by 0.75% to 1.25%. Another factor could be the statements of both Christine Lagarde and Jerome Powell, which once again hinted that central banks would act aggressively when raising rates. However, some believe that the Fed will not be able to withstand pressure, so they will take a pause in rate increases. They said the central bank will act only when consumer inflation in the US slows down. Forecasts already say CPI is likely to decline from 8.5% to 8.1% y/y, then from 0% to -0.1% m/m. If the data comes out lower than expected, the Fed will raise rates by only 0.25% in October. In this case, a slowdown in the sale of government bonds and a continuation of the weakening of dollar can be expected. Also, the rally in stocks that began last week may continue, which will spur the growth of risky assets, including euro. Forecasts for today: EUR/USD The pair is trading below 1.0110. Overcoming this mark may push the quote towards 1.0200. USD/JPY The pair is rising, thanks to positive market sentiment. This may lead to a further increasefrom 143.65 to 145.00.   Relevance up to 08:00 2022-09-14 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/321372
Russia's Weekend Mutiny Raises Concerns About Putin's Power Grip; Market Highlights: Gold Support, FX Intervention, and Fed's Stress Test Results

The US Dollar Keeps Growing And Is It Thanks To Fed's Policy?

InstaForex Analysis InstaForex Analysis 12.09.2022 11:17
Former US Treasury Secretary Lawrence Summers said dollar has more room to grow given a number of fundamentals behind it. He expressed skepticism over the effectiveness of any intervention to turn the tide for yen. In a statement, Summers stressed that the US has a huge advantage in not being dependent on "outrageously expensive foreign energy." He noted that Washington has taken a stronger macroeconomic response to the pandemic, and that the Federal Reserve is now tightening monetary policy faster than its counterparts. So far, the Bloomberg Dollar Spot Index is up about 11% year-to-date, hitting a record high this week. Dollar reached its highest level against euro since 2002 on Tuesday - 0.9864, while it reached the highest level since 1998 against yen on Wednesday - 144.99. Yen has depreciated faster than euro, causing a more-than-19% fall against dollar this year. This prompted increased warnings from Japanese officials, with Bank of Japan Governor Haruhiko Kuroda meeting with Prime Minister Fumio Kishida to discuss latest concerns on Friday. Japanese officials are not ruling out options as market participants discuss the chances of intervention to buy yen and sell dollars. Japan hasn't done this since 1998, when it teamed up with the US - while Summers was deputy treasury secretary - to help stem the yen's fall. For its part, the US Treasury Department insisted on its unwillingness to support any potential intervention in the forex market to stop the depreciation of yen. Summers stressed that the more fundamental issue for yen is the interest rate adjustments in Japan, both short-term and long-term. The Bank of Japan maintained a negative short-term interest rate, as well as a 0.25% yield cap on 10-year bonds.  Go to dashboard       Relevance up to 14:00 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/321348
Construction Activity in Poland Contracts in May: Focus on Building Decline and Infrastructure Investment

USD: Markets Expect A 75 Rate Hike From Fed. Inflation Data Could Throw Light On Further Moves Of Federal Reserve

Jing Ren Jing Ren 12.09.2022 12:29
Tomorrow is likely to be one of the most important days for the markets this week, because we get some crucial data ahead of the FOMC meeting next week. To make matters more interesting, the Fed is already in its blackout period. Meaning officials are likely to not respond to the data, and provide some context on how it could affect the interest rate decision. The market is pricing in a 75bps hike at the next meeting, based on expectations that inflation will remain high. But this opens the question of what could happen with the data that might change those expectations? Can the Fed be dissuaded from a "triple hike"?  What's driving the moves The Fed is looking to restore what it calls "credibility", in order to "anchor" inflation expectations. This is because the economic theory that the Fed is following argues that prices fluctuate primarily based on whether market makers think prices will go up. It's the job of monetary policy, therefore, to "anchor" those expectations at a certain level. How? By ensuring that market makers believe that the Fed will do what it takes to get inflation back to that level. That belief is called the "credibility" of the bank. Which is why there is such a strong push by the Fed at the moment to communicate that interest rates are going to keep rising. But the purpose is to get inflation to go down. So, if inflation has peaked, then it could be understood that inflation expectations are starting to get "anchored" and the Fed has retained its "credibility". Therefore, further aggressive hikes might not be needed. Since bond values are pricing in where the rates will be in a few months, when the Fed will start slowing the pace is the key to markets. If inflation comes down, it might signal that interest rates won't rise as fast, which could continue to weaken the dollar. What's in the data The headline number is what's going to get most of the media coverage, since that's what affects consumers most directly. Annualized August CPI Change is expected to slow down to 8.1% compared to 8.5% prior. That would be the second consecutive months of declines, and might start providing a more convincing case that inflation has peaked. Read next: Waiting For Important News From Overseas. Forecasts For US Indices| FXMAG.COM But the Fed cares more about the core inflation rate, which doesn't consider the variation in the cost of food and fuel. We have to remember that food prices have continued to rise, but fuel prices have been declining since June. WTI Crude, the benchmark for US fuel prices, fell below $90/bbl last month, continuing a lower trend due to slowing demand. Potential Fed reaction Core August annualized CPI is forecast to accelerate to 6.1% from 5.9% prior. This would bring it back up to a rate not seen since May, and be more than three times the Fed's target. With crude prices going down, a rise in core rate could imply a more systemic price problem. That would likely make the Fed even more eager to restore "credibility" by hiking rates. If headline inflation falls, but core inflation increases, the Fed is likely to stick to its hiking path. But if core inflation were to unexpectedly come in below 5.9%, it would imply that the trend remains downwards since April, and could lead to a reevaluation of how many hikes we can expect by the end of the year.
Bank of England Faces Rate Decision: Uncertainty Surrounds Magnitude of Hike

US Dollar Index (DXY) - Let's Look At Possible Scenarios

Jing Ren Jing Ren 12.09.2022 12:56
The current chart of the DXY index shows the completion of the global corrective trend, which took the form of a triple zigzag consisting of five main cycle waves w-x-y-x-z. Thus, the market is currently at the stage of reversal, that is, if this hypothesis is confirmed, the formation of the initial part of a new bearish trend may begin.  It is assumed that the bears are starting to build the first impulse sub-wave of the potential standard zigzag Ⓐ-Ⓑ-Ⓒ. The end of the impulse Ⓐ is possible just below the minimum of 104.63, which is marked by a minute fourth correction. An approximate scheme of possible future movement is shown on the chart.  Let's look at another option in which the formation of a cycle triple zigzag is not yet fully completed. Most likely, the bearish cycle wave x was completed not so long ago, which took the form of a standard zigzag Ⓐ-Ⓑ-Ⓒ of the primary degree. After that, an upward impulse price movement began in the initial part of the wave z. The wave z may take the form of a zigzag Ⓐ-Ⓑ-Ⓒ, where the first impulse and correction are already completed. The entire z wave may complete its pattern near 114.41. At that level, it will be at the 50% Fibonacci extension of wave y.
Britain's Rishi Sunak And EU's Ursula Von Der Leyen Will Meet Today To Finalize The Northern Ireland Drama

Can Prices Of The EUR/USD And The GBP/USD Pairs Stay Steady?

InstaForex Analysis InstaForex Analysis 13.09.2022 10:10
The only thing investors are worried about right now is the extent of the European Central Bank and Federal Reserve's rate hikes. That was the reason for the noticeable growth of the euro, which, due to its scale, pulled up other currencies as well—firstly, the pound. The reason for this was the words of ECB Vice President Luis de Guindos, who almost directly stated that the refinancing rate will be raised again by 75 basis points at the next board meeting. The reason for such aggressive actions of the European Central Bank is the growing inflation. Most likely, the dollar will continue to lose its positions today. The reason for this will be inflation. According to forecasts, US inflation should slow down from 8.5% to 8.1%. That is, inflation is slowing down for the second month in a row, which gives the Fed a reason to reduce the rate of interest rate growth. So there may be a situation where interest rates are rising quite strongly in Europe but much slower in the United States, if the American regulator does not stop this process at all. Just a few months ago, the situation was diametrically opposite, and it was the Fed that was actively raising the rate, and the ECB was only considering the possibility of tightening monetary policy. And this led to a serious rise in the dollar. Now it is quite possible to talk about a U-turn. Inflation (United States): The EURUSD currency pair locally jumped to 1.0200 during an intense upward movement. This move resulted in overheating of long positions in the short term, resulting in a technical pullback in the market. A stable holding of the price above 1.0150 allows the subsequent growth of the euro with a breakout of 1.0200. The GBPUSD currency pair has a similar dynamics, where the quote has firmly fixed above the level of 1.1650. With the upward mood on the market, a subsequent increase in the value of the pound sterling in the direction of 1.1800 is not excluded, where stagnation/pullback is already possible.   Relevance up to 20:00 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/321509
Gold Stocks Have Performed Very Well Under Pressure

The Gold: What To Do After The Release Of The US Inflation Report?

InstaForex Analysis InstaForex Analysis 13.09.2022 13:08
Previous trading tips in gold pointed to a price decrease towards $1675 and below. It was based on the continuation of the downward trend, as well as on the levels left unbroken by buyers at different times. Currently, there are two such levels. The first is the monthly high at $1687, while the second is the yearly high at $1675. Today's data from the US will be decisive for the market. The official report on inflation will certainly affect the plans of the Fed on interest rates. Indicators show that there is likely a sell-off during the US trading session. There are two possible scenarios: 1. Traders will take short positions, with stop loss at $1734. Then, they will exit the market when the quote reaches $1675. 2. After the release of the US inflation report, traders will sell gold until the price reaches $1675. This trading idea is based on the "Price Action" and "Stop Hunting" methods. Good luck and have a nice day! Don't forget to control the risks!   Relevance up to 10:00 2022-09-18 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/321550
Switch Splatoon 3 Broke All Previous Sales Records, The Closer To Winter The More Visible Crisis

Switch Splatoon 3 Broke All Previous Sales Records, The Closer To Winter The More Visible Crisis

Saxo Bank Saxo Bank 13.09.2022 13:42
Summary:  Equities extended their gains yesterday closing a winning streak over four trading sessions as we see clear signs that the market across equities, bonds, and currencies are positioning itself for a weaker than estimated inflation print in August. If the market gets want it wants in the form of a lower core inflation rate compared to July and hourly wages are not surprising to the upside, then there is enough room and energy for US equities to push even higher with the 4,200 level in S&P 500 futures being the big level to watch. In today's equity note we also cover Nintendo's record sales of its newest Switch game Splatoon 3 pushing its shares 6% higher in Japanese trading. US equities extend momentum ahead of CPI print S&P 500 futures gained another 1.5% yesterday extending the winning streak to four sessions and the good mood continues today ahead of the US August CPI print later today at 12:30 GMT with the index futures trading around the 4,145 level. It is very clear that the market is positioning itself for risk-on in the expectation that August inflation came in lower than current consensus by economists. The current estimates for the headline and core CPI m/m are -0.1% and +0.3% respectively telling the story of food and especially energy costs coming down from their peaks, but the core CPI will continue to tell a story of sustained inflationary pressures outside the volatile commodity markets. If US inflation indeed was lower than consensus in August then our best guess is that there is enough room and momentum to extend S&P 500 futures to around the 4,200 level. The medium outlook for inflation will not change today regardless of the inflation figure. The US will not be able to continuously releasing their oil reserves and as the winter approaches the energy crisis will continue to haunt the US, European, and Chinese economies. Outside the inflation figure today we also get hourly wages figures for August and central bank literature indicates that nominal wage growth is a key driver of inflation dynamics in the future, so we could get a situation today with a weaker than estimated inflation print, but higher than estimated hourly wages causing the market to price a more hawkish policy rate trajectory for 2023. In any case, today’s inflation and wage reports will be key for sentiment in equities in the weeks ahead. Nintendo is running ahead of forecasts The gaming industry has had a tough 2022 with our Saxo gaming theme basket covering the industry being down 27% year-to-date driven by many factors such as reopening of the economy after the pandemic, iOS change policy on privacy limiting online advertising targeting, cost-of-living crisis, and higher interest rates compression equity valuations in the gaming industry. But inside the dark clouds there is one bright story and that is Nintendo. The Japanese gaming and console developer announced today that its newest game to its Switch console Splatoon 3 has beaten all previous records selling 3.45mn units in its first week. Shares reacted in today’s session gaining 6%. Nintendo’s performance is continuing a long series of successes for the company exceeding analysts estimates. It looks like the company can defy the economic and market gravity extending its gains to a new all-time time high. Time will tell whether investors are agreeing about the positive outlook. Analyst estimates on revenue at 0.7% revenue growth in the current fiscal year ending 31 March 2023 might be too negative. Nintendo has been one of the most successful gaming companies over the past 10 years with a total return of 21.5% annualized over this period. Source: https://www.home.saxo/content/articles/equities/us-cpi-print-to-dictate-sentiment-nintendo-shines-with-splatoon-3-launch-13092022
The Commodities Digest: US Crude Oil Inventories Decline Amidst Growing Supply Risks

USA: Core Inflation Print Plays In Favor Of A 75bp Fed's Move

ING Economics ING Economics 14.09.2022 10:10
Gasoline prices pulled headline inflation down to 8.3% YoY, but it was a smaller decline than hoped as housing, medical costs and vehicle prices lifted the core rate to 6.3% from 5.9%. This firmly backs a 75bp rate hike next week and the market now anticipate a terminal rate in the 4-4.25% range, but there are still strong reasons for inflation to fall sharply Medical costs helped to lift core inflation in the US 8.3% Annual US inflation   Housing, medical and autos keep core pressures elevated US consumer price inflation has certainly surprised on the upside and heighted the chances of the Federal Reserve hiking to an even higher terminal interest rate. The market (and ourselves to be fair) were looking for headline inflation to slow from 8.5% to 8%, but for lagged effects of house price gains to push up rents and move core inflation to 6.1% from 5.9%. Instead we got readings of 8.3% and 6.3% respectively. Housing costs were indeed strong with the rental components rising 0.7%, but utility payments also increased 1.5% while new car prices rose 0.8% and used car prices fell “only” 0.1%. There had been some talk that new models and promotions would have generated a lower figure while second-hand auction prices had pointed to a larger decline. Other goods and services were also firmer than anticipated, rising 0.7% month-on-month with medical care services rising 0.8%. The 4.6% month-on-month decline in airline fares and the 10.6% drop in gasoline prices were the main area of softness, reflecting broader energy cost declines. US consumer price inflation with ING's forecasts Source: Macrobond, ING The Fed has more work to do Clearly this outcome throws out any talk of the Fed potentially surprising with a 50bp hike next week, but it isn't calamitous enough to see a big push for 100bp – at the time of writing the market is pricing 80bp, up from around 72bp before the report’s publication. We are sticking with the 75bp call. It also means the Fed won't be particularly explicit in any guidance following next week's Federal Open Market Committee (FOMC) meeting. Nonetheless, the breadth and stickiness of inflation pressures has seen the market shift its expectations for the terminal rate up to 4-4.25% from the 3.75-4% range before the release. We are going to stick with the 3.75-4% call for December – a 50bp hike in November and a final 25bp move in December. But price pressures will subside On the activity side the external environment of a European energy crisis, a China slowdown and a strong dollar combined with ongoing interest rate hikes domestically and a slower housing market raise concerns about the growth story heading into year end. On the inflation side we feel that the weaker activity backdrop will dampen corporate pricing power and lead to a squeeze on profit margins. Indeed, the National Federation of Independent Businesses (NFIB) survey released this morning suggests, in the small business sector, that inflation pressures are already softening with a clear drop in the proportion of companies looking to raise their prices further. NFIB prices and price plans point to lower CPI readings ahead Source: Macrobond, ING   Furthermore, the drop in both market and consumer inflation expectations is clearly a positive development as it suggests confidence in the Federal Reserve’s ability to get inflation back to target next year and helps to diminish fears of a 1970s style wage-price spiral. Officials repeatedly state that expectations remain anchored and there are clear signs of success here. Inflation expectations are normalising Source: Macrobond, ING Still targeting 2% CPI by end-2023 With the outlook for the housing market deteriorating, we expect to see home prices move lower over the next 6-12 months, which will help to depress the rental components (that make up a third of the inflation basket). Meanwhile, supply chain improvements and lower used car prices will also be key factors that contribute to slower inflation next year. Add in weaker commodity prices, squeezed margins and the effects of dollar strength and we still see a strong chance that inflation hits 2% by the end of 2023. Read this article on THINK
Rates and Cycles: Central Banks' Strategies in Focus Amid Steepening Impulses

As A Result Of The Fight Against Inflation, The Appetite For Risk Has Decreased

InstaForex Analysis InstaForex Analysis 14.09.2022 11:59
Euro and pound collapsed as inflationary pressure in the US jumped again. Risk appetite noticeably fell because the Federal Reserve is likely to continue its aggressive increase of interest rates in order to curb inflation. This may occur as early as next week, during the September meeting of the central bank. In fact, in the most recent speech of Fed Chairman Jerome Powell, another 75 basis point rate hike is said to be possible, following the increases in June and July. He said the decision will depend on the data collected. Chicago Fed chief Charles Evans, who in the past has been dovish, also noted that a soft landing could be achieved for the economy without triggering a recession. He reasoned that unemployment is now 3.7%, so the central bank will be able to meet the targets and keep it at about 4.5% by the time the fight against high inflation is finished. He added that the danger of excessive tightening of policy will increase only when rates reach 3.5%. Of course, rising inflation is not only a concern for the Federal Reserve, but also for the Biden administration as his Democratic Party moves closer to the midterm congressional elections. High gas and food prices earlier in the year have seriously undermined the president's popularity and the Democrats' prospects for maintaining control of Congress. Talking about the forex market, a collapse was seen in EUR/USD, which forces buyers to cling to 1.0010. Only its breakdown will lead to a rise towards 1.0040 and 1.0090, or to 1.0120. In case of a further decline, sellers will become more active in the market, which will result in a price decrease towards 0.9880 and 0.9810. In terms of GBP/USD, quotes fell below the 15th figure, indicating the sellers'persistence to return to the September lows. Only the return to 1.1560 will prompt a rebound towards 1.1610 and 1.1660, or possibly 1.1720. If pressure continues, the pair will drop below 1.1460 and head towards 1.1405.     Relevance up to 09:00 2022-09-15 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/321656
Gold Is Showing A Good Sign For Further Drop

The Gold (XAU/USD) Has The Wrost Conditions, The Bulls Can Show Weakness

InstaForex Analysis InstaForex Analysis 14.09.2022 12:17
The "believe it or not" game ended badly for most financial assets, which turned a blind eye to the "hawkish" rhetoric of Fed officials. Yes, most of them did not indicate how much the Central Bank is going to raise the federal funds rate in September, by 50 or 75 bps, but the words that the work has not been done yet deserve attention. Stock markets and gold did not believe the Fed and paid the price. Only the Treasury market turned out to be right—the Fed does not throw words into the wind. The slowdown in consumer prices from 8.5% to 8.3% in August was more modest than the 8% predicted by Bloomberg experts. Core inflation, on the other hand, accelerated faster than their estimates, which was the main driver of the worst peak in XAUSD since mid-August. Then, too, the inflation data knocked out the bulls. History doesn't repeat itself, it rhymes. The slowdown in inflation expectations from the New York Federal Reserve for the coming year from 6.2% to 5.7%, for three years from 3.2% to 2.8% and for five years from 2.3% to 2%, coupled with an increase in nominal rates on US Treasury bonds, lead to an increase in real yields to the maximum levels from 2018. Dynamics of real yields of US bonds If four years ago, after several increases in the federal funds rate, the Fed found financial conditions too tight and marked a dovish turn, now it will not do this. "Don't let inflation fool you," FOMC member Christopher Waller said ahead of the CPI data release. In order to reset the rate of monetary restriction, several reports are required to convince the underlying indicator to confidently head towards the 2% target. The August statistics show the opposite. High inflation is taking hold in the US economy, requiring new firepower from the Fed. CME derivatives give a 35% chance of a 100 bps increase in the federal funds rate in September, finally discarding the idea of 50+ bps. The market believes borrowing costs will rise to 4.3% in early 2023. The 4.5% level, which previously seemed unrealistic, is now widely discussed among investors. Previous FOMC forecasts included 3.8% at the end of 2022, but it is likely to rise in September, which will be good news for the US dollar and bad news for gold. The Fed's aggressive monetary tightening, leapfrogging nominal and real Treasury yields, and the USD index near 20-year highs are the worst environment imaginable for XAUUSD. The inability of the precious metal to cling to $1,700 an ounce will be evidence of the weakness of the bulls and will open the way for it in the direction of $1,600. Technically, on the daily chart, quotes for the third time in a row over the past couple of weeks have approached the lower limit of the fair value range of $1,692–1,754 per ounce. A break of support at $1,692 will increase the risks of implementing the target by 161.8% according to the AB=CD pattern and will become the basis for building up previously formed shorts.   Relevance up to 09:00 2022-09-19 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/321660
The Forex Market Is Under Strong Pressure From Geopolitical Events And Statistics

Podcast: Comments To US CPI Report, Discuss About Next The FOMC Meeting, Look At Crude Oil, Metals And Stocks

Saxo Bank Saxo Bank 14.09.2022 12:34
Summary:  Today we discuss the August US CPI shocker yesterday, as the core inflation reading on the month rose at twice the expected pace, taking even headline inflation into positive territory month-on-month despite the huge drop in energy prices. The market tanked and the USD soared as investors are forced to consider whether the FOMC meeting next week will bring a 100 basis point hike. Crude oil, metals, stocks to watch and a preview of Adobe and more also on today's pod, which features Peter Garnry on equities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are found via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.     Source: https://www.home.saxo/content/articles/podcast/podcast-sep-14-2022-14092022
The USD/JPY Price Seems To Be Optimistic

The USD/JPY Pair Retreated From The High, Awaiting For PPI Report

TeleTrade Comments TeleTrade Comments 14.09.2022 12:52
USD/JPY flirts with daily low, around 143.00 mark amid chances of BoJ intervention   USD/JPY meets with a fresh supply and retreats sharply from the 145.00 neighbourhood. Jawboning by Japanese authorities points to an imminent intervention and boosts the JPY. The emergence of some selling around the USD also contributes to the intraday downfall. The USD/JPY pair faces rejection near the 145.00 psychological mark and retreats from the vicinity of a 24-year high retested earlier this Wednesday. The downward trajectory extends through the first half of the European session, though the pair manages to rebound a few pips from the daily low and is currently placed just above the 143.00 mark. A combination of factors fails to assist the USD/JPY pair to capitalize on the previous day's post-US CPI strong rally of over 300 pips. The Japanese yen strengthens across the board amid jawboning by Japanese officials and chances that the Bank of Japan (BoJ) may step in to arrest a freefall in the domestic currency. This, along with the emergence of some US dollar selling, exerts downward pressure on the major. That said, a recovery in the global risk sentiment - as depicted by a generally positive tone around the equity markets - could cap gains for the safe-haven JPY. Apart from this, a big divergence in the monetary policy stance adopted by the Japanese central bank and the Federal Reserve supports prospects for the emergence of some dip-buying around the USD/JPY pair. The BoJ remains committed to continuing with its monetary easing. In contrast, the US central bank is expected to keep raising interest rates at a faster pace to tame inflation. The bets were reaffirmed by the stronger US CPI report on Tuesday. The markets quickly started pricing in the possibility of a full 1% rate hike at the next FOMC meeting on September 20-21. This is evident from a fresh leg up in the US Treasury bond yields, which favours the USD bulls and should lend support to the USD/JPY pair. Nevertheless, the fundamental backdrop remains tilted firmly in favour of bullish traders. Hence, any subsequent decline could still be seen as a buying opportunity and remain limited. Market participants now look forward to the US Producer Price Index (PPI), due for release later during the early North American session. Apart from this, the US bond yields and the broader risk sentiment should provide some impetus to the USD/JPY pair.
Analysis Of The AUD/JPY Currency Pair Scenarios

Report Results And Their Impact On The Market And Decisions Of The Fed And Bank Of Japan

Saxo Bank Saxo Bank 14.09.2022 13:28
Summary:  The core US August inflation data shocked the market as prices reportedly rose at twice the expected rate in August at the core. This triggered a massive spike back higher in the US dollar, with the market caught on the wrong foot and suddenly forced to entertain the risk of a 100 basis point rate hike from the Fed at next week’s FOMC meeting. Overnight, the Bank of Japan and Japanese Ministry of Finance upped the ante on intervention risks, tempering the rise in USDJPY. FX Trading focus: Core CPI shocker from the US resets the USD. Beware the BoJ. The headline US CPI data came in slightly above expectations, with a year-on-year reading of 8.3% vs. 8.1% expected and a month-on-month reading of +0.1% vs. -0.1% expected, the latter a solid surprise given sharp drops of late in gasoline prices. But the real shock was the core Ex Food and Energy inflation reading of +0.6% month-on-month, twice what was expected. This triggered an enormous slide in risk sentiment as the market rushed to price the risk that the FOMC might hike as much as 100 basis points next week. As of this morning, nearly 85 basis points of tightening are priced in the market for next meeting. The Fed doesn’t like to surprise the market, so if that builds a bit higher rather than receding back closer to 75 basis points on its own accord by early next week, the Fed will need to send out the WSJ’s Timiraos to pen an article guiding for 75 basis points if it wants to avoid shocking the market. There are a number of good reasons that the market was looking for a softer print yesterday, and this one data point is not enough to suggest that inflation will continue at the run-rate suggested by the August CPI data point, but as is readily evident, it had changed the odds on the size of next week’s hike, the guidance in the wake of that hike in terms of the monetary policy statement and the Fed’s own macro-economic projections. To get follow-on USD strength here, the next data points of note are tomorrow’s US August Retail Sales and weekly US initial jobless claims. I lean for the risk of a stronger than expected Retail Sales data point due to the psychological boost of gasoline prices having dropped so precipitously from their June highs and as millions of US consumers saw their student debt loads drastically reduced by the Inflation Reduction Act that was passed mid-month. As for the weekly claims, these seem to be in a new declining trend after rising into the early summer period from record lows (adjusted for population) earlier in the year. The Bank of Japan and Japanese Ministry of Finance, as I discuss below, may make life difficult for FX traders. Chart: AUDUSDInteresting to note that the USD reaction was most violent against some of the traditional risk-correlated currencies like AUD and NZD, with AUDUSD suddenly poking down close to cycle lows this morning, or at least below the lowest daily close of the cycle at one point this morning. To get new lows, we’d likely need to see the weak risk sentiment persisting her and a test of the June market lows, together perhaps with the Fed delivering a 100 basis point hike next week and US 10-year yields moving above the 3.50% cycle high from June (this morning trading at3.43%.) The recent price action cemented the 0.6900+ area pivot high as the key tactical resistance of note. Australia reports employment data tonight. The Bank of Japan carried out a “rate check” in the FX market, which is widely seen as a precursor for actual market intervention. This tamed the USDJPY move higher from sub-142.00 levels to nearly 145, as the gains were pared back below even 143.00 this morning, with the JPY also firmer broadly. Finance Minister Suzuki said nothing could be ruled out in response to the weakening JPY and that if the current trend persisted, stepping into markets is an option. But as past experience has shown, intervention often only creates temporary volatility if the underlying issue is not addressed - in this case, the Bank of Japan's insistence on maintaining very low rates and capping yields out to 10 years. If yields continue to rise globally, Japanese officialdom will have an enormous and likely unwinnable fight on its hands if the Bank of Japan fails to change its policy. In the meantime, history shows that determined intervention can make for very choppy markets, even for other USD pairs as USDJPY volatility spikes back and forth. Table: FX Board of G10 and CNH trend evolution and strength.The USD has leaped back higher – watching for the degree to which the price holds and follows through if the 100 basis point FOMC move scenario next week solidifies amidst a supporting cast of data. Note the marked NOK weakening, a theme discussed yesterday. And note the CHF Strength – an interesting test for the EURCHF pair next week over the SNB meeting, given EU plans to cap energy prices as the pair trades near multi-year lows. Will there be a bit more caution from the SNB than before? Table: FX Board Trend Scoreboard for individual pairs.We noted many pivotal USD pairs yesterday: well the USD provided a pivot and then some yesterday – now about seeing whether the action remains choppy a la USDJPY or reasonably smooth new USD trend can develop. Note USDNOK trading up against a big resistance line, NZDUSD toying with 0.6000 this morning and AUDUSD not far from the cycle lows, while USDCAD has poked near the cycle top. Also, very interesting signs of possible exhaustion of weak GBP sentiment as the currency is rolling higher against a growing cast of the smaller G10 currencies (GBPNOK, GBPNZD, GBPAUD on the cusp, etc.) Upcoming Economic Calendar Highlights 1230 - US Aug. PPI  1230 - Canada Jul. Manufacturing Sales 1430 - ECB's Villeroy to speak 2245 - New Zealand Q2 GDP 2350 - Japan Aug. Trade Balance 0120 - China Rate Announcement 0130 - Australia Aug. Employment Data Source: https://www.home.saxo/content/articles/forex/fx-update-us-august-cpi-triggers-a-landslide-beware-the-boj-14092022  
The China’s Covid Containment Continued To Negatively Impact The Output At The End Of 2022

Forex: Possible Scenarios For USD/CNH (US Dollar To Chinese Renminbi)

Jing Ren Jing Ren 14.09.2022 08:58
The last primary wave â’¸ takes the form of an intermediate 5-wave impulse (1)-(2)-(3)-(4)-(5). Perhaps the last intermediate wave (5) is currently under development. It is assumed that it will take the form of a minor impulse 1-2-3-4-5. For its full completion, a sub-wave 5 is needed. The growth in this wave may continue to 7.097. At that level, sub-wave (5) will be at 100% of wave (3). An alternative scenario shows that the construction of the entire cycle correction IV has already been fully completed. It took the form not of a simple zigzag, but of a double zigzag consisting of primary sub-waves â“Œ-Ⓧ-â“Ž. If this assumption is correct, then the market may begin to move in a downward direction, forming the final cycle wave V. Read next: Great Britain’s CPI Lower Than The Expected, Eyes On US PPI| FXMAG.COM Most likely, the wave V will have the form of a primary impulse, as shown in the chart. And it will finish its pattern near 6.572. At that level, sub-wave V will be at 50% of impulse III.
The Commodities Digest: US Crude Oil Inventories Decline Amidst Growing Supply Risks

Markets Look Like Battlefields After The US Inflation Print. S&P 500, Dow Jones And Nasdaq All Plunged. Forex: Will BoJ Intervene?

Conotoxia Comments Conotoxia Comments 14.09.2022 15:22
Yesterday's presentation of inflation data in the United States shook financial markets. Investors, looking by the reaction in many markets, seemed to expect inflation to fall faster than the estimation presented. The markets were shaken. US inflation - a powerful blow to financial markets The August consumer price index report showed that inflation rose 0.1 percent on a monthly basis, despite forecasts for a 0.1 percent decline, while the annual rate of consumer inflation fell less than expected in August to 8.3 percent (consensus 8.1 percent). The higher-than-expected U.S. inflation reading and slower pace of decline may have given rise to speculation that the Fed may deliver a larger interest rate hike than 75 bps. The game may now be on for a 100 bp hike next week. Read next: Great Britain’s CPI Lower Than The Expected, Eyes On US PPI| FXMAG.COM At the end of Tuesday's session, the Dow Jones index was down 3.94 percent, the S&P 500 down 4.32 percent, and the Nasdaq Composite down 5.16 percent. All three major indexes broke a four-day streak of gains and posted their biggest one-day decline in more than two years. All sectors in the S&P index ended the session in negative territory, with communications services, technology and consumer products falling more than 5 percent.  Bitcoin had already fallen at one point, in a move initiated after the US data, to levels below $20000. This could mean a drop of more than 10 percent. The EUR/USD pair price, in turn, retreated below parity, recording a cumulative drop of more than 2 percent after the data. Such large changes in many markets could be fears of faster and larger interest rate hikes in the US. Source: Conotoxia MT5, US100 m30 How is the Fed's action priced in? According to the interest rate market, the chances of a 100bp hike on September 21 have risen to 34 percent. Previously, the market had not considered such a large US interest rate hike at all, and was considering a rate hike between 50 and 75 bp. The current pricing could lead to an increase in the range for the federal funds rate to between 3.25 and 3.5 percent, which in turn could mean that the market is pricing the end of the hike cycle no longer in the 3.9 percent region, but in the 4.2 percent region, which could also contribute to the strengthening of the USD. In the bond market, on the other hand, the yield on 2-year U.S. Treasury securities rose to its highest level since 2007, exceeding 3.7 percent. In the past, the level of 2-year bonds may have coincided with the target level of the federal funds rate for the hike cycle. Source: Conotoxia MT5, USDIndex D1 Yen struggles against dollar strength It seems that this morning only the Japanese yen is trying to fight the strength of the USD. This  might have to do with further news of possible intervention. Japan's Finance Minister Shunichi Suzuki said on Wednesday that currency intervention is among the options to combat the decline of the country's currency, the BBN news service reported.  "We are talking about taking all available options, so it is right to think that way," he said. - Suzuki told reporters after being asked if currency intervention in the form of yen buying was on the table. "Recent moves have been quick and one-sided, and we are very concerned. If such moves continue, we must respond, and we are not ruling out any options." - He added. A break of the 145 level by USD/JPY would   lead to intervention by Japanese authorities, David Forrester, senior FX strategist at Credit Agricole CIB, told Bloomberg. The problem facing the Ministry of Finance in the event of any FX intervention is that the upward movement of USD/JPY reflects the divergence between the Fed and BOJ, so the impact of any intervention would only be temporary, the Credit Agricole representative added. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
BSP Maintains Rates Amid Moderate Inflation; Eyes Further Tightening if Needed

ING Economics Expects US 10yr Treasury Yield To Range Between 3.50-3.75%

ING Economics ING Economics 14.09.2022 15:45
US inflation remains comfortably above 8%, placing implied pressure on the Federal Reserve to stay tough. In consequence, the market discount for the funds rate peak has extended to 4.25%. This is important for the 10yr Treasury yield, as there is a path there now to target 3.75%. It can get to 4%, but does not have to, as inflation expectations are at c.2.5% How we got to here - Our calls Back in June we called a peak for the US 10yr yield when it hit 3.5%. We premised this on quite a rapid change in the structure of the curve, where the 5yr moved from a state of trading quite cheap to the curve to one where it traded outright rich. That switch is a classic turning point signal. And it worked. The 10yr shot back down towards 2.5%. As it approached 2.5% we argued that it should not break any lower, and in fact called for it to turn higher, and for it to re-target 3%. The rationale was that the 10yr yield should not trade too far through the funds rate, at least until the funds rate had actually peaked. Along that journey back towards 3% we also noted that the prior fall in market rates (and tighter credit spreads) had loosened financial conditions far too much, which laid the groundwork for a subsequent break back above 3%. And since then we consolidated this view against a backdrop where evidence began to grow that the US economy was refusing to lie down (re-firming of many macro data through July and August) and called for a re-hit of 3.5%. This has been topped off by an August CPI reading that shows US inflation still running with a solid 8% handle, down but not by enough. Where now? We're suggesting 3.75% (highest since 2011). If the funds rate gets to 4.25% the 10yr is heading to 3.75% The combination of financial conditions not being tight enough and the resoluteness of stubbornly robust US macro conditions (excluding the housing market) places pressure on the Federal Reserve to continue to tighten rates. The market discount now has the funds rate hitting 4.25%. That same discount was 3.5% about a month ago. And even though we’ve had a notable elevation in the market discount, the risk remains that the market continues to edge the likely terminal rate higher still. The 5yr is now neutral to the curve (bp) - No particular signal here Source: Macrobond, ING estimates   For bonds this is crucial. The messaging from the curve structure, which sees the 5yr currently trading neutral to the curve, is not pointing in any particular direction (chart above). So we look at the funds rate for key guidance. If the funds rate gets to 4.25%, in all probability the 10yr Treasury yield heads for 3.75%. At 50bp through the funds rate there is room for it to get higher. It just depends on the conviction the market attaches to the funds rate getting to above 4%. The 10yr Treasury yield can trade through the funds rate at this phase of the cycle, but not by more than 50bp (chart below). Direction comes from terminal funds rate discount - And that's still up! Source: Macrobond, ING estimates   And in fact anything more than 25bp through for the 10yr Treasury yield versus the funds rate has been unusual historically. Once the peak for the funds rate is in, then the 10yr yield can sail up to 150bp through the funds rate. But we need to see the peak first, and the market can’t say with certainty that the 4% area will be the peak. So we need the actual peak to be delivered before we can say for sure that the peak is in. That’s what keeps the pressure up. What about 4%? We need more to call for that That would suggest that a funds rate peaking at 4% or higher can easily drag the 10yr yield up to 3.75% (a level last seen in 2011). And what about the possibility of a 4% handle for the 10yr Treasury yield? It’s possible, but not probable based on what we know. We look to the virtual collapse in the 2yr breakeven inflation rate in recent months (albeit up post CPI) as evidence that the inflation battle can be won, as the market thinks it will be. That's in the 2.5% area, which can help at the very least tame any potential route towards 4%. Hence 3.5% to 3.75% is our target range for the 10yr Treasury yield. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Euro to US dollar - Ichimoku cloud analysis - 21/11/22

What Do We Learn From European Central Bank's Philip Lane's Rhetoric?

ING Economics ING Economics 15.09.2022 12:37
Into next week’s Fed meeting, bond markets will take heart from a slowdown in supply. It seems there are only hawks left at the European Central Bank, and collateral scarcity is here to stay Markets left to their own bearish devices, but supply abates With US inflation reports out of the way, and little by way of events until then, focus is turning to next week’s Federal Open Market Committee meeting. Hard data from the US, in the form of August retail sales and industrial production, are the exception. They could dispel the impression that the US economy is going from strength to strength if, as expected, they show a slowdown from July. Our economics team expects a strong 3Q, however, which should in turn be of little help for bond markets trading mostly on macro drivers. Thankfully, technicals might lend a helping hand. The end of this week’s supply slate should help bonds regain their poise after a bruising week. We may have seen this at play already with the long-end bond rally late in yesterday’s session. Today sees auctions from Spain and France but they are mostly short duration, hence adding to the flattening theme. Bonds should take a breather before next week's FOMC meeting Source: Refinitiv, ING Lane joins the hawks, and collateral scarcity remains unaddressed In Euroland, European Central Bank Chief Economist Philip Lane seemingly endorsing the hawks’ narrative in a speech is another clue that the central bank has experienced a significant shift in its reaction function. This is no guarantee of ever-increasing interest rates, but this means that the hawkish skew in the market reaction to future economic releases should be stronger than in the past months. Realistically, we won't get much evidence of that before the European PMI releases at the back end of next week. Until then, EUR markets will be at the mercy of moves in their USD and GBP peers. Lane’s speech was also a reminder that collateral scarcity issues will remain despite the ECB offering a delay to governments in finding alternative avenues to place their liquidity. Until April 2023, they will continue to earn the euro short-term rate on their deposits at the central bank, which at least delays the time when more demand emerges for already scarce collateral. What the ECB has not addressed, however, is the initial collateral shortage, which Lane blamed in part on interest rate uncertainty and rates volatility. Rates volatility has boosted demand for already scarce collateral Source: Refinitiv, ING Today's events and market view Spain and France conclude this week’s supply slate with auctions in the 3Y/5Y/8Y and 5Y/6Y/7Y sectors. Their short duration should add to the cuve-flattening theme. The Bank of England inflation expectations survey is likely to gather some attention one week ahead of its policy meeting, and as inflation fever grips markets. Other European data, eurozone trade and final French August inflation appear less market-moving to us. Luis De Guindos and Fabio Centeno of the ECB are on the speakers list. This is just as well because there is a full schedule in the US. Jobless claims are expected to edge up, while Empire manufacturing and Philly Fed indices should offer an early peek into business sentiment in September. Retail sales and industrial production are expected to slow down in August. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Collapse Of The Silicon Valley Bank Weakened The Dollar And USD/JPY But Supported EUR/USD, AUD/USD, And GBP/USD

Upcoming US Data And The US Dollar Situation

TeleTrade Comments TeleTrade Comments 15.09.2022 14:35
The US Dollar Index holds in positive territory but stays below 110.00. Strategists at OCBC Bank highlight the key technical levels to watch. USD could still stay bid on dips “The USD could still stay bid on dips and take cues from upcoming US data – retail sales, industrial production today, Uni of Michigan sentiment on Fri, alongside the roll-out of regional Fed manufacturing surveys for September. In the interim, the debate between a 75 bps and 100 bps hike is likely to retain a bid tone on the USD overall.” “Resistance at 110.30 before 110.78 (previous high). Support at 109.10 (21 DMA), 108.45 (38.2% Fibo retracement of Aug low to Sep high) and 107.70 levels (50 DMA, 50% Fibo).” See – US Retail Sales Preview: Forecasts from six major banks, can the US consumer remain strong?
In China coronavirus cases exceeded this Spring's levels what could lead to declines of local stocks on Tuesday. In the USA US100 and S&P 500 gained ca. 0.5%.

Auto Sales Up! US Economy: Although Retail Sales In General Rose Slightly, Gasoline Stations, Electronics Health/Personal Core Sales Declined

ING Economics ING Economics 15.09.2022 15:59
US retail sales, despite beating expectations today, appear to be on a softening trend. The core figure that better matches broader consumer trends was flat and revisions were unfavourable. Consumer spending is more than retail and there is scope for rebalancing towards services, but the report still favours a 75bp hike from the Fed next week over 100bp Auto sales rose 2.8% in August Core retail activity hints at a softening trend US retail sales rose 0.3% month-on-month in August, much better than the 0.1% fall that was expected, but there have been quite a few revisions to the history that hint of a softer trend in spending. Moreover, the control group, that excludes volatile items such as autos, building supplies and food service, which better matches broader consumer trends as measured within GDP, was considerably softer than predicted. Spending was flat on the month rather than rising 0.5%, while July’s figure was revised down to growth of 0.4% having initially been reported as +0.8%. US retail sales levels versus pre-pandemic Source: Macrobond, ING   The detail show gasoline station sales falling 4.2% given the steep price falls, but the furniture (-1.3%), electronics (-0.1%) health/personal care (-0.6%) and non-store retail (-0.7%) also fell. On the positive side, eating and drinking out rose 1.1%, in line with restaurant dining data, while building materials rose 1.1% and miscellaneous stores posted a 1.6% gain. Auto sales rose 2.8%, despite lower volumes numbers, underscoring what we saw within the CPI report that vehicle pricing remain robust. Consumer spending is broader than retail, but 75bp still favoured next week Looking at the report it is a mixed picture and is likely to see GDP growth expectations for the third quarter revised down a little. Nonetheless, we must remember that consumer spending isn't just retail. Consumer services are a bigger component of overall spending and total spending should outperforming retail. After all retail sales are currently 48% of consumer spending versus 43% before Covid so there is scope for a rebalancing. Retail sales as a proportion of total consumer spending Source: Macrobond, ING Expectations Stay The Same Still, with consumer confidence remaining weak as a result of the squeeze on spending power from inflation, falling equity markets and surveys suggesting growing nervousness on the state of the property market, we continue to favour a 75bp hike from the Federal Reserve rather than 100bp. Read this article on THINK TagsUS Spending Retail Federal Reserve Consumer Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Steady BoE Rate Expectations Amid Empty Event Calendar in the UK

China Is Ready To Work With Russia, Ethereum Merge Successfully Completed

Saxo Bank Saxo Bank 16.09.2022 09:58
Summary:  U.S. equity markets declined again on the economic good news which added to investors’ worries about more and for longer rate hikes from the Fed. The Chinese Yuan weakened and broke the 7-handle. China's August activity data is scheduled to release today. What is happening in markets?   Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) face further pressure as US eco news brightens        US equities closed lower on Thursday with the S&P500 losing 1.1% taking its weekly loss to almost 4%, while the Nasdaq fell 1.4%, losing 4.6% across the week, with both major indices eroding last week’s gain. Investors are growing cautious, as new economic data gives the Fed room to raise rates, and keep them higher for longer to control inflation. Retail sales unexpectedly rose in August, showing consumer spending is far from collapsing and jobless claims fell for the fifth straight week, suggesting employers worker demand remains healthy despite an uncertain outlook. For the market to turn around, it will need to see earnings multiples expand, as that supports share price growth. And we need to see earnings per share move up from a decline, to growth. But if the Fed keeps hiking rates, and the energy crisis continues, this scenario means tech stock earnings multiples are likely to see earnings per share (EPS) growth pressure. On the flip side, EPS in energy continues to gain momentum. Big movers in US shares Adobe shares fell 17%, weighing on the Nasdaq and S&P 500 after the software giant announced $20 billion deal to buy design start up Figma. The weakness flowed through to other tech stocks, with Apple shedding 1.9% and Salesforce sliding 3.4%. Meanwhile oil stocks also copped selling after the WTI oil price fell below $86 after the US announced it would restock oil reserves but without a trigger price. Bank stocks were a bright spot, with Goldman Sachs and JPMorgan rising more than 1% apiece. U.S. treasuries (TLT:xnas, IEF:xnas, SHY:xnas) The U.S. short-end yields continued to charge higher, 2-year yields up 7bps to finish the session at 3.86%, flattening the 2-10 year curve to -42bps, as the 10-year yields up 5bps to 3.44%.  The 30-year yields, however remained well anchored at 3.47%, up only 1bp and not far from the pre-CPI release levels. Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) Hang Seng Index edged up by 0.4%, helped by the rise in Chinese developers, while the CSI 300 dropped by 0.9%.  Securities Times reported that more than 120 cities have relaxed providence fund policies to boost the local property markets and other media reported that a large number of cities had loosened home purchase restrictions.  Country Garden (02007:xhkg) surged by 8.7% followed by Guangzhou R&F (02777:xhkg) up 8.6%, CIFI (00884:xhkg) up 7%, China Resources Land (01109:xhkg) up 4.9%, and China Overseas Land & Investment (00688:xhkg) up 4%. Catering names gained on news that Chengdu was relaxing its lockdown, Xiabuxiabu (00520:xhkg) up 5.5%.  Li Auto (02015:xhkg) fell 2.3% as the President of the company reduced his shareholding. EV names overall were also pressured by the news that China’s ambassador to the U.S. warned against the potential risks of the US trying to cut China off the EV supply chains.  Solar names were down following reports about the European Union was going to ban manufactured goods with forced labour in them and raised concerns about much of China’s solar products originated from Xinjiang. Australia’s ASX200 The ASX200 is on tracking lower this week, after losing 0.7% Monday to Thursday with the technical indicators suggesting the market is likely to head lower from here and it could retest the lows set in June. However, it’s not all doom and gloom. We saw commodity stocks march up this week, with coal companies Coronado Global rising 13%, New Hope up 5%. It’s also worth noting these are some of this year’s best performing stocks on the ASX, with Coronado up 82%, New Hope up 182%, while the coal giant Whitehaven is up 266% YTD, supported by the coal price hitting new highs this week, as well as the coal futures price. Meanwhile, with crop prices likely to go higher amid La Nina, Agri business Elders rose 4%. Elsewhere, technical buying picked up in oil and gas companies including Woodside, supporting its shares rise ~4%, with Beach Energy following. USDCNH breaks above 7 handle USDCNH broke 7.00 and the markets is expecting little reactions from the PBOC given the latest state-owned media’s effort to downplay the importance of the 7-handle. Crude oil (CLU2 & LCOV2) Crude oil prices slumped overnight as demand concerns came back into the focus. The International Energy Agency said that China faces its biggest annual drop in demand in more than three decades as COVID-19 lockdowns weigh on growth. Oil demand could fall by 420kb/d, or 2.7% this year. This led to the IEA trimming its estimate of global demand. It now sees consumption rising by only 2mb/d. Further, supply situation also seemed to fluctuate with the US Department of Energy walking back on its SPR refill stance by saying that it didn’t include a strike price (that was said to be around $80/barrel) and it isn’t likely to occur until after fiscal 2023. WTI futures fell below $85/barrel while Brent futures touched lows of $90/barrel. Oil technical levels to watch For traders and investors, for WTI to reverse its downtrend, it needs to close above resistance at $97.66, which is what our technical analyst pointed out here. So the next level for you to watch, is if it breaks above $90.40, it would signal an uptrend, for this to occur, the market will need good news, perhaps even bright news from China, the biggest oil consumer. Regardless, right now, oil is in a bear trend and if it closes below $81.20 the bear run-lower could be extend to $78.48-$74.27. Gold (XAUUSD) The yellow metal saw a drop to $1,660/oz down more than 2% to over 2-year lows, amid expectations of more aggressive rate hikes by the Fed as strong US economic data underpinned. Markets are now pricing in a more than 75bps rate hike by the Fed at the September meeting, and a terminal rate of ~4.5%. What to consider? Mixed US data, but further upward pricing of the Fed rate path US retail sales saw the headline rising 0.3% m/m in August (exp -0.1%, prev -0.4%) but the core retail sales print was weaker than expected at -0.3% m/m (exp 0%, prev 0.0%). The slower retail spending does reflect the current slowdown in goods spending despite services remining strong and supporting the overall consumer strength in the US. Meanwhile, initial jobless claims were lower than expected at 213K (exp 226K, prev 218K). That is the lowest since early June and the 5th consecutive decline (the high reached 262K), suggesting that labor markets still remain tight. Regional Fed indices offset each other The regional Fed indices on manufacturing gave contrasting signals with the Philly Fed index falling -9.9 vs +2.8, but the Empire improving markedly to -1.5 vs -13.0 estimate. For both indices, the prices paid components did fall and has moved markedly lower over the last few months, but still remains with a positive number (i.e., more businesses reporting higher prices vs lower prices). For the Philly Fed, the price paid came in at 29.8 v 43.6. For the Empire, the prices paid came in at 39.6 vs 55.5. Australia’s latest economic news shows employment growth is slowing with the jobless rate rising for the first time in 10 months; giving the RBA less room to hike rates Australia’s unemployment rate unexpectedly rose in August, rising from 3.4% to 3.5% with less jobs being added to economy than expected (33,500 instead of the 35,000). Given employment has fallen from its 50-year peak, and job growth is slowing, the RBA effectively has a solid barrier in its way preventing it from rapidly rising rates over the coming months, with room of a 0.5% hike being taken off the table. For equity investors, this supports risk-appetite slightly increasing in the banking sector, given employment nears its peak and credit might not be squeezed as hard as feared, thus property price growth also might not continue to fall as rapidly as forecast. For currency traders, the AUDUSD sharply fell from its intraday high (0.6769) and now faces pressure back to two-year lows, where support is at 0.61358, implying it may fall 10%. Further to that, the currency pair faces downside simply as the market is pricing in 0.25% RBA hike next month, versus the more aggressive US Fed Reserve’s hike potentially being 100bps (or 1%) next week. Slower export growth, power shortage, and pandemic controls would probably have taken their toll on China’s August activity data China’s activity data for August, scheduled to release today, would probably be at risk of missing the median forecasts in the Bloomberg survey, which has industrial production at 3.8% YoY in August (vs 3.8% YoY in July), retail sales at 3.2% YoY in August (vs 2.7% YoY in July), and fixed asset investment year-to-date 5.5% YoY (vs 5.7% YoY). The heatwave-induced power shortage caused disruption to industrial production in Sichuan. The heatwave might have also caused delays in infrastructure construction which was largely outdoor and offset some of the positive impacts of accelerated credit extension. The pandemic control measures affected the manufacturing and export hub of the city of Yiwu in Zhejiang province in August. The much weaker expected export growth data for August released last week and the continuously weak data in the property market also pointed to potentially downside surprises to these forecasts.  While a favourable base effect and stronger auto sales in August could have boosted retail sales, tightened pandemic control measures might have damped catering and other services and dragged down retail sales growth.  Russian President Putin said he appreciated China’s “balanced position” on Ukraine President Xi and President Putin met on the sidelines of the Shanghai Cooperation Organization summit held in Uzbekistan.  The Russian president said he values China’s “balanced position” on Ukraine and he backs the latter’s “One China” principle and opposes “provocations” by the U.S. on the issue of Taiwan.  On the other hand, the readout released by China only did not touch on Ukraine.  As in the readout, Xi told Putin that “China is ready to work with Russia in extending strong support to each other on issues concerning their respective core interests”. China’s State Council reiterated support for the economy and opening up trade and investment In a meeting chaired by Premier Li Keqiang, China’s State Council rolled out an additional RMB200 billion relending quota to support key industries in the real economy and pledged to support international trade and open up to foreign investment. Ethereum Merge – a new chapter in crypto Yesterday, the second-largest cryptocurrency Ethereum successfully underwent its merge from proof-of-work to proof-of-stake. From consuming around 0.2% of the world’s electricity, Ethereum now consumes a fraction of that. Our Crypto analyst calls it a new chapter not only for Ethereum but crypto in general. Read more here.    For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast.     Source: https://www.home.saxo/content/articles/equities/apac-daily-digest-16-sept-2022-16092022
Norges Bank Takes Bold Steps: Signals Strong Tightening to Strengthen Weaker Krone

Financial Conditions Favorable To US Dollar And Unfavorable To Assets

TeleTrade Comments TeleTrade Comments 16.09.2022 10:45
The dollar continues to benefit from safe-haven flows on the last trading day of the week. Economists at MUFG Bank expect the greenback to stay on a solid foot. Mixed data, further curve inversion and asset price declines “Add to that the flow of data this week that indicates a slowing economy there are reasons for the Fed to stick to the current pace of tightening. Retail sales for August revealed no growth in Control Group sales while the July data was revised sharply lower. Manufacturing slowed markedly in August as well and manufacturing sentiment for New York and Philadelphia remained negative. We have not had housing data this week but the housing market is weakening sharply.” “With the Fed set to hike by possibly another 175 bps before year-end, we would expect financial conditions to remain unfavourable for assets generally and it clearly points to the US dollar being the primary beneficiary.”  “For 2s10s to break to new levels of inversion (beyond the Aug low of -58 bps) would take us to levels last seen in the early 1980’s. That would certainly likely mean a broadening of the strength of the US dollar.”
EM Index Inclusions and Exclusions: India Thrives, Egypt Faces Challenges

The Markets Are Concentrated On Inflation, Crude Oil Is Down

Swissquote Bank Swissquote Bank 16.09.2022 10:24
US railroad companies and the unions representing their workers reached a tentative agreement early Thursday to prevent a rail strike in the US. Avoiding a rail strike is good news, but not good enough to give a smile to investors. The markets remain too focused on inflation. Increases and decreases The S&P500 closed the session more than 1% lower, as US retail sales and jobless claims – which both hinted that the US economy remains relatively resilient to the Federal Reserve (Fed) rate hikes - didn’t help keeping the Fed hawks at bay. The US 2-year yield spiked to 3.90%, the mortgage rates in the US topped 6%, the US dollar consolidated a touch below the 110 level, Ethereum lost 10% and gold dived to $1660 per ounce. US crude took a good 4% dive. But this time, it wasn’t just the recession talk, it was because the Americans rectified a beginner’s mistake that they have made earlier this week, saying that they will refill their strategic oil reserves if prices fall below $80 per barrel. Waiting For Reports We will likely close this week on a sour note. Next on the economic calendar are the final European CPI read, which will confirm that inflation spiked to 9.1% in August, and the University of Michigan Consumer Sentiment, which will hopefully not print a significantly positive number, because the Fed hawks got strong enough the week before the Fed decision. Watch the full episode to find out more! 0:00 Intro 0:25 US rail strike will likely be avoided! 2:08 But sentiment remains sour on strong US data 3:57 World Bank points at recession 5:04 Crude oil down as Americans understand their mistake 6:41 Strong dollar weighs on major peers 6:55 Joke of the day 7:09 Ethereum down 10% post Merge upgrade 7:51 Adobe dives 17% on Figma acquisition 8:44 Watch EZ final CPI & UoM Consumer Sentiment today! Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #US #rail #strike #inflation #USD #EUR #GBP #Gold #XAU #crude #oil #natgas #energy #crisis #Bitcoin #Ethereum #Merge #update #Bitcoin #Adobe #Figma #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH
BSP Maintains Rates Amid Moderate Inflation; Eyes Further Tightening if Needed

US Dollar, British Pound (GBP), SEK (Swedish Krona) And Other Currencies May Be Fluctuating Next Week As Central Bank Decides On Rates!

ING Economics ING Economics 16.09.2022 15:02
Next week is packed with central bank meetings. The Fed is likely to match the European Central Bank in hiking rates by 75bp, while the Bank of England and Norges Bank are expected to make 50bp moves In this article US: 75bp is our favoured call, however there's a chance for the Fed to go even further UK: Bank of England to stick to 50bp rate hike despite Fed and ECB doing more Sweden: Riksbank to match ECB’s 75bp hike – and there’s a risk of more Norway: Norges Bank to repeat August’s 50bp rate hike Switzerland: SNB will follow the lead of other central banks and hike rates by 75bp Eurozone: PMIs expected to remain below 50 Source: Shutterstock      US: 75bp is our favoured call, however there's a chance for the Fed to go even further All eyes will be on the Federal Reserve meeting next Wednesday. The market was favouring a 75bp hike ahead of the August CPI report, but the much higher-than-expected inflation print has seen the market price in a 20% chance that the Fed will go over and above that by opting for 100bp. A 75bp hike is still our favoured call, but we acknowledge the risk that with inflation proving to be stickier than we had suspected, the subsequent meetings in November and December could see more aggressive action from the Fed than we are currently pencilling in. While the geopolitical backdrop, the China slowdown story, the potential for energy rationing in Europe, the strong dollar and fragile-looking domestic equity and housing markets argue for a more moderate path of tightening in the coming months, if inflation momentum doesn’t slow the bank will hike by a further 75bp in November and possibly 50bp in December. The message from the Fed next week is likely to emphasise data dependency, but its updated economic forecasts are likely to show the end-2022 Fed funds rate at 4.125% rather than 3.4% (July forecast) and we suspect it will be kept at that for 2023, before dropping back to a long-term average rate of 2.5%. UK: Bank of England to stick to 50bp rate hike despite Fed and ECB doing more We narrowly favour a 50bp hike on Thursday, taking the Bank Rate to 2.25%, although 75bp is clearly on the table and we would expect at least a couple of policymakers to vote for it. The announcement of an energy price cap from the government will drastically lower near-term CPI, reducing concerns about consumer inflation expectations becoming de-anchored and reducing the urgency to act even more aggressively. However, the hawks will be worried about the recent independent sterling weakness, and will also argue that the government’s support package could increase medium-term inflation given it reduces the risk of recession. That means it’s a close meeting to call, but if we’re right and the committee does move more cautiously than the Fed and ECB next week, then we expect another 50bp move in November and at least another 25bp in December. That would take Bank Rate to the 3% area. Read our full Bank of England Preview here. Sweden: Riksbank to match ECB’s 75bp hike – and there’s a risk of more With only two meetings left this year, and facing higher-than-expected inflation and a tight jobs market, we expect the Riksbank to hike rates by at least 75bp on Tuesday. We expect a repeat move in November. Norway: Norges Bank to repeat August’s 50bp rate hike Norway’s central bank stepped up the pace of rate hikes in August, and core inflation has continued to push higher than Norges Bank’s most recent forecasts in June. The message from the August meeting was that the central bank is keen to continue front-loading tightening, and we expect another 50bp hike next week. That would take the deposit rate to 2.25%, and we’d expect another 50bp move in November. Switzerland: SNB will follow the lead of other central banks and hike rates by 75bp The Swiss National Bank (SNB) meets next week and is ready to raise its key interest rate for a second time, after the 50bp increase in June. Inflation in Switzerland stood at 3.5% in August, still above the SNB's target of 0-2%, although well below the inflation rate in neighbouring countries. The fact that the Swiss franc is relatively strong against the euro is no longer a problem for the SNB, as it reduces imported inflation. The SNB focuses much more on the real exchange rate, which takes into account the inflation differential and has remained very stable in recent months. With no fears of too much appreciation and with inflation above target, there is little reason for the SNB not to follow the lead of other central banks, especially as it only meets once every quarter, so the next meeting will be in December, while the ECB and the Fed will meet in between. We expect a 75bp rate hike next week. Eurozone: PMIs expected to remain below 50 In the eurozone, we get the first look at economic activity in September with PMIs due on Friday. After two months below 50, we expect another one to follow as manufacturing production cuts due to high energy prices and the end of the tourist season are set to impact business activity. Consumer confidence will also be released next week, where we expect confidence to remain near historical lows for the moment as the cost-of-living crisis continues. Key events in developed markets next week Source: Refinitiv, ING TagsRiksbank Norges Bank Federal Reseve Central banks Bank of England Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Chinese Stocks: Attractive Valuations Amidst Challenges and a Cyclical Recovery - 12.09.2023

Fed Decides On Interest Rate, So Does BoE - The Coming Week Is Simply Action-Packed

Craig Erlam Craig Erlam 16.09.2022 23:35
US Many on Wall Street are watching the Fed’s rate hiking cycle and are getting nervous they will tip the economy into a recession.  With scorching inflation, the FOMC may consider a full-point rate hike but will likely settle on delivering its third consecutive 75 basis-point increase. At Wednesday’s policy meeting, Fed Chair Jerome Powell will likely acknowledge downside risks to growth are here and unrelenting inflation is forcing them to maintain an aggressive pace of tightening.  Inflation risks are still tilted to the upside and will likely keep the Fed from providing any hints that a “Fed put” is coming. EU  The ECB appears to be one of the few major central banks not holding a monetary policy meeting next week but that won’t keep them out of the headlines. Policymakers are scheduled to make regular appearances including Philip Lane on Saturday which may present some weekend risk. On Friday, the flash PMIs could give an idea of how the economy is coping and whether it is heading for a recession in the fourth quarter, as some fear. UK Monday is a bank holiday in the UK as the country pays its respects to Queen Elizabeth II on the day of her funeral. After being pushed back a week due to the 10-day period of national mourning, the BoE will meet on Thursday and it has a big decision to make. Inflation is running extremely hot – although it did drop back below 10% last month – and while it has likely not yet peaked, the high should be much lower now that the new government has announced a cap on energy bills.  That may come as a relief to many but it could mean higher core inflation and interest rates further down the road. How the BoE responds to all of this without the aid of new economic projections is what will interest investors. The week draws to a close with PMIs on Friday. Russia Markets continue to monitor the situation in Ukraine amid a strong counteroffensive that saw Russia concede a lot of ground while raising the prospect of defeat and waning support for Vladimir Putin. The only economic release next week is PPI inflation on Wednesday.  South Africa The SARB is expected to hike rates by another 75 basis points to 6.25% on Thursday as inflation continues to rise. The CPI is currently well above the 3-6% target range at 7.8% and the central bank will get an update on this the day before their decision, which could play a role in just how aggressive they’ll be this month.  Turkey One central bank that almost certainly won’t be raising interest rates next week is the CBRT. Last month, it unexpectedly cut rates by another 100 basis points to 13% despite inflation running at almost 80%. That has risen further since but the central bank will not be deterred. No change is expected from the CBRT next week but clearly, another rate cut should not be ruled out. Switzerland Inflation continues to run hot which makes a large rate hike on Thursday from the SNB highly likely. Markets are pricing in at least 75 basis points, maybe even 100, taking the policy rate out of negative territory for the first time since early 2015. The central bank loves to spring a surprise though, the biggest recently perhaps being that it’s waited until a scheduled meeting to act. We’ll see how bold it’s prepared to be on Thursday.  China China is expected to keep rates unchanged at 3.65%, as the 1-year LPR (Loan Prime Rate) was just recently adjusted down from 3.7%. If the Chinese central bank unexpectedly adjusts rates to a lower level again, it may be detrimental to the yuan. The PBOC’s fixings are must-watch events now that the yuan has weakened beyond the key 7 against the dollar.   India Traders will pay close attention to the second quarter current account data.  Expectations are for the current account deficit to widen from $13.4 billion to $30.36 billion.  India has been weakening as trade balances balloon and foreign investment takes a big hit.   Australia & New Zealand Traders are awaiting the release of the minutes of the RBA meeting next Tuesday and upcoming speeches by RBA’s Kearns and Bullock. The RBA seems poised to move forward with smaller rate hike moves, but traders will look to see if the latest round of RBA speak confirms the downward shift discussed by central bank chief Lowe.  It will be a busy week in New Zealand as a steady flow of economic data is accompanied by a couple of RBNZ speeches by Governor Orr and Deputy Governor Hawkesby.  The big economic releases of the week are Wednesday’s credit card spending data and Thursday’s trade data.     Japan The FX world is closely watching everything out of Japan. Traders are waiting to see if policymakers will intervene to provide some relief for the Japanese yen. What could complicate their decision is that Japan has a holiday on Monday.   The divergence between the Fed’s tightening cycle and the Bank of Japan’s steady approach continues to support the dollar against the yen. The BOJ is widely expected to keep rates on hold even as core inflation extends above the BOJ’s 2% target.    Singapore The focus for Singapore will be the August inflation report that should show pricing pressures remain intense.  The year-over-year reading is expected to rise from 7.0% to 7.2%.  Economic Calendar Saturday, Sept. 17 Economic Data/Events Thousands pay their respects to Queen Elizabeth II at Westminster  European Central Bank chief economist Lane speaks at the Dublin Economics Workshop in Wexford, Ireland Monday, Sept. 19 Economic Data/Events World leaders attend Queen Elizabeth II’s funeral in Westminster Abbey in London UK Bank Holiday Japan Bank Holiday New Zealand performance services index RBA’s head of domestic markets Kearns delivers the keynote address at the Australian Financial Review Property Summit in Sydney ECB’s de Guindos speaks at the annual Consejos Consultivos meeting   Tuesday, Sept. 20 Economic Data/Events US housing Starts Canada CPI China loan prime rates Japan CPI Mexico international reserves Spain trade Sweden rate decision: Expected to raise rates by 75bp to 1.500% UK Parliament in session Annual UN General Assembly in New York Dockworkers at the UK’s Port of Liverpool are expected to begin a two-week strike Norges deputy central bank Governor Borsum speaks German Economy Minister Habeck speaks at the congress of municipal energy suppliers RBA releases minutes from its September policy meeting. BOC Deputy Governor Beaudry delivers a lecture on “pandemic macroeconomics” at the University of Waterloo in Ontario Wednesday, Sept. 21 Economic Data/Events FOMC Policy Decision: Fed expected to raise rates by 75bps US existing home sales Argentina unemployment, trade Australia leading index New Zealand credit-card spending South Africa CPI Big-bank CEOs testify before the US House Financial Services Committee at a hearing titled, “Holding Megabanks Accountable.” RBA Deputy Governor Michele Bullock speaks at a Bloomberg event in Sydney ECB’s de Guindos to speak at Insurance Summit 2022 organized by Altamar CAM in Cologne, Germany EIA crude oil inventory report Thursday, Sept. 22 Economic Data/Events US Conference Board leading index, initial jobless claims China Swift global payments Eurozone consumer confidence BOJ rate decision: No changes expected with rates and 10-year yield target Japan department store sales New Zealand trade, consumer confidence Norway rate decision: Expected to raise rates by 50bps to 2.25% South Africa rate decision: Expected to raise rates by 75bps to 6.25% Switzerland rate decision: Expected to raise rates by 75bps to 0.50% Taiwan jobless rate, rate decision, money supply Thailand trade Turkey rate decision: Expected to cut rates by 100bps to 12.00% UK BOE rate decision: Markets remain split between expectations for a half-point or a three-quarter-point hike. US Treasury Secretary Janet Yellen addresses the Atlantic Festival in Washington. The UN Security Council holds a meeting on Ukraine   BOE’s Tenreyro speaks at a seminar at the San Francisco Fed on “climate-change pledges, actions and outcomes.” Friday, Sept. 23 Economic Data/Events US Flash PMIs Australia prelim PMI Canada retail sales European Flash PMIs: Eurozone, Germany, France, and the UK Singapore CPI Spain GDP Taiwan industrial production Thailand foreign reserves, forward contracts Norway Central Bank Governor Wolden speaks Sovereign Rating Updates Germany (S&P) Hungary (Moody’s) Sweden (Moody’s) European Union (DBRS) Finland (DBRS) This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Week Ahead - Aggressive tightening - MarketPulseMarketPulse
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US Dollar To Crush Other Currencies This Week? Even A 125bp Rate Hike? Let's Check Four Possible Scenarios For Fed's Decision!

ING Economics ING Economics 19.09.2022 09:48
We expect a third consecutive 75bp hike. High inflation means 100bp is a risk, but inflation expectations and corporate price plans look less threatening and the growth outlook is more uncertain so we don’t see it. Still, a more hawkish message surrounding sticky inflation will see the Fed dots closer reflect the market pricing of a 4.25-4.5% terminal rate Fed Chair, Jerome Powell 75bp remains the call The market was favouring a 75bp hike ahead of the August CPI report, but the higher-than-expected inflation numbers, that saw the core rate accelerate to 6.3% from 5.9%, have led the market to price a 20% chance that the Fed go over and above that and opt for a 100bp move. 75bp is still our favoured call and the overwhelming majority of economists appear to think the same. Inflation does indeed appear to be stickier than we'd first thought and it remains broad-based. That said, there isn’t a great deal the Fed can do about current inflation so its response will depend on where it sees inflation heading. The jobs market remains strong, and near-term activity data has been holding up, but there are encouraging signs on both market and household inflation expectations, and also corporate price plans which suggest inflation may not be as embedded as some in the market fear. Consumer inflation expectations heading lower Source: Macrobond, ING Corporate pricing power shows signs of weakening Indeed, the National Federation of Independent Businesses reports that the proportion of companies looking to raise prices over the next three months has fallen from 51% in May to 32% in August. This is a sizeable turn which, given the strong relationship over the past 40+ years, offers a signal that inflation rates could soon start to slow. After all, in the current environment, there has been a strong argument that consumers flush with stimulus cash have been able to tolerate higher prices. Also, households have been expecting more price rises to come which had effectively given many companies some 'cover' to raise them still further.  But the lagged effects of rate rises, weak equity market performance and concerns over the state of the housing market suggest that consumer spending is plateauing; retail sales, for example, are down 0.7% since March in volume terms. A more competitive environment means less corporate pricing power and fewer inflation pressures. NFIB points to weakening corporate pricing power Source: Macrobond, ING Fed forecasts set to change Nonetheless, we acknowledge that higher near-term inflation prints are not welcome and hurt the Fed’s credibility. The subsequent meetings in November and December could therefore see more aggressive action from the Fed than we are currently pencilling in. We could see more aggressive Fed action Our current 50bp call for November looks on very shaky ground with 75bp probably more likely right now,  while the 25bp we have been forecasting for December could easily become 50bp. As such, depending on what the Fed says, we will be looking to formally change our house view from a 3.75-4% terminal rate in December 2022 to a 4.25-4.5% call. Key to this will be the Fed’s forecasts. Below is a table of what they forecast in June versus what we think they will say on Wednesday. Expectations for the Federal Reserve forecasts Source: Federal Reserve, ING Four alternative scenarios In the graphic below, you can see how we've been exploring different scenarios and their potential impact on the FX and Treasury markets. The forecast levels for EUR/USD and 10Y yields are based on the assumption that both trade at current levels on the morning of the Federal Reserve meeting. The market is currently assuming a 75bp hike as the bare minimum and it would probably be seen as the Fed taking a level-headed, data-dependent approach. A more cautious growth assessment could see yields move a touch lower following their recent sharp increase.  Anything less than 75bp would be perceived very dovishly. A 50bp move would be the catalyst for an initial downward move in the 10Y yield of perhaps 10bp and the dollar weakening with some further follow-through over subsequent days since it would be interpreted as an earlier end to tightening with a lower terminal rate.  On the hawkish side, a 100bp hike would signal a clear intent from the Fed, and in some quarters could be interpreted as a sign of panic. The knee-jerk reaction would be a stronger dollar and a 10bp+ move in Treasury yields with the market pricing a higher terminal rate, especially if inflation forecasts are revised up for 2023 and 2024. A 125bp hike would not just be a signal of panic, it could be an outright risk to market stability with risk assets crumbling. On the one hand, it could prompt a safe haven bid for bonds in subsequent days, but the initial reaction is likely to be a big gap higher in 10Y yields of the order of 25bp. Scenario analysis: The Federal Reserve's alternatives Source: ING 2023 still the year of rate cuts Looking further ahead, we are not in the camp expecting ongoing rate hikes in 2023. The geopolitical backdrop, the China slowdown story, the potential for energy rationing in Europe, the strong dollar and fragile-looking domestic equity and housing markets point to rising recession risks. A more aggressive Federal Reserve rate hike profile and tighter monetary conditions will only intensify the threat. We already expect inflation to fall sharply We already expect inflation to fall sharply on a weaker housing market translating into lower home rental components in CPI. Falling second-hand car prices will also contribute while less aggressive corporate pricing plans amid weaker demand in a recessionary environment will also drive inflation lower. We also should remember that the average period of time between the last rate hike in a cycle and the first Federal Reserve rate cut has averaged just six months over the past fifty years. Given the risks to growth and the potential for lower inflation, we are still forecasting rate cuts throughout the second half of 2023.    If the funds rate breaks above 4%, the 10yr yield gets pulled higher too For market rates, their prognosis is tied up with the terminal Fed Funds rate (i.e. where the Funds rate peaks). When it does peak, the likes of the 10yr Treasury yield will feel unshackled and can go ahead and discount future cuts, with yields capable of trading well through the Funds rate. But we are not at that point just yet; we’re still in the Fed Funds up-move phase. For as long as that’s the case, long tenor market rates will tend to be pulled higher. Should the Fed hike by 75bp in September and by another 75bp in November, that would pitch the Funds rate ceiling at 4%. Against that backdrop, and given the likelihood that the rate pushes above 4%, the 10yr Treasury yield is likely to target the 3.75% area (versus 3.45% currently). One clear consequence is a likely further yield curve inversion Once clear consequence in a likely further inversion of the yield curve. The Federal Reserve will not want to see this become too pronounced, as it would open a gap between the longer-term implied subsequent rate cut discount versus the nearer-term objective to get the Funds rate up. Balance sheet roll-off, which is now running at USD 95bn per month, will slowly address this issue, as the bid for longer tenor bonds is no longer being supported by Fed buying. This also helps to tighten conditions. The Fed has not had a whole lot to say about this in recent months, preferring to let the process play out quietly in the background. But in any case, it is pushing in the same direction as rate hikes and should help to coax longer tenor rates higher. FX Markets: Hawkish Fed takes us a step closer to Plaza 2.0 The dollar goes into the September FOMC meeting on the highs for the year. The story is quite a simple one. Aggressive Fed tightening and US yield curve inversion have taken their toll on the currencies of the more open economies outside of the US – especially those on the wrong side of the energy war. On a year-to-date basis, this leaves the dollar stronger by as little as 5% against the Canadian dollar and as much as 20% against the Japanese yen. The dollar's going to stay at these strong levels Driving the most recent leg higher in the dollar has been the August US CPI data, which has inverted the curve still further and prompted money markets to price Fed Funds close to 4.50% next spring. Could the market shift to pricing a 5% Fed Funds rate? That cannot be ruled out over the coming months were the market to second-guess the meaning of ‘restrictive’ policy and US price data were to continue to deliver some nasty surprises. As such we see the dollar staying at these strong if not stronger levels for the rest of the year. The dollar hitting its highest levels since 1985 has also raised some questions as to whether global policymakers are close to discussing a Plaza 2.0 agreement – or a revised version of the 1985 G5 agreement for an orderly dollar reversal lower. We feel it is far too soon for such an agreement in that for it to be successful the Fed would need to be ready to cut rates – consistent with any coordinated FX intervention to sell dollars probably against euros and yen. Equally the Bank of Japan would need to be ready to hike rates, just as they were in 1985. Neither of these is a given. That said we do have a G20 meeting of Central Bank governors and Finance Ministers coming up on October 12th in Washington. Were dollar strength to be causing collective anguish, a G20 Communique could express some concern with disorderly moves – and provide some more credibility to Japanese threats to intervene to sell USD/JPY. In reality those, FX moves have not been disorderly and we very much doubt US authorities are yet prepared to sanction a weaker dollar – not until the inflation battle is won. Read this article on THINK TagsUSD US Powell Interest rates Federal Reserve Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Philippines Central Bank's Hawkish Pause: Key Developments and Policy Stance

Only Turkey And Japan Are Expected To Keep Rates Unchanged?

Saxo Bank Saxo Bank 19.09.2022 11:01
Summary:  Markets trade nervously ahead of the FOMC meeting this week, as a minority consider it likely that last week’s hotter-than-expected US August CPI data could see the Fed hiking 100 basis points at Wednesday’s FOMC meeting, driving further painful USD strength. Other notable central bank meetings this week include the Bank of Japan, Swiss National Bank, Norges Bank and Bank of England meetings, all on Thursday.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities were lower on Friday but managed to stage a pullback in the later part of the trading session with S&P 500 closing at 3,890. Sentiment remains weak this morning with US equity futures trading lower and Friday’s low in S&P 500 futures at the 3,853 level is the key critical downside level to watch. Financial conditions are still tightening, VIX curve is flattening, and the US 10-year yield is trending higher pointing to weaker equities ahead., The next big level in S&P 500 futures is the 3,800 level. This week the key event risk for US equities is naturally the FOMC meeting which will provide another tightening of policy rates and potentially a hawkish tilt on the guidance due to the latest inflation figures in the US. Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) Hang Seng Index dropped nearly 1%, dragged by technology stocks, with Hang Seng Tech Index (HSTECH.I) declining 2%, Alibaba (09988:xhkg) falling 3.3%, Tencent (00700:xhkg) down 1%. EV makers underperformed, with NIO (0986), Li Auto (02015:xhkg), and Xpeng (09868:xhkg) declining 4% to 6%. Following the news that the Hong Kong Government is reviewing and considering plans to end the hotel quarantine requirements for inbound travellers, tourism and retail stocks rallied, Cathay Pacific Airways (00293:xhkg) up nearly 2%, travel agent EGL surging 11.5%, Chow Tai Fook Jewellery (01929:xhkg) rising 6.6%. CSI 300 was little charged, with coal, and beverage names outperforming. USD traders mull FOMC meeting this Wednesday The US dollar has remained rangebound in most pairs ahead of this Wednesday’s FOMC meeting, but did break higher recently versus GBP, CAD, and NZD. Whether the Fed hikes 100 basis points (a minority looking for this after the hot CPI print for August last week) may prove less important than the Fed’s guidance on its forecasted “terminal rate” in the quarterly refresh of its accompanying “dot plot” forecasts for the Fed rate and as the market reads the tone of the statement and draws conclusions from the latest economic projections. The June PCE inflation forecasts, for example, still see 2023 inflation falling back to 2.7% and 2024 inflation to 2.3%. That latter forecast has only been raised 0.2% from the year-earlier level, suggesting that the Fed still sees the inflationary threat as something that its current path of tightening will make a transitory phenomenon. Gold (XAUUSD) Gold remains below $1680 and may struggle ahead of Wednesday’s FOMC rate decision given its potential impact on the dollar and Treasury yield as well as its impact on the terminal rate, currently priced around 4.5% by next March.  Speculators flipped their gold position to a net short in the week to September 13 and it highlights the upside risk should the price manage to break above the twice rejected support-turned-resistance level at $1680. Strong short covering from speculators in silver, supported by copper market tightness, has seen its relative value as seen through the XAUXAG ratio rise to a three-month high. Below $1854, last week's low in gold, the market may target the 50% retracement of the 2018 to 2020 rally at $1618.    Crude oil (CLV2 & LCOX2) Crude oil remains rangebound with Brent continuing to find support ahead of $90 and WTI around $84.50. Prices are being supported by the reopening of Chengdu in Sichuan, boosting the outlook for demand. Overall, however, the potential negative impact on demand from a global economic slowdown will not go away, and the market will be watching central bank decisions from the US to Europe and Asia and their overall impact on the dollar. Production from the OPEC+ alliance fell 3.6 million barrels/day short of its target level in August according to delegates and with Russia’s production at risk of falling by 1.9 million barrels per day once the EU embargo starts in December, the risk to supply remains equally high and price supportive. US Treasuries (TLT, IEF) US treasury yields trade near the cycle highs ahead of the FOMC meeting on Wednesday, with focus on the 10-year benchmark at 2.50%, the cycle high from June and on guidance from the Fed, as a minority are looking for a 100 basis point hike this week, while the terminal rate for next spring has risen almost to 4.50% recently, up more than 100 basis points from early August. What is going on? Dreadful UK retail sales in August There is no other word to qualify the latest retail sales report in the UK. Retail sales (important to note: UK Retail Sales are reported in volume, not price) contracted by minus 5.4 % year-over-year versus expected minus 4.2 %. Excluding fuel bills, it was out at minus 5 %. Just for the sake of comparison, UK retail sales fell 3.8 % year-over-year at the worst point of the Global Financial Crisis. High inflationary pressures coupled with the upcoming recession will certainly pose a serious challenge to the Bank of England (BoE). The market participants expect the central bank will hike rates by at least 50 basis points later this week (a stronger hike of 75 basis points is possible on cards). But we wonder how long the tightening cycle can last in the UK given the rapid deterioration of the situation on the growth front. On a flip note, the EZ CPI for August was confirmed at 9.1 % year-over-year. This is painfully high. Expect the ECB to hike interest rates by at least 50 basis points at its October meeting. In her last appearance last Friday, ECB president Christine Lagarde did not give much clue about the pace of the tightening cycle in the eurozone. She only mentioned that “hikes should send a signal that we’ll meet price goals”. US University of Michigan survey remains optimistic The preliminary September University of Michigan sentiment survey saw the headline rise to 59.5 from 58.5, just short of the expected 60, but nonetheless marking a fourth consecutive rise. Notably, the rise in forward expectations was starker than in current conditions, with the former also coming in above consensus expectations. Also, key were the inflation expectations, which echoed what was seen in the Fed surveys last week. The 1yr slowed to 4.6% from 4.8% and the 5yr expectations slowed to 2.8% from 2.9%.  EU recommends withholding EUR 7.5B from Hungary on rule of law violations The specific accusation is one of corruption in Hungary’s awarding of public contracts. The amount of budget funds to be withheld represents some one-third of the budget for Hungary during the current 7-year budget period. A majority of EU member states will have to approve the recommendation for the funds to be withheld. Hungary has scrambled recently to address the EU’s concerns, with new laws to be debated next week as the country has until November 19 to make changes and inform the commission. What are we watching next? Japan’s CPI and central bank decision to signal concerns on yen weakness Japan has key data on August inflation due Tuesday followed by the Bank of Japan decision a day after the FOMC on Thursday. Consensus estimates for August CPI are touching close to 3% levels, with core higher as well at 1.5% YoY from 1.2% previously. Upside pressures continue to persist from high food and energy prices, while the soft year-ago base also means mobile phone charges are likely to pick up. While it is still hard to expect a pivot from the Bank of Japan this week, given that Governor Kuroda remains focused on achieving wage inflation, the meeting will still likely have key market implications. Raft of central bank meetings this week It isn’t just FOMC week, we also have a bevy of other central banks up with rate decisions this week, including Sweden’s Riksbank tomorrow, which is expected to hike 75 basis points to take the policy rate to 1.50%. The FOMC meets Wednesday, followed by a historic Thursday in which the Bank of Japan, Norges Bank of Norway, Swiss National Bank and Bank of England meet among G-10 currencies, with the Central Bank of Turkey and South Africa’s Reserve Bank also meeting that day. Of those, only Turkey and Japan are expected to keep rates unchanged, with all others looking to continue tightening policy. Porsche IPO set for €70-75bn valuation The Porsche brand is set to be spun out from the Volkswagen group on September 29, with 12.5% of the shares to be floated. VW shareholders will be awarded a special dividend on half of the proceeds from the IPO, with the remaining half targeted for investing in the transition to EVs. The IPO comes with a greenshoe option of 10-15% dilution. Earnings calendar this week This week our earnings focus is on Lennar on Wednesday as US homebuilders are facing multiple headwinds from still elevated materials prices and rapidly rising interest rates impacting forward demand. Later during this week, we will watch Carnival earnings as forward outlook on cruise demand is a good indicator of the impact on consumption from tighter financial conditions. Today: AutoZone Tuesday: Haleon Wednesday: Lennar, Trip.com, General Mills Thursday: Costco Wholesale, Accenture, FactSet Research Systems, Darden Restaurants Friday: Carnival Economic calendar highlights for today (times GMT) 0800 – Switzerland Swiss National Bank Sight Deposits 0900 – ECB’s Guindos to speak 1200 – ECB's De Cos to speak 1245 – ECB's Villeroy to speak 1400 – US Sep. NAHB Housing Market Index 2330 – Japan Aug. National CPI 0115 – China Rate Announcement 0130 – Australia RBA Minutes of Sep. Policy Meeting  Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: https://www.home.saxo/content/articles/macro/market-quick-take-sep-19-2022-19092022
Hawkish Fed Minutes Spark US Market Decline to One-Month Lows on August 17, 2023

Opinions Of The Majority Of Leading Academic Economists

TeleTrade Comments TeleTrade Comments 19.09.2022 11:17
According to the majority of leading academic economists polled by the Financial Times (FT) in partnership with the Initiative on Global Markets (IGM) at the University of Chicago’s Booth School of Business, the US Federal Reserve bank (Fed) is seen raising above 4% and holding it there beyond 2023. Key takeaways “Nearly 70 percent of the 44 economists surveyed between September 13 and 15 believe the fed funds rate of this tightening cycle will peak between 4 percent and 5 percent, with 20 percent of the view that it will need to pass that level.” “Most of the respondents project core PCE will drop from its most recent July level of 4.6 percent to 3.5 percent by the end of 2023. But nearly a third expect it to still exceed 3 percent 12 months later. “ “Another 27 percent said “it was about as likely as not” to remain above that threshold at that time — indicating great unease about high inflation becoming more deeply embedded in the economy.” “Nearly 70 percent of the respondents expect the National Bureau of Economic Research — the official arbiter of when US recessions begin and end — to declare one in 2023, with the bulk holding the view it will occur in the first or second quarter.”
Gold Has A Chance For Further Downside Movement - 30.12.2022

The Sale Of Gold From Last Week Is A Continuation Of The Trend

InstaForex Analysis InstaForex Analysis 19.09.2022 11:45
There is a lot of doom and gloom in the gold market as prices ended the previous week at their lowest level since April 2020. For many analysts, a break below $1,675 would spell the end of gold's three-year upward trend. Along with the fall in gold prices, Wall Street analysts and retail investors turned bearish, highlighting the downside risks in the near term. Last week's gold sell-off is a continuation of a trend that began in early March as markets react to the Federal Reserve's aggressive monetary policy moves to curb inflation, which remains stubbornly high. Markets are almost ready for a 75 basis point rate hike; however, surprisingly resilient inflation in August, with the US CPI rising to 8.3% from an expected 8.1% gain, has left markets priced in at a slim chance of a full 1% move. Rising hawkish expectations supported the US dollar near its 20-year high and lifted 10-year bond yields to 3.5%, the highest level since April 2011. Under these conditions, many analysts say that gold prices have suffered a lot of technical damage and it will be difficult for the precious metal to find any bullish momentum anytime soon. Last week, a total of 22 market specialists took part in a Wall Street survey. Fourteen analysts, or 63%, said they are bearish this week. At the same time, four analysts, or 18%, were optimistic or neutral. In the retail sector, 1,045 respondents took part in online surveys. A total of 395 voters, or 38%, called for gold to rise. Another 489, or 47%, predicted a fall in gold. The remaining 161 participants, or 15%, voted for a sideways trend. Bannockburn Global Forex Managing Director Mark Chandler said his next gold price target is between $1,615 and $1,650 and does not rule out a fall to $1,500 by next year. It is unlikely that the Fed will raise interest rates by 1% this week, the markets still expect further aggressive actions before the end of this year. Chandler noted that markets now see the final federal funds rate at 4.50%.     Relevance up to 09:00 2022-09-22 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/322017
Oil Prices Soar on Prospect of Soft Landing, Eyes Set on $80 Breakout

What Can We Expect From Standard&Poor 500 (S&P 500)?

Conotoxia Comments Conotoxia Comments 19.09.2022 16:42
Today, U.S. stock index contracts seem to indicate the possibility of a cash market opening on the downside. Investors may be estimating the possibility of Fed action, and not just this week, but for the rest of the year. Currently, the market may believe that the Federal Reserve will not end the cycle of hikes below the 4 percent level, but above it. This could put pressure on company valuations on Wall Street. Have low-interest rates helped the Wall Street stock market? Since 2008, the US stock market has been able to enjoy the ongoing bull market that followed the Great Financial Crisis. Back then, both the financial markets and the economy were supported by very low-interest rates or asset purchase programs. From 2008 until the beginning of 2022, the average federal funds rate was 0.58 percent, and the average price-to-earnings P/E ratio for the entire S&P 500 index had a value of 25. Currently, the P/E for the S&P 500 is 21.49, according to wsj.com, and the federal funds rate rose to 2.33 percent in September. The market, in turn, seems to expect that it could rise above 4 percent in the next two quarters. Source: Conotoxia MT5, US500, W1 Current valuations on Wall Street According to data from wsj.com, the forward P/E ratio, which is the one showing the future earnings of companies in relation to the current stock price, is 17.48 for the S&P 500, while the Nasdaq 100 has a value of 22.57. The current values are 21.49 and 24.97, respectively. This may mean that the market expects that the earnings of U.S. companies may increase next year, which may be good news, but on the other hand, interest rates may rise at the same time. This, in turn, could have a negative impact on company valuations and could cause rates to potentially be lower than they were during a period of low-interest rates. If investors can choose between the U.S. dollar soon at 4.5 percent interest, or riskier stocks with a P/E ratio of 17, it seems that some of them may choose the U.S. dollar over stocks and thus demand for them may be lower. Another group of investors, on the other hand, may forgo risk in favor of safety until valuations become more attractive relative to interest rate levels. This, in turn,  could  happen in one of two ways, either U.S. companies will begin to rapidly expand earnings (which may be difficult in an environment of a slowing economy) or stock prices will find lower levels. Forecasts for the S&P500 at the end of 2022 According to analysts surveyed by Reuters, the S&P 500 could end this year at 4280 points. This is the median forecast of nearly 50 strategists surveyed by Reuters in the second half of August 2022. The median forecast for 2022 is down from 4400 points in a Reuters survey conducted in late May. Survey respondents, therefore, seem to be optimistic about the index's year-end result after all. This could mean a return to the peaks of August this year.   Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. Are valuations on Wall Street currently attractive? (conotoxia.com)
Oanda Podcast: US Jobs Report, SVB Financial Fallout And More

It Is Possible The US Dollar Will Remain A Safe Haven

TeleTrade Comments TeleTrade Comments 20.09.2022 09:29
In the view of economists at HSBC, the USD’s outlook depends on global growth, risk appetite, and relative yields but they still do not see a shift in these three drivers. As such, the US dollar will remain resilient. Ongoing and persistent strength The USD is likely to remain supported by a deteriorating global growth outlook, with rising recession probabilities in Europe and the UK.  “The Federal Reserve is likely to continue to hike rates until early 2023 before keeping its policy rate steady throughout 2023, according to our economists and the current rates market expectations. In other words, the Fed’s tightening path and associated USD strength are likely to persist.”  “It is hard to see how risk appetite can change for the better, while global growth weakness and central banks pivoting to rate cuts are not on the near-term horizon. The current risk-averse tone in financial markets is likely to also support the USD, given its ‘safe-haven’ profile. Nonetheless, it will be important to see if risk appetite improves, once markets believe central banks have raised rates enough.”
Indonesia's Inflation Slips, Central Bank Maintains Rates Amidst Stability

The Major Currency Pairs On The Forex Market And Their Move Ahead Of Important Decisions

TeleTrade Comments TeleTrade Comments 20.09.2022 10:35
Here is what you need to know on Tuesday, September 20: Major currency pair trade in familiar ranges on Tuesday as investors move to the sidelines ahead of key central bank policy decisions. The US Dollar Index (DXY), which closed virtually unchanged on Monday, moves sideways slightly above 109.50 and the market mood improves modestly with US stock index futures rising between 0.2% and 0.3%. Later in the day, Building Permits and Housing Starts data for August will be featured in the US economic docket. Consumer Price Index (CPI) figures from Canada will also be watched closely by market participants. Wall Street Journal author Nick Timiraos, who correctly leaked the 75 basis points (bps) rate hike in July, published an article late Monday and refrained from suggesting that the Fed could raise its policy rate by 100 bps on Wednesday. The greenback lost some interest after this development and the DXY erased its daily gains. The benchmark 10-year US Treasury bond yield stays relatively quiet near 3.5% on Tuesday. Federal Reserve Preview: Forecasting 5% interest rates? Dollar to move on dot-plot, Powell's pledges. Earlier in the day, Sweden's central bank, Riksbank, announced that it raised its policy rate by 100 bps to 1.75%, compared to Reuters' estimate for a rate increase of 75 bps. With the initial reaction, EUR/SEK fell to a fresh daily low of 10.7305 but managed to recover to the 10.8000 area. During the Asian trading hours, the Reserve Bank of Australia's (RBA) September monetary policy meeting minutes showed that policymakers saw a case for a slower pace of rate increases as becoming stronger. AUD/USD's reaction to the RBA's publication was largely muted and the pair was last seen trading flat on the day at around 0.6730. Annual CPI in Canada is expected to decline to 7.4% in August from 7.6% in July. Ahead of this data, the USD/CAD pair trades in a tight range near the mid-1.3200s. EUR/USD managed to stage a rebound in the second half of the day on Monday and closed in positive territory above parity. The pair was last seen posting small daily gains near 1.0030. GBP/USD clings to modest daily gains at around 1.1450 early Tuesday. “There aren’t currently any negotiations taking place with the US and I don’t have any expectation that those are going to start in the short to medium term," British Prime Minister Liz Truss said regarding a potential trade deal with the US but these comments were largely ignored by market participants. The data from Japan revealed on Tuesday that the National CPI climbed to 3% in August from 2.6% in July. Although this print came in stronger than the market expectation of 2.6%, USD/JPY managed to hold its ground and was last seen rising 0.2% on the day at 143.50. Gold is having a tough time attracting buyers and trading in negative territory slightly above $1,670. The resilience of the 10-year US T-bond yield makes it difficult for XAU/USD to gather recovery momentum. Bitcoin shook off the bearish pressure late Monday but it's yet to reclaim $20,000. Ethereum gained nearly 3% on Monday but failed to preserve its bullish momentum early Tuesday. At the time of press, ETH/USD was down 1% on the day at $1,360.
FX Daily: Low Volatility Persists Amidst US Jobs Data Ripples

Rate Hike Announcements Throughout This Week

Swissquote Bank Swissquote Bank 20.09.2022 14:03
FOMC begins its two-day policy meeting today, and is expected to deliver the third 75-bp hike tomorrow. Activity on Fed funds futures gives more than 80% chance for a 75bp hike this morning, and less than 20% chance for a 100bp hike. Although the probability of a full percentage point hike spiked up to 35% after last week’s disappointing inflation reports, we still believe that the Fed has nothing to gain by surprising the market with a bigger than expected rate hike. The strength of the US dollar is too threatening for the Fed to pull out the bazooka. Banks will announce their latest decisions  Therefore, a 75bp hike at tomorrow’s announcement has the potential to give some relief to the US dollar and the equity markets, as it would help de-pricing the scenario of 100bp hike. Yet, the size of an eventual relief, or whether we would see a relief or not will also depend on the economic projections and the dot plot. And the global tightening winds will continue to blow beyond the US this week. The Bank of Japan, Sweden, Norway, Brazil, South Africa, Philippines, Indonesia, Taiwan, Turkey, the Bank of England and the Swiss National Bank will announce their latest decisions throughout this week. Most of these banks are expected to raise their interest rates, and/or sound hawkish in an effort to slow the depreciation of their currencies against the Fed-boosted US dollar. The Swiss National Bank (SNB) is one of them. We discuss why the SNB should follow the Fed with a 75pp hike, and what would be the impact on the Swiss markets. Watch the full episode to find out more! 0:00 Intro 0:32 Market update 1:25 Fed will likely hike by 75bp this month… 4:05 The Swiss National Bank will likely follow! Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #FOMC #Fed #meeting #SNB #rate #decision #jumbo #hikes #USD #CHF #EUR #SMI #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH
US Dollar (USD) May Be Skyrocketing! Fed Decides On Interest Rate Shortly. Why 75bp Variant Is More Likely Than The 100bp Hike?

US Dollar (USD) May Be Skyrocketing! Fed Decides On Interest Rate Shortly. Why 75bp Variant Is More Likely Than The 100bp Hike?

Jing Ren Jing Ren 20.09.2022 13:41
Expectations for what the Fed will do at its next meeting have been on a bit of a rollercoaster. This has created some fluctuations in the dollar, as well as the stock market. But now that Fed officials are sitting down for the two-day policy rate decision, it seems like economists are finally coming to some kind of agreement on what to expect tomorrow. Four fifths of surveyed economists expect a 75bps hike, with the remainder still holding on for 100bps. That's a consolidation of agreement compared to just a week ago, when over a quarter of analysts were predicting a full percentage point hike. Part of that is due to actually digesting the CPI figures that came out last week. Why not 100bps? Last week's inflation figures were a bucket of cold water on the markets, as headline inflation was above expectations and core inflation continued to rise. Both pushed in the direction of the Fed keeping its aggressive hiking stance. But, the thing is, the Fed hasn't met since July, so expectations for what the Fed will do this time have to take into consideration the last two inflation reports. And July CPI figures were substantially better than the August ones. Taking into consideration all the data that has been released since the last FOMC meeting, there is still a bias towards aggressive hiking, but not so much as the last data indicates. Getting expectations in order In fact, one of the reasons that there was such a strong reaction to the CPI data was that it came as a surprise. July data was implying a possibility for the Fed to start moderating the pace of hikes. Prior to the release, the consensus was for 75bps, and dissenters were arguing for 50bps. The latest guidance from the Fed is that rates will be determined on a meeting-by-meeting basis based on the data. Which means now the focus is on whether the Fed will start giving hints for longer-term policy outlook. If the Fed does a "triple" rate hike, the third in a row, the very next question traders will be asking is, what's next? Tracing lines into the future Several Fed officials have said that interest rates are getting near "neutral", which is the point at which the Fed presumably will start moderating its aggressive hiking. It's estimated that it is around 3.5%. Another 75bps would not only push the rate above where it was in 2018, but up to 3.25%. If the Fed were to continue hiking for the rest of the year (there are two meetings left), then it might be in 25bps increments so as not to substantially go above the "neutral" rate. Therefore, there will be a lot of focus on the dot-plot matrix, which is the summary of where FOMC officials expect rates to be in the future. Up until now, rates were expected to remain high for at least the first quarter of next year. A change in those expectations could determine where the market goes after the FOMC meeting.
The South America Are Looking For Alternatives To The US Currency

Are Levels Over 111 Reachable For US Dollar Index (DXY)?

TeleTrade Comments TeleTrade Comments 20.09.2022 15:42
US Dollar Index to extend upward momentum on a break above 111 – SocGen The US Dollar Index (DXY) moves sideways slightly above 109.50. Economists at Société Générale expect the index to enjoy further gains on a break past 111. Read next: The Global Household Wealth Report, A Hacking Attack And More| FXMAG.COM Short-term downtrend likely on a dip under 107.60 “If the index establishes itself above the high formed earlier this month at 111 – which is also a graphical level, the up move is expected to extend further towards next projections at 112.60/113.00.”  “It is worth noting that the daily MACD has started posting negative divergence. Although this is not a reversal signal, it does point towards receding upward momentum.” “Defending the 50-DMA at 107.60 would be essential for persistence in uptrend. Should a break materialize, a short-term downtrend is likely.”
The USD/JPY Currency Pair Is Awaiting The Fedu's Decision, Will The US Dollar Rise Against The Yen

The USD/JPY Currency Pair Is Awaiting The Fedu's Decision, Will The US Dollar Rise Against The Yen

InstaForex Analysis InstaForex Analysis 21.09.2022 08:23
On Tuesday, the USD/JPY pair added 54 points amid an overall strengthening of the dollar by 0.53%. The US stock market lost more than 1% of capitalization yesterday (S&P 500 -1.13%, Russell 2000 -1.36%), but investors are still guided by the situation with the dollar. We believe that after the hype subsides after the Federal Reserve's rate hike, the yen may strengthen under the pressure of stock indices. While we are waiting for the price to rise to the nearest target of 145.10 - to the embedded line of the global price channel, if it is overcome, the growth will continue to the next line at 147.10. A price divergence with the Marlin Oscillator is possible in the area of the second target. This will be a sign of a trend reversal. The price is consolidating under the MACD line (143.83) on the four-hour chart. Consolidating above it, as an initial success, will push the price to storm 145.10. The Marlin Oscillator is moving sideways in the positive area. We are waiting for the Fed's decision and the dollar's growth against the yen. Relevance up to 04:00 2022-09-22 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/322222
Today’s Federal Reserve (Fed) Decision, And The Market After Riksbank Shocked

Today’s Federal Reserve (Fed) Decision, And The Market After Riksbank Shocked

Swissquote Bank Swissquote Bank 21.09.2022 11:08
Risk appetite is poor into today’s Federal Reserve (Fed) decision, and after Riksbank shocked the market with a 100bp hike yesterday. The announcement couldn’t get the SEK appreciate against the US dollar; it rather got many investors more uncomfortable, and worried that the Fed would do the same today: deliver a 100bp hike. But it may not. The expectation for the decision Activity on Fed funds futures still assesses less than 20% probability for a 100bp hike from the Fed today. So, the expectation is that the Fed will deliver a 75bp hike today. We could see a relief rally in equity and bond markets, if, of course, the dot plot doesn’t show projections going above market expectations. One good news in all this is that inflation in Canada eased more than expected last month, both the headline and the core inflation softened. But the data obviously revived the BoC doves and sent the Loonie lower against a broadly stronger US dollar. The USDCAD spiked to 1.3375 as a result. And cheaper oil didn’t help. The market is under pressure Crude oil fell below $85 per barrel, as the US announced it would sell 10 million barrels more from the Strategic Reserves for delivery in November to help keeping a negative pressure on oil prices. The EURUSD consolidates below parity, as Cable slipped below 1.14 mark. Bitcoin is testing the $19K support this morning and gold remains under a decent selling pressure due to strong dollar and rising US yields. Watch the full episode to find out more! 0:00 Intro 0:27 Riksbank raised by 100bp 1:16 Could the Fed do the same? 3:12 Market update 4:15 Betting against treasuries is fructuous, but risky 6:28 Oil down as US announced more strategic reserve sale 7:25 EUR, GBP, Gold and Bitcoin under pressure into Fed decision Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH
What Is The Situation Of The Euro To Us Dollar (EUR/USD) Pair Today

What Is The Situation Of The Euro To Us Dollar (EUR/USD) Pair Today

InstaForex Analysis InstaForex Analysis 21.09.2022 11:21
Technical Market Outlook: After making the local high at the level of 1.0050, EUR/USD reversed lower, broke the intraday technical support at 0.9950 and is heading lower. The market participants await the FED interest rate decision and press conference scheduled at 8:00 PM tonight. The nearest technical support is seen at 0.9934 and 0.9901. In the longer term, the key technical resistance level is located at 1.0389 (swing high from August 11th), so the bulls still have a long road to take before the longer term down trend is reversed. Please watch the USDX as the correlation between this two is directly opposite. Weekly Pivot Points: WR3 - 1.01231 WR2 - 1.00595 WR1 - 1.00262 Weekly Pivot - 0.99959 WS1 - 0.99626 WS2 - 0.99323 WS3 - 0.98687 Trading Outlook: Despite the recent relief rally towards the short-term support, the EUR is still under the strong bearish pressure and as long as the USD is kept being bought all across the board, the down trend will continue. In the mid-term, the key technical resistance level is located at 1.0389 and only if this level is clearly violated, the down trend might be considered terminated. Relevance up to 08:00 2022-09-22 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/293561
Pressure On The Euro Is Rising And The Dollar Is More Attractive

Pressure On The Euro Is Rising And The Dollar Is More Attractive

InstaForex Analysis InstaForex Analysis 21.09.2022 12:24
The US currency is still holding steady, gaining momentum before the Federal Reserve meeting, which cannot be said about the European one. The latter tries to gain a foothold in the positions won, but these efforts often do not meet expectations. Constantly rising inflation and unstable geopolitical background keep market participants and world central banks in suspense. Recently, many of them expected the Fed to raise interest rates by 50-75 bps at the next meeting. However, now the situation has worsened, so traders and investors expect the rate to rise by 75 bps and higher, that is, by 100 bps. Market participants expect that the Fed will announce its final decision on the rate on Wednesday, September 21. According to preliminary estimates, it is expected to increase by 75 bps, up to 3-3.25% per annum. At the same time, the central bank will present macroeconomic forecasts, followed by a press conference by Fed Chairman Jerome Powell. Against this background, the markets are in suspense about the Fed's future strategy. According to analysts, the central bank will continue to raise interest rates until it gets inflation under control. At the moment, futures show the probability of a rate hike above 4% by the end of 2022, which implies a further increase at two meetings of the Federal Open Market Committee (FOMC), which are scheduled for early November and mid-December. Against this background, the pressure on the euro is increasing and the dollar's appeal as a protective asset is growing. On the morning of Wednesday, September 21, the greenback remained near a two-decade high against most currencies, primarily the euro. At the same time, the EUR/USD pair was trading at 0.9952, almost without going beyond the current range. According to analysts, the Fed's interest rate decision will set the tone in the financial markets for the coming months. At the moment, the topic of quantitative tightening remains in the focus of the markets' attention. Central banks are withdrawing liquidity from the financial system and reinvesting less and less of the income received from the repayment of state bonds. It should be noted that the Fed, whose balance sheet reaches $9 trillion, has reduced the volume of reinvestments by $47.5 billion per month, starting in June 2022. According to preliminary calculations, by the end of September, this figure will increase to $95 billion. Market participants expect the European Central Bank to take similar actions, that is, to reduce its balance sheet, which is 8 trillion euros. However, in this matter, the ECB also falls behind the American one. According to ECB President Christine Lagarde, at the moment the introduction of quantitative tightening is impractical. However, despite such statements, the central bank is expected to consider this issue at the next meeting, which is scheduled for October. Against this background, the euro has lost part of its gains. Unlike the greenback, it is difficult for the single currency to gain a foothold in the current positions. As a result, the euro is constantly slipping into a downward spiral. The situation was not changed even by decisive measures on the part of the ECB, which sharply raised rates (by 50 bps and 75 bps) at the last two meetings. Thanks to these steps, high inflation does not put too much pressure on the euro, analysts believe. However, the US central bank began to raise interest rates earlier than the European one, having gained a head start in this matter. Currently, the Fed is raising interest rates more aggressively than other central banks. As a result, a sharp increase in Fed rates contributed to a significant strengthening of the greenback, which continues to grow. At the same time, the rise in the price of USD exacerbates inflation in other countries, since the lion's share of international settlements is made in the US currency. In the event of a fall in other currencies against the greenback, imports in most countries sink, as goods denominated in dollars become more expensive. The noticeable strengthening of the US currency worsens the prospects for the global economy, experts emphasize. First of all, developing countries suffer from this, whose economic growth opportunities are severely limited. In addition, the strong USD and the global economic downturn have a negative impact on the income of American companies abroad. The further expansion of the global crisis is pushing the authorities of a number of countries to introduce measures to curb the dominance of the USD, experts summarize. Relevance up to 08:00 2022-09-24 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/322242
The Euro Has A Limited Downward Potential

The Euro Has A Limited Downward Potential

InstaForex Analysis InstaForex Analysis 21.09.2022 12:31
H4 chart of EUR/USD The euro sank ahead of the FOMC meeting. Still, I think the currency is heading in the wrong direction. The thing is that the euro has limited downside potential. Moreover, it is already hovering at extreme lows. Any dovish hints from the US Federal Reserve at the meeting today could trigger a surge in the euro. Long positions could be considered at 0.9970 after a breakout through yesterday's high. Relevance up to 09:00 2022-09-22 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/322256
US Dollar (USD) And Fed Decision: ING Economics Team Thinks 75bp Rate Hike Is Enough

US Dollar (USD) And Fed Decision: ING Economics Team Thinks 75bp Rate Hike Is Enough

ING Economics ING Economics 21.09.2022 10:58
So here we are. Another FOMC meeting, and another 75bp hike. But there is a rump going for 100bp, so 75bp could be positive for risk assets (albeit briefly). The dot plot will be watched, as the terminal rate is key for where market yields peak. A 75bp hike takes the effective funds rate up to 3.08%, but leaves the Fed with more to do as the 2yr heads for 4%. Expect a 75bp hike, although there is a rump positioned for 100bp Ahead of the Federal Open Market Committe (FOMC) meeting there has been some market flows positioning for a 100bp hike, but the dominant discount as we head into the meeting is for 75bp to be delivered. A 100bp hike would be an over-reaction, in our view, while 75bp would be enough to solidify a market discount that is already projecting a terminal funds rate north of 4.25%. Chair Powell's Humphrey-Hawkins testimony followed by a re-acceleration in core CPI inflation has been enough to push the market discount up by some 100bp in the space of a month. At this juncture the Fed does not need to do much more than deliver the 75bp hike, and maintain a hawkish bias. The Fed does not need to do much more than deliver the 75bp hike The dot plot will be important, but not critical, as the dots do move over time. We think the median dot will print above 4% for 2022 (to be read as end year), and the Fed may well choose to keep it above 4% for 2023. The Fed's dot plot does print a longer-run rate at 2.5%, which is deemed to be their neutral rate, and is broadly where the funds rate is now. So the 75bp hike, when delivered, moves the policy rate into a tightening stance for the first time in this cycle. The calls for 100bp area partly premised on the notion of pitching the funds rate 1% tight versus neutral in one go. But 75bp also tightens policy reasonably aggressively, and avoids unnecessary market consternation with respect to future intentions. The Fed's message is finally delivering tighter financing conditions Source: Refinitiv, ING The terminal funds rate remains key for the bond market Beyond this meeting, where the funds rate peaks is critical for pitching bond yields. Once the funds rate is hiked, the new reference for market rates is north of 3% (with the effective fund rate set to settle at 3.08%). A similar hike in November would then have the ceiling at 4%, an area that the 2yr Treasury yield is currently targetting. History shows that the 2yr will anticipate moves in the funds rate well in advance, but as we get towards the end of the rate hiking cycle, reaction from the 2yr yield becomes smaller. Based off the price action of the past few weeks we are not quite there yet. But if the funds rate peaks at 4.25% to 4.5%, we'd be surprised if the 2yr yield were to get much above 4.25%. Further out the curve the 10yr yield has more capacity to trade through the funds rate sooner than the 2yr. This is typical as the curve has moved into a state of inversion. In that sense longer tenor rates are being pulled higher by higher short tenor rates at this stage of the cycle. This is the opposite to what happened before rate hikes were discounted, as the curve steepened from the long end. Now the long end is waiting for the funds rate to come up and hit it. From there, likely around the 2 November meeting, the 10yr can trade flat to the funds rate (at around 3.75%, or slightly higher), and that would anticipate a peak in the fund rate at around 4.25% (actually 4.33%). Right now the Fed does not want any focus on a rate hike discount Once the peak in the fund rate is in with a reasonable degree of certainty, the 10yr can free itself from the shackles of terminal rate uncertainty, and can begin to trade well through the funds rate (anticipating cuts). Right now the Fed does not want any focus on a rate hike discount, but in fairness the market will tend not to aggressively discount a top until it actually sees it. This is where the value of a hawkish tone comes to the fore, as it helps to sustain that link with upward pressure on market rates generally. That said, with the 10/30yr spread now on the verge of inversion, expect any future peaking and fall in market rates to come earliest from the 30yr. The Treasury 10s30s slope is on the verge of inversion Source: Refinitiv, ING Today's events and market view Italy will exchange short-end bonds for issues in the 10Y and 15Y sectors worth up to €2bn. Germany will auction €4bn 10Y bonds. Austria mandated a new 4Y bond yesterday, which should be today's business. Luis de Guindos is the only European Central Bank official on the schedule. Both UK CBI prices and orders are expected to decline in September.. The FOMC meeting this evening looms large in an otherwise quiet session. The tone of the conference and quarterly economic and rates projections will be closely watched to shape future hike expectations. The thought leadership taken by the Fed, and the continued dollar rally, mean read-across to other rates markets is even greater than usual. Ahead of the FOMC, US releases to watch will comprise mortgage applications and existing home sales. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Collapse Of The Silicon Valley Bank Weakened The Dollar And USD/JPY But Supported EUR/USD, AUD/USD, And GBP/USD

How Did Stocks React To Fed? How High Could Fed Hike The Rates Till The End Of The Year?

Ed Moya Ed Moya 21.09.2022 23:40
Stocks initially tumbled after the Fed remained very much committed to winning the war against inflation. The Fed is not taking any chances with inflation and they are prepared to send this economy into a recession. Goodbye soft landing, Wall Street prepares for a hard landing. The Fed delivered a third straight 75bp rate hike and signaled they expect the Federal funds rate to rise to 4.6% this cycle. ​ The updated staff projections were a bit more hawkish than many expected. ​ The Fed expects unemployment to rise to 4.4% next year and that they will keep rates elevated and eventually bring them down to 3.9% in 2024. Stocks rebounded during Powell’s press conference as the economic pain threshold for the Fed seems somewhat limited. Softer labor conditions are going to happen, but it seems a pause will happen fairly quickly at some point in the middle of next year. ​ Powell noted that FOMC is split between 100 and 125 bp in rate hikes for the rest of the year. ​ Peak tightening is almost here and that should be good news for risky assets. ​ Housing  US existing home sales edged lower in August, but further weakness is coming as mortgage rates continue to soar, a weakening consumer, and on a growing likelihood the economy is recession bound. Home sales declined to 4.80 million, the seventh straight monthly decline. ​ The housing market will continue to cool especially considering yesterday’s plunging building permit data and with the 30-year fixed mortgage rate surging to 6.25%. ​ Putin raises the ante Russian President Putin’s latest escalation sent a shock through financial markets. ​ Putin announced the immediate “partial mobilization” of Russian citizens and noted they would use “all the means at our disposal” which raises the risk that nuclear weapons could be used. Putin is obviously frustrated with Ukraine’s counter-offensive and recapturing of territory. ​ Investors are worried that a major escalation could be near and that is weighing on European assets. ​ Crypto The post-Fed crypto reaction was initially weakness as the hawkish stance was affirmed by Fed Chair Powell. Bitcoin found support at the $18,800 level as Wall Street gains confidence they have a handle on how high the Fed will take rates. Wall Street also saw Nomura, Japan’s largest broker, continue to make the push into crypto. Steven Ashley is switching roles from Nomura’s Head of Wholesale Division and Executive Officer to Chairman of Laser Digital Holdings AG1, Nomura’s new digital asset company. ​ Nomura was expected to make a big splash into the digital asset industry and insiders are not surprised Ashley will lead the charge. ​ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. FOMC React: Hard landing will lead to a pause, housing market cools, Putin’s escalation, bitcoin stabilizes - MarketPulseMarketPulse
The Euro May Attempt To Resume An Upward Movement

Technical Outlook Of The EUR/USD Pair After The Fed Meeting

InstaForex Analysis InstaForex Analysis 22.09.2022 08:36
Technical outlook: EURUSD dropped through the 0.9806 lows early hours of trade on Thursday. The recent sell-off can be accredited to the overall euro's weakness amidst the Fed interest rate hike by 0.75 bps on Wednesday.Technically, a long-awaited pullback rally should materialize any moment, pushing the process through 1.0800 at least. EURUSD has registered just a shallow low at 0.9806 delaying a pullback rally towards the Fibonacci 0.382 retracement of the entire drop between 1.2350 and 0.9800. It is still seen passing close to 1.00750 and 1.0800 as seen on the daily chart presented here. Immediate resistance is now seen at around 1.0200 and a push higher is required to confirm that the bottom is in place. We do not intend to speculate on whether a low is in place at 0.9806 but would certainly wish to bring to notice a strong bullish divergence on the daily RSI. With each swing low from 0.9950, the RSI has been printing higher lows as marked on the chart. A high probability remains for a bottom formation soon as the bulls prepare to be back in control. Trading idea: Get ready for a bullish reversal soon. Good luck!     Relevance up to 07:00 2022-09-27 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/293744
Nubank Announced The Introduction Of Nucoin's Own Cryptocurrency

Ethereum Charts Are Still Indicating A Long-awaited Bullish Reversal

InstaForex Analysis InstaForex Analysis 22.09.2022 08:40
Technical outlook: Ethereum dropped through $1,220 during the New York session on Wednesday. Most risky assets were under pressure after the Fed raised an interest rate by 75 bps to tame inflation. Fundamentals might affect a short-term price action but technically, charts are still indicating a long-awaited bullish reversal to resume from here. Ethereum has completed three waves between $2,031 and $1,220 as seen on the 4H chart here. The above drop seems corrective and is bouncing off the Fibonacci 0.618 retracement of the early rally between $800 and $2,031 as seen on the 4H chart here. If the above structure holds well, the bulls will be back in control soon. Also, note that the RSI has produced a bullish divergence as prices dropped to a fresh swing low at $1,220. A combination of a bullish divergence, the past resistance-turned-support zone and the Fibonacci 0.618 bounce offers a highly probable set-up. A push above $1,412 will confirm a meaningful low in place and the bulls are back in control. Trading idea: Potential rally through $1,800 against $900 Good luck! Relevance up to 07:00 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/293756
EU Gloomy Picture Pointing To A Gradual Approach To Recession

How Much Have European Governments Invested In Supporting Businesses And Consumers, The Demand For Copper And More

Saxo Bank Saxo Bank 22.09.2022 08:47
Summary:  The Fed’s 75bps rate hike came with a strong message emerging from the Dot Plot that rate hikes will continue despite risks of slower economic growth and higher unemployment rate. Clear focus remains on tightening the financial conditions, which was reflected in equities and other risk assets. Russia’s partial mobilization has raised geopolitical concerns as well, adding a risk-off bid to the US dollar. EURUSD appears to be heading for 0.98 even as pressure on the Japanese yen remains capped due to lower long-end US yields. Hard to expect Bank of Japan pivot today, but FX comments could be the highlight before focus turns to another jumbo hike from the Bank of England later. What is happening in markets?   Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) are looking bearish again The Fed managed to deliver a hawkish surprise without going for a 100bps rate hike, as the message was clear – rate hikes will continue even if economic pain worsens. While the initial reaction from equities was a negative one, some ground was regained with Powell’s presser, once again, lacking further hawkish surprises. However, Powell said in his concluding Q&A response that rates will likely get to levels seen in the Dot Plot, reigniting their signaling power after initially warnings against taking the Dot Plot as Fed’s plan. Whether that was the catalyst or not is hard to tell, but stocks went on to sustain new lows into the close. What’s for sure is the Dot Plot still gives a clearer message on the Fed’s path than Powell. S&P500 fell below 3800 to close down 1.7% while NASDAQ 100 was down 1.8%. General Mills (GIS:xnys) reported better-than-expected earnings and raised its outlook, which helped it to defy the broader market decline, while also lifting other food stocks such as B&G Foods (BGS:xnys) and Kellogg (K:xnys), and supporting the overall consumer staples sector. Another chemical manufacturer joined the chorus of negative pre-announcements. Chemours (CC:xnys) revised down its 2022 EBITDA by 7% from its previous guidance, citing weaker demand from Europe and Asia. Lennar (LEN:xnys), up by 0.9%, reported adj. EPS of USD5.18, beating consensus estimate of USD4.87, primarily due to a lower tax rate and an improvement on margins. Unit orders, however, fell 12% Y/Y, missing expectations of modest growth, signing moderating housing demand, especially in Texas and the West. U.S. treasuries (TLT:xnas, IEF:xnas, SHY:xnas) After the Fed delivering a 75bps hike as expected but signaling a hawkish higher terminal rate of 4.6% in 2023 as well as projecting lower real GDP growth rates (0.2% in 2022, 1.2% in 2023, 1.7% in 2024) and higher unemployment rates (4.4% in 2023, 4.4% in 2024, 4.3% in 2025) than the long-run equilibrium levels (1.8% real GDP growth, 4% unemployment rate) anticipated by the Fed, the treasuries yield curve went further inverted, with 2-10 year spread closing at -54bps. Traders sold the 2-year notes, bring yields up by 7bps to 4.05% in response to clear “no pivot” message from the Fed. On the other hand, long-end yields declined on the Fed’s acceptance of slower growth and higher unemployment for longer as a price to put inflation under control. The 10-year yields fell 3bps to 3.53% and 30-year yields plunged 7bps to 3.50%. The U.S. yield curve’s trend to go deeper into inversion continues. The 3-month bills versus 10-year notes yield spread may go negative (inverted) as the 3-month rates keep rising on Fed tightening and the 10-year yield being anchored by improved inflation expectations. Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) Stocks in Hong Kong, Shanghai, and Shenzhen bourses continued to decline, with Hang Seng Index and CSI300 Index falling 1.8% and 0.7% respectively, and both making new lows.  Hang Seng Tech Index (HSTECH.I) lost 3%, dragged down by China Internet, tech hardware, and EV names.  Sunny Optical (02382:xhkg) tumbled 10.5% as analysts had concerns over a saturated smartphone market and increased competition in smartphone cameras.  Alibaba (09988:xhkg) and Tencent (00700:xhkg) declined 3.7% and 2.5% respectively.  While real estate stocks gained on the mainland bourses after some Chinese cities relaxed second-property buying restrictions, shares of Chinese developers traded in Hong Kong fell, with CIFI 00884:xhkg) tumbling 11.3%, Country Garden (02007:xhkg) sliding 4%.  The solar power space plunged from 5% to 8%.  Following the news of a partial mobilization in Russia to bolster armed forces, higher crude oil prices boosted the shares prices of energy companies, CNOOC (00883:xhkg) up by 2.2%, PetroChina (00857:xhkg) up by 1.2%.  %.  A tanker shipping company, COSCO Shipping Energy Transportation (01138:xhkg) soared more than 8%.  Bloomberg reported that Chinese refiners are applying for quotas from the Chinese government to export as much as 16.5 million tons of fuel oil, such as gasoline and diesel. A dry bulk shipping company, Pacific Basin (02343:xhkg) surged 7.9% after the Baltic Dry Index jumped over 11%.  The tanker shipping space and natural gas space gained and outperformed in A shares.  Asian markets to face risk-off after a hawkish Fed message Australia holds a National Day of Mourning to honour the Queen. Trading of ASX instruments will not occur as the ASX is closed. Trading resumes Friday September 23. Japan’s Nikkei 225 opened down 1.4%, eying the Bank of Japan meeting later today. Taiwan, Indonesia and the Philippines are also likely to raise rates today. AUDNZD and the NZ trade balance AUDNZD remained supported above 1.1320 and upside tests were seen with the relative current account balances in play. NZ reported August trade data this morning and imports accelerated while exports have declined. The deficit in NZ Trade Balance data has widened further to -$12.28B vs. the prior release of -$11.97B on an annual basis. Also, the monthly deficit has widened to -$2,447M against the former figure of -$1,406M. This is a contrast to Australia which is reporting fresh highs in trade balance due to its bulk of commodity exports. The next focus for AUDNZD is perhaps 1.1516, the high of 2015. EURUSD heading for 0.98 EURUSD broke lower to fresh 20-year lows of 0.9814 amid Putin’s partial mobilization and the strength of the dollar from the hawkish Fed signals. While the ECB stays hawkish as well, the relative hawkishness still tilts in favour of the Fed due to the harsh winter coming up especially for Europe as Russia has cut gas supplies. Stronger case of a recession also continues to bode for more downside in EURUSD in the near-term. Crude oil (CLU2 & LCOV2) Crude oil prices bumped up higher on Wednesday after Putin’s speech but gains faded later in the day amid a hawkish Fed boosting the US dollar and strengthening the case for a deeper economic slowdown. The EIA data saw a 1.1mn barrel build in crude stocks, similar to the private data, although given the 6.9mn barrel SPR release, that was a net 5.8mn draw. WTI futures slid below $83/barrel although some recovery was seen in early Asian hours, and Brent futures attempted to head back over the $90/barrel mark.   What to consider? Powell beats the hawkish drum louder The Federal Reserve delivered its third consecutive 75bps rate hike and showed no sign of easing its push into restrictive territory as it battles to cool inflation. This comes despite Fed’s latest projections showing slower growth and a rise in unemployment next year. The FOMC raised the benchmark rate to 3-3.25% and projected the terminal rate at 4.6% in 2023, suggesting Fed will remain committed to bring inflation down even if that means significant economic pain. Fed members estimate the economy will grow 0.2% in 2022, down sharply from a prior forecast of 1.7%. Growth forecasts were also revised lower for 2023 and 2024 to 1.2% and 1.7% from 1.7% and 1.9%, respectively. The central bank now sees the unemployment rate at 3.8% at year-end, up slightly from a prior forecast of 3.7%. But labor supply and demand may likely be restored in subsequent years, with unemployment expected to reach 4.4% in 2023 and remain unchanged the following year, according to the Fed's projections. That is above the prior June forecast of 3.9% and 4.1% unemployment in 2023 and 2024, respectively. Russia’s partial mobilization spurs risk off Russian President Putin, in his televised speech to the nation Wednesday morning, announced partial mobilization, calling up 300k reserves, whilst threatening the west with “All means of destruction, including nuclear ones”. Referendums in Donetsk, Luhansk, Kherson and Zaporozhye (15% of Ukraine territory) are scheduled September 23-27, and any fighting in these regions will eb considered as attacks on “Russian territory” and thus pave the way for a potential military escalation, justifying the use of mass destruction weapons. Looking out for some FX comments at the Bank of Japan meeting While it is still hard to expect a pivot from the Bank of Japan this week, given that Governor Kuroda remains focused on achieving wage inflation, the meeting will still likely have key market implications. There will likely be increased voicing of concerns by the authorities on yen weakness, and there is also some chatter around the Bank of Japan bolstering its lending programs to support the private sector as high inflation curbs spending. Also watch for intervention risks as highlighted here. Bank of England may tilt to hawkish despite recession concerns The BoE meets on Thursday after last week’s meeting was delayed by a week for Queen Elizabeth II’s funeral. Policymakers are expected to hike rates by another 50bps, which would bring the Bank Rate to 2.25%, although a 75bps hike is still on the table. Beyond September, analysts forecast a 50bps increase in November and 25bps in December, taking the Bank Rate to 3%, where it is expected to stay until October 2023. Also worth highlighting is the “fiscal event” delivered by new Chancellor of the Exchequer Kwasi Kwarteng on Friday. This will be his first statement on how he plans to deliver new Prime Minister Liz Truss' pledge to make the U.K. a low tax economy, which risks stoking inflation in the medium-term. However, short-term plans on energy support package suggests lower inflation to end this year, but that wouldn’t be enough for the BoE to go easy on its inflation fight. Rio Tinto joins BHP in saying Copper’s near-term outlook is challenged Rio Tinto’s CEO has joined a suite of companies, including BHP, saying copper’s short-term outlook faces pressure. From supply-chain issues to 30-year high inflation and restricted demand from China, the metal is seeing less demand, and supply is outpacing supply. However, that is not expected to be the case over the longer term. Goldman Sachs predicts copper demand will be greater than supply by 2025, and will push prices to twice their current levels. Copper is used in everything from buildings to automobiles, to wiring in homes and mobile phones. Chinese media called for Loan Prime Rate Cuts Although the Loan Prime Rates (“LPR”) were fixed at the same level earlier this week, leading Chinese financial newspapers, including the China Securities Journal and Shanghai Securities Journal are calling for LPR cuts in the coming months to boost the economy.  Temporary measures to shield European consumers from high energy prices are becoming permanent According to the calculations of the Brussels-based think tank Bruegel, European governments have allocated about €500bn to protect consumers since September 2021 (see the report). The exact figure is higher because Bruegel has not yet counted the most recent packages from the United Kingdom, Germany and Denmark. We would not be surprised if the total amount will reach at some point next year €1tr. But there is more. European governments have also allocated more to support utilities facing risk of liquidity crisis (several instruments are used including loans, bailouts and fully fledged nationalisation). This represents a total amount of €450bn (this is actually above half of the NexGenerationEU funding which was agreed after the Covid crisis). Dreadful growth forecasts for the eurozone We all know forecasting is a tricky task, even more so in the current macroeconomic environment (the impact of the energy crisis is tough to assess). Yesterday, Deutsche Bank revised downward its 2023 growth forecast for the eurozone, from minus 0.3 % to minus 2.2 %. This is a massive drop in GDP if it happens. It would actually be the third lowest euro area GDP growth since WW2 (behind 2009 and 2020, of course). This shows how expectations are low for the eurozone next year.   For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: https://www.home.saxo/content/articles/equities/apac-daily-digest-sept-22-2022-22092022
A Bright Spot Amidst Economic Challenges

Forecasts Expect Another Decline In Growth In The Eurozone, A Yen's Volatility And More

Saxo Bank Saxo Bank 22.09.2022 08:56
Summary:  The FOMC meeting triggered a fresh downdraft in market sentiment late yesterday, as they made it explicitly clear in its economic and policy forecasts, that it will continue to hike the policy rate even if the economy begins slowing and labor market conditions materially worsen. The US dollar spiked higher in response across the board, although new highs in USDJPY were tamed by fresh intervention threats from officials in Japan overnight. The US 2-year yield rose above the 4-handle for the first time since 2007.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities were not double thinking the signal from the Fed as Powell said the current level was at the absolute lower level of what is seen as necessary to get inflation under control. The US 2-year yield is trading 4.12% this morning adding renewed pressure on S&P 500 futures trading around the 3,788 level after touching the big 3,800 level in yesterday’s session. A soft landing scenario is increasingly getting difficult in the Fed’s assessment of the economy and the dot-plot also showed that the Fed’s intention of tightening further in 2023 despite the economy cooling. The next big level to watch on the downside in S&P 500 futures is the 3,740 level. USD flies higher after hawkish FOMC meeting As noted below in the comments on the FOMC wrap, the Fed’s hawkish surprise took the US dollar sharply higher across the board, with even EURUSD touching new lows for the cycle towards 0.9800 and USDJPY trying above the former cycle high near 145.00, though some push-back from Japanese officials overnight tamed that move partially. Still, if the move is linked directly to the latest rise in US yields, it may be difficult for short yields to continue rising at anything resembling the pace they have achieved over the last few weeks, with the 2-year rising from below 3% to above 4% since early August. Stronger US data from here suggests a more resilient US economy than expected (potentially lifting the entire US yield curve, importantly at the long end as well as the short end) is one way that the USD bull can continue rampaging. EURUSD heading for 0.98 EURUSD broke lower to fresh 20-year lows of 0.9809 amid Putin’s partial mobilization and the strength of the dollar from the hawkish Fed signals. While the ECB stays hawkish as well, the relative hawkishness still tilts in favor of the Fed due to the harsh winter coming up especially for Europe as Russia has cut gas supplies. The stronger case of a recession also continues to bode for more downside in EURUSD in the near-term. Japan's intervention warnings continue, without much effect on the yen As the Bank of Japan held its policy rates unchanged at ultra-low levels today in-line with expectations, there was a spike in yen volatility with a new 24-year low printed at 145.405 but that was soon reversed and USDJPY corrected back sharply lower to 143.55. The pair has since traded back higher towards 145 again, despite some stark FX warnings including top currency official Masato Kanda saying that the government could conduct stealth FX intervention and will remain on standby. To be fair, pressure on the yen should ease with long-end US yields reacting to recession concerns arising out of the more aggressive near-term rate hike plans of the Fed as was firmly communicated by the latest FOMC dot plot. Governor Kuroda will be on the wires at 3:30pm local time, and more yen volatility can be expected. Gold (XAUUSD) focus alternates between Powell and Putin Gold trades softer following another hawkish FOMC rate hike that helped send the dollar sharply higher. By continuing to raise interest rates while also raising expectations for lower growth and rising unemployment the FOMC is signaling a recession is a price worth paying for getting inflation under control. Putin’s increasingly desperate measures and threats regarding his war in Ukraine helped support gold and shield it from losses as the dollar and yields rose. Geopolitical support aside, the yellow metal may struggle as long yields continue to rise and the market continues to price inflation sub 3% in a year from now. Resistance was confirmed above $1680 while below $1654, last week's low, the market may target the 50% retracement of the 2018 to 2020 rally at $1618. Crude oil (CLX2 & LCOX2) Crude oil prices received a boost on Wednesday after Putin’s speech, but gains faded later in the day amid a hawkish Fed boosting the US dollar and strengthening the case for a deeper economic slowdown, not only in the US but around the world. EIA’s weekly stock report had a softening impact with crude and fuel stocks all rising while the four-week averaged demand for gasoline slumped to the lowest level since 1997 on a seasonal basis, and a measure of diesel demand fell to its lowest since 2009. Geopolitical worries and the EU embargo on Russian imports remain the main source of support for a market that is increasingly worried about an economic slowdown and with that lower demand for crude oil. US Treasuries (IEF, TLT) The more hawkish than expected Fed (more below) inverted the US yield curve further, as the 2-10 inversion fell well below -50 basis points and therefore to its most inverted level since the early 1980’s as the market figures that the Fed’s continue pace of rate tightening will eventually lead to a recession. While the 3.50% yield level was broken ahead of the FOMC meeting, all of the action was at the short-end of the curve yesterday as the Fed made clear it will hike even if economic conditions and the economy deteriorate. So, the surprise at the longer end of the yield curve would be a resilient economy. Either way, longer treasuries will trade nervously around inflation- and growth-related data releases from here. What is going on? Fed surprises hawkish as 2-year yield leaps over 4% The Fed managed to surprise on the hawkish side of expectation at yesterday’s FOMC meeting with the message embedded in the combination of the new set of staff economic projections and policy forecasts for this year and next. The surprise was less about the modestly higher median projections for the Fed policy rate by the end of this year and the end of next year relative to market expectations, and more that the Fed made those forecasts despite a significant lowering of the GDP forecast for this year and next and a sharp rise in the unemployment rate forecast. In other words, the clear message that the Fed is willing to continue hiking even if the economy deteriorates to get ahead of inflation made an impression, taking market expectations for Fed policy some 20 basis points higher by mid next year and spiking the US dollar higher and US yields to new cycle highs – mostly at the front end of the curve. Russia’s partial mobilization spurs risk off Russian President Putin, in his televised speech to the nation Wednesday morning, announced partial mobilization, calling up 300k reserves, whilst threatening the west with “All means of destruction, including nuclear ones”. Referendums in Donetsk, Luhansk, Kherson and Zaporozhye (15% of Ukraine territory) are scheduled September 23-27, and any fighting in these regions will be considered as attacks on “Russian territory” and thus pave the way for a potential military escalation, justifying the use of mass destruction weapons. US earnings recap General Mills rose 5% yesterday on better-than-expected earnings in its fiscal year Q1 on top of raising its outlook on organic revenue growth to 6-7% from 4-5% reflecting higher prices. The US homebuilder Lennar was down 2% on Q3 revenue and earnings in line with estimates and Q4 estimates on deliveries in line with analysts' expectations. But purchase contracts were down 12% from a year ago missing estimates highlighting the pressure from higher interest rates. Temporary measures to shield EU consumers from high energy prices are becoming permanent According to the calculations of the Brussels-based think tank Bruegel, European governments have allocated about €500bn to protect consumers since September 2021 (see the report). The exact figure is higher because Bruegel has not yet counted the most recent packages from the United Kingdom, Germany and Denmark. We would not be surprised if the total amount will reach at some point next year €1tr. But there is more. European governments have also allocated more to support utilities facing risk of liquidity crisis (several instruments are used including loans, bailouts and fully fledged nationalisation). This represents a total amount of €450bn (this is actually above half of the NexGenerationEU funding which was agreed after the Covid crisis). Dreadful growth forecasts for the eurozone We all know forecasting is a tricky task, even more so in the current macroeconomic environment (the impact of the energy crisis is tough to assess). Yesterday, Deutsche Bank revised downward its 2023 growth forecast for the eurozone, from minus 0.3 % to minus 2.2 %. This is a massive drop in GDP if it happens. It would be the third lowest euro area GDP growth since WW2 (behind 2009 and 2020, of course). This shows how low expectations are for the eurozone next year. Bank of England may tilt to hawkish despite recession concerns The BoE meets on Thursday after last week’s meeting was delayed by a week for Queen Elizabeth II’s funeral. Policymakers are expected to hike rates by another 50bps, which would bring the Bank Rate to 2.25%, although a 75bps hike is still on the table. Beyond September, analysts forecast a 50bps increase in November and 25bps in December, taking the Bank Rate to 3%, where it is expected to stay until October 2023. Also worth highlighting is the “fiscal event” delivered by new Chancellor of the Exchequer Kwasi Kwarteng on Friday. This will be his first statement on how he plans to deliver new Prime Minister Liz Truss' pledge to make the UK a low tax economy, which risks stoking inflation in the medium-term. However, short-term plans on energy support package suggest lower inflation to end this year, but that would not be enough for the BoE to go easy on its inflation fight. What are we watching next? Earnings calendar this week Today’s earnings focus is Costco and Darden Restaurants as both companies are exposed to the US consumer. Analysts expect Costco to show 15% y/y revenue growth as the US retailer gains market share on a strong competitive position amid the ongoing cost-of-living crisis. Darden Restaurants is expected to post a growth slowdown as the pent-up demand driven quarters following the reopening after the pandemic are over. Revenue growth is expected to slow to 7% y/y in FY23 Q1 (ending 31 August). Today: Costco Wholesale, Accenture, FactSet Research Systems, Darden Restaurants Friday: Carnival Economic calendar highlights for today (times GMT) 0730 – Switzerland SNB Meeting 0800 – Norges Bank Deposit Rate 1100 – Turkey Rate Decision 1100 – Bank of England meeting 1430 – EIA's Weekly Natural Gas Storage Change South Africa Rate Decision Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: https://www.home.saxo/content/articles/macro/market-quick-take-sep-22-2022-22092022
EM Index Inclusions and Exclusions: India Thrives, Egypt Faces Challenges

Yesterday's Decisions Strongly Influenced The Situation In The Market, How Will Today's Decisions Affect The Market?

Swissquote Bank Swissquote Bank 22.09.2022 10:28
We thought that the Federal Reserve (Fed) decision would be the highlight of yesterday but news from Russia came to eclipse the FOMC. Putin’s announcement and Fed decision Vladimir Putin declared partial mobilization yesterday morning. Putin’s announcement, which fell like a bomb on investors who were already stressed out due to the Fed decision, sent capital to safe haven assets yesterday, but gains elsewhere than the US dollar remained short-lived.On the FOMC front, the Fed delivered the third 75bp hike yesterday, as expected, but the dot plot revealed that the officials’ rate projections went well above the market expectations. Banks' decisions The Bank of Japan (BoJ) maintained its policy unchanged. The Swiss National Bank hiked by 75bp hike*. The Bank of England (BoE) could opt for 50bp hike, instead of 75bp, as Liz Truss’s energy package could help taming inflation. While the Central Bank of Turkey (CBT) should keep its rate at 13%. BUT WHO KNOWS! Watch the full episode to find out more! 0:00 Intro 0:28 Russia escalates tensions in Ukraine 2:35 Fed hikes 4:34 BoJ maintains status quo 5:42 SNB hikes, as expected*  6:12 BoE could hike by 50bp 7:30 Turkey: God knows. *decision came after the shooting of the show Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #FOMC #Fed #SNB #BoE #BoJ #CBT #rate #decision #jumbo #hikes #XAU #USD #JPY #GBP #CHF #TRY #BIST #Russia #Ukraine #war #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH
Hawkish Fed Minutes Spark US Market Decline to One-Month Lows on August 17, 2023

The Unchanging Situation Of Bitcoin And Yesterday's The Fed Decision

InstaForex Analysis InstaForex Analysis 22.09.2022 11:17
In the last few days before the Fed meeting, Bitcoin lost about 7% of its capitalization. Cryptocurrency quotes reached the dangerous level of $19k, but the bears did not have enough strength to break through it. The outcome of the Fed meeting helped the sellers increase pressure and bring the price of BTC to $18.8k. Results of the Fed meeting Fed members voted unequivocally to raise the key rate by 75 basis points. As of September 22, the key rate is at the level of 3.25%. At the same time, the Fed is actively withdrawing liquidity from the markets, but it is not possible to curb inflation. And here it is worth paying tribute to BBG analysts, who stated that the market lays a high probability of a rate at the level of 4.5% by the end of 2022. Fed Chairman Jerome Powell confirmed these intentions. The agency plans to bring the figure to 4.5% by the end of 2022. This means that the Fed has underestimated the scale of inflation and maintains an aggressive monetary policy. That is why a statement was made about the need to maintain the current policy in 2023. According to the results of the meeting, key rate easing is not planned until the end of 2023. Long term forecasts Considering that the bullish movement of Bitcoin is completely dependent on the policy of the Fed and the movement of the DXY index, this is extremely negative news for the cryptocurrency market. The Fed has signed up for the ineffectiveness of its fight against inflation, and you can forget about the promises to start easing monetary policy in the second half of 2022. Fed Watch believes futures markets have an 89% chance of raising the key rate by 75 bps in November. Given the Fed's theses, this should be the last increase in 2022 in increments of 0.75%. The situation remains negative, and the liquidity crisis will continue to worsen over time. Given this, with a high degree of probability, a significant increase in BTC/USD in 2022 should not be expected. Correlation of Bitcoin and stock indices Analyzing the movement of the price of Bitcoin and actively trading this instrument, it is necessary to pay attention to stock indices. The preservation of the current state of the market, at least until the end of 2022, indicates the continued correlation of cryptocurrency with stock indices. The S&P 500 formed a large bearish candle at the end of yesterday's trading day and started trading inside the support zone. Considering that the price of Bitcoin remained practically unchanged at the end of the trading day, we should expect a similar movement of the cryptocurrency after the opening of the American markets. Bitcoin: Technical analysis As of writing, Bitcoin has broken through the $19k support zone and is trading near $18.8k. It is noteworthy that the price drop was provoked by the bulls' attempt to reach the $20k level. However, the lack of sufficient volumes provoked a price reversal and a breakdown of the $19k support zone. On the daily chart, technical metrics point to buying activity in the $18.8k–$19.1k area. The RSI index and the stochastic oscillator resumed their upward movement in parallel, however, on the chart, we still do not see the bullish momentum working off. Given the fundamental background, there is a high probability that we will not see it. Despite the fierce resistance of the bulls, sellers manage to push the price lower and lower. Gradually, the range of price movement decreases towards the local bottom, which hints at its imminent retest. Over the past week, the price of Bitcoin has tested the final support level of $18.1k twice. The bulls repelled the attack on $18.1k, but there is every reason to believe that after the Fed meeting, the boundary will be broken, and the price will update the market bottom. Earn on cryptocurrency rate changes with InstaForex Download MetaTrader 4 and open your first trade Relevance up to 10:00 2022-09-23 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/322399
It's not clear we find out the results of mid-term elections immediately. Binance to buy FTX

USA: Fed Decision Itself Wasn't Everything What Aroused Interest Yesterday

Alex Kuptsikevich Alex Kuptsikevich 22.09.2022 11:01
As most had predicted, the Federal Reserve raised the rate yesterday by 75 points to 3.00-3.25%. However, all participants' attention was drawn to the accompanying comments and forecasts, a change that underpinned the latest market movements and may explain its dynamics in the coming days. US Economy, What Can We Expect From GDP Print? The outlook for the economy has darkened considerably, with GDP forecasted to rise by a flimsy 0.2% in 2022 against June's projection of 1.7%. Unemployment is expected to grow from 3.7% now to 4.4% next year. Both of these forecasts point to a reversal of the economic cycle to a downturn. Perhaps most sensitive to the markets was the change in key rate expectations. For the end of this year, the Fed plans to raise the rate to 4.4% from 3.4% three months earlier. At the end of next year, the rate is projected at 4.6% versus 3.8% in June. Monetary Policy - What's Next? This outlook sets the markets up for another 75-point increase in November and another +50 points in December. The current Fed Funds Rate level is the highest since the beginning of 2008, breaking a trend of declining peaks over the last 40 years. A significant shift for markets is also Powell's comments calling for a recession to be seen as a price stability payment. This is a very bearish signal for markets that they may have to endure more pain, and the recent sell-off in equity and bond markets has not shaken confidence in their chosen path. Read next: In Switzerland And Japan, Rates Have Reached The Level Forecasted. What Will Be The Decision Of The Bank Of England ?| FXMAG.COM This potentially means more pressure on markets in the coming days and more demand for the dollar as a higher-yielding currency.
Financial World in a Turbulent Dance: Lego, Gold, and Market Mysteries

Podcast: Comments On The Fed And Bank Of Japan Decisions, Putin's Actions And Its Impact On Commodities

Saxo Bank Saxo Bank 22.09.2022 11:49
Summary:  The FOMC delivered a hawkish message to the market sending equities and bonds lower. Russia also announced a partial mobilization of its reservists increasing the stake in its war in Ukraine impacting commodities. We go through the details of yesterday's FOMC decision and details, and what knock-on effects they have caused throughout the various markets. We also discuss BOJ's decision to stay firm on its rate policy putting more pressure on JPY. Today's pod features Peter Garnry on equities and Ole Hansen on commodities. Listen to today’s podcast - slides are found via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com. Share   Source: https://www.home.saxo/content/articles/podcast/podcast-sep-22-2022-22092022
Bitcoin Has Strong Sign That Buyers Are In Control

Bitcoin's Downtrend With No Signs Of Possible Ending Or Reversal

InstaForex Analysis InstaForex Analysis 22.09.2022 11:55
Crypto Industry News: Unsurprisingly, the Fed raised rates by 0.75% again, reassuring those who feared a 1% rate hike, but not preventing a bearish reaction to risk assets, including cryptocurrencies. The largest digital asset in the market by capitalization indeed fell to its lowest level in more than three months after the Fed decision, reaching a low of around $ 18,200. Let us remember that the Fed's rate hike was accompanied by hawkish details, especially with regard to the FOMC members' rate forecasts outlined in the dot plot. The forecasts suggest that the Fed will raise rates by another 1.25% by the end of the year. Considering that 2 more meetings will be held by the end of 2022, rate hikes by 0.75% and then 0.50% are the most likely scenario. In addition, Jerome Powell maintained a largely hawkish tone in his press conference, leaving no doubt that the Fed will continue to fight inflation until it is brought under control. Technical Market Outlook: The BTC/USD pair has made a new marginal swing low at the level of $18,142 after the FED decided to deliver the interest rate hike to the level of 3.25%. Currently the market is trying to bounce from the extremely oversold market conditions on the H4 time frame chart, so the nearest technical resistance is seen at the level of $19,347 and $19,679. The weak and negative momentum on the H4 time frame chart still supports the short-term bearish outlook towards the level of $17,600 again, but any breakout above the descending trend line will be considered bullish. Weekly Pivot Points: WR3 - $21,295 WR2 - $20,039 WR1 - $19,341 Weekly Pivot - $18,764 WS1 - $18,064 WS2 - $17,526 WS3 - $16,271 Trading Outlook: The down trend on the H4, Daily and Weekly time frames continues without any indication of a possible trend termination or reversal. So far every bounce and attempt to rally is being used to sell Bitcoin for a better price by the market participants, so the bearish pressure is still high. The key long term technical support at the psychological level of $20,000 had been violated, the new swing low was made at $17,600 and if this level is violated, then the next long-term target for bulls is seen at $13,712. On the other hand, the gamechanging level for bulls is located at $25,367 and it must be clearly violated for a valid breakout. Earn on cryptocurrency rate changes with InstaForex Download MetaTrader 4 and open your first trade     Relevance up to 11:00 2022-09-23 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/293816
Central Bank Policies: Hawkish Fed vs. Dovish Others"

The Fed Will Do Whatever It Takes To Regain Control Of Inflation

InstaForex Analysis InstaForex Analysis 22.09.2022 12:49
Fed officials have given the clearest signal that they are willing to tolerate a recession in order to regain control of inflation. It seems that they are finally taking active steps to catch up after being criticized for being too late in realizing the magnitude of the inflation problem in the US. On Wednesday, the central bank raised interest rates by 75 basis points and announced a potential 1.25% increase before the end of the year. This is more hawkish than economists expected. Growth forecasts were also cut, while unemployment forecasts were lifted. Fed Chairman Jerome Powell repeatedly spoke of the painful slowdown needed to contain price pressures at their highest levels since the 1980s. Gold reacted brightly to this news. Powell told reporters that soft landings are likely to decrease to the point where policies need to be tighter or more restrictive for a longer period. This assessment contrasts sharply with six months ago, when Fed officials first started raising rates from near zero and pointed to the strength of the economy as a positive. Now, officials are implicitly acknowledging through their pessimistic unemployment forecasts that demand will need to be cut at all levels of the economy as inflation has proven resilient and widespread. The median forecast among the 19 Fed officials is that unemployment will hit 4.4% next year and remain at that level through 2024. But this new level may still be too low as interest rates are likely to hit 4.4% this year and 4.6% in 2023, before falling to 3.9% in 2024.   Relevance up to 11:00 2022-09-23 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/322407
Gold Stocks Have Performed Very Well Under Pressure

The Geopolitical Conflict In Ukraine Briefly Pushed The Gold Price

InstaForex Analysis InstaForex Analysis 22.09.2022 13:37
Gold is going to win favor with investors as a safe haven asset after Russia's President Putin delivered a televised address to order a partial mobilization of reservists to bolster forces in Ukraine. The Russian leader warned the West he was prepared to use all available means to protect the Russian territory and respond to all threats to its territorial integrity. Putin's remarks were viewed as an escalatory address and another "nuclear blackmail". The deeply unpopular Kremlin's move enabled the US dollar to conquer a new 10-year peak. The US dollar index skyrocketed above 111 points shortly after the announcement. Nevertheless, gold managed to show resilience despite a new spike in the US dollar. Some analysts speculate that gold might have surged as high as $1,700 per troy ounce following the Fed's policy decision depending on the Fed's hawkish magnitude. In practice, the gold rally didn't happen. Head of Commodity Strategy at Saxo Bank Ole Hansen said that the recent price moves prove gold stayed afloat because of high demand for safe-haven assets, even though gold prices dropped to the lowest levels in two years, testing critical long-term support. By and large, gold has outpaced other assets amid global risk aversion that has been setting the tone for the overall market sentiment. Remarkably, gold has not collapsed to historic lows despite the stunning rally of the US dollar and massive sell-offs of stocks and government bonds. The geopolitical conflict in Ukraine briefly pushed the gold price to $2,000 per ounce. Nevertheless, later on, the geopolitical threat disappeared from investors' scope of interest. Indeed, investors have shifted focus toward inflation dynamics and rate hikes by major central banks. Hedge funds have been keeping short positions on gold for five weeks in a row. Ole Hansen admitted that gold has been bruised by ongoing headwinds on the back of the cycle of rate hikes. He also added that besides the demand for safety, investors view gold as a shield against errors in monetary policies. Influential central banks have not been able to contain inflationary pressure worldwide so far.   Relevance up to 09:00 2022-09-23 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/322385
Fed is expected to hike the rate by 50bp, but weaker greenback and Treasury yields don't play in favour of the bank

Fed helps dollar to shine

Alex Kuptsikevich Alex Kuptsikevich 22.09.2022 16:07
The Fed has launched a new wave of revised market expectations, simultaneously worsening its view of the macroeconomy while promising to raise rates longer and higher. All these factors are working to boost the dollar, reinvigorating its already protracted rally. The US central bank does not seem to be shy about helping the dollar to grow to 20-years+ highs, adding more than 17% so far this year and 25% from the bottom in the middle of last year. The expensive dollar and the cooling of the credit market amid high-interest rates are helping to push inflation back towards the target. Yesterday's meeting showed that the Fed is not yet ready to change that path. This is partly due to the Fed having overlooked the inflation problem for too long, working to make inflation more sticky. However, the Fed's actions not only describe the currency market's dynamics. Plenty of other central banks have resorted to similar measures, racing to tighten policy and contain the weakening of their currencies, but so far, they have not kept up with the leader. And we are seeing the market punishing them for it. On Thursday morning, the British pound was renewing 37-year lows, at one point finding itself near 1.1210. The market was unimpressed with a 50-point rate hike, although it got precisely what it had expected. The EURUSD made its 20-year low at 0.9800. The USDJPY was close to 146, but the first intervention since 1998 saved the yen from an uncontrolled collapse, which pushed the USDJPY to 141. However, it is unlikely that the pair has peaked yet as the Bank of Japan has confirmed its efforts to target interest rates. The Swiss National Bank raised the rate by 50 points, after which the franc lost over 2%. The markets were hoping for some surprise. However, Switzerland is not suffering from excessively high inflation or an excessively low currency. Most likely, traders avoided making big bets after the Fed and NBS announcements but did so when all cards were on the table. It will not be surprising if the Dollar Index continues its strengthening in the near term towards 120 until the end of the year. With the dollar at multi-year highs, the currency market has entered an area of increased volatility. Sharp movements in the yen and other major currencies can still occur repeatedly, creating risks and opportunities for short-term speculators.
At The Close On The New York Stock Exchange Indices Closed Mixed

Falls At The Close Of The New York Stock Exchange

InstaForex Analysis InstaForex Analysis 23.09.2022 08:16
At the close of the New York Stock Exchange, the Dow Jones fell 0.35% to a 3-month low, the S&P 500 fell 0.84%, and the NASDAQ Composite fell 1.37%. Merck & Company Inc was the top performer among the components of the Dow Jones in today's trading, up 2.98 points or 3.53% to close at 87.51. Quotes Johnson & Johnson rose by 2.90 points (1.78%), ending trading at 166.18. Salesforce Inc rose 2.52 points or 1.71% to close at 150.15. Shares of American Express Company were the leaders of the fall, the price of which fell by 5.68 points (3.82%), ending the session at 143.03. Boeing Co was up 3.20% or 4.58 points to close at 138.71, while Goldman Sachs Group Inc was down 2.43% or 7.79 points to close at 312. .92. Among the S&P 500 index components gainers today were Eli Lilly and Company, which rose 4.85% to 310.87, Merck & Company Inc, which gained 3.53% to close at 87.51. , as well as shares of Bristol-Myers Squibb Company, which rose 2.63% to end the session at 71.29. The biggest losers were Caesars Entertainment Corporation, which shed 9.44% to close at 37.62. Shares of Ball Corporation lost 8.66% to end the session at 49.23. FactSet Research Systems Inc dropped 8.29% to 394.75. Leading gainers among the components of the NASDAQ Composite in today's trading were Spero Therapeutics Inc, which rose 167.74% to hit 2.20, Avenue Therapeutics Inc, which gained 105.90% to close at 0.44, and also shares of Panbela Therapeutics Inc, which rose 46.39% to end the session at 0.35. Top Ships Inc. was the biggest loser, shedding 44.06% to close at 0.12. Shares of Ecmoho Ltd lost 42.72% and ended the session at 0.10. Quotes of Pintec Technology Holdings Ltd decreased in price by 28.80% to 0.42. On the New York Stock Exchange, the number of securities that fell in price (2596) exceeded the number of those that closed in positive territory (546), while quotes of 120 shares remained virtually unchanged. On the NASDAQ stock exchange, 3,011 stocks fell, 765 rose, and 257 remained at the previous close. The CBOE Volatility Index, which is based on S&P 500 options trading, fell 2.29% to 27.35. Gold futures for December delivery added 0.24%, or 4.00, to $1.00 a troy ounce. In other commodities, WTI crude for November delivery rose 0.54%, or 0.45, to $83.39 a barrel. Brent oil futures for November delivery rose 0.50%, or 0.45, to $90.28 a barrel. Meanwhile, in the Forex market, the EUR/USD pair remained unchanged 0.04% to 0.98, while USD/JPY fell 1.14% to hit 142.40. Futures on the USD index rose by 0.65% to 111.07.   Relevance up to 05:00 2022-09-24 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/293918
Italian headline inflation decelerates in January, courtesy of energy

The Italian Elections And Their Impact On The Euro, Interest Rates Around The World

Swissquote Bank Swissquote Bank 23.09.2022 10:24
A busy week for central banks come to an end with plenty of rate hikes, increased prospects of slowing growth, that leave investors with a bad taste in their mouth. Eyes on rate hike The Swedish Riksbank was the first major central bank to surprise with a 100bp rate hike. The US Federal Reserve (Fed) delivered its third 75bp hike. But the dot plot hinted at another jumbo hike before the year-end. The Bank of Japan (BoJ) maintained its policy rate unchanged at -0.10%, but intervened directly in the FX market to buy yen to fight back the strengthening dollar. The Swiss National Bank (SNB) raised its policy rate by 75bp. The Bank of England (BoE) opted for a 50bp hike, combined with an £80 billion Quantitative Tightening, and said the UK is now in recession. The UK will reveal the ‘mini’ budget today. Norges Bank also increased its policy rate by 50bp but signaled that tightening may be coming to an end. Indonesia and the Philippines also hiked by 50bp. Taiwan raised by a modest 12.5% as expected, Vietnam opted for a 100bp hike, South Africa raised by 75bp… …and Turkey… cut its rate by 100bp for the second consecutive meeting! But the week is not over. The Italian elections due Sunday will likely continue pressuring the euro lower. Watch the full episode to find out more! 0:00 Intro 0:26 Keeping up with the central banks 4:37 UK 'mini' budget is all but mini. 6:15 Continue keeping up with the central banks 7:22 Market update 8:42 Into the Italian elections Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #FOMC #Fed #SNB #BoE #BoJ #CBT #rate #decision #jumbo #hikes #USD #JPY #GBP #EUR #CHF #TRY #BIST #UK #mini #budget #Italy #elections #crude #oil #FedEx #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH
The US Has Again Benefited From Military Conflicts In Other Parts Of The World, The Capital From Europe And Other Regions Goes To The US

The Fed Can Tolerate Recessions, While Other Economies Need To Do Much More To Deal With Inflation

InstaForex Analysis InstaForex Analysis 23.09.2022 11:43
Measures taken by the US Federal Reserve to curb inflation in the country could lead to a recession in the global economy. To combat inflation, the Fed slowly exited the blocks, underestimating the rise in prices, considering this a temporary factor. And now, it will have to do much more to achieve the same effect, which means that advanced and emerging economies also have to do much more to cope with inflation. Emerging markets from Ghana to Kenya bear the brunt of Federal Reserve Chairman Jerome Powell's push to raise borrowing costs, causing global currencies to weaken and debt service costs to rise. The Fed's signal on Wednesday that it could tolerate a recession as a necessary trade-off to regain control of inflation means that the global economy could plunge into a deep recession. The biggest loss is the loss of trust. Whatever they do, they must restore trust. The only currency of central banks is trust. Rising US interest rates are effectively blocking frontier markets from capital markets, urging investors to consider fundamental factors rather than "hype."   Relevance up to 08:00 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/322479
The ECB President Christine Lagarde's Speech Could Bring Back Risk Appetite

"Fed Listens" Takes Place Today! In Europe, Eurozone PMIs Are Released And ECB's, Bundesbank's And SNB's Members Are Set To Speak

ING Economics ING Economics 23.09.2022 11:14
Rates push higher and curves flatten as the hawkish message from the latest central bank meetings sinks in. The decisions have also highlighted policy transmission issues that have to be overcome as negtiave rates are left behind. Today's eurozone PMIs underscore the growing economic pain the ECB is willing to tolerate, as it focuses on inflation  Gilts lead the sell off, caught between BoE and fiscal measures As the hawkish message of this week’s raft of central bank meetings sinks in, rates markets remain under pressure with front to intermediate rates underperforming initially. The German 2Y 10Y curve came close to inversion, re-steepened only as 10Y Bund yield pushed towards 2%. Yet it was Gilts that led the sell-off. At first sight, it was surprising as the Bank of England underwhelmed market expectations with a smaller than expected 50bp hike, but the Bank later added that the impact of the government’s fiscal package would only be considered at the next meeting. With the promise to act forcefully if necessary that leaves the door open to substantial increases further down the road – 75bp not excluded with three Monetary Policy Committee votes in favour already this time around. It gets uncomfortable for Gilts amid quantitative tightening and fiscal spending  However, it is also the Gilt supply dynamics weighing heavily. The BoE announced yesterday its plans to kick off active sales of its bond holdings in October. This would amount to the portfolio shrinking by £80bn over the next 12 months, half of that sales, the other half passive roll off. Those numbers were not entirely unexpected, but amid current market conditions and given that the government's energy-related spending plans could create unpredictable upside risks for Gilts issuance, this puts private Gilt investors in an uncomfortable position. We would not exclude 10Y Gilt yields at 4% soon. Fiscal measures and QT add up to a daunting amount of Gilt supply Source: Refinitiv, ING Transmission and cost issues as rates are hiked A more technical aspect faced by central banks as policy rates are lifted from zero or below into positive territory was highlighted by the Swiss National Bank yesterday. It hiked the key rate by 75bp to 0.5%. But to ensure that the market rate actually follows the policy rate higher, it introduced what essentially boils down to a reverse tiering system. Sight deposits are now remunerated at the key rate up to a multiple of individual banks’ reserve requirements, and anything above does not earn interest. Crucially, that will compel banks to participate in the SNB’s repo and bills issues have been introduced alongside to mop up this remaining excess liquidity, ensuring that the overnight rate actually trades at the policy rate. Rate hikes are not properly transmitted into all corners of the money market The European Central Bank has also faced the problem that its rate hikes are not properly transmitted into all corners of the money market. Collateral scarcity is affecting core rates with Germany’s 3m treasury bills still trading some 40bp below ESTR OIS (euro short-term rate overnight indexed swap) for instance. The ECB has prevented at least a worsening of the situation by remunerating the vast government cash holdings at national central banks that would have otherwise pushed into the tight market for collateral. But it is only a temporary fix and the ECB may eye other central banks’ approaches, in this case, the SNB's issuance of central bank bills – which is essentially converting excess liquidity into collateral. It does not address the issue of the ECB being left with rising interest costs as it has started to remunerate banks’ excess liquidity holdings.     Collateral scarcity means higher ECB rates don't transmit fully to German bonds and bills Source: Refinitiv, ING Today's events and market view The eurozone PMIs are expected to drop further below the 50 threshold as high energy prices bite and force manufacturing production cuts. Yet ECB officials have already started to prepare markets for upcoming pain, signalling their intent to remain focused on inflation and hike rates despite an economic downturn. This had boosted the flattening dynamic of yield curves, and while yesterday it was already close, the Bund curve should eventually follow the OIS and swap curves into inversion.   Gilts markets will focus on today's fiscal event and what it will mean for issuance. At least equally important will be the implications for the upcoming BoE policy decisions, with the Bank having already warned that the government's energy package will increase medium-term inflation pressure. Elsewhere, we will follow comments from the ECB's Martins Kazaks as well as Bundesbank's Joachim Nagel alongside the SNB's Thomas Jordan. Later in the day, Fed Chair Jerome Powell will open a "Fed Listens" event with Vice Chair Lael Brainard and the Fed's Michelle Bowman. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Grains Sector Saw Continued Demand| Acceleration In The Sale Of Gold

Fed Monetary Policy Will Drive Investment In Dividend Stocks

Saxo Bank Saxo Bank 23.09.2022 13:48
Summary:  The FOMC will push interest rates much higher from here to rein in inflation and with that lowering equity valuations. This means that higher P/E ratios, also called growth stocks, will suffer relative more compared to lower P/E companies and especially those with high dividend yields and that have proven their robustness over the past 10 years. Dividend stocks are in high demand and have been outperforming the global equity market by 14% since November and will likely continue to do well over the coming six months. The monetary pivot in November 2021 kickstarted dividend investing Since November last year when the Fed pivoted on its temporary inflation thesis and indicated that it would significantly tighten financial conditions to rein in inflation, dividends aristocrats* (see definition below) have outperformed the global equity market by 14.2% and are only down 10.7% this year compared to 21.2% for the MSCI World. The question is whether the relative outperformance can continue for dividend stocks. The FOMC’s decision on Wednesday to hike the US policy rate by another 75 basis points and sending a hawkish signal through its dot-plot and economic forecasts (read our in-depth take on the FOMC decision in our Thursday Quick Take note) will add more tailwind for dividend stocks. The reason for that is that higher interest rates will reduce equity valuations through a higher discount rate on future cash flows. Lower equity valuations will, all things being equal, have a larger impact on higher P/E ratio companies than those with low P/E ratios, because high P/E companies have a larger part of their value coming from cash flows expected far into the future. As our table below shows, the dividend aristocrats generally have lower valuation multiples and thus have less interest rate sensitivity. In addition, higher interest rates coupled with potential recession and uncertainty lift the value of companies with higher more predictable income stream in the short-term. It is worth noting that over the past five years, global dividend stocks have delivered a significantly worse return for shareholders than the global equity market. There are many ways to define good dividend paying companies and in this equity note we have focused on the SPDR S&P 500 Global Dividend Aristocrats UCITS ETF, but there is also the iShares MSCI World Quality Dividend ESG UCITS ETF which focuses on companies with high dividend yield and quality characteristics (strong return on capital and strong balance sheets). Below we have listed the 10 largest holdings in each ETF. SPDR S&P 500 Global Dividend Aristocrats UCITS ETF – 10 largest holdings H&R Block LTC Properties South Jersey Industries Unum Universal Pinnacle West Capital Northwest Bancshares IBM OGE Energy Spire MSCI World Quality Dividend ESG UCITS ETF – 10 largest holdings Microsoft Apple Roche Cisco AbbVie Merck Texas Instruments Unilever Qualcomm Novartis The chart below shows the 5-year weekly prices on the SPDR S&P Global Dividend Aristocrats UCITS ETF * S&P Global defines dividend aristocrats as the highest dividend yielding companies within the S&P Global Broad Market Index (BMI) that have followed a policy of increasing or stable dividends for at least 10 consecutive years. Source: https://www.home.saxo/content/articles/equities/hawkish-fomc-means-more-tailwind-for-dividend-stocks-23092022
The US Has Again Benefited From Military Conflicts In Other Parts Of The World, The Capital From Europe And Other Regions Goes To The US

The Fed Is Ready To Sacrifice Growth And Employment To Bring Inflation Back To Its Target

ING Economics ING Economics 24.09.2022 08:51
US housing numbers will be the main focus next week. The Federal Reserve's aggressive hiking cycle has already sent the market into recession and more pain lies ahead. In the eurozone, we expect higher inflation at 9.6% while unemployment should remain unchanged In this article US: Housing numbers in focus after Fed's 75bp hike Eurozone: Higher inflation and unemployment rate expect to remain at 6.6% Source: Shutterstock US: Housing numbers in focus after Fed's 75bp hike After the Federal Reserve's 75bp rate hike this week and Jerome Powell's commentary that the Fed is prepared to sacrifice growth and jobs to ensure inflation comes back to target, we will be hearing from many more officials over the coming week. Given the strong clustering of near-term forecasts for rates and the economy, the hawkish comments hinting at another 75bp hike in November are likely to come thick and fast. The data calendar is fairly light with housing numbers the main focus. With mortgage rates now firmly above 6%, more pain is coming in the housing market where a recession is already underway. Eurozone: Higher inflation and unemployment rate expect to remain at 6.6% Inflation figures will be the main focus in the eurozone. Expect higher prices partly due to Germany's decision to end cheap public transport tickets as of 31 August. The key will be to see how much other categories have continued to rise. Separately, unemployment data is out on Friday. We expect the labour market to have remained very tight with the unemployment rate stable at a historic low of 6.6% despite business hiring expectations sliding in recent months. Key events in developed markets next week Source: Refinitiv, ING This article is part of Our view on next week’s key events   View 3 articles TagsFederal Reseve Eurozone   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
EM Index Inclusions and Exclusions: India Thrives, Egypt Faces Challenges

Market Participants Fear A Recession, The Indices Of Leading European Companies Has Declined

InstaForex Analysis InstaForex Analysis 24.09.2022 13:48
On Friday, key European stock indices declined more than 1%. The stock market has been in the red zone for the eighth consecutive session. Investors continue to analyze the Fed and other global regulators' hawkish monetary policy decisions. At the time of writing, the STOXX Europe 600 index of Europe's leading companies fell by 0.82% to 396.48 points. Meanwhile, the French CAC 40 was down 1.11%, the German DAX dropped by 1.33% and the British FTSE 100 lost 1.73%. Top gainers and losers The value of the securities of the German automobile concern Volkswagen AG fell by 2%. On the eve, the company's management said that it did not rule out the possibility of moving production from Germany and Eastern Europe amid growing gas shortages in the region. Quotes from Swiss bank Credit Suisse plummeted 7.8% on reports that the company may again turn to investors for new cash in order to radically overhaul its investment bank. The market capitalization of Norwegian metals company Norsk Hydro fell 1.3%. Even the statement of the company's management about the beginning of a securities buyback program totaling $192.2 million did not support quotations. The program is scheduled to start on September 26, 2022, it will last until September 20, 2023. Market sentiment On Friday, European investors continue to analyze the results of the U.S. Federal Reserve's September monetary policy meeting published the day before. Market participants are afraid of recession in the whole world as well as in Europe in particular after the hawkish decisions of the American regulator. On Wednesday, the US central bank raised its key rate range by 75 basis points to 3-3.25%, the highest since 2008. The Fed also lowered its forecasts for US gross domestic product and raised its estimates of inflation and unemployment for 2022-2023. Moreover, US Central Bank officials said they will continue to reduce their holdings of Treasury and mortgage-backed securities and agency debt. The latest news from the US Federal Reserve gave investors an idea of the future prospects of the interest rate in the face of a permanently rising inflation rate. As a reminder, the US Federal Reserve already raised its key rate by 25 basis points in March 2022, by 50 in May and by 75 in June. On Thursday, the Bank of England raised the discount rate by 0.5 percentage points, the seventh consecutive increase in the rate. As part of its September meeting, the British regulator also adjusted its next steps in monetary policy to take into account the measures of the new government of Liz Truss to curb energy prices. Recall that at the August meeting, representatives of the Bank of England predicted that inflation in the country will peak at 13.3% by the end of 2022, after which the UK will plunge into recession and not come out of it until early 2024. On Thursday, the Swiss central bank announced a 75 basis point interest rate hike to 0.5% per year. The September rate hike was the second in a row: in June it was increased by 50 basis points - to minus 0.25% per annum. As a result of August, the inflation rate in Switzerland was at its highest point in the last thirty years - 3.5% per annum. Recall that earlier in September the European Central Bank raised the basic rate on loans to 1.25% per annum, the rate on deposits to 0.75%, and the rate on marginal loans to 1.5%. At the same time, the discount rate increased immediately by 0.75 percentage points for the first time in history. In addition, members of the Central Bank noted that the regulator intends to continue raising the rate in the upcoming meetings. Thus, ECB President Christine Lagarde said that further pace of interest rate hikes will depend on statistical data. Thus, global central bank decisions on monetary policy in September 2022 were among the most aggressive in a generation. An important factor of pressure on the European stock market on Friday was also weak EU and UK statistics. According to preliminary data from the American information media holding S&P Global, the composite PMI of the European Union in September fell to 48.2 points from 48.9 points in August. For the last three months, the Euro-region PMI has been balancing below the 50 level, which is the line between contraction and expansion. Meanwhile, the risk of recession in the euro-area economy has reached its highest level since July 2020. Meanwhile, the manufacturing index fell to 48.5 in the outgoing month from 49.6 points in August, and the services sector fell to 48.9 from 49.8 points. Germany's composite PMI in September slipped to 45.9 points from August's 46.9 points. In France, the indicator rose to 51.2 points from 50.4 points. According to GfK NOP, Ltd., the U.K. consumer confidence index fell 5 points to minus 49 points in the month, its lowest level in the history of calculations since 1974. However, Friday was not without positives. Thus, Spain's economic growth accelerated to 1.5% in the second quarter of 2022 from the previous 1.1%. Thus, the current macroeconomic outlook in Europe remains gloomy amid disruptions in energy supplies, a protracted conflict between Russia and Ukraine, as well as a permanent rise in energy and food prices. Previous trading results On Thursday, European stock indices closed in the red zone. The STOXX Europe 600 index of Europe's leading companies fell by 1.79% to 399.76 points. The French CAC 40 declined by 1.87%, the German DAX lost 1.84%, and the British FTSE 100 was down 1.08%. The value of securities of the Finnish energy giant Fortum Oyj soared by 7.9%. The quotations of the Swiss bank Credit Suisse Group AG sank by 5.5%. The day before, the British media wrote that the financial institution plans to split its investment banking into three businesses and sell profitable divisions to prevent the damage caused by capital gains. The market capitalization of French hotel chain Accor S.A. plummeted 6.9 percent after U.S. financial conglomerate J.P. Morgan downgraded the company's stock from "neutral" to "below market. The value of the shares of the largest British bank HSBC decreased by 1.3% on the news that the company will gradually exclude coal energy and steam coal mining from its list of assets. The share price of the largest British retailer of sportswear JD Sports fell by 6.3%. Earlier the company reported a decline in profits in January-June on the background of soaring inflation and lower consumer spending. An important pressure factor for the stock market in Europe on Thursday was weak results of the last trading session on the US stock market. Thus, on Wednesday the Dow Jones Industrial Average index collapsed by 1.7%, the S&P 500 also sank by 1.7% and the NASDAQ Composite by 1.8%. In addition, the key trading floors of Asia also showed a strong decline the day before.   Relevance up to 20:00 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/322574
Biden Declared Unwavering Support For Ukraine, The Reserve Bank Of New Zealand May Go Back To Raising Rates

Next Week The Focus Will Be On "Referendums" On Russia-Controlled

Craig Erlam Craig Erlam 24.09.2022 14:42
US Now that Wall Street has had some time to digest the FOMC decision, the focus shifts to how quickly the economy is weakening and a wave of Fed speak.  A wide range of economic releases includes more Fed regional surveys, durable goods orders, consumer confidence, new home sales, initial jobless claims, personal income & spending, and the PCE deflator.  An overwhelming amount of Fed speak include 16 appearances by policymakers.  Monday is filled with comments from Fed’s Collins, Bostic, Logan, and Mester. On Tuesday, Chair Powell will participate in a panel on digital currencies. Evans, Bullard, and Daly will also speak. Wednesday has appearances from Bostic, Bullard, and Evans. Thursday’s speakers include Bullard, Mester, and Daly. On Friday, both Brainard and Williams speak at the Fed conference on Financial Stability.    EU  Next week is littered with appearances from ECB policymakers which comes at a good time following a raft of massive rate hikes around the world and as we get the latest flash inflation figures for September.  The Italian general election on Sunday will also be interesting, with it expected to end in victory for the far-right.  UK  There’s been a lot to process this week from the latest rate hike to the supposed “mini-budget” and subsequent sterling plunge. There’s a lot of heat on the UK economy and government at the moment and all of that tax cutting has added fuel to the fire rather than put it out. Next week will tell us if the UK could already be in recession as the final reading of second-quarter GDP is released. The last reading was -0.1% so a small positive revision could be enough to kick the technical recession down the road, not that it actually changes anything.  Apart from that, we have a few appearances from BoE policymakers to look forward to. Russia The focus next week will be on the “referendums” in Russian-controlled territories of eastern Ukraine and what the Kremlin will do next. The rhetoric has become far more aggressive recently amid constant reference to its nuclear might and ability to use it.  On the economy, unemployment data will be released which seems very insignificant in the grand scheme of things.  South Africa PPI data is expected to show pressures slightly softening, albeit from 18% to 17.6%. This comes after CPI data last week fell at a slower pace than expected and the SARB hiked rates by 75 basis points to 6.25%. With two of the five members of the MPC voting for 100bps, further tightening looks likely at upcoming meetings. Turkey With inflation running above 80%, the CBRT obviously cut the repo rate by another 100bps to 12%. Which makes observing the data feel a bit pointless at times but only here will the cost of this monetary policy experiment show up. Next week has little to offer on that front, with the few releases being tier two and three.  Switzerland The SNB opted for a 75bps rate hike this month and warned that it could intervene in the currency markets – despite referencing the benefits of the stronger franc – and hold an emergency meeting if necessary before the next scheduled quarterly gathering in December.  As far as next week is concerned, the quarterly bulletin on Tuesday will be of interest, as will the retail sales number and KOF and ZEW surveys.  China On Friday, manufacturing and non-manufacturing PMIs will be released. As a result of the historically hot and dry weather extremes in 14 provinces and cities in China from July to August, many provinces are experiencing water and electricity shortages. At the same time, China’s house prices have been falling for 12 consecutive months, and the house price inflation rate has dropped to -2.1 % on an annual basis. Real estate has always been the main component of Chinese household wealth and a pillar industry of the economy. The continuous decline of this data indicates that consumption is and will remain weak.  This may suggest further weakness in the data and could further weigh on the yuan as the PBOC continues to prop it up. India The RBI is expected to raise the repo rate again on Friday but by a smaller margin of just 35bps. There is scope for more though, with some suggesting 50 could be on the table. Australia & New Zealand The August retail sales are to be released next Wednesday. Data from China, Australia’s largest trading partner, could have an impact on the Australian dollar next week, as could risk appetite which has weighed on the currency in recent weeks. A serious downturn in the New Zealand ANZ business outlook and confidence for September on Thursday could weigh on the kiwi in the short term and even get the attention of the central bank as it aggressively tightens monetary policy. The currency could also be sensitive to Chinse data and the risk environment.  Japan The Ministry of Finance stole the spotlight on Thursday as it conducted its first FX intervention in 24 years. This came as the BoJ held firm on its monetary policy stance after the Fed hiked by 75 basis points, sending USD/JPY above 145. It was around this point that the BoJ carried out a rate check recently and just above here that the last intervention was conducted in 1998. Next week brings a whole host of economic data as well as the BoJ minutes (from the July meeting, not September). Pressure could mount on the BoJ in the coming months as it can’t rely on the MoF to tame the decline in the currency longer term.  Singapore Industrial production figures will be released on Monday.  Data last week showed inflation rising from 7% to 7.5% in August, far ahead of expectations of 7.2%. Singapore’s Minister of Finance, Lawrence Wong, has said that inflation in Singapore will peak by the end of this year. Economic Calendar Saturday, Sept. 24 Economic Events General debate continues at the UN General Assembly in New York. Sergei Lavron due to speak German Chancellor Scholz begins a trip to Saudi Arabia, Qatar and the UAE Russia’s invasion of Ukraine hits the seven-month mark   Sunday, Sept. 25 Economic Events Italian general election is expected to result in a far-right victory  UK Labour Party conference takes place in Liverpool US Vice President Harris will travel to Japan and South Korea and lead the presidential delegation to the state funeral of former Japanese Prime Minister Shinzo Abe Monday, Sept. 26 Economic Data/Events Germany IFO business climate Japan PMI Singapore industrial production Thailand trade, manufacturing production index, capacity utilization Boston Fed President Susan Collins speaks at the Greater Boston Chamber of Commerce event Atlanta Fed President Raphael Bostic discusses income and wealth inequality at a Washington Post event Cleveland Fed President Loretta Mester discusses the economic outlook at an MIT event ECB President Christine Lagarde appears before the Committee on Economic and Monetary Affairs of the European Parliament in Brussels ECB policymakers Joachim Nagel and Fabio Panetta speak at a Bundesbank’s ­symposium BOE’s Tenreyro speaks at the E-Axes Forum webinar Tuesday, Sept. 27 Economic Data/Events US new home sales, Conference Board consumer confidence, durable goods China industrial profits Japan PPI services, machine tool orders Mexico international reserves, trade, unemployment South Korea consumer confidence Taiwan monitoring indicator ECB’s Villeroy and Panetta, Fed Chair Powell and BIS’s Carstens speak at the Bank of France Seminar on Tokenization of Finance Chicago Fed President Evans speaks at an event in London hosted by the Official Monetary and Financial Institutions Forum. Sweden’s Riksbank Governor Ingves speaks on the economic situation and current monetary policy at Nordea in London Bank of England chief economist Pill, St. Louis Fed President Bullard and ECB Vice President de Guindos speak at Barclays-CEPR International Monetary Policy Forum Japan holds a state funeral in Tokyo for former Prime Minister Shinzo Abe Wednesday, Sept. 28 Economic Data/Events US wholesale inventories Australia retail sales Japan leading index, coincident index Russia industrial production, unemployment Thailand rate decision: Expected to raise rates by 25bp to 1.00% EIA crude oil inventory report San Francisco Fed President Daly speaks in a virtual moderated Q&A at an Asian banking symposium in Singapore Atlanta Fed President Bostic speaks in a moderated Q&A on leadership in banking hosted by the Atlanta Fed Chicago Fed President Evans to discuss the economic and monetary policy outlook at an event hosted by the London School of Economics The Milken Institute’s 9th annual Asian Summit kicks off in Singapore ECB President Lagarde gives opening remarks at the Frankfurt Forum on US-European geoeconomics Riksbank Deputy Governor Jansson speaks about current monetary policy at a breakfast meeting at Handelsbanken BOE Deputy Governor Cunliffe gives the keynote speech on payments systems at AFME’s innovation conference Thursday, Sept. 29 Economic Data/Events US initial jobless claims, GDP Australia job vacancies Eurozone economic confidence, consumer confidence Germany CPI Mexico rate decision: Expected to raise Overnight Rate 75bp to 9.25% New Zealand business confidence Spain CPI ECB Governing Council members Simkus, Centeno, de Guindos, Kazaks and Muller speak at a central banking conference in Vilnius, Lithuania Cleveland Fed President Mester and ECB Executive Board member Lane take part in a policy panel during a Cleveland Fed conference on inflation ECB’s Villeroy, Knot and Elderson speak at a climate conference in Amsterdam. San Francisco Fed President Daly gives keynote speech at Boise Steve University ECB Governing Council member Rehn speaks on the euro area economic outlook and monetary policy at a Bank of Finland news conference in Helsinki Riksbank Deputy Governor Ohlsson to discuss the economic situation at Swedbank in Uppsala Deputy Governor Floden to speak on monetary policy at the Nordic Forum in Stockholm BOE’s executive director Hauser speaks at a Market News event on “The Bank of England’s balance sheet” Friday, Sept. 30 Economic Data/Events US consumer income, University of Michigan consumer sentiment Fed Vice Chair Brainard and New York Fed President Williams speak at Fed conference on financial stability Deadline for the US government shutdown ECB Executive Board member Schnabel joins panel “Fight against inflation” at La Toja Forum 2022 in Pontevedra, Spain Riksbank Governor Ingves speaks about digital currencies and decentralized finance in Stockholm EU energy ministers meet in Brussels on the current crisis Australia private sector credit China PMI, Caixin PMI, BoP Czech Republic GDP Eurozone CPI, unemployment France CPI Germany unemployment Hong Kong retail sales, budget balance, money supply India rate decision: Expected to raise Repurchase Rate by 35 bps to 5.75% India fiscal deficit, eight infrastructure industries Italy CPI, unemployment Japan unemployment, industrial production, retail sales, consumer confidence New Zealand building permits, consumer confidence Poland CPI Singapore money supply South Africa trade balance Thailand trade, BoP, forward contracts, foreign reserves UK GDP Sovereign Rating Updates Poland (S&P)  Turkey (S&P) Italy (Moody’s) France (DBRS) This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Bio Twitter Latest Posts  
For What It Is Worthy To Pay Attention Next Week 23.01-29.01

Markets Affected By The Announcement Of Tax Cuts In The UK, The Intervention Of The Japanese Authorities

Saxo Bank Saxo Bank 26.09.2022 09:07
Summary:  The global macro environment took another beating late last week with disappointing Eurozone PMIs and a UK mini-budget causing a havoc in markets as it fueled further debt and inflation concerns. Dollar dominance continued with sterling pressured despite higher UK yields, and risk off tone is likely to continue as Russia-Ukraine tensions in focus. The yen’s intervention risks also on watch as Japan returns from holiday today. Oil prices slid to multi-month lows amid a stronger dollar and demand concerns, with supply factors turning supportive for now, weighing on energy stocks. What is happening in markets?   The Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) continue to tumble on rising interest rates  The selloff last Friday continued its long stretch of turbulence, which first kicked off following Powell’s hawkish Jackson Hole speech on August 26, then was exacerbated by a much-stronger-than expected CPI on September 13. And the selloff has most recently been bolstered by the hawkish rate and economic projections released after the FOMC meeting last Wednesday. Adding to the woes, earnings warnings from heavy-weight industrial and transportation companies have warned of weaker demand and an opaque outlook. The S&P 500 lost 12% and Nasdaq 100 dropped 13.9% over the period. Of note, last Friday, financial conditions tightened further, with US 2-year yields soaring to 4.2%, the highest since 2007, while the dollar soared to a new high and dragged down stocks, with both the S&P 500 and Nasdaq ending Friday down 1.7% lower.   Big US stock movers: oil and gas stocks plunge as oil falls to an eight-month low  All 11 sectors in the S&P500 closed lower on Friday, with Energy falling the most, 6.8%, after WTI crude declined by about 5% to an eight-month low after the US dollar hit its highest level in two decades on fears rising interest rates will tip major economies into a recession. APA Corp (APA:xnas) and Marathon Oil (MRO:xnys) fell about 11%. FedEx (FDX:xnys) fell 3.4% with its US$2.7 billion cost-saving by cutting flights, deferring projects, and closing offices facing skepticism. Ford (F:xnys) fell 3.6%, following a WSJ report that Ford delayed vehicle deliveries due to supply chain issues in getting Ford logo badges to put on its vehicles. On the upside, Generac Holdings (GRNC:xyns), Domino’s Pizza (DPZ:xyns) shares rose the most in the S&P 500 on Friday, gaining 3.2% and 3.1% respectively, perhaps with traders closing shorts as their stocks are continuing to hit new lows on a yearly basis.  U.S. treasuries (TLT:xnas, IEF:xnas, SHY:xnas) rattled by soaring U.K. bond yields  In London trading hours before New York came in, U.S. treasuries were rattled by the jaw-dropping, emerging market style meltdown in U.K. Gilts, as 5-year UK Gilts soared 50bps and 10-year Gilts jumped 33bps in yields in an hour, following the announcement of a massive loosening of fiscal policy of nearly 2% of GDP by the new U.K. government. Investors are worried as when the U.K. acted similarly last time in 1972, inflation soared and the U.K. had to go to the IMF for a loan in 1976. When New York came in, bids emerged for U.S. treasuries, in particular, for the long end of the curve. 10-year and 30-year yields fell 3bps to 3.68% and 3.61% respectively while 2-year yields finished the session 8bps higher at 4.20%, the highest level since 2007.    Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) glided lower  Hang Seng Index continued its losing streak and tumbled 1.2% to its lowest level last seen in 2011.  Materials, healthcare, China Internet, EV, shipping, and consumer stocks led the market lower.  In the materials sector, Ganfeng Lithium (01772:xhkg) plunged 5%, followed by MMG (01208:xhkg) down 3.6%, and China Shenhua (01088:xhkg)  off 3.4%.  Despite the weakness in international crude oil prices, PetroChina (00857:xhkg) and Sinopec (00386:xhkg) managed to bounce by around 1.5%. Alibaba (09988:xhkg), Tencent (00700), and Meituan (03690:xhkg) declined by nearly 3%. Hong Kong’s end of hotel quarantine requirement lifted the share price Cathay Pacific (00293:hk) by 1% while Chinese airlines declined moderately.  Hong Kong luxury retailers gained, with Oriental Watch (00398:xhkg), Luk Fook and Chow Sang Sang rising from 0.5% to 2.2%. Banks in Hong Kong gained in anticipation of improvement in net interest margins following the lenders increased their prime rates, BOC Hong Kong (02388:xhkg) rising 3.8%, Hang Seng Bank (00011:xhkg) up by 2.5%. In mainland A shares, CSI300 swung between modest gains and losses and finished the day down by 0.3% and declining to within 3% from its April low. In terms of sectors, electronics, semiconductors, autos, coal, and solar power were among the worst laggards, while banks and appliances outperformed. Australia’s ASX200 (ASXSP200.1) to be pressured by oil prices pulling back  This week Australia’s share market will likely take its lead from commodity prices pulling back, with oil stocks like Woodside (WDS:xasx), Santos (STO:xasx) and Worley (WOR:xasx) to take a hair cut. Inversely, the coal price has continued to move higher, along with coal futures, so there is likely to be further upsdise in coal stocks including; New Hope, Whitehaven (WHC:xasx) and Coronado (CRN:Xasx) Washington Soul Patts (SOL:xasx). Dollar dominance continues, sterling battered The dollar rallied broadly, hitting a new all-time high against a currency basket and pushing the euro to a 20-year low while the pound plunged to a fresh 37-year low below 1.10 after the new UK government unveiled a massive fiscal stimulus plan to boost economic growth, which is sure to send inflation soaring even higher and force the BOE to do even more QT. Safe-haven demand also boosted the greenback amid risks from the escalation of Russia tensions and more signs of a slowing Chinese economy, which raised concerns about the outlook for global economic growth.  Crude oil (CLU2 & LCOV2) inches below key supports Crude oil prices fell sharply last week with the focus fixed on demand concerns while supply issues turned supportive. The continued surge higher in dollar and yields, aided by not just the FOMC but also the UK fiscal expansion measures into the end of the week, drove a slump in risk appetite. Brent crude fell to a nine-month low of $86.15/bbl, and this may warrant an OPEC action to support prices. Russia also warned it will not supply commodities to nations that join any agreement to cap prices for its crude. WTI crude traded below $80/bbl in early Asian trading hours as the new week kicked off.   What to consider? US PMIs come in better than expectations US flash PMIs for September surpassed expectations across the board, as manufacturing rose to 51.8 (prev. 51.5, exp. 51.1) and services, despite remaining in contractionary territory, printed 49.2 (prev. 43.7, exp. 45.0). Composite lifted to 49.3 from 44.6. At the same time, the inflation components of the PMIs continue to show some relief, with the report showing that supplier shortages eased and both cost and selling prices for both goods and services were at fresh lows, while still-high compared to the usual levels.  Eurozone PMIs disappoint, but ECB speakers (including Lagarde) will be in focus this week Both manufacturing and services PMIs for the Eurozone came in weaker-than-expected in a flash reading for September, with rising energy costs and decline in purchasing power weighing on manufacturing activity as well as the services sector. The headline reading fell to 48.2 in September from 48.9 in August. New orders disappointed, and the outlook was bleak as well. Manufacturing continues to be hit harder by elevated commodity prices. The reading slipped to 48.5 from 49.6. The services figure came in a bit higher at 48.9, but still fell from 49.8 in the previous reporting period. While supply bottlenecks eased, surging energy prices suggest these could reverse again. UK’s historic tax cuts raise the case for a BOE’s emergency rate hike New UK Chancellor Kwasi Kwarteng announced a mini-budget on Friday, which included wide-ranging tax cuts of the order of GBP 45bn, adding to an estimated cost of GBP 60bn for the energy plan. Instead of stabilizing markets, the announcement sparked mayhem as it promised even more inflation at a time when the UK is set to slide into a crippling stagflationary recession as prices soar. Bank of England last week stuck with a 50bps rate hike as recession is likely on the cards. Bonds were sold off and the sterling dipped to 37-year lows, suggesting UK’s inflation-fighting credibility at stake and demands risk premia.  Investors pile into insurance against further market sells offs. Over the last four weeks money managers have spent US$34 billion purchasing put options, which provides protection against a further fall in stock markets (according to the Financial Times). According to the article, ‘Investors pile into insurance against further market sell-offs', $9.6 billion was spent in the last weeks alone on options protecting against downside risks.  Will Japanese authorities intervene further to defend the yen? The Japanese authorities intervened in the currency markets for the first time in two decades last Thursday. USDJPY’s move above 145 following a hawkish FOMC and a still-accommodative Bank of Japan prompted the intervention, and dragged the pair to sub-141 levels before some of the move was retraced. However, Japan was closed on Friday for a holiday, and returns to trading today. Moreover, Governor Kuroda will make a speech and talk to reporters today. We believe the yen could weaken further given the pressure from yield differentials between the US, which continues to rise to fresh highs, vs. the yields in Japan which continue to remain capped. Meanwhile, the intervention last week has been possibly unilateral, suggesting it may not be long-lasting. This continues to raise the possibility of further intervention from the Japanese authorities, especially if USDJPY rises back above 145. Russia referendums results may create market volatility The four Moscow-held regions of Ukraine – Donetsk, Luhansk, Kherson and Zaporizhzhia – began voting on Friday on whether to become part of Russia, and results may be expected this week. The referendums are reminiscent of one in 2014 that saw Ukraine’s Crimea annexed by Russia. The four regions’ integration into Russia – which for most observers is already a foregone conclusion – would represent a major new escalation of the conflict. The threat of nuclear weapons will also keep risk off on the table, with Putin threatening to use “all means” to protect the annexed Russian territory. Hong Kong ended hotel quarantine for arrivals Effective from today, Hong Kong ended its requirements for people arriving Hong Kong to be under hotel quarantine.  Under the new arrangement, people arrive to Hong Kong from overseas and Taiwan are still required to undergo three days of medical surveillance at home or hotels.  They can go out, including taking public transportation and going to work but are still denied access to some public venues such as restaurants during the medical surveillance as well as required to take RAT daily for seven days plus three PCR tests on day 2, 4 and 6 each.  For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast .     Source: https://www.home.saxo/content/articles/equities/apac-daily-digest-sept-26-2022-26092022
ECB's Knot: July Rate Hike Necessary, Beyond July Uncertain; Canadian CPI Supports Rates on Hold; Global Crypto Market at $1.2 Trillion; Oil Market Tightens with Russian Shipments Drop and China's Support Measures

The Actions Of The Fed And The Bank Of Japan Are Drowning The Japanese Currency (JPY)

InstaForex Analysis InstaForex Analysis 26.09.2022 12:22
The dollar burst on horseback in the new working week, and the USD/JPY pair regained strength. The asset jumped by more than 0.3% at the beginning of Monday and broke through the resistance at 144. The dollar broke loose Recall that last week the dollar-yen pair tickled the nerves of traders more than once, getting into a zone of increased turbulence. First, on the increased monetary divergence between the US and Japan, the asset managed to reach a new 24-year high at 145. And then, as a result of the currency intervention carried out by Japan in support of its national currency, the quote sharply collapsed from this peak by more than 500 points. The intervention of the Japanese authorities helped JPY to complete the last seven days in a slight positive. This was the first weekly growth of the yen in a month. However, as analysts predicted, the effect of unilateral intervention was short-lived. The USD/JPY pair started the new working week with a steady growth. During the Asian session, the Japanese currency fell again against its US counterpart below the 144 mark. The pressure on the JPY was exerted by a large-scale rally of the dollar. On Monday morning, the greenback reached another high against the euro and the pound. Thus, the euro fell against the dollar by 0.4%, to $0.9654, as the Democrats lost to the far-right party in the parliamentary elections in Italy. Such an outcome opens the way to the political restructuring of the EU. Meanwhile, the British pound fell in price against the dollar by 2.8%, to a record low of $1.0555. Fears of an even greater increase in inflation if the government implements a plan to reduce taxes contributed to the pound's fall. At the time of release, the dollar strengthened on almost all fronts, as a result of which the DXY index soared by more than 0.5%, to a new 20-year peak at 114.58. Why is the demand for USD growing? The strong jump in the US currency was caused by an increase in anti-risk sentiment and an increase in the yield of 10-year US Treasury bonds. World stock markets are falling now for two main reasons. The first is another escalation of the conflict between Russia and the West. This time, relations have worsened amid referendums held by the Kremlin in the Luhansk and Donetsk People's Republics, as well as in the Kherson and Zaporozhye regions of Ukraine. Moscow has promised to take these regions under full protection if they become part of Russia. Western politicians regarded this as a direct threat of the use of nuclear weapons. Also, the growth of fears about the global recession contributes to a decrease in risk appetite. The wave of rate hikes observed last week significantly worsened forecasts for global economic growth. As major central banks continue to raise rates, their economies are noticeably weaker. The only exception is the US. Despite the fact that the Fed is at the forefront of tightening monetary policy, the American economy is still firmly on its feet. This is evidenced by the latest US macro data published on Friday. A report from S&P Global showed that in September, the index of business activity in the manufacturing sector of America rose from 51.5 to 51.8, while its counterpart in the service sector recovered from 44.6 to 49.3. Positive statistics helped to strengthen expectations of a more aggressive Fed policy, especially since at the end of the week, officials of the US central bank intensified their hawkish rhetoric. On Friday, Fed Chairman Jerome Powell said that the central bank is determined to continue actively fighting inflation. The comments of Fed Vice Chairman Lael Brainard and Atlanta Fed President Rafael Bostic were in the same spirit. Hawkish speeches by politicians helped to disperse the yield of 10-year US Treasury bonds to 3.74%, which inspired the dollar to a new record. You can't envy the yen The aggressive position of the US central bank in relation to interest rates is what is now drowning the Japanese currency. Despite the recently thrown lifeline in the form of intervention, the yen is increasingly sinking to the bottom and risks approaching the red line again – the 145 mark. An additional ballast that does not allow the JPY to go up is the news about the next dovish actions of the Bank of Japan. On Monday morning, it became known that the BOJ again decided to increase the volume of bond purchases, as the benchmark yield of 10-year Japanese bonds jumped to the upper limit of the acceptable trading range of the central bank. Also, strong pressure on the JPY was exerted by the statement of the former chief currency diplomat of Japan, Naoyuki Shinohara. In an interview with Reuters, the official said that the government is unlikely to go for another large-scale intervention, so as not to draw fire from other G7 participants. – The most that the authorities can do now is to try to smooth out the volatility in the foreign exchange market with small purchases of the yen, but this will clearly not be enough to reverse the downward trend, – he stressed. Nevertheless, traders playing bullish for the USD/JPY pair should be on their guard. Some analysts do not rule out that the Japanese authorities may again intervene, which will cause a short-term rebound of the quote. This is evidenced by today's comments by Japanese Finance Minister Shunichi Suzuki. On Monday morning, the politician issued another warning: "We are deeply concerned about the recent rapid decline of the yen, partly caused by speculative trading, and our position of readiness to respond to such steps as necessary has not changed," he said. The increased risk of intervention may become a minor obstacle for bulls on the dollar-yen pair in the short term. However, most analysts believe that this week the asset will still move mainly in the upward direction. In the coming days, the dollar may receive several more powerful impulses for growth, as a number of speeches by Fed representatives are expected throughout the week. According to experts, American politicians will continue to bend the hawkish line, which will further add fuel to the fire of monetary divergence between the United States and Japan. This will favor the dollar's growth, as a result of which the USD/JPY pair can demonstrate another record.   Relevance up to 09:00 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/322630
The Commodities Digest: US Crude Oil Inventories Decline Amidst Growing Supply Risks

The Federal Reserve (Fed) Is Facing The Consequences Of The Rising Inflation

InstaForex Analysis InstaForex Analysis 26.09.2022 14:13
The Federal Reserve is facing one of its most difficult times, which began with the enforced worldwide lockdown that brought the global economy to a standstill. This led to excessive government stimulus. The result: rising inflation and a critical blunder by the Federal Reserve that led the economy into a potential intractable crisis. This was the single but critical fallacy of the Fed that made it impossible for the US economy not to enter a deep recession with high and persistent inflation that would hurt the economy for years to come. The Fed did nothing The Federal Reserve System has for many years maintained the view that inflation is transitory. On the assumption that rising inflation was a temporary scenario that would naturally work out over time, the Fed did nothing. By not raising interest rates a few years ago when inflation began to rise, they sealed the fate of creating the economic scenario that was currently in place. This inaction put the Fed in a position where it was too late to act. Because the Federal Reserve did not respond in a timely manner, it lost the ability to effectively stem the rise in inflation. There has never been a case in history when the Federal Reserve effectively reduced inflation without raising interest rates. Forced lockdowns and the 2020 recession resulted in an average inflationary pressure of 1.2%. In 2021, inflation was 1.4% in January, and was already 2.6% in March. If the Federal Reserve were to step in and start raising rates rather than keeping inflation going, it could have dramatic consequences. Instead, the Federal Reserve did nothing. If they had acted at this point and started slowly raising interest rates that were artificially set low between 0 and a%, they would have made a huge impact by simply bringing interest rates up to 2%. The Fed will need to raise rates In April 2021, inflation was 4.2%, and the Federal Reserve continued to do nothing and artificially lower interest rates. By May 2021, inflation rose to 5%, and to 5.4% in June, and the Fed still did nothing. In fact, inflation rose to 6.2% in October, 6.8% in November and 7% in December, while the Federal Reserve still did nothing and kept interest rates artificially low. By the time the Federal Reserve initiated its first interest rate hike in March 2022, inflation was already at 8%. For now, the Fed will need to raise rates to at least 8% to have any sustained impact on lowering inflation. It is clear that the signs of rising inflation that took place in 2021 showed a clear and systemic increase by the first quarter, when the Fed should have acted, but did not. It was its basic misconception that inflation was transient that led to the inactivity of the Federal Reserve before it was too late. The consequences of the inaction Now the Federal Reserve is trying to reduce inflation by raising interest rates that cannot be sustained for a long time. With the national debt well above 120% of GDP, if interest rates were raised from 3% to 8% today, it would add $1.5 trillion a year to service the national debt. Clearly, the Federal Reserve has backed itself into a corner, and because of a critical mistake that forced them to do nothing when they could have had a strong and immediate impact on inflation, instead they sat on the sidelines and watched interest rates spiral out of control. In the coming years, the consequences of the inaction of the Federal Reserve System will certainly take place in the form of a deep and prolonged recession and high inflation, which at best will remain at a level of just above 4%.   Relevance up to 11:00 2022-09-28 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/322656
Gold Stocks Have Performed Very Well Under Pressure

Mixed Sentiment In The Gold Market Due To Rising Dollar (USD)

InstaForex Analysis InstaForex Analysis 26.09.2022 14:27
The inexorable rally of the US dollar to 20-year highs is taking its toll on the gold market. Prices ended last week near their lowest level since April 2020. The extraordinary momentum of the dollar and rising bond yields turned Wall Street analysts into bearish sentiment. At the same time, according to the latest weekly survey, retail investors are more optimistic that prices may rise this week. A total of 19 market professionals took part in Wall Street survey last week. Ten analysts, or 53%, said they are bearish on gold this week. At the same time, six analysts, or 32%, said they expect prices to rise in the near future, and three, or 16%, are neutral about the precious metal. In the retail sector, 963 respondents took part in online surveys. A total of 469 voters, or 49%, called for gold to rise. Another 341, or 35%, predicted a fall in prices. The remaining 153 voters, or 16%, were in favor of a side market. Retail investor sentiment improved from the previous week. The past week has been volatile for the gold market as the precious metal managed to maintain critical support levels even after the Federal Reserve raised interest rates by 75 basis points and signaled that the federal funds rate could exceed 4.5% next year. Many analysts say gold has been able to withstand the US central bank's aggressive monetary policy as the threat of a recession continues to grow. Federal Reserve Chairman Jerome Powell said he didn't know if the central bank's move would send the US economy into recession but added that consumers should expect some trouble as lower growth is needed to contain inflation. Similarly, analysts believe that the threat of a recession created some initial demand for gold as a safe-haven asset. However, that sentiment has been dampened by volatility in global currency markets as the British pound suffered its biggest price drop since 2016, when the country voted to leave the European Union. The sell-off was triggered after Chancellor of the Exchequer Kwasi Kwarteng unveiled the government's new budget, with spending commitments of between £36bn and £45bn over the next four fiscal years. The massive spending initiative will be paid for with new debt. Analysts note that the dominance of the US dollar can be felt in a wide-ranging sell-off in the commodity sector. Although there is still some optimism in the market as many see gold as oversold and see any rally as a short term correction. Marc Chandler, managing director at Bannockburn Global Forex, sees a short-term rebound as bond yields consolidate. He added that he is observing if support at $1,650 can hold. Many analysts are bearish on gold as they expect the US dollar may still rise.   Relevance up to 11:00 2022-09-28 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/322658
The South America Are Looking For Alternatives To The US Currency

Could US Dollar Index (DXY) Decrease Below 107.40?

InstaForex Analysis InstaForex Analysis 26.09.2022 15:23
  US Dollar Index Chart - Where Is The Support? The US dollar index rose to fresh highs at about 114.35 during the early trading hours on Monday before finding resistance and reversing sharply lower. The index is seen to be trading close to 113.00 at this point in writing. It is expected to continue drifting lower towards 110.17 going forward. The bulls might have carved a potential top around 114.36 as the bears are getting ready to break below 112.85 now. Read next: The Statement By Elon Musk About Starlink May Cause Confusion | Leaders Must Take Action To Protect The Environment | FXMAG.COM The 1-hour chart presented here is indicating initial support at 110.17, followed by 109.00 and 107.40 levels. Potential resistance stays at 114.35 respectively. A break below 110.17 will confirm with respect to the price action that a top is in place and the bears are back in control. It is not shown here but a Doji/Pinbar candlestick pattern is being carved on the daily chart. DXY - What Can We Expect From The USD Index In The Near Future? The US dollar index might be setting up for a larger-degree corrective drop towards 107.40 and further in the coming weeks. We need to see a bearish candle formation on the daily chart to confirm the same. While it is early to confirm a bearish resumption, a high probability remains for a meaningful top to be in place at 114.35 so that the bears are back in control soon. Trading idea: Preparing for a potential drop against 114.35 soon. Good luck! Relevance up to 15:00 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/294251
The EUR/USD Pair Is Showing A Potential For Bearish Drop

EUR/USD: Is There Any Premise Of The Euro To US Dollar Future?

InstaForex Analysis InstaForex Analysis 26.09.2022 16:10
  The wave marking of the 4-hour chart for the euro/dollar instrument still does not require adjustments, but it is undoubtedly becoming more complicated. We saw the completion of the construction of the next five-wave impulse descending wave structure, then one correction wave upward, after which the low waves of 5 were updated. These movements allow me to conclude that the pattern of five months ago was repeated when the 5-wave structure down was completed in the same way, one wave up, and we saw five more waves down. There is no question of any classical wave structure (5 trend waves, 3 correction waves) right now. The news background is such that the market even builds single corrective waves with great reluctance. Thus, in such circumstances, I cannot predict the end of the downward trend segment. We can still observe the pattern of a strong wave down "a weak corrective wave up" for a very long time. The goals of the downward trend segment, which has been complicated and lengthened many times, can be found up to 90 figures, and maybe even lower. The market should be blamed for the fall of the euro currency. At the moment, many analysts note that relations between Brussels and Rome may become seriously complicated The euro/dollar instrument fell by 130 basis points on Monday and then rose by 80. For the European currency, the first day of the week passed relatively calmly, as the pound sterling fell by 400 points simultaneously. On Saturday, I questioned the assumption that the business activity indices caused a strong fall in the euro and the pound on Friday. As we can see, Monday has already shown us this is the case. After the usual statistical data (and there was nothing terrible or beautiful in the indexes), the instruments do not pass by several hundred points. The normal reaction to the indices is a movement of 30-50 points. Even before Friday's reports, most indices were below the key 50.0 mark, meaning the market was not shocked by the sudden decline in business activity. Read more: The Statement By Elon Musk About Starlink May Cause Confusion | Leaders Must Take Action To Protect The Environment | FXMAG.COM I can say the same about another news background. For example, today it became known about the victory in the elections in Italy of far-right parties, which, to put it mildly, are not too focused on the European values that Brussels preaches. At the moment, many analysts note that relations between Brussels and Rome may become seriously complicated, but there is no word that Italy may leave the European Union or may now adhere to a radically different policy than the one that has been in recent years. The government has changed, but what has changed for the country itself if it still remains in the European Union, where all decisions are made collectively and at the highest level, which presupposes the consent of the majority of the alliance members? Therefore, I personally believe that the election results, which, by the way, were not yet known at night, are also not the reason for a new decline in demand for the euro currency. It seems to me that the foreign exchange market has been in a state of shock due to too much negative economic, political and geopolitical news. General conclusions. Based on the analysis, I conclude that the construction of the downward trend section continues, but can end at any time. At this time, the instrument continues to decline, so I advise careful sales with targets located near the estimated mark of 0.9397, which equates to 423.6% Fibonacci. I urge caution, as it is unclear how much longer the decline in the euro currency will continue. At the higher wave scale, the wave marking of the descending trend segment becomes noticeably more complicated and lengthens. It can take on almost any kind of length, so I think it's best now to isolate the three and five wave standard structures from the overall picture and work on them. One of these five waves can be just completed now, and the new one has begun its construction.   Relevance up to 15:00 2022-09-27 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/322690
Rates and Cycles: Central Banks' Strategies in Focus Amid Steepening Impulses

Statement Of Boston Fed Chief|No Move From The Bank Of England (BoE)

Saxo Bank Saxo Bank 27.09.2022 09:37
Summary:  Market sentiment was weak again yesterday, but the price action in the US market managed to avoid a break of key support despite a fresh surge higher in US treasury yields, taking them to new cycle highs. Sentiment has improved slightly overnight as the further USD spike late yesterday eased off the accelerator. The chaotic moves in sterling likewise calmed, despite lack of clarity from the Bank of England on the degree to which an emergency move to shore up the currency is necessary.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities were under a lot of pressure yesterday as the US 10-year bonds saw big moves pushing the 10-year yield closer towards 4% in moves that smelled of thin liquidity and heightened nervousness. S&P 500 futures did the worst close in terms of level for this drawdown cycle but did not go below the intraday lows hit during the June selloff. This morning the mood among investors is stabilising and S&P 500 futures are rebounding 1.1% trading around the 3,710 level. If the USD Index and US yields come down today we could see the VIX forward curve flip back into contango and help push equity futures higher planting the seeds for a short-term rally. Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) Hang Seng Index fell another 1% to its lowest level since 2011, led by the charge lower of the tech sector. Hang Seng Tech Index (HSTECH.I) dropped 1.7% and leading China Internet names fell over 2%. HSBC (00005:xhkg) failed to rally despite the Pound Sterling having stabilized. Ahead of quarter-end and the National Day golden week holiday, the PBoC for two consecutive days in a row this week via open market operations. The year-on-year decline in China’s industrial profits slowed in August. CSI 300 gained 0.5%, led by wind power, solar power, semiconductor, and infrastructure stocks. Sterling (GBPUSD, EURGBP) reversed Monday’s flash crash, but risks seen ahead Sterling reversed from the flash crash seen in the Asian session on Monday, and thin liquidity conditions may have been a reason for the sharp drop. The new all-time low was set at 1.0350 but GBPUSD recovered later to trade closer to 1.0800-levels even as BOE’s lack of action (read below) continued to weigh on sterling. BOE’s Chief Economist Pill is scheduled to make a statement on Tuesday, and lack of real action may mean further downside in sterling. EURGBP traded between 0.8900 and 0.9000 after the wild spike to 0.9200+ on Monday, with the highest weekly close during the 2016-2020 “Brexit limbo” years just above 0.9300. Some USD pairs seeing wild moves on further spike in US yields The US dollar strength spiked higher yesterday, with the extension higher particularly aggressive against some of the G10 weaklings of late like NZD and NOK (USDNOK only has one weekly close above the current level near 10.75 in its history, posted during the pandemic outbreak in early 2020). The move was supported by a further rise in long US treasury yields yesterday, as the 10-year benchmark rose sharply again. Today’s September US Consumer Confidence reading and 5-year treasury auction (more below under US Treasuries) are in focus for next steps for the USD and US yields. Gold (XAUUSD) Gold dropped further on Monday as the relentless dollar and US yields surge left it with nowhere to go but down. It has since bounced back a bit after almost reaching $1618, the 50% retracement of the 2018 to 2020 rally. The short-term direction will be dictated by the dollar and the duration of the current bond market rout which has seen an almost one percent jump in US ten-year real yields this month. With the recent decline in breakeven yields, as investors buy into the Fed’s ability to bring down inflation, real yields have risen strongly thereby challenging gold and other investment metals. Crude oil (CLX2 & LCOX2) Crude oil traded higher in Asia following another day of selling led by a continued rally in the dollar and US Treasury yields driving concerns about tighter monetary policy leading to weaker demand for crude oil and fuel products. Brent and WTI both reached their lowest levels since January after several Federal Reserve policy makers signaled that further rate rises were in store to tame inflation regardless of the economic impact of such actions. The question now is at what levels OPEC+ will step in to pare supplies and stem what increasingly has become a rout, not only in crude oil but across markets. Also focus on hurricane Ian which is gaining power as it nears Cuba on a path toward the eastern part of the Gulf and Florida, leading to a surge in demand for diesel. While it is expected to miss most of the energy infrastructure in the Gulf of Mexico some offshort production has been shut down with employees being evacuated. US treasuries (TLT, IEF) US treasury yields rose sharply once again yesterday, particularly at the longer end of the curve, where the US 10-year treasury yield came within eight basis points of the 4% handle. For perspective, that benchmark has not closed above 4% on a weekly close since 2008. A 2-year US Treasury auction saw surprisingly tepid demand, given the very high yield on offer well north of 4%. Today sees the auction of 5-year treasuries and tomorrow a 7-year auction. What is going on? Bank of England’s lack of action Sterling slid to record lows of 1.0350 on Monday on the fallout from the announcement of new tax cuts late last week, prompting calls for an immediate action from the Bank of England to stem the slide in the currency or stabilize inflation expectations. However, the BOE response was rather lacking, only bringing a few words rather than action, and bringing doubt on whether the BoE would hike rates between now and the next regularly scheduled meeting on November 3. The risk of rate hikes being ineffective to restore sterling credibility may be seen, but BOE’s currency reserves are also rather limited and can only cover about two months of imports. This suggests sterling can remain prone to more wild swings.  The BOE’s Chief Economist Huw Pill will speak today.  Fed speakers maintain hawkish rhetoric Cleveland Fed President Mester (voter this year) was on the wires in the late US hours, reaffirming that further rate hikes will be needed and as the Fed is set to maintain a restrictive stance for some time, while she added it can be better to act more aggressively in an uncertain environment and that pre-emptive action can prevent the worst-case outcome. Boston Fed chief and FOMC voter Collins also spoke about getting inflation under control even if that means deteriorating labour markets, while Logan (2023 voter) also stressed the 2% inflation goal. Fed’s 2023 rate cuts bets are easing since the hawkish FOMC last week, More Fed speakers are lined up for Tuesday, including Powell, Bullard, Evans and Kashkari. German Ifo survey slips to new lows Germany’s Ifo business-climate index fell to 84.3 points in September from a revised figure of 88.6 points in August, data from the Ifo Institute showed Monday. This is its lowest value since May 2020 and below expectations of 87.1. The Ifo president said that the German economy is slipping into a recession, as business confidence worsened due to the escalating energy crisis.  China’s industrial profits declined 9.5% Y/Y in August but slower sequentially In the first eight months of 2022, China’s industrial profits contracted 2.1% y/y. For the month of August, industrial profits declined 9.5% y/y, a slower contraction that July’s -14.5% y/y. The National Bureau Statistics noted that the slower pace of contraction was helped by stronger auto, electrical equipment, electricity generation, and consumer product industries. No Russian oil price cap for the moment Yesterday, the EU countries announced they will delay the introduction of an oil price cap on Russian imports. At least two countries, Cyprus and Hungary (the Hungarian government is one of the most vocal European governments criticizing the sanctions against Russia) have expressed opposition to the oil cap proposal. Expect intense negotiations ahead to reach a compromise. For this matter, the EU requires unanimity among member countries. Each country has an effective veto. What are we watching next? Traders are expecting further tightening from central banks The money markets expect that the European Central Bank (ECB) will go for another 75 basis point interest rate hike in October. Given the plunge of the sterling pound, traders expect that the Bank of England (BoE) could go in with a 100 basis points emergency rate hike before the scheduled November meeting. Hopefully, this will work. If it fails, the Bank would be in a complicated situation and the sterling pound would certainly further weaken. This is one of at least four options the Bank must use to stop the currency slide. The three others are: 1) say and do nothing until the calm comes back in the forex market; 2) say something but do nothing (with might not be the best option so far); and 3) do something small (50 basis point interest hike for instance) but the market might then test the Bank. There is no easy answer, as you can see. Apple begins production in India Apple has begun assembling some of its iPhone 14 in India. This may be the start of a manufacturing boom in India, as China transitions to a consumption economy and US-China tensions continue to play out. Meanwhile, India’s push on electronics manufacturing could mean more foreign investments to come, as India seeks to solidify its position in global supply chains in addition to being a large consumption-driven economy. Our India equity theme basket is worth considering as India remains one of the big winners of deglobalization and slowing Chinese economy. US September Consumer Confidence up later today Confidence according to this survey rebounded in August to 103.20 versus the local low of 95.30 in July, likely as the labor market remains strong and gasoline prices had fallen sharply from the record levels back in June. Today’s number is expected at 104.5, but it is worth noting that while the overall survey has remained well within the range since 2015, the ratio of the very high Present Situation versus very low Expectations was the widest (-81.4) recorded in July since a brief episode in early 2001. Earnings calendar this week The action this week will be on Thursday with earnings from H&M, Nike, and Micron Technology, with earnings from Micron being the most interesting to watch as we already know H&M and Nike are seeing weak demand. Micron has exposure to the consumer electronics industry and manufactures memory chips in Asia which means that the company sits in at the intersection of many interesting trends. Today: Ferguson Wednesday: Paychex, Cintas Thursday: Polestar Automotive, H&M, Nike, Micron Technology, CarMax Friday: Carnival (postponed from last week), Nitori Economic calendar highlights for today (times GMT) 0730 – US Fed’s Evans (voter in 2023) to speak on CNBC 1000 – Sweden Riksbank's Ingves to speak 1015 – US Fed’s Evans to speak 1100 – UK Bank of England Chief Economist Pill to speak 1100 – ECB's Villeroy to speak 1130 – Fed Chair Powell to speak on digital currencies 1230 – US Aug. Preliminary Durable Goods Orders 1300 – US Jul. S&P CoreLogic Home Prices 1315 – ECB's Guindos to speak 1355 – US Fed’s Bullard (voter 2022) to speak 1400 – US Sep. Consumer Confidence 1400 – US Aug. New Home Sales 1700 – US 5-year Treasury Auction 1700 – US Fed’s Kashkari (voter 2023) to speak 2030 – API's Weekly Crude and Fuel Stock Report 2350 – Japan Bank of Japan meeting minutes 0130 – Australia Aug. Retail Sales   Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: https://www.home.saxo/content/articles/macro/market-quick-take-sep-27-2022-27092022
EM Index Inclusions and Exclusions: India Thrives, Egypt Faces Challenges

Chaos And Rising Volatility Are Present In Market Mood

Swissquote Bank Swissquote Bank 27.09.2022 09:52
We had a bearish start to the week on Monday and the price action across several asset classes remains volatile and chaotic - and that’s especially true for the FX markets shaken by the freefall in sterling. FX Market The US dollar remains king, on the back of a heavy sterling meltdown due to irresponsible UK government / lazy Bank of England (BoE), and euro selloff on the back of Italy turning right / cautious European Central Bank. The USDJPY spiked at yesterday’s dollar rally, as if the Bank of Japan (BoJ) never intervened last week. The BoJ head says that he supports intervention in the yen. In vain. Stock Martet  Equities selloff, as investors expect a deeper downside move due to pressured earnings. Tech stocks remain on the chopping block. To reverse sentiment, Amazon throws the second Prime Day sale this year, and Apple hurries out of China. While outlook for equities remains bearish, the rising yields make sovereign markets increasingly appetizing, and an eventual inflows in global sovereign markets could be the first sign of healing from the actual financial crisis. Watch the full episode to find out more! 0:00 Intro 0:27 Bailey is clearly not a good 'adult' in the room… 4:26 Where is the money, and where could it go next? 5:53 Stock mood update 8:20 FX talk Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #GBP #EUR #selloff #UK #mini #budget #USD #rally #Apple #Amazon #Google #Netflix #UK #gilt #sovereign #bonds #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH
Bank of England Faces Rate Decision: Uncertainty Surrounds Magnitude of Hike

S&P 500 Decreased By Over 1% Yesterday, Nasdaq Lost 0.6%. US Dollar (USD) Still Strong

ING Economics ING Economics 27.09.2022 10:00
Selling momentum may be easing, but a trend reversal looks optimistic Source: shutterstock Macro outlook Global Markets: Slightly smaller declines in US stocks overnight may indicate that the momentum of the current stock selling spree may be running out. And certainly, relative strength indicators are pointing to stocks entering an oversold area. We are also sitting at approximately the June 2022 lows, so any further downward push may need a bit more fresh news, though if these levels are breached, it then opens up a lot more downward space. The S&P500 finished down 1.03% yesterday, the NASDAQ down 0.6%. Equity futures are signalling a tentative increase on today’s open. The USD continues to strengthen against almost everything. EURUSD is now 0.9614, though again, the moves were more muted than the previous session. Cable continues to look extremely dicey, dropping to 1.035 at one stage yesterday, though clawing back to 1.0718 currently on some comments from HM Treasury that there may be a plan to come up with a more coherent fiscal adjustment plan than what was delivered at the recent budget. It looks like markets are giving sterling the benefit of the doubt for now, though any mistakes will likely be punished severely and they may not wait until November for the new plan. The AUD also slid further yesterday, reaching 0.6465, while the JPY is back within spitting distance of the 145 level that led to intervention last time. So there may be a bit of hesitancy around this level, though ultimately, we see it being breached once more. Asian FX played catch up with Friday’s G-10 losses to the USD on Monday, The KRW and THB fell the most, though the INR has also gapped higher and is now at 81.62.  US Treasury markets keep weakening, and yields on the 2Y note have risen a further 14bp to 4.34%, while the 10Y yield has shot up 24bp to 3.92%, clearly eyeing the 4% level. Why not? Once again, the UK Gilt market was terrible, with 10Y Gilt yields rising just under 42bp to 4.24%. That was again worse than struggling Eurozone peripheral bond markets. G-7 macro: US housing data dominates the calendar today. We get house price data for July, which is still showing month-on-month gains, even if the annual rates of growth are coming off a bit. And we also have August New Home Sales, which at a 500,000 annual rate really are beginning to look quite tepid. Conference Board consumer confidence and durable goods orders complete the G-7 macro calendar today with nothing of note out of Europe, barring possible emergency central bank meetings and panicky government messaging. China: USDCNY and USDCNH are approaching 2019 and 2020 highs. But this time, there is an extra factor - a very weak EUR. So, we cannot rule out USDCNY and USDCNH passing 7.20 as aggressive Fed hikes stand out against the PBoC's accommodative rate policy. The main worry of such a weak yuan is capital outflows. If there were any signal of such outflows becoming meaningful, the PBoC would first increase the cost of shorting the yuan offshore. Korea: According to the Bank of Korea’s consumer sentiment survey, inflation expectations appear to have stabilized slightly for the second month in a row. Inflation expectations over the next 12 months have come down slightly to 4.2% in September from their recent peak of 4.7% in July. The Bank of Korea doesn’t seem to be worrying too much about anchoring consumers’ expectations for now. However, headline inflation will likely remain in the 5- 6% range until the year-end, increasing the risk of rising food prices and further currency depreciation. Therefore, we believe that the BoK will front-load its rate hikes to better contain inflation, and we look for them to take a 50bp step at their October meeting. What to look out for : China PMI South Korea consumer confidence (27 September) China industrial profits (27 September) US durable goods orders (27 September) US Conference Board consumer confidence and new home sales (27 September) Australia retail sales (28 September) Japan leading index (28 September) Bank of Thailand meeting (28 September) US mortgage applications and wholesale inventories (28 September)       South Korea business survey manufacturing (29 September) US initial jobless claims, 2Q GDP and core PCE (29 September) South Korea industrial production (30 September) Japan labour market data (30 September) China official and Caixin PMI manufacturing (30 September) India RBI meeting (30 September) Hong Kong retail sales (30 September) US personal income, personal spending and core PCE (30 September) US University of Michigan sentiment (30 September) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Rates Spark: Riding the hawkish wave while it lasts

The Fed’s Determination Is The Most Important Factor Supporting The Dollar (USD)

TeleTrade Comments TeleTrade Comments 27.09.2022 10:11
The US dollar continues to move higher. Economists at Commerzbank believe that a strong greenback is fundamentally justified. Strong, stronger, too strong? “The outlook for the US dollar remains positive. Yes, the significant rate hikes are beginning to have an effect, as today’s housing market data in particular is likely to underline. But order intake and consumer confidence are also likely to illustrate that the real economic environment remains relatively robust.” “Further rate hikes will be required to get a grip on inflation. The Fed’s determination is the most important factor supporting the dollar.” “It cannot be overlooked that the dollar is trading at record levels on a trade-weighted basis. However, current exchange rate levels are fundamentally justified.”
The Turkish Central Bank Cut Its Policy Rate by150bp | Credit Suisse Outflows Benefit UBS

The US Dollar To Turkish Lira (USD/TRY) Pair Can Continue To Remain Firmer

TeleTrade Comments TeleTrade Comments 27.09.2022 10:15
USD/TRY remains on the front foot at all-time high during three-day uptrend. CBRT documents hints at further rate cuts, DXY retreats from 20-year high. Fed’s Powell, US data can entertain intraday traders, bulls are likely to keep reins. USD/TRY shrugs off the US dollar pullback to stay on the front foot and refresh the all-time high near 18.48 heading into Tuesday’s European session. In doing so, the Turkish lira (TRY) seems to cheer hints of more rate cuts from the Central Bank of the Republic of Türkiye (CBRT). Reuters quotes an official document from the CBRT, published Monday, to mention that Turkey's central bank lowered its reference interest rate by nearly 140 basis points to 13.96% for October in a move aimed at further cutting rates on corporate loans. The news also mentioned, “Last month, the central bank unveiled new required bond holdings for lenders meant to address the widening gap between the bank's policy rate and lending rates.” Ankara is already going through a lot these days due to the CBRT’s resistance to rate hikes and nearly 80% inflation, not to forget broad geopolitical tension. That said, the latest moves from the central banks add weakness to the TRY. On the other hand, the US Dollar Index (DXY) retreats from the 20-year high, down 0.45% intraday near 113.60 by the press time, as softer yields join downbeat US data and inflation expectations. US Treasury yields retreat from the multi-year high while the S&P 500 Futures also print mild gains by the press time. That said, US 10-year Treasury yields rose to the highest levels in 12 years while the 2-year bond coupons refreshed the 15-year top as traders rushed to the risk safety. Further, Chicago Fed National Activity Index weakened to 0.0 in August versus 0.09 market expectations and an upwardly revised prior reading of 0.29. Elsewhere, the US inflation expectations as per the 10-year and 5-year breakeven inflation rates per the St. Louis Federal Reserve (FRED) data, signaled that the gauges refreshed the multi-day low on Monday. While noting the details, the longer-term inflation expectations dropped to the lowest level since July 13, 2022, whereas the 5-year benchmark slumped to the lowest levels since June 2021 with the latest figures being 2.32% and 2.33% respectively. Given the fundamental weakness in Turkey, vis-à-vis the US, the USD/TRY pair can continue to remain firmer. However, US CB Consumer Confidence for September and Durable Goods Orders for August will join today’s speech from Fed Chair Jerome Powell to direct short-term moves. Technical analysis A two-month-old ascending resistance line challenges USD/TRY bulls around 18.50 amid the overbought RSI conditions. The anticipated pullback moves, however, remain elusive unless breaking an upward sloping trend line support near 18.28.
UK Monetary Policy Outlook: A September Hike Likely, but November Uncertain

Intervention In The Yen (JPY) Still Remains A Far Cry| The Pound (GBP) Is The Weakest Against The Dollar (USD)

InstaForex Analysis InstaForex Analysis 27.09.2022 11:04
Summary:  Havoc has spread to the markets, not just with the Fed staying the hawkish course, but with the collapse in confidence in the UK economy after a fiscal policy and lack of monetary policy response adding into the mix with a massive bond selloff. Meanwhile, the surge in the US dollar continued taking its toll on several currencies, and the effect of Japan’s intervention from last week has also faded. Earnings pressure may be the next shoe to drop, and recession concerns also still need to be priced in more broadly. Fed’s high-for-longer message is now being taken seriously The September FOMC meeting was not precisely a pivot point for the Fed, but more so for the markets which finally understood the Fed’s message on inflation. The dot plot, particularly, conveyed two key messages as listed below. Even though the accuracy of the dot plot remains in doubt, given a very weak correlation with what actually transpired previously, it is a great signalling tool to understand the intentions of the FOMC members. Terminal rate is seen at ~4.6%, which was above what Fed funds futures were pricing in before the meeting. Even slower growth and higher unemployment levels, as conveyed by the Fed’s projections, would not deter the central bank from hiking rates There was some pushback on premature easing, with the dot plot showing a 4.5-5.0% rate even at the end of December 2023. Alongside that commitment to tighten, the Fed is now at the full pace of its quantitative tightening program, which is sucking liquidity out of financial markets at a rapid pace. The aim is to shrink the Fed’s balance sheet by $95bn a month — double the August pace. While quantitative tightening strongly influences liquidity conditions and asset markets, it is less useful in directly impacting inflation. While systemic risks from QT may remain contained, it ramps up the rise in Treasury yields as the Fed’s balance sheet shrinks and the amount of Treasuries in private hands increases. Trussonomics pushing UK to an emerging market status Sterling has fallen close to 10% on a trade-weighted basis in a little under two months, and has surpassed the Japanese yen to be the weakest against the US dollar year-to-date. An immediate response from the Bank of England may have saved some face, but remember that last week’s BOE decision was a pretty split vote as well with two members voting for 75bps rate hike and one calling for a smaller 25bps rate hike as well. So, it remains hard to expect a prudent policy response from the BOE, and a parity for GBPUSD in that case may not prove to be the floor. UK’s net forex reserves of $100bn are also enough to only cover two months of imports, or roughly equal to 3% of GDP as compared to Japan’s 20% and Switzerland’s 115%. But it’s not just about the sterling crisis in the UK, but more generally a crisis of confidence. Not to forget, inflation forecasts for end of the year are already at 10%+ levels and the market is now pricing in over 200bps of rate hikes by the end of the year, with two meetings left. The central bank will need to deliver this massive tightening simply to keep the sterling where it currently is and that won’t reverse the impact of the government’s decisions on UK markets. The scale and speed of the hikes could also do significant damage to the economy. The iShares MSCI United Kingdom ETF (EWU:arcx) traded lower by another 1.8% on Monday and is now down 7.3% over the last one week. Bank of Japan’s patience will keep getting tested We wrote earlier about what will need to change to call it a top in the US dollar, and nothing seems to be in order yet except some of the non-US officials starting to get concerned about currency weakness. Still, the intervention from Bank of Japan didn’t have long lasting effects on USDJPY, even as it helped to strengthen the yen against some of the other currencies such as the EUR, GBP or AUD. It may have also helped to stop some speculative shorts. But a coordinated intervention in the yen still remains a far cry, with the weakness in the Japanese yen being BoJ's own-doing due to the yield curve control policy. Japanese government bonds will likely continue to test the patience of Bank of Japan with its yield curve control policy. Downside for Japanese government bonds (JGB1c1) will potentially spike exponentially if the BOJ pivots at some point. Earnings pressure may be next While the Q2 earnings season proved to be more resilient than expectations, intensifying inflation concerns have turned corporates more cautious on the outlook and less optimistic for the near-term earnings performances. We have seen some downward revision of EPS estimates for the third quarter in July and August, and we still cannot rule out further grim outlook and margin pressures. Estimates for S&P 500 earnings in 2022 stood at $226.15 per share as of August 31, according to FactSet. This is down 1.5% from the $229.60 per share estimate as of June 30. For 2023, analysts now expect EPS of $243.68, down 2.8% from the June estimate of $250.61. So far, companies dealt with rising inflation by passing on increased costs to consumers, given the pandemic-era fiscal support measures underpinned strength in the consumer side. These increased pass-through was also visible in higher CPI prints. But with the economic outlook getting duller by the day, there is bound to be some pushback from the consumers and that will likely show up in the earnings report card. From a sectoral perspective, tech stocks will likely be battered as tight corporate budgets weigh and the US 10-year yields are in close sights of 4%. Semiconductors, a barometer of global economic health, could also face further pressure. Meanwhile, the oil and gas sector was the saviour of the Q2 earnings season, but would also likely see some pressure in Q3, unless the outlook starts to look slightly more upbeat with improving capex plans. Dollar pivot is the next key catalyst to watch The majority of the market downfall we have seen so far has come from a rapid shift in cost of capital and correcting peak valuation. The next leg, as discussed above could be the earnings recession. Still, economic recession risks remain and history suggests that the market lows do not come until after the recession begins (see chart below). Still, with the US 10-year yields approaching 4% - which maybe a likely ceiling – the focus turns to a reversal in the US dollar as the next pivot, not the Fed. Testing those key levels could mean a short-term bounce in equities which may be favourable for building new short positions as the trend still remains down. Alternatively, for investors, it would rather be optimal to look for signs of selling exhaustion to accumulate long positions, such as VIX above 40. Historically, a decline in stocks of the order of 20% makes it buying stocks after they have been down 20% from record highs has been a good risk/reward proposition for longer-term investors.     Source: https://www.home.saxo/content/articles/macro/macro-insights-approaching-a-breaking-point-but-not-without-more-pain-first-27092022
Thursday's Bank's of England decision may be record-breaking!

British Pound (GBP) May Be Helped With Forex Intervention, But It May Take A While. Bank Of Japan Supported Yen This Way, Swiss National Bank May Do The Same

Alex Kuptsikevich Alex Kuptsikevich 27.09.2022 12:01
The US dollar is under some pressure on Tuesday morning, which can be attributed to the dollar's local profit-taking after substantial gains on previous days. European equities and US index futures are also getting some relief, pulling back from lows. Read next: GBP/USD Is Expected To Trade Between 1.07 And 1.09 Today. Could British Pound Touch 1.0350 In Next Month? Fed And ECB Members Speak Today| FXMAG.COM The dollar has been in increasing demand in recent months, as comments from the Fed are methodically pushing higher the expected interest rate ceiling and for longer However, until we see a change in the fundamentals, bounces like today's are likely to be nothing more than local retracements of established trends - bullish for the dollar and bearish for equities. There is little doubt in the markets now that the main driving force behind the markets is the continuing tightening of current and, most notably, expected conditions. The dollar has been in increasing demand in recent months, as comments from the Fed are methodically pushing higher the expected interest rate ceiling and for longer. Not all major central banks have the ability or the courage to maintain the same pace, which is taking the dollar's main competitors out of the game. But these same conditions require regulators to act more aggressively. Last week, Japan began its interventions to defend the yen exchange rate. The Swiss National Bank has repeatedly warned that it is ready to intervene. Observers have also demanded action from the Bank of England. But the latter has yet to budge, taking a week to assess the situation. In the words of the ECB officials, there is more and more evident dissatisfaction with the ongoing weakening of the euro. Because a sharp rise in interest rates in over-leveraged economies may come as a shock, the central bank may intervene to stop the unilateral weakening of national currencies. Right now, it seems unlikely that the major central banks would be willing to press on the dollar in a coordinated way as they did in 1985 with the secretly prepared so-called Plaza Accord. It hardly fits with US priorities to lower inflation and weaker commodity prices. At the same time, there are increasing risks that the major central banks, one by one and acting on the situation, may use this almost forgotten instrument to stop unilateral speculation against their currencies. Among the other majors, the GBP has the highest currency intervention risks right now, with EUR and CHF slightly less so In our view, since last week and for the foreseeable future, Japan has already included interventions in its active policy, potentially limiting the USDJPY from rising above 145. It is unlikely to be an easy ride for Japan's Ministry of Finance, but it has the strength to fight back. Among the other majors, the GBP has the highest currency intervention risks right now, with EUR and CHF slightly less so. In Canada and China, the monetary authorities are not concerned about the exchange rate, as inflation is slowing down there. Hence, it is unlikely that we will see interventions in the CAD and the CNY. Although the Australian dollar has lost 6% since the beginning of the month, it is now 18% above the 2020 'bottom', so in our view, monetary authorities can use traditional rate hikes and quantitative tightening for now.
Bank of England Confronts Troubling Inflation Report; Fed Chair Powell's Testimony Echoes Expected Path

This Morning The Pount To US Dollar (GBP/USD) Pair Recovered

InstaForex Analysis InstaForex Analysis 27.09.2022 13:21
The main event in the foreign exchange market on Monday was another steep peak of the sterling. The pound's approach to parity has caused a wave of speculation about an unscheduled rate hike by the Bank of England. Yesterday, the British currency continued its loud fall, which began last week. Paired with the dollar, sterling fell by 1.6% and tested a record low of 1.0327. Thus, since last Thursday, the pound has fallen by 5% against its American counterpart, and since the beginning of the year, the GBP/USD pair has already fallen by 21%. The reason for the current weakening of sterling is Britain's economic gambit to reduce taxes, initiated by the country's new prime Minister Liz Truss. Recall that on Friday, British Finance Minister Kwasi Kwarteng unveiled a mini-budget aimed at stimulating the economy by cutting taxes by 45 billion pounds. The financial plan had the effect of an exploding bomb. Markets are concerned that the largest tax cut program since 1972 will further spur inflation in the country. That is why the British currency did not receive any benefit from the next rate hike that occurred last week. Like most major central banks, the BoE continues to actively fight high price growth by raising interest rates. At its September meeting, the central bank increased the indicator by 50 bps, to the highest level since 2008 at 2.25%. But now that inflation expectations have jumped again, this increase is clearly not enough to curb record price growth. On the wave of pessimism, the pound set a new anti-record on Monday. However, active speculation about an unscheduled rate hike by the BoE brought it back to life a bit. This morning, the GBP/USD pair recovered to 1.0770, which was facilitated by BoE Governor Andrew Bailey's comment from the day before. Last night, the official said that the central bank is closely monitoring what is happening in the financial markets. If necessary, the MPC can change interest rates without hesitation. – As much as it is necessary for a steady return of inflation to the target of 2% in the medium term, – he stressed. In addition, the pound received support amid an incredible surge in the yield of 2-year and 5-year British government bonds. The indicator increased by 100 bps for two trading days. This suggests that in the light of recent events, the market has revised its forecasts for the future monetary policy of the BoE. There was an opinion that the British central bank could urgently raise rates without waiting for its next meeting, which is scheduled for November 3. – The Bank of England will have no choice but to raise interest rates if Truss and Kwarteng do not retreat, – said economist Mohamed El-Erian. – Moreover, it will be necessary to increase the indicator by a full percentage point in order to try to stabilize the situation. Today's speech by Huw Pill, Chief Economist of the BoE can shed light on the future plans of British politicians. If his comment turns out to be more hawkish, it will help the GBP/USD pair to move further away from the parity line. Otherwise, the asset may tickle the nerves of pound bulls again. – Without timely political action this week, sterling risks quickly falling below parity, – analyst Lee Hardman predicts. Also, do not forget that the GBP/USD pair is under strong pressure from any news indicating the Federal Reserve's determination regarding interest rates. One of the powerful triggers is expected just today. Fed Chairman Jerome Powell will deliver a speech on Tuesday. If he again hints at a more aggressive policy of the US central bank, this will give the dollar a new growth impulse, which means that the pound will have to retreat. But be that as it may, most analysts are inclined to believe that the British currency will remain in the zone of increased volatility this week. Now we can expect strong jumps both in one direction and in the other.   Relevance up to 09:00 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/322746
The Collapse Of The Silicon Valley Bank Weakened The Dollar And USD/JPY But Supported EUR/USD, AUD/USD, And GBP/USD

Will The Dollar's (USD) Situation Change And Start Falling?

InstaForex Analysis InstaForex Analysis 27.09.2022 13:34
Technical outlook: The US dollar index rallied through 114.10 during the New York session on Monday before finding resistance again. The index slippped lower and is seen to be trading close to the 113.40 mark at this point in writing. Prices oscillated within the range of 113.00-114.00 in the last 24 hours, thus raising probabilities for a drop towards 110.00. The hourly chart presented here also projects a potential drag towards the 110.00-20 mark, the initial support level. Immediate resistance or a top is seen at 114.35 and prices should stay lower to keep the bearish structure intact. A break below 112.90 from here will accelerate a further decline towards 111.90 in the near term. Going further, a real drop below the 110.17 initial support will confirm that bears are back in control and a deeper correction could be on its way. Only a consistent break above the 114.35 mark from here will bring back bulls into control and nullify the bearish scenario. Watching for prices to break below 112.90 for acceleration lower towards 110.20. Trading plan: Preparing for a potential drop towards 110.20 against 114.50 Good luck!     Relevance up to 12:00 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/294414
It's not clear we find out the results of mid-term elections immediately. Binance to buy FTX

US Dollar Index (DXY) - Technical Analysis - 27/09/22

InstaForex Analysis InstaForex Analysis 27.09.2022 16:58
  As of writing, the dollar index (CFD #USDX) is trading near 113.55, down from yesterday's new local high near 114.41. The dollar's upward trend continues, pushing the DXY to new highs on its way to over 20-year highs near 120.00, 121.00. The break of yesterday's local high at 114.41 will be a confirmation signal of our assumption.     Alternatively, the very first signal for short-term selling will be a breakdown of the short-term support level 113.12 (200 EMA on the 15-minute CFD #USDX chart). The target is the important short-term support level 111.42 (200 EMA on the 1-hour chart). Its breakdown, in turn, may provoke a deeper correction to the support levels of 109.40 (200 EMA on the 4-hour chart), 108.75 (50 EMA and the lower line of the rising channel on the daily chart). However, once again we note that this is an alternative and theoretically possible scenario.     Strong bullish momentum prevails based on fundamental factors, favoring long positions. Support levels: 113.12, 111.42, 110.76, 109.40, 108.75, 105.00, 103.35 Resistance levels: 114.00, 114.41, 115.00 Trading Tips Sell Stop 112.90. Stop Loss 114.30. Take-Profit 111.42, 110.76, 109.40, 108.75, 105.00, 103.35 Buy Stop 114.30. Stop-Loss 112.90. Take-Profit 114.41, 115.00, 116.00, 120.00 Relevance up to 11:00 2022-09-30 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/322778
Fed is expected to hike the rate by 50bp, but weaker greenback and Treasury yields don't play in favour of the bank

Look How Much Have JPY, British Pound, Euro And New Zealand Dollar (NZD) Lost Against USD In 2022 So Far

Conotoxia Comments Conotoxia Comments 27.09.2022 17:23
You can't complain about volatility lately, looking at the traditional financial markets. Both stock indexes and currencies may have seen increased volatility, not to mention the bond market. Bitcoin to the dollar It would seem that a dollar hitting consecutive 20-year peaks, indexes deepening the bottom of a bear market, or rampant bond yields would be an environment in which cryptocurrencies could significantly fall. For the moment, however, this has not happened. On the contrary, despite the downswing in stock markets and a more expensive dollar or higher bond yields than at least a week ago, bitcoin seems to be gaining against the USD. Can the world's largest cryptocurrency provide an alternative in these times? Source: Conotoxia MT5, BTCUSD, H4 Bitcoin an alternative in a currency crisis? Since the beginning of this year, the Japanese yen and the British pound have lost more than 20 percent against the U.S. dollar. The euro has lost more than 15 percent against the USD, and the New Zealand dollar more than 16 percent. We are talking about some of the world's most important currencies and a period of less than 10 months. In the long term, the losses of individual currencies seem to be even greater. From this perspective, the market is beginning to talk about a possible currency crisis, as well as new resolutions, or an increase in the chances of joint intervention against the strength of the USD. Whether this would happen is a separate topic, but if the major currencies are losing value so significantly, the question is whether bitcoin will be able to play the role of an asset, to store the value of money over time. Additionally, Americans may have an even bigger problem than other countries. While investors from Europe or Asia were able to buy USD with their local currency and could possibly benefit from a change in the exchange rate, Americans seem that they did not have such an opportunity. U.S. investors, what they would touch this year, they could lose on. Foreign currencies against the USD weakened, the stock market fell, together with bonds and gold in USD. There seems to be no place where, owning dollars and being in the US, someone could store capital so that it is not devoured by inflation (except for short positions in the aforementioned markets). While this is a far-fetched thesis, it is worth recalling that bitcoin could have been a response to the ineptitude of government, supervision and the central bank, leading the US economy to collapse through the real estate crisis. Today, citizens' wealth may also be at risk. Inflation, high interest rates (but not so high that they yield interest over inflation), an economic slowdown or recession, or poor prospects for recovery. Perhaps when the situation is already very bad in the markets and in the economy (according to forecasts, this could be the case in 2023), bitcoin could attract capital to store it over time, because here the rules about money creation are very clear and known in advance for decades ahead, unlike the actions of central banks. Did you know that CFDs allow you to trade on both falling and rising prices? CFDs allow you to open buy and sell positions, and thus invest when quotes rise as well as fall. At Conotoxia, you can choose from CFDs on more than 5,000 financial instruments, including more than 140 CFDs on cryptocurrencies. Wanting to find a CFD on the cryptocurrency of your choice, all you need to do is follow 4 simple steps: To access Trading Universe - a state-of-the-art center for financial, information, investment and social products and services with a single Smart account, register here. Click "Platforms" in the "Invest&Forex" section. Choose one of the accounts: demo or live On the MT5 or cTrader platform, search for the CFD cryptocurrency you are looking for and drag it to the chart window. Use the one-click trading option or open a new order with the right mouse button. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. Read more on Conotoxia
CZK: Koruna's Resilience Amid Global Influences - 16.08.2023

The Latest Economic Forecasts From The World Bank|The Major Gas Leaks And A Claim That It Was Sabotage

Saxo Bank Saxo Bank 28.09.2022 09:15
Summary:  The risk off tone continued with Fed official Kashkari warning ‘there’s a lot of tightening in the pipeline’. Meanwhile, BOE’s Chief Economist Pill further deterred expectations of an inter-meeting action. Oil prices recovered amid Russia’s push for the OPEC+ to cut production and worries over supply curbs in Gulf of Mexico, while European energy situation worsened with likely sabotaged leaks detected on Nord Stream pipelines and Gazprom issuing sanction warnings on Ukraine’s Naftogaz. What is happening in markets? The Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) The bond sell-off extended, pushing up the 10-year Treasury yield to 3.95%, while the US dollar index extended its run-up hitting a new 20-year high after Fed officials continued to warn of higher rates to come. That pressured stocks lower once more with the S&P500 down 0.2%, marking its 6th daily drop, with the latest round of selling taking the index to levels not seen since November 2020. The Nasdaq 100 ended about 0.2% higher. The next technical major level of support for the S&P500 is around 3,500. If that level is taken out, there is a probability of perhaps hitting the 3,100 level (which is 15% lower than the current level). In terms of sectors, consumer staples and utilities, were each down about 1.7%, claiming the worst performing spot among the 11 sectors of the S&P 500, while energy outperformed with a 1.2% gain. Tesla (TSLA:xnas) gained on high volume delivery comment Tesla shares rose as much as 4.4% before settling 2.5% higher on a report saying that Tesla’s management told its staff in an email that a “very high volume of vehicles to eagerly waiting customers during the final days” of the Q3.  U.S. treasury curve (TLT:xnas, IEF:xnas, SHY:xnas) steepened with a sell-off in the long end The U.S. treasury yield curve twisted and steepened on Tuesday as 30-year bond yields surged 9bps higher to a new high at 3.83%, following a dramatic 45bps jump across the pond in the U.K. Gilts. Lack of investor interest in the 5-year auction added to the bearishness of the U.S. bond market sentiment. 10-year yields surged to 3.99% during the day before paring slightly to settle at 3.95%, up by 2bps from Monday. 2-year yields took a pause in their march higher to finish the session bps lower at 4.28%. Australia’s ASX200 (ASXSP200.1) awaits retail trade data; oil & wheat stocks will be a focus Australia’s share market is suggested to fall 0.6% on Wednesday (according to the futures), after US stocks lost 0.2%. The extra weight on the index today could come from iron ore stocks after the Iron Ore (SCOA) price pulled back 0.4% overnight to US$96.80, having lost 4% so far this month, which might keep BHP, Fortescue and Rio contained at these levels. A bright spark might be expected in Oil stocks and wheat stocks today after the Oil price jumped off its 9-month low, hitting $78.39, while the wheat price extended its rebound from August, and lifted 1.6% overnight. From an economic perspective, we will be watching Australian retail trade data, with Australia’s sales expected to rise 0.4% in August (according to a Bloomberg survey), compared to July’s hotter growth of 1.3%. Spending has been at a record pace in Australia, with Australian’s clothing buying growing at a record pace in winter. It’s worth watching retail stocks, like Kathmandu-owner, KMD Brands, and JB HiFi for example. If the data is hotter than expected, you could see the AUD rally, in a knee jerk manner, however the AUDUSD remains much pressured. It’s worth watching the AUDGBP though, which is gaining upside. Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) Hang Seng Index finished the session on Tuesday little changed following a late afternoon rally, bouncing off its lowest level since 2011. Meituan (03690:xhkg), up by 4%, outperformed other China internet names. The China property services industry gained. Jinke Smart Services (09666:xhkg) jumped 32.6% following a general offer at about a 33% price premium from shareholders holding 53% of the company. Shimao Services (0873:xhkg) surged 8.3%. CIFI Ever Sunshine Services (01995:xhkg) and A-Living (03319:xhkg) rose around 6%.  Macao casino shares continued their charge higher for the second day in a row, rising from 3% to 9% across the board. China Healthcare Services names surges, Hygeia Healthcare (06078:xhkg) surged over 8%.  China catering stocks also rose for the second day, gaining from 3% to 6% among the leading names.  In mainland bourses, CSI300 gained 1.5% with catering, tourism, and Chinese liquor stocks leading the charge higher ahead of the National Day long holiday.  Reuters ran a story saying that China’s security regulators were asking some funds not to sell large amounts of stocks. USDJPY testing 145, but yen crosses lower Bank of Japan released the meeting minutes from the July meeting, understandably stale, but continuing to signal that easing intentions remain prevalent. Despite a further run higher in US Treasury yields with the 10-year touching the 4% mark, USDJPY has still remained capped below 145. More importantly, the weakness in the yen has now become more isolated against the USD. The yen is stronger against the EUR, GBP and AUD since the intervention on 22 September. Crude oil (CLU2 & LCOV2) recovers, European natural gas (surges Crude oil shifted focus back on supply worries with curbs in the U.S. Gulf of Mexico ahead of Hurricane Ian and with reports that Russia is pushing for the OPEC+ alliance to cut production. The group of oil producing nations is due to meet early next month to discuss its production plans. They already announced a cut to output for October by 100kb/d and have warned of further reductions amid falling prices. There has been reports that Russia is pushing for a cut to output of at least 1mb/d. Meanwhile, a pause in USD rally also helped to put a floor to the declines in commodity prices. WTI futures rose but still remained below $80/barrel while Brent futures were above $86. European Dutch TTF natural gas futures (TTFMQ2) European natural gas rallied as risks to further supply disruptions rattled an already fragile market. Dutch front month futures jumped more than 22% with reports of supply leaks in Nordstream followed by Gazprom issuing sanction warnings for Ukraine’s Naftogaz (read below).   What to consider? BOE Chief Economist Pill also pushed back on inter-meeting rate hike Huw Pill said the UK’s government’s fiscal announcement and the market reaction that followed it requires a significant monetary policy response, but the best time to assess and react to their impact is at the institution’s next meeting in November. He acknowledged the challenge to the bank’s inflation goal arising from the loose fiscal policy, while also saying that the bank’s program of government bond sales should go ahead as planned next week if the market repricing stays orderly, as has been the case in recent days. However, worth noting that BOE’s November 3 meeting is still before the medium-term fiscal strategy is announced, and if that contains significant spending cuts, the budget may prove contractionary, especially given the rise in yields. Nordstream leaks highlight geopolitical fragility Danish and Swedish authorities have attributed the major gas leaks on the Nord Stream 1 and 2 pipelines to large explosions, coming amid claims it was sabotage. With the pipelines not being used currently, there is likely to be minimal impact but it still signals an escalation of geopolitical tensions. In addition, Gazprom warned there’s a risk Moscow will sanction Ukraine’s Naftogaz, which would prevent it from being able to pay transit fees, and therefore put at risk whatever little gas is still flowing to Europe via Ukraine. Fed officials continue with a united hawkish voice While inflation and higher-for-longer interest rates remain a key theme in all Fed commentary these days, there is also another common theme emerging. All three officials on the wires yesterday – Kashkari, Bullard and Evans – suggested that the US may avoid a recession. Kashkari (2023 voter), in an interview with WSJ, said he’s unsure if the policy is tight enough suggesting more rate hikes will be needed to bring down inflation. Bullard (2022 voter) said the US has a serious inflation problem and the credibility of the inflation targeting regime is at risk. Evans (non-voter) is optimistic the terminal rate the Fed has set out (4.6% median in Dot Plot) will be restrictive enough. US consumer confidence beats expectations US consumer confidence for September rose to 108.0, above the expected 104.5 and the prior, revised higher, 103.6. The Present Situation and Expectations indices both rose to 149.6 (prev. 145.3) and 80.3 (prev. 75.8), respectively. Lower pump prices and a tight labor market possibly aided a rebound in sentiment, but high inflation and interest rates will continue to constrain consumer spending in the fourth quarter. Meanwhile, 1yr consumer inflation expectations declined to 6.8% (prev. 7.0%), but still remaining significantly higher than the Fed’s 2% goal. Meanwhile, durable goods order fell 0.2% in August, still coming in better than expected while new home sales rose to the strong pace of sales since March to 685k in August, above the expected 500K and prior, revised higher, 532k. The World Bank downgraded its growth forecasts for China while upgrading the growth of Vietnam The World Bank published its latest economic forecasts on Tuesday, cutting the 2022 growth rate of China to 2.8% from its previous forecast of 5%, and the 2023 growth rate to 4.5% from 4.8%.  On the other hand, the supra-national bank raised Vietnam’s growth rate in 2022 to 7.2% from the 5.3% forecast released in April. It also raised the 2022 growth forecasts for the Philippines to 6.5% from 5.7% and Malaysia to 6.4% from 5.5%. Excluding China, the East Asia, Pacific region is forecasted to grow 5.3% in 2022 and 6.0% in 2023, which are higher than the growth rates expected in China. China’s industrial profits declined 9.5% Y/Y in August In the first eight months of 2022, China’s industrial profits contracted 2.1% Y/Y. For the month of August, industrial profits declined 9.5% Y/Y, a slower contraction than July’s -14.5% Y/Y. The National Bureau of Statistics noted that the slower pace of year-over-year contraction in August was helped by stronger auto, electrical equipment, electricity generation, and consumer product industries. For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: https://www.home.saxo/content/articles/equities/market-insights-today-28-sept-28092022
The French Housing Market Is More Resilient | The Chance Of Republicans Winning The Senate Is Up

Optimistic Forecasts Of The French Government|Three Officials Suggested That The US May Avoid A Recession

Saxo Bank Saxo Bank 28.09.2022 09:24
Summary:  Market sentiment tipped sharply lower late yesterday after an earlier rally attempt in the US session on the news of sabotage of the Nord Stream pipelines in the Baltic sea. Elsewhere, the US 10-year treasury benchmark rose again and is pushing on the major 4.00% level, taking the USD higher and pressuring global liquidity. Adding further to weak sentiment overnight, the Chinese yuan slipped sharply lower as USDCNH broke above its longer term range highs of 7.20 established back in 2019 and 2020.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities jumped higher out of the gates in early trading yesterday, but the action faded all day and the market closed back near the key cycle support, with the S&P 500 index even posting a minor new bear market low intraday below the prior 3637 mark on the cash index, as the news of the Nord Stream pipeline sabotage (see below) weighed, and US yields and the US dollar continued their ascent. Pivotal levels here for equities as we await further developments and consider end-of-quarter flows into Friday. Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) Stocks traded in the Hong Kong bourse notably underperformed those in Shanghai and Shenzhen. Shares of public utilities fell from 3% to 5%.  U.K. headquartered HSBC (00005:xhkg) and Standard Chartered (02888:xhkg) continued their slide, falling 3% to 4% for the day and 9% to 11% since last Friday’s post-mini-budget turmoil in the Pound Sterling and U.K. Gilts.  Both Hong Kong and China developers plunged across the board,  mostly by 1% to 5%, with CIFI (00884:xhkg) falling over 27% and being the largest casualty in the property space.  CIFI, the 13th largest property developer in mainland China was said to have missed a payment on a project-related debt.  CSI300 fell 1%, dragged by ferrous metal, electric equipment and defence industries while banks, textiles, food and beverage stocks outperformed. Strong USD continues to rage. We have witnessed an historic move in the USD this month, with month-end and quarter-end drawing into view on Friday. Besides the massive, more than 8% meltdown in GBPUSD this month (trading sub-1.0700 this morning), a pair like AUDUSD has lost over 6.5% as of this morning’s exchange rate. The question soon has to be: when does this strong USD finally “break something” and bring an official response, whether coordinated or unilaterally from the Fed or the US Treasury? So far, there seems no sense of emergency, judging from comments yesterday by US National Economic Council director Brian Deese, who pushed back against the idea that the a Plaza Accord-like deal is under consideration. USDCNH reaches all-time highs, intensifying strong USD story. The strong US dollar finally took USDCNH above the 7.20 area that defined major tops on two prior occasions in 2019 and 2020. The exchange rate traded as high as 7.239 overnight, the highest in the history of the offshore CNH currency. USDCNY has not traded this high since early 2008. The move comes ahead of a major holiday next week in China, with markets closed for the entire week, which will leave markets in limbo next week as USDCNY won’t trade. Gold (XAUUSD) remain under pressure from the stronger US dollar and rising US treasury yields, perhaps showing resilience at the margin given that the precious metal failed to post new lows for the cycle yesterday or today even as the USD surges to new highs elsewhere. The next focus is perhaps the round 1,600 level if the selling continues. Crude oil (CLU2 & LCOV2) recovers, European natural gas surges. Crude oil shifted focus back on supply worries with curbs in the U.S. Gulf of Mexico ahead of Hurricane Ian and with reports that Russia is pushing for the OPEC+ alliance to cut production. The group of oil producing nations is due to meet early next month to discuss its production plans. They already announced a cut to output for October by 100kb/d and have warned of further reductions amid falling prices. There has been reports that Russia is pushing for a cut to output of at least 1mb/d. Meanwhile, a pause in USD rally also helped to put a floor to the declines in commodity prices. WTI futures rose but still remained below $80/barrel while Brent futures were above $86. US treasuries (TLT, IEF) US treasury yields rose once again after a brief and relatively sharp stumble yesterday, taking the 10-year yield to the symbolic 4.00% yield. It is worth noting that large round numbers on the yield often provide sticking points – for example, the 3.50% defined the top in June. Is this an important cycle top in yields or can they continue to power higher. The 4.00% level was also the stop for much of late 2008 and 2009. Yesterday saw a weak 5-year treasury auction despite the high yields. What is going on? Nord Stream pipelines severed, presumably an act of sabotage. Enormous upwellings of gas in the Baltic along the Nord Stream 1 and Nord Stream 2 pipelines in the Baltic Sea and detection of seismic activity that resembled explosions rather than earthquakes suggest that the pipelines were sabotaged to prevent the delivery of gas to Germany from Russia. The Nord Stream 2 pipeline was never operational, and the Nord Stream 1 deliveries had recently ceased. EU commissioner joined others in pointing the finger at Russia for the action, promising “the strongest possible response” if it is confirmed that Russia is behind the action. The development saw European natural gas jumping more than 22%, with Gazprom also issuing sanction warnings for Ukraine’s Naftogaz, which would prevent it from being able to pay transit fees, and therefore put at risk whatever little gas is still flowing to Europe via Ukraine. Fed officials continue with a united hawkish voice. While inflation and higher-for-longer interest rates remain a key theme in all Fed commentary these days, there is also another common theme emerging. All three officials on the wires yesterday – Kashkari, Bullard and Evans – suggested that the US may avoid a recession. Kashkari (2023 voter), in an interview with WSJ, said he’s unsure if the policy is tight enough suggesting more rate hikes will be needed to bring down inflation. Bullard (2022 voter) said the US has a serious inflation problem and the credibility of the inflation targeting regime is at risk. Evans (non-voter) is optimistic the terminal rate the Fed has set out (4.6% median in Dot Plot) will be restrictive enough. France releases ‘rosy’ economic forecasts for 2023. Yesterday, the French government published its economic forecast for 2022-23 as part of the parliamentary debate on the 2023 debate. The forecasts are overly optimistic. The Ministry of Finance expects that household investment (which mainly consists of the purchase and renovation of dwellings) will increase by 0.6 point over 2022-23 despite a jump of 250 basis points in the 10-year government bond yield and falling (or at best stagnant) purchasing power. We are a bit skeptical. We think that a sharp decrease in real estate prices is one of the less mentioned risks in France for 2023. This will be something to monitor very closely. It could seriously deepen the expected recession. USDJPY testing 145, but yen crosses lower. Bank of Japan released the meeting minutes from the July meeting, understandably stale, but continuing to signal that easing intentions remain prevalent. Despite a further run higher in US Treasury yields with the 10-year touching the 4% mark, USDJPY has still remained capped below 145. More importantly, the yen is stronger against the EUR, GBP and AUD since the intervention on 22 September, and the contrast with the struggling CNH is particularly notable. The World Bank downgraded its growth forecasts for China while upgrading the growth of Vietnam. The World Bank published its latest economic forecasts on Tuesday, cutting the 2022 growth rate of China to 2.8% from its previous forecast of 5%, and the 2023 growth rate to 4.5% from 4.8%.  On the other hand, the supra-national bank raised Vietnam’s growth rate in 2022 to 7.2% from the 5.3% forecast released in April. It also raised the 2022 growth forecasts for the Philippines to 6.5% from 5.7% and Malaysia to 6.4% from 5.5%. Excluding China, the East Asia, Pacific region is forecasted to grow 5.3% in 2022 and 6.0% in 2023, which will be, for the first time over the past three decades, higher than the growth rates in China. BHP takes advantage of sterling slump and redeems notes more than half a century early. Despite the iron ore (SCOA) price falling 1.4%, to its equal lowest level this year (US$95.90), BHP shares in Australia rallied to a three-day high after the mining giant paid off debts earlier than expected. BHP took advantage of the slump in the sterling against the USD, and used its record profits to redeem pound-denominated notes (due in 2077). This resulted in BHP effectively paying down $643 million of notes early. Last month BHP reported net debt of just $333 million. BHP also announced mining expansion plans. From exploring options to mine copper at Cerro Colorado beyond 2023, with Chilean regulation easing, to also seeing huge commodity upside in Peru, and spending $12m on exploration there over 10 months. Meanwhile, BHP also affirmed it’s working toward bringing forward production for its new potash (fertilizer) business to 2026. BOE Chief Economist Pill also pushed back on inter-meeting rate hike. Huw Pill said the UK’s government’s fiscal announcement and the market reaction that followed it requires a significant monetary policy response, but the best time to assess and react to their impact is at the institution’s next meeting in November. He acknowledged the challenge to the bank’s inflation goal arising from the loose fiscal policy, while also saying that the bank’s program of government bond sales should go ahead as planned next week if the market repricing stays orderly, as has been the case in recent days. However, it is worth noting that BOE’s November 3 meeting is still before the medium-term fiscal strategy is announced, and if that contains significant spending cuts, the budget may prove contractionary, especially given the rise in yields. US consumer confidence beats expectations. Lower petrol prices and a tight labor market possibly aided a rebound in sentiment, but high inflation and interest rates will continue to constrain consumer spending in the fourth quarter. Meanwhile, 1yr consumer inflation expectations declined to 6.8% (prev. 7.0%), but still remaining significantly higher than the Fed’s 2% goal. In other data, US durable goods order fell 0.2% in August, still coming in better than expected while new home sales rose to the strongest pace of sales since March to 685k in August, above the expected 500K and prior 532k (revised up from 511k). What are we watching next? End of quarter rebalancing? We have seen aggressive moves across markets this quarter, to say the least, which brings the question of whether significant rebalancing flows are set for the quarter end this Friday. The relative bond performance has been perhaps worse than that for equities, while in FX the focus may be on possible rebalancing after a tremendous USD upsurge in Q3. Earnings calendar this week The chief action this week is up tomorrow as H&M, Nike, and Micron Technology deliver earnings reports, with the earnings from Micron the most interesting to watch as we already know H&M and Nike are seeing weak demand. Micron has exposure to the consumer electronics industry and manufactures memory chips in Asia which means that the company sits in at the intersection of many interesting trends. Today: Paychex, Cintas Thursday: Polestar Automotive, H&M, Nike, Micron Technology, CarMax Friday: Carnival (postponed from last week), Nitori Economic calendar highlights for today (times GMT) 0715 – ECB President Lagarde to speak 0815 – UK BoE Deputy Governor Cunliffe to speak 0830 – ECB’s Holzmann to speak 1230 – US Aug. Pending Home Sales 1230 – US Aug. Advance Goods Trade Balance 1235 – US Fed’s Bostic (non-Voter) to speak 1400 – US Aug. Pending Home Sales 1410 – US Fed’s Bullard (voter 2022) to speak 1415 – US Fed Chair Powell to speak (opening remarks at conference) 1430 – US DoE Weekly Crude Oil and Product Inventories 1500 – US Fed’s Bowman (voter) to speak 1700 – US 7-year Treasury Auction 0000 – New Zealand Sep. ANZ Business Confidence survey   Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: https://www.home.saxo/content/articles/macro/market-quick-take-sep-28-2022-28092022
RBA Pauses Rates as Australian Dollar Slides; ISM Manufacturing PMI in Focus

Powell Touched On The Topic Of The Digital Dollar And The Crypto Industry

InstaForex Analysis InstaForex Analysis 28.09.2022 11:56
Yesterday, the next speech of the Chairman of the Federal Reserve System, Jerome Powell, took place. In his speech, he touched on the topic of cryptocurrencies and, in particular, decentralized finance (DeFi). Coincidence or not, bitcoin and ether reacted with a sharp decline to the statements, which led to the return of trading instruments to quite dangerous levels. But before we discuss the technical picture, let's deal with the statements. At a panel discussion on digital finance organized by the Bank of France, Federal Reserve Chairman Jerome Powell spoke about the planned regulation of decentralized finance. "The normalization of monetary policy worldwide is very important for the future. We must deal with structural problems in the Defi ecosystem and conflicts of interest." First, one of the most important problems that Powell drew attention to is the structure of transparency. "The good news is that, from the point of view of financial stability, the interaction between the Defi ecosystem, the traditional banking system, and the traditional financial system is not so great at the moment. The recent sharp collapse of DeFi has not significantly impacted the banking system and financial stability in general," Powell said. According to the official, it is necessary to do a lot of work with regulations, but it should be done carefully and thoughtfully. The Chairman of the Federal Reserve System warned that the uncontrolled situation in the crypto industry would not continue indefinitely. There is now a real need for more substantive regulation so that as Defi expands again and begins to cover more and more retail customers, there will be appropriate regulation. It is worth noting that Christine Lagarde, President of the European Central Bank, and Agustin Carstens, Director General of the Bank for International Settlements, also participated in the discussion. The head of the Fed also noted the risk of using stablecoins in a broader sense and the need to develop legislation in this direction. Powell also touched on the topic of the digital dollar, saying that it will take several more years of research before the Fed decides to issue it or not. As for today's technical picture of bitcoin, as I noted above, the failure of the trading instrument and the return to the framework of the side channel took place quite quickly. This indicates that investors have no interest in risks. The focus is now on the $19,000 resistance, the return of which is necessary to build a new upward correction in the pair. In the case of a breakthrough in this area, you can see a dash up to $19,520 and into the $20,000 area. To build a larger upward trend, you need to break above the resistances: $20,540 and $21,410. If the pressure on bitcoin increases, and all the prerequisites for this, the bulls should make every effort to protect the support of $18,625, just above which trading is now underway. Its breakdown will quickly push the trading instrument back to the lower border of the $18,100 side channel and pave the way for an update of the $17,580 level. Ether has again failed to reach the significant support of $ 1,275, and now there is a risk of building a new bear market. A breakdown of $1,275 can lead to significant changes in the market. Only a fix above $1,343 will somehow calm the situation and return the balance to the ether. Consolidation above $1,343 will stabilize the market direction and push the ether to another correction in the area of $1,402 and $1,457. The further targets will be the areas: $1,504 and $1,550. If the pressure on the trading instrument remains and at the breakdown of $1,275, we can see a new movement of the trading instrument down to the support of $1,210. Its breakdown will push the ether to $ 1,150, where major players will manifest themselves in the market again.   Relevance up to 10:00 2022-09-29 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/322886
Gold Is Showing A Good Sign For Further Drop

The Situation Around The World Force Investors To Keep Precious Metals In Portfolios

InstaForex Analysis InstaForex Analysis 28.09.2022 12:29
Everything is relative in this world. Although gold has lost about 11% of its value in 2022, it is better than stocks or bonds. What, no matter how the precious metal, is a means of protecting wealth and insurance against inflation? Even despite the extremely unfavorable background, XAUUSD retreats reluctantly. The bulls are fighting for every dollar, and as the global recession approaches, the chances of saving gold increase everyday. Since the start of the Fed's monetary policy tightening cycle, long-term inflation expectations have been securely anchored at around 2.5%, which is what the Central Bank required. At the same time, aggressive rate hikes around the world turned into a meteoric rally in bond yields. The cost of storing precious metals in ETFs is growing, and it does not generate interest income. Should we be surprised at the outflow of gold from specialized exchange-traded funds? The 10-year US Treasury yield, for the first time since 2010, exceeded the 4% mark. With inflation expectations at anchor, real debt rates are climbing ever higher. In such conditions, gold usually falls like a stone, but now it is resisting. Even against the backdrop of the rapid strengthening of the US dollar, the US dollar receives preferences both as a safe-haven asset and as a currency whose Central Bank is conducting aggressive monetary restrictions. The precious metal should be seriously affected in such conditions, but it clings to any straw. Dynamics of gold and US dollar But the Fed is not going to stop! St. Louis Fed President James Bullard says the federal funds rate should reach 4.5% as soon as possible as confidence in the Fed is under threat. Indeed, there is an opinion that gold will start to rise after the Central Bank realizes that it cannot control inflation. Minneapolis Fed President Neel Kashkari will not repeat the same old mistakes. Kashkari said the Fed decided in the 1970s that it had done its job, looking at slowing inflation and the economy, and was punished for it. His colleague, Chicago Fed President Charles Evans, says rates will hit a ceiling by spring, after which the central bank will be able to sit on the sidelines. Looking at rising bond yields, a stronger US dollar, and hawkish rhetoric from FOMC members, hedge funds are never tired of getting rid of gold. "Bearish" sentiment in the market reached a 4-year high. As of September 20, speculators reduced the size of net longs to the lowest level since November 2018. In my opinion, the reluctance of XAUUSD to fall as fast as the US securities market requires, indicates that the risks of recession and the escalation of the conflict in Ukraine force investors to keep precious metals in portfolios. Technically, on the daily chart of gold, quotes approached the previously indicated target at $1,600 per ounce at arm's length. I believe that the potential of the downward movement is not revealed, and the expected stop will be at the level of $1,590 or $1,575. The recommendation is to keep shorts.   Relevance up to 09:00 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/322882
Central Bank Policies: Hawkish Fed vs. Dovish Others"

The Fed Plans To Address The Regulation Of Unattended Wallets

InstaForex Analysis InstaForex Analysis 28.09.2022 12:36
Jerome Powell, Chairman of the US Federal Reserve, said that the central bank is not going to issue a digital dollar anytime soon. "We do not see ourselves making that decision for some time," Powell said on Tuesday, speaking remotely about the role of central banks in digital markets to global financial leaders and cryptocurrency regulatory experts attending a conference in Paris. Powell indicated that the central bank would instead work in collaboration with Congress and the executive branch to assess policy and technology issues. This includes a multi-year period during which the Fed will focus on "building public confidence in our analysis and ultimate conclusions, which we certainly haven't reached yet." The central bank chairman also said the Fed would need White House and Congress approval to proceed with issuing a digital dollar. Regarding the criteria required for a central bank to create a CBDC, Powell identified four key characteristics: intermediation, privacy protection, identity verification, and interoperability. "We would be looking to balance privacy protection with identity verification, which has to be done in today's traditional banking system as well." Powell said. According to him, the Fed's sharp interest rate hike this year contributed to the collapse of some stablecoins and a significant drop in the value of cryptocurrencies, which led to the onset of a "crypto winter" and revealed "significant structural issues" that exist in decentralized finance (DeFi). Moreover, he said that the ongoing decline in the cryptocurrency market gave regulators more time to fully assess the capabilities of the digital dollar, identify weaknesses and adopt appropriate rules, noting that the crypto winter did not have a significant impact on financial stability and the banking system as a whole. "This demonstrates the weaknesses and work that needs to be done," Powell said, referring to problems with the structure and transparency of DeFi. "Crypto winter gives us a little bit of time. That situation will not persist indefinitely." Issues such as the need to regulate unattended wallets or algorithms have been identified as examples of issues requiring more work. Powell emphasized the need to develop appropriate regulations in the future as DeFi gains popularity and attracts more retail investors.   Relevance up to 09:00 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/322884
bybit-news1

USD: What Can We Expect From US Dollar Index (DXY)?

Jing Ren Jing Ren 29.09.2022 10:03
We talked about the situation on the DXY index a little more than two weeks ago. Apparently, its internal structure shows the completion of the global corrective trend, which took the form of a triple zigzag consisting of five main cycle waves w-x-y-x-z. It is possible that the market has now begun the formation of the initial part of a new bearish trend. It is assumed that the bears are starting to build the first impulse sub-wave of the potential standard zigzag â’¶-â’·-â’¸. The end of the impulse â’¶ is possible at a minimum of 107.67, which is marked by a minuette fourth correction. An approximate scheme of possible future movement is shown on the chart. However, another option is also possible, in which the formation of a cycle triple zigzag is not yet fully completed. Most likely, at the level of 104.60, the bearish cycle wave x was completed, which took the form of a standard zigzag â’¶-â’·-â’¸ of the primary degree. After that, an upward impulse price movement in the wave z began. The wave z may take the form of a zigzag â’¶-â’·-â’¸, where the first impulse and correction are already completed. The entire wave z may complete its pattern near 119.56. At that level, it will be at the 76.4% Fibonacci extension of wave y.
A Bright Spot Amidst Economic Challenges

The Move Of The Bank Of England Forced British Yields To Plummet

Saxo Bank Saxo Bank 29.09.2022 10:04
Summary:  Equity markets rallied yesterday after the Bank of England announced an emergency QE action to calm a dysfunctional long maturity gilt market, a move that smashed UK gilt yields lower and took major global sovereign yields lower as well. The market’s inference is perhaps that central bank tightening in general has been taken too far and the Bank of England is perhaps the canary in the coal mine. The US dollar also traded weaker yesterday before rebounding slightly overnight.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities rose sharply after posting new intraday lows for the cycle as the Bank of England QE announcement pushed US treasury yields sharply lower, offering the hope of a pivot in the brutal cycle of rising yields. The rally encourages the technical idea that we have created a double bottom as long as these new marginal cycle lows continue to support the price action. The next area of resistance is around 12,000 in the Nasdaq 100 index. Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) Following the rally in global equity markets overnight, Hong Kong and mainland China stocks gained, with Hang Seng Index up by 1% and CSI300 0.3% higher. HSBC (00005:xhkg) rose 2.8% on the temporary calm of the U.K. bond market and currency.  China internet stocks and the new energy space were among the top gainers. China property developers failed to participate in the rally, with leading names falling from 1.5% to 9%. In the mainland bourses, medical equipment, healthcare, precious metal, coal mining and chemical stocks outperformed while property developers, shipping, tourism, lodging declined.   Strong USD fades as bond yields punched lower The sharp reversal in bond yields yesterday after yields had ground higher in a seemingly inexorable and increasingly rapid pace over the last few weeks saw the USD trading sharply lower, suggesting that the USD and yields will continue to trade in tightly correlated fashion and as important indicators for global risk sentiment. So far, the move has only reversed a portion of the greenback’s recent gains. A more notable reversal would require, for example EURUSD trading back above 0.9900, GBPUSD back above what looks an impossible 1.1250 or higher, and AUDUSD above 0.6700. Huge sterling focus after BoE move The initial reaction to the BoE emergency QE move (more below) was to sell sterling, as all other things equal, an easing move for a central bank in an otherwise tightening world is a negative for the currency. But perhaps as the market saw the move as the start of a possible trend that might spread elsewhere, sterling actually rose sharply later in the session on the improvement in global sentiment after the BoE’s move helped not only UK yields to sharply reverse, but other yields to do likewise, if less so. GBPUSD rose back to above 1.0900 late yesterday after trading 1.0540 earlier in the session. The gains were reversed in early European trading to below 1.0800 as of this writing. Sterling will remain extremely volatile, with EURGBP worth tracking around the pivotal 0.9000 area. Gold (XAUUSD) Gold rebounded reflexively as the pressure from rising yields and a rising US dollar suddenly faded yesterday. After trading near 1,615 yesterday, the price action ripped all the way back to 1,660+, short of the critical resistance zone into 1,680-1,700 that is the departure point for this latest bear market move. It is clear that global bond yields and the USD will continue to lead the way as coincident indicators. Crude oil (CLU2 & LCOV2) prices rallied as supply conditions worsened... ... as suggested by the first drop in US crude inventories in a month. EIA data showed stockpiles fell 215k bbl last week, while West Coast gasoline stockpiles fell to their lowest level in 10 years. Disruption to supplies due to Hurricane Ian are also causing some concerns, with US president Joe Biden warning oil companies not to hike prices for the second time this week. Furthermore, the geopolitical situation has turned more fragile once again with the European Union announcing a new round of sanctions against Russia including a ban on European companies from shipping Russian oil to third countries above an internationally set price cap. Brent futures rose close to $90/barrel while WTI futures got in close sights of $82/barrel. US treasuries (TLT, IEF) US treasury yields fell sharply in sympathy with UK gilt yields on the surprise announcement of an emergency QE programme from the Bank of England that erased most of the enormous spike in yields there that had developed since the UK government announced its new tax cut package late last week. The price action for the 10-year US treasury benchmark settled near 3.75% after trading slightly above the 4.00% mark yesterday. The Bank of England move brings hope that other central banks may ease off the tightening accelerator. The next important yield level to the downside is the cycle top of 3.50% from June. A 7-year treasury auction yesterday What is going on? Bank of England announces emergency QE to counter systemic risks The Bank of England on Wednesday announced that it would purchase long-dated UK gilts to stabilize the market in a “temporary operation”. The move forced UK yields sharply lower, reversing most of the recent spike that had developed after UK Chancellor Kwasi Kwarteng announced tax cuts late last week. The 30-year UK Gilt yield fell over 100 basis points after the announcement to below 4.0%, although it was trading 3.50% a week ago. While this may be touted as yield curve control of some sort, the BoE claimed that it is a time limited event until October 14 with the intention of restoring orderly market conditions. Pressure is building on the Truss government to reverse the planned tax cuts and shore up fiscal credibility. Apple cancels additional iPhone 14 production capacity Apple announced that it would not move forward with plans for additional iPhone production as the demand for the new phone was not living up to expectations. The increase would have been on the order of 6 million iPhones in the second half of this year, suggesting that the running demand for iPhones in the period is on the order of 90 million, about the same as last year. Demand for higher end new iPhone 14 has been stronger than for the entry-level models. Apple fell 1.3% yesterday after trading as much as 4.5% lower intraday. Key chipmakers were also impacted, including Taiwan Semiconductor, which fell 2.2% and Apple’s biggest iPhone assembler, Hon Hai Precision Industry, lost 2.9% amid the electronics supplier selloff, on fears demand will slow. Fed speakers maintain optimism on US economy and markets Fed’s Bostic suggested year-end rates of 4.25-4.50% while the market pricing is still at 4.2% suggesting more room for upward pricing. Although not a voter this or next year, he said that his baseline is a 75bps increase at November meeting and 50bps in December. Meanwhile, he remained optimistic on US economic momentum and ruled out any contagion risks from systemic global events (possibly referring to the UK crisis). Meanwhile, Bostic noted no evidence of dysfunction in the Treasury market at this point. Another Fed speaker, Charles Evans, vouched for a further move into restrictive territory, saying that the FOMC’s current target range is “not nearly restrictive enough”. Australian inflation rose 7% in the year to July, based on new monthly CPI At this rate it doesn’t appear CPI will peak at just shy of the 8% the RBA forecasts, given price pressures have resumed this month from the largest inflation contributors. Based on the ABS’s new monthly CPI print, some of the largest price jumps year-on-year to July were in fuel (+29.2%) and fruit & vegetables (+14.5%). The concern is that, with La Nina set to hit Australia and population growth continuing, food and housing (rent) prices will continue to rise apace. In September alone, contributors to food prices have risen markedly, as the global supply outlook has weakened amid poor crop conditions. This could tilt the RBA back toward a more hawkish stance. China warned banks about one-way bets on the weakening of the renminbi Yesterday as the onshore and offshore renminbi weakened below 7.20 versus the dollar, the China Foreign Exchange Market Self-Regulatory Body, attended by PBoC Vice Governor Liu Guoquiang, told banks in a meeting to “safeguard the stability of the market and prevent volatile movements in the exchange rate”, in particular not to make one-way bets on the weakening of the renminbi. What are we watching next? End of quarter rebalancing? We have seen aggressive moves across markets this quarter, to say the least, which brings the question of whether significant rebalancing flows are set for the quarter end this Friday. The relative bond performance has been perhaps worse than that for equities, while in FX the focus may be on possible rebalancing after a tremendous USD upsurge in Q3. Porsche shares to debut today (P911:xetr) Volkswagen set the listing price for Porsche’s shares at €82.50, which would value the company at €75 billion. The shares will begin trading today for the company and this will be the largest IPO in over a decade. Earnings calendar this week The chief action this week is up with today’s earnings reports from H&M (this morning before market open at 0700 GMT), Nike (after US market close today at 2100 GMT), and Micron Technology (after market at 2030 GMT). The earnings from Micron the most interesting to watch as we already know H&M and Nike are seeing weak demand. Micron has exposure to the consumer electronics industry and manufactures memory chips in Asia which means that the company sits in at the intersection of many interesting trends. Today: Polestar Automotive, H&M, Nike, Micron Technology, CarMax Friday: Carnival (postponed from last week), Nitori Economic calendar highlights for today (times GMT) 0700 – Spain Flash Sep. CPI 0745 – ECB's Centeno to speak 0800-0815 – Multiple ECB speakers 0900 – Eurozone Sep. Confidence surveys 1130 – UK Bank of England Deputy Governor Ramsden to speak 1230 – Czechia Central Bank Rate Announcement 1230 – Canada Jul. GDP 1230 – US Weekly Initial Jobless Claims 1330 – US Fed’s Bullard (voter 2022) to speak 1430 – US Weekly Natural Gas storage change 0130 – China Sep. Manufacturing and Non-manufacturing PMI 0145 – China Sep. Caixin Manufacturing PMI Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app:   Source: https://www.home.saxo/content/articles/macro/market-quick-take-sep-29-2022-29092022
Bank of England Faces Rate Decision: Uncertainty Surrounds Magnitude of Hike

PBoC Talks CNY And Forex Market. Check How Have US Stocks, EURUSD And Other Assets Been Performing Recently

ING Economics ING Economics 29.09.2022 11:08
Bank of England Gilt intervention shakes up despondent markets Source: shutterstock Macro outlook Global Markets: US stocks rallied hard yesterday, though the catalyst for this seemed more to do with the Bank of England (BoE) deciding to prop up the ailing Gilts market with an offer to buy unlimited bonds, rather than anything US-related. And this is a bit odd, because we don’t get the sense that international markets were all that worried by the UK’s economic and market problems before yesterday, so the rally probably had more to do with markets that had been looking oversold anyway, and month and quarter end re-positioning than the BoE’s move itself. Indeed, the day started exceptionally well for the USD, following White House remarks that seemed to rule out a plaza-style agreement to stem USD strength. But EURUSD swung violently the other way after the BoE move taking EURUSD back up to 0.9721 currently. Most Asian currencies haven’t reflected this swing yet, so early trading today is likely to be positive, especially for the likes of the KRW and THB which were down more than 1% yesterday. The BoE’s actions took 10Y Gilt yields down by just under 50bp, to 3.999%, and US Treasuries and Bund yields also dropped sharply, though by less. The 10Y US Treasury yield is now 3.73%, and German 10Y Bund yields are 2.11% by comparison. G-7 Macro: Yesterday’s macro releases included a slightly narrowing US trade deficit, falling (pending) US new home sales, but rising US retail inventories in what looks like a mixed to slightly positive bag for 3Q US GDP. Today, preliminary September German inflation data will set the scene for the Eurozone figures released shortly, and the forecasts look for sharp increases in the annual rate driven by month-on-month gains of 1.5% that make talk of the ECB potentially hiking 75bp at their next meeting (both Martin Kazaks, and Robert Holzmann yesterday) look inadequate even as they are intended to calm market concerns.  US data is dominated by the third release of 2Q22 GDP, which isn’t likely to be met with much interest. China: The PBoC stepped up its efforts to limit the CNY's slide yesterday, bolstering stronger daily fixes with advice from a regulatory body governed by the PBoC warning banks against one-way bets on the yuan, which pushed as high as 7.25 yesterday (though is back to just over 7.20 currently). Banks were told to respect the daily fixing in what looks like a warning that we may see even stronger fixes if current trends persist. The PBoC also made a statement that "The foreign exchange market is of great significance and its stability is the top priority", making it pretty clear that further CNY weakness will be resisted.   Vietnam: Vietnam delivers a large data dump today, which will include 3Q22 GDP, September CPI, industrial production, retail sales and trade data. The gist of the consensus expectation is that this dynamic SE Asian economy will continue to show decent strength in economic activity while keeping inflation relatively well managed, which could provide some support for the VND, which year-to-date remains one of the region’s strongest currencies.   Read next: Tim Moe (Goldman Sachs) Comments On USD And Turbulent Times For Markets In General, Ole Hansen (Saxo)Talks Nord Stream | FXMAG.COM What to look out for: Fed speak and China PMI South Korea business survey manufacturing (29 September) US initial jobless claims, 2Q GDP and core PCE (29 September) Fed Presidents Mester and Daly speak at separate events (29 September) South Korea industrial production (30 September) Japan labor market data (30 September) China official and Caixin PMI manufacturing (30 September) India RBI meeting (30 September) Hong Kong retail sales (30 September) US personal income, personal spending and core PCE (30 September) US University of Michigan sentiment (30 September) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Canada's Inflation Expected to Ease in May, Impacting BoC's Rate Decision

Oh My! Forex Market Rocks! Could Anything Change The EUR/USD Trend? | Let's Check Comments On Euro, British Pound And USD!

ING Economics ING Economics 29.09.2022 11:31
Events in the UK yesterday marked the first time this stagflationary macro environment risked evolving into a financial crisis. Fortunately, the Bank of England intervened aggressively in the Gilt market and market conditions have temporarily stabilised. However, there will be no room for complacency this autumn as volatility returns to 2020 highs USD: Trying to avoid a crisis Traded levels of volatility continue to rise in FX and debt markets. Remember these represent expected levels of volatility and are really being driven by the big swings we are seeing in spot FX and bond yields. Interestingly, equity volatility is a lot more subdued with perhaps equity investors already defensively positioned for late-cycle equity losses.   So far, this stagflationary environment and the aggressive response from central bankers - especially the Federal Reserve - have seen financial assets adjust as one would expect at this stage in the economic cycle. Up until recently, conditions in FX and debt markets had been reasonably orderly and there was no hint of financial stress in the system. Sadly the same could not be said of frontier markets, where the likes of Sri Lanka defaulted earlier this year.   Yesterday, however, saw the Bank of England's Financial Policy Committee take the decision to break the 'doom loop' at the long end of the UK Gilt market as margin calls on pension funds and the need to raise cash risked a downward spiral for long-dated Gilts. In effect, this is the first big intervention from a G10 central bank in this cycle to avert a financial crisis. It may not be the last. It serves as a reminder to policymakers around the world that any perceptions by the market of a policy misstep will be heavily punished. And with the Fed to keep hiking into a slowdown - probably taking rates to the 4.25/4.50% area into 1Q23 - these conditions may well be with us for the next six to nine months. What does this all mean for FX? The dollar will continue to be favoured - especially if it is soon to be paying 4% on deposits. And tighter liquidity conditions as central banks battle inflation around the world mean still higher levels of FX volatility. This will discourage a return to carry trade strategies meaning that high-yielding FX and commodity currencies will not be given the benefit of the doubt. We, therefore, continue to favour defensive strategies in FX - which means backing the dollar and looking for the Swiss franc to outperform in Europe as the Swiss National Bank (SNB) guides it higher.   Out of interest as well, the US trade balance has narrowed back to levels last seen in October 2021 - meaning that the dollar's Achilles Heel - the trade deficit - does not look as vulnerable as it could. Expect there to remain strong demand for the dollar on dips - e.g in the 112.50/113.00 area for DXY. Chris Turner EUR: Gearing up for new highs in inflation Beyond geopolitics, the short term focus in the eurozone is on inflation - where the September readings (Germany today, eurozone tomorrow) should mark new highs. The European Central Bank (ECB) is talking tough and will probably deliver on the 75bp of hikes expected for the 27 October meeting. We doubt this provides much support for the euro, however. 0.9500 has proved a good support area for EUR/USD after all and the BoE action did provide a brief reprieve to non-dollar currencies across the board. But we see nothing yet to reverse this powerful underlying downtrend in EUR/USD and expect any rallies above 0.97 to prove brief. Chris Turner GBP: Cable gets a reprieve Aggressive BoE intervention in the UK Gilt market was firmly in the realms of financial stability and we would overlook the hyperbole of 'fiscal dominance' or 'monetary financing here. This was a necessary, temporary intervention to ensure the orderly function of the UK Gilt market - which our debt strategists describe as the 'bedrock' of the UK banking industry. Yet there is only so much the BoE can do to support cable, since we think FX intervention and emergency rate hikes are not on the table. And we see no change in the strong dollar story over the next six to nine months. Instead, expect cable volatility to stay high (one week realised volatility is a staggering 34%) and be beholden to any fiscal updates. As we have been saying recently, trying to hold sterling together until the 3 November BoE rate meeting or 23 November fiscal update will be a tough challenge for policymakers. As we said in our reaction piece yesterday, we doubt cable holds gains to 1.08/1.09 and the bias has got to be for a 1.0350/1.0500 retest. Chris Turner CEE: CNB confirms end of hiking cycle At today's Czech National Bank (CNB) meeting, we expect rates to be unchanged in line with surveys and market expectations. The main news in our view will be the confirmation of an end to the hiking cycle. We cannot expect a new central bank forecast today, but as always, we will see the governor's press conference. We expect the topic of FX intervention and the long-term level of interest rates, or the timing of the first rate cut, to be addressed. However, the CNB will mainly want to present unchanged rates as stability in uncertain times. From an FX perspective, it is evident from last week's data that the CNB has returned to the market for the first time since the August meeting, but intervention volumes have so far been minimal. We believe that part of the market is betting on an end to CNB intervention or a change in the central bank's approach again. However, we do not expect any change and so we can see them closing short CZK positions after the meeting, resulting in a stronger koruna. In the rest of CEE, Tuesday's jump in the gas price translated to FX yesterday, as we expected, with the Polish zloty generating a loss of 0.4% and the Hungarian forint 1.5%. In Hungary, the move was supported by a further drop in market rates as a result of Tuesday's National Bank of Hungary decision. Unless we see a further rise in gas prices, we believe the forint has already taken its losses and should stabilise around EUR/HUF 412. The Polish zloty, on the other hand, still has room to move closer to 4.82 EUR/PLN. Moreover, in our view, the market is still too hawkish on Polish rates. However, Friday's inflation release from Poland will be crucial in this sense. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
BSP Maintains Rates Amid Moderate Inflation; Eyes Further Tightening if Needed

GBP/USD: There Are Two Important Releases Today: Final US GDP (Q2) And Unemployment Data

InstaForex Analysis InstaForex Analysis 29.09.2022 16:18
Today, the dollar is recovering its positions in the foreign exchange market after yesterday's fall. The Bank of England said it would make temporary purchases of UK government bonds with long maturities "to restore orderly market conditions." As part of the announced bond purchase program, the Bank of England will buy bonds with a maturity of more than 20 years: "initially, bonds worth up to 5 billion pounds will be bought at one auction." On Wednesday, the Bank of England said it had purchased £1.025 billion worth of bonds. "Subsequent auctions will be held every business day from 13:15 to 14:45 (GMT) through October 14." As a result of Wednesday's intervention to buy bonds by the Bank of England, the yields of European and US government bonds fell sharply. Yields on 10-year U.S. Treasury fell from 4.01% to 3.73%, rolling back from multi-year highs by 7.5%. Against the backdrop of falling yields on US government bonds, the dollar fell sharply on Wednesday. Its DXY index lost more than 1%, dropping from an earlier new local 20-year high of 114.74 to 112.50. Today, the markets are gradually calming down and "recovering" after yesterday's storm. The dollar, as we noted above, is recovering its positions, and its DXY index is near 113.25 as of this writing, while 10-year US Treasury yields is also growing again, which, in turn, is facilitated by the tough policy of the Federal Reserve. Atlanta Fed President Raphael Bostic said yesterday that the base case for now is a 75 bps rate hike in November and a 50 bps hike in December. In his opinion, the lack of progress in curbing inflation means that by the end of the year, the Fed will have to set rates in the range 4.25%–4.5%. The Fed's super-tight monetary policy cycle is an undeniably strong positive fundamental factor for the dollar. As for the pound, the new policy announced yesterday by the Bank of England on the purchase of government bonds is "mixed" news for it, economists say. By buying bonds, the BoE actually suspended the planned quantitative tightening (QT). As you know, interest rate cuts and quantitative easing (purchases on the government bond market) are one of the main instruments of the central banks' monetary policy, as a result of which the quotes of the national currency, as a rule, are declining. Given yesterday's sharp rise in government bonds, the fall in dollar quotes and the fact that the Bank of England intends to conduct large-scale purchases of government bonds daily until October 14, regular bursts of volatility in financial markets are likely during the time period announced by the BoE (from 13:15 to 14:45 GMT ). Today also (at the beginning of the American trading session), the U.S. Bureau of Economic Analysis will publish the final data on GDP growth for the 2nd quarter, and the U.S. Department of Labor will present the data on weekly jobless claims. This will also affect the dollar quotes and cause volatility in the market, especially if the data differs greatly from the forecast values.   As of writing, the GBP/USD pair is trading near 1.0863, remaining in the zone of both short-term (below resistance levels 1.0998, 1.1438) and long-term (below resistance levels 1.2165, 1.2380) bear markets. Relevance up to 12:00 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/323028
Saxo Bank Podcast: The Risk Of An Escalation In The US-China Confrontation, The Risk Of An Escalation In The US-China Confrontation And More

Market Focus Will Likely Be On Putin’s Warnings To The West, Nike (NKE) Reported Slightly Better Revenues And More

Saxo Bank Saxo Bank 30.09.2022 08:37
Summary:  Fresh lows return in US equities with more hawkish Fed comments and fear of earnings downgrades picking up as the Q3 earnings season draws closer. Cable extended its rally despite UK PM’s commitment to fiscal plan and weakening BOE hike expectations, while the EUR gained strength on the back of hot German CPI and uptick in ECB rate hike expectations. Talks of OPEC+ production cuts are gaining momentum, and focus today will be on China PMIs. Also watch for Eurozone CPI, US PCE data as well as Putin’s speech in the day ahead. What is happening in markets? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) fall to 22-month lows US stocks sank to their lowest levels since November 2020 after another round of Fed speakers continued with hawkish remarks, while oil maintained gains on expectations of OPEC+ cuts. Nasdaq 100 was down almost 4% at one point, but trimmed the losses before closing 2.9% lower, while the broader S&P500 met a similar fate nearing 3,600 before ending 2.1% down. All 11 sectors of the S&P 500 dropped, with Utilities falling the most and followed by Consumer Discretionary. Retail favorites Tesla (TSLA) and Apple  (AAPL)  led the declines falling 6.8% and 4.9% while chip makers followed with AMD (AMD) down 6.2% with PC demand falling away. On the upside, oil stocks like Devon Energy (DVN), and Diamondback Energy (FANG) and Occidental (OXY) moved higher. Separately the European Commission announced an eight package of sanctions that would include a price cap on Russia’s oil exports. U.S. treasury yields (TLT:xnas, IEF:xnas, SHY:xnas) climbed again After plunging sharply the day before on the Bank of England move, yields of U.S. treasury securities rose, with the 10-year note yields rising 6bps to 3.79% on Thursday.  Yields initially crept higher on bounces of U.K. Gilt yields and higher German regional CPI data, but paring their rise in the afternoon.  Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) Hong Kong and mainland equity markets opened higher on Thursday and pared the gain through the day and settled moderately lower, with the Hang Seng Index down by 0.5%, and CSI300 little changed. The news of the imposition of a 3-day mandatory PCR test in the financial district, Lujiazui in Shanghai due to one new Covid-19 case triggered some fears among investors. In spite of PBoC’s supportive statement coming out from its quarterly monetary meeting saying that the central bank will expand its special lending program to ensure the delivery of delayed housing projects, Chinese developers declined, with Country Garden (02007:xhkg) plunging 11.6%, Longfor (00960:xhkg) down by 7.5%, and CIFI (00884:xhkg) tumbling 16.3%.  Chinese EV maker, Zhejian Leapmotor (09863:xhkg), tumbled 33.5% in its first day of trading after an IPO priced at the bottom of a guided range.  XPeng (09868:xhkg) dropped 5.3%.  Trading in the China Internet space was mixed with Alibaba outperforming (+2.9%). Australia’s ASX200 (ASXSP200.1) likely to follow Wall Street lower: futures suggest a 0.3% fall today, aluminum stocks to be bright spark As above, on the ASX today, it’s worth keeping an eye on aluminum related stocks on the ASX including Rio Tinto (RIO) and Alumina (AWC). Meanwhile, diversified miners including the major retail favorites, like BHP (BHP) are worth watching after the Iron Ore (SCOA) price remains supported with China ramping up housing support. This morning the iron ore price (SCOA, SCOV2) pushed up ~1.1% to US$96.50. In NY BHP closed 0.6% higher, implying the ASX primary listing of BHP will likely move up, especially after the aluminum and iron ore prices rose. Cable stays bid and Euro follows The US 10-year yields as well as the dollar could not catch a strong bid on Thursday, which helped other G10 currencies gain some ground. Sterling was the strongest on the G10 board, with GBPUSD now testing 1.12 in early Asian hours. BOE’s emergency bond-buying measures however hints at a push lower in gilt yields, and GBP will likely come back under pressure if the surge in global yield resumes. This will need a focus shift back on Fed tightening as we think there is still some room for upward repricing of terminal rate Fed expectations and higher-for-longer rates. Meanwhile, expectations for an ultra-aggressive BOE hike in November cooled slightly. EURUSD also surged above 0.98 with ECB rate hike expectations for October meeting picking up after the hot German inflation, and with the ECB downplaying the chance of an emergency move to prop up Italian bonds. EURGBP was however lower from 0.8950 to 0.88. Aluminum and aluminum stocks on watch It’s worth watching aluminium related shares across the Asian-Pacific region today after the record jump in Aluminum price on the LME after Bloomberg reported plans to discuss a potential ban on new Russian metal supplies. The metal jumped 8.5% (its biggest intraday jump in record) before paring back. Crude oil (CLU2 & LCOV2) prices maintain gains Crude oil prices maintained the momentum with OPEC+ production cuts becoming a key factor going into the next week’s meeting. OPEC+ commenced discussions around an output cut with one saying it a cut is “likely”, according to Reuters sources. This comes after previous reports that Russia will likely propose OPEC+ reduces output by around 1mln BPD. Demand conditions are likely to weaken as global tightening race heats up, and this has prompted expectations for a supply cut as well. Brent futures touched $90/barrel mark but reversed slightly later, while WTI futures rose to $83/barrel before some decline later in the session.   What to consider? German inflation sparks EZ inflation fears German inflation touched double digits, as it came above consensus at 10.9% YoY for September from 8.8% YoY previously. Germany is also preparing to borrow an additional €200 billion to finance a plan to limit the impact of soaring energy costs, which could keep consumption high even as shortages loom. Up today will be the September eurozone inflation print. Expect a new record which will increase the pressure on the European Central Bank to hike interest rates by at least 75 basis points in October. The economist consensus expects that the headline harmonized index of consumer prices (HICP) will reach 9.7% YoY against 9.1% in August. The core rate is expected to climb to 5.6% YoY against 5.5% previously. The spread between the headline and the core inflation figures is mostly explained by a decrease in oil and natural gas prices in recent months. However, this is clear that inflation is becoming broad-based, including in the services sector. This means that inflation is here to stay for long. The HICP is likely to continue increasing in the coming months. A peak in inflation in the eurozone is possible in the first quarter of 2023, in our view. This is much later than in the United States. Fed speakers push for more hikes Loretta Mester remains more hawkish than the Fed’s median dot plot, and said that rate are not in restrictive territory yet and more rate hikes will be needed. No signs of concern on economy or dollar strength were noted, while inflation remained the key point of concern for her. James Bullard also made some key comments on ‘bad idea to mess’ with the inflation target while the labor market conditions remain tight and recession is only a risk. Mary Daly was more cautious, saying officials should work to avoid "inducing a deep recession." However, she still raised the bar on expectations on the Fed funds rate saying that she is comfortable with median Fed rate path projection of 4%-4.5% by year end, 4.5%-5% in 2023 (pointing to upside risks as the dot plot suggested 4.6%, or 4.5-4.75% if we talk in ranges). US initial claims come in strong again Initial claims came in lower than expected at 193k with last week’s also revised lower to 209k from 213k. Continued claims cooled to 1.347mln from 1.376mln despite the expected rise to 1.388mln. The data shows how tight the labour market is in the US and Fed's Bullard labelled today's claims metric as "super low". Meanwhile, the third estimate of Q2 GDP was confirmed to decline 0.6%, notably with consumer spending revised higher to 2% from 1.5% previously. Australian inflation rose 7% in the year to July, based on new monthly CPI At this rate it doesn’t appear CPI will peak at just shy of the 8% the RBA forecasts, given price pressures have resumed this month from the largest inflation contributors. Based on the ABS’s new monthly CPI print, some of the largest price jumps year-on-year to July were in fuel (+29.2%) and fruit & vegetables (+14.5%). The concern is that, with La Nina set to hit Australia and population growth continuing, food and housing (rent) prices will continue to rise apace. In September alone, contributors to food prices have risen markedly, as the global supply outlook has weakened amid poor crop conditions. This could tilt the RBA back toward a more hawkish stance. Australian rents to drive higher, adding to inflation woes Australia’s population growth resumed after borders reopened and business employment remains strong for the time being, at 50-year highs. New office and residential supply is expected be subdued in 2023 as interest rates rise; which supports the notion of falling vacancy rates. According to Colliers and the ABS, Sydney CBD rents rose 3.6% to $5.22 per square foot in the June quarter, driven by competition for top-quality office space. China’s manufacturing PMIs are expected to stay in the contractionary territory China’s September official NBS Manufacturing PMI and Non-manufacturing PMI as well as the Caixin China Manufacturing PMI are scheduled to release today. The median forecast of, economists surveyed by Bloomberg for the NBS Manufacturing PMI is 49.7 for September, a modest improvement from August’s 49.4 but remains in contraction territory.  Economists cite the lockdown of Chengdu and restrictive measures in some other cities during most part of the month and the weak EPMI released earlier as reasons for expecting the NBS Manufacturing PMI to stay below 50.  The Caixin Manufacturing PMI, which has a larger weight in coastal cities in the eastern region, is expected to remain at 49.5 as export-related manufacturing activities and container throughput were weak.  The consensus estimate for the NBS Non-manufacturing PMI is 52.4, staying in the expansionary territory, supported by infrastructure construction but slowing slightly in September from August’s 52.6 due to weakness in the housing sector.  On the other hand, steel production and demand data in September suggest the PMIs may potentially surprise the upside. Buying activity up in food and Agricultural instruments, stocks and ETFs Food prices are supported higher as the global crop outlook dampens for 4 reasons; concern lingers over Ukraine’s exports being cut off, South America has been hit by rains and frosts, the US has been plagued by drought and dry conditions and as Hurricane Ian made landfall in the, US conditions are likely to go from bad to worse. And lastly - La Nina is expected to hit Australia for the third year in a row. So we are seeing clients buy into Wheat and Corn. Both prices are up 20% off their lows. Secondly, buying has been picking up in agricultural stocks like General Mills (GIS) and GrainCorp (GNC). And lastly, clients are biting into agricultural ETFs like Invesco DB Agriculture Fund (DBA) and iShares MSCI Agricultural Producers ETF (VEGI). Fed preferred inflation measure, US PCE, on the radar today The Fed’s preferred inflation measure, the PCE is due today, and it will likely echo the same message as given by the last strong CPI number which has made the Fed even more hawkish in the last few weeks since the Jackson Hole. Headline numbers may be lower due to the decline in gasoline prices, but the price pressure on services side will likely broaden further. Last week, the Fed also raised its forecasts for inflation, with the central bank now seeing core PCE at 4.5% by the end of this year (it previously projected 4.3%), moderating to 3.1% next year and at 2.1% at the end of its forecast horizon in 2025, but thinks that headline PCE prices will be at its 2% target by then. Putin's speech due today after Russia annexed parts of Ukraine Vladimir Putin will address legislators after Russia signs treaties today to absorb four occupied regions, with Ukrainian forces threatening to encircle a pocket of the Donbas region. There is also growing resistance to Putin’s decision to call up 300,000 reservists. Market focus will likely be on Putin’s warnings to the West about any potential threats of using nuclear weapons, which may mean risk aversion getting another leg up. Nike sank on concerns about inventory build-up and margins Nike (NKE) reported slightly better than expected revenues and inline earnings but below expectation gross margins and a 65% surge in inventories for the North American market.  In the earnings call, the company’s CFO pledged to take “decisive action to clear excess inventory” and such efforts will have “a transitory impact on gross margins this fiscal year”.  Investors took note of the implication on demand and profitability and sold stock to more than 9% lower in the extended hour trading. Apple fell on analyst downgrade After being sold on the company’s announcement to back off plans to increase iPhone production this year on the day before, Apple’s shares fell another 4.9% yesterday after an analyst downgrade from a U.S. investment bank.  In this Market Daily Insights piece yesterday, we mentioned the warnings from Peter Garnry, Saxo’s Head of Equity Strategy, about the likelihood that Apple’s revenue could slip into negative growth for the current quarter ending Sep 30 and you can find more details of his analysis from here. In his note, Peter also warns that analysts may be way off in their estimates for the S&P 500 for Q3 and it is highly probable that there will be significant misses to the downside followed by gloomy comments from company management about the outlook on margins.     For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: https://www.home.saxo/content/articles/equities/market-insights-today-30-sept-30092022
Philippines Central Bank's Hawkish Pause: Key Developments and Policy Stance

A Peak In Inflation In The Eurozone Is Possible| H&M’s Challenging Position And Micron's Shocking Forecast

Saxo Bank Saxo Bank 30.09.2022 09:44
Summary:  After celebrating the injection of liquidity from the Bank of England on Wednesday, global markets swooned again yesterday, taking the major US indices. Elsewhere, sterling has recovered most of the lost ground since the announcement of last week’s tax cuts on the stabilization of the gilt market, with other major sovereign yields also easing lower. The drop in yields and a consolidation in the US dollar have supported gold, which is poking higher toward important resistance.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities traded lower yesterday after hawkish remarks from Mester and Bullard that policy rates will stay higher for longer than what the market is expecting (pricing in). In addition, the market is increasingly at edge with the expectation that Russia will annex four regions of Ukrainian territory because the fear is that it could escalate the war to new levels. Nasdaq 100 futures are most sensitive to the hawkish Fed messages and tumbling growth outlook, so watch this index going into the weekend. Nasdaq 100 futures are trading around the 11,265 level this morning and 11,000 is naturally the big next level on the downside in case selling resumes into the weekend. Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) Hong Kong and mainland China markets were treading water ahead of the week-long National Day golden week holiday. Chinese developers rallied to recoup some of the recent losses following PBoC’s supportive statement coming out of its quarterly monetary meeting saying that the central bank will expand its special lending program to ensure the delivery of delayed housing projects. Country Garden (02007:xhkg) rebounded 10% after plunging 11% yesterday. Chinese EV maker, Zhejian Leapmotor (09863:xhkg), tumbled another 11% after having tumbled 33.5% yesterday on its first day of trading. Other Chinese EV names traded in the Hong Kong bourses plunged from 2% to 9%. Strong USD fades as bond yields punched lower The weak US dollar suggests that the market was more focused on rising US treasury yields during the recent upswing than the accompanying risk sentiment deterioration: yesterday, the USD weakened sharply as yields were flat to lower while risk sentiment was in the dumps. Hard to tell if some end-of-month/quarter rebalancing through today might be in play as well. A proper reversal of the recent USD bull move would require far more weakness, for example: EURUSD back above the 0.9900-0.9950 area and AUDUSD above perhaps 0.6700 (more on GBPUSD below). Next week features a full line-up of key US macro data and should bring a test of the USD’s status. Was that the climax for sterling bear market? Too early to draw conclusions here, as sterling has not yet recovered sufficient ground in the most important EURGBP and GBPUSD pairs to suggest that we have seen a climax reversal, although overnight, GBPUSD did reverse the entire plunge sparked by the announcement of the special budget last Friday by Chancellor Kwarteng, which started around 1.1200. Arguably, a close above 1.1200-1.1250 suggests a chance over reversal, though really 1.1500 was a more significant starting point for the recent slide. For EURGBP, the key support/pivot zone is 0.8750-0.8700. While there was nothing specifically supportive about the Bank of England’s emergency QE, if the logic is that the BoE saved the system from a financial crisis and that the exercise demonstrated that quantitative tightening will prove impossible elsewhere eventually (and therefore the BoE is only the first of many), sterling’s situation looks less bad if other central banks eventually follow suit. Gold (XAUUSD) Gold continues to rebound from key support at $1615 with the focus now being the critical resistance zone into 1,680-1,700 that is the departure point for this latest bear market move. While global bond yields and the USD will continue to lead the way as coincident indicators, the market has held up relatively well with geopolitical concerns (Putin’s N threat) and investors increasingly worried the FOMC with its hawkish actions may break the currency and bond market. Some signs of that were seen this week with some extreme moves in local bond and currency markets. Speculators hold a rare net short in COMEX gold futures and any further strength will trigger short covering, while total holdings in ETFs backed by bullion have declined to a 30-month low. Crude oil (CLX2 & LCOX2) Crude oil is heading for its first albeit small weekly gain in five and the first quarterly drop since 2020. The market remains troubled by forces pulling prices in opposite direction, and while the strong dollar, surging yields, and continued lockdowns in China have raised demand worries, the risk to supply continues to be a supporting theme. That focus returned on Thursday when OPEC+ said a production cut would be discussed at next week's meeting with Russia proposing a 1 mln barrels per day cut, a reduction towards which they are unlikely to contribute much as they are already producing below their quota. In addition, the combination of Russian sanctions and embargo and the US pausing its sales from strategic reserves will continue to dampen the downside risks. US treasuries (TLT, IEF) US treasury yields remained calm yesterday as we can infer that the recent wild ride in UK gilts had triggered contagion into US treasury yields, likely aggravating the recent rise toward 4.00% for the 10-year treasury benchmark before the BoE’s emergency efforts took major sovereign yields back lower. US macro data next week, including the ISM surveys and the September jobs report next Friday, will be key for the direction in US yields, with the major 3.50% level, the June high, the key downside pivot point. What is going on? Apple shares (AAPL:xnas) crater after the company announced it will skip production increase and on analyst downgrade Apple shares ended the day nearly 5% lower, helping to drag the broader market lower as it is world’s largest company by market capitalization. A Bank of America analyst cut the rating on the company to “neutral” from “buy”. Apple’s demand is hurt by the cost-of-living crisis and the earnings outlook last night from the chip manufacturer Micron Technology is indicating that demand is coming down fast. Fed speakers push for more hikes Cleveland Fed president Loretta Mester (voter this year) remains more hawkish than the Fed’s median dot plot and said that rates are not in restrictive territory yet and more rate hikes will be needed. No signs of concern on economy or dollar strength were noted, while inflation remained the key point of concern for her. St. Louis Fed president James Bullard, likewise a voter this year, said it was a ‘bad idea to mess’ with the inflation target while labor market conditions remain tight and recession is only a risk. San Francisco Fed president Mary Daly (voter in 2024) was more cautious, saying officials should work to avoid "inducing a deep recession." However, she still raised the bar on expectations on the Fed funds rate saying that she is comfortable with median Fed rate path projection of 4%-4.5% by year end, 4.5%-5% in 2023 (pointing to upside risks as the dot plot suggested 4.6%, or 4.5-4.75% if we talk in ranges). Eurozone inflation is set to hit a new record in September The September eurozone inflation will be released today. Expect a new record which will increase the pressure on the European Central Bank to hike interest rates by at least 75 basis points in October. The economist consensus expects that the headline harmonized index of consumer prices (HICP) will reach 9.7 % year-over-year against 9.1 % in August. The core rate is expected to climb to 5.6 % year-over-year against 5.5 % previously. The spread between the headline and the core inflation figures is mostly explained by a decrease in oil and natural gas prices in recent months. However, this is clear that inflation is becoming broad-based, including in the services sector. This means that inflation is here to stay for long. The HICP is likely to continue increasing in the coming months. A peak in inflation in the eurozone is possible in the first quarter of 2023, in our view. This is much later than in the United States.  Earnings recap (H&M, Nike, and Micron) H&M delivered a big miss yesterday on operating profit as input costs surprised to the upside. H&M is starting charging for online returns to save costs and the demand in China is still weak due to H&M’s challenging position in the country. Nike surprised positively on revenue but missed on earnings against estimates as margin compression has begun, and the company’s inventory is building up fast creating a potential headache going forward as consumer demand is expected to decline in the coming quarters. Micron delivered a shocking outlook for the current quarter with revenue expected at €4-4.5bn vs est. €6bn. CEE currencies under strain, likely on geopolitical unease CEE currencies are under significant pressure since the news of the pipeline explosions this week – this was likely triggered by the sabotage of the Nord Stream pipelines to Germany, which could be a prelude to the cutting off of other pipelines from Russia. EURHUF has pulled above 420 for the first time ever, EURPLN yesterday spiked to the highest level since the timeframe just after the breakout of war in Ukraine.  Hungary continues to not support new sanction efforts against Russian energy imports. In Prague, protests have broken out against the country’s energy policy, while EURCZK remains sedated by heavy Czech central bank intervention. US initial claims come in strong again Initial claims came in lower than expected at 193k with last week’s also revised lower to 209k from 213k. Continued claims cooled to 1.347mln from 1.376mln despite the expected rise to 1.388mln. The data shows how tight the labour market is in the US and Fed's Bullard labelled today's claims metric as "super low". Meanwhile, the third estimate of Q2 GDP was confirmed to decline 0.6%, notably with consumer spending revised higher to 2% from 1.5% previously. Aluminium prices bolt higher; fuelling a rally in major mining companies Aluminum prices on the London Metal Exchange briefly jumped by a record 8.5% on Thursday before retracing lower. The sudden burst which to a minor extent was replicated in zinc and nickel was driven by a Bloomberg report saying that the LME as an option is looking into whether and under what circumstances they might place a ban on Russian metal being cleared via the exchange. Any such move by the LME to block Russian supplies could have significant ramifications for the global metal markets given their importance as a supplier of the mentioned metals, which to a smaller extend also includes copper. What are we watching next? Change of course from UK government after recent events? UK Prime Minister Liz Truss and Chancellor Kwarteng will meet with the Office of Budget Responsibility today for emergency talks before they receive the first draft of fiscal forecasts from the OBR next week. The recent crisis in the UK gilt market and downward spiral in sterling could elicit a response and possible backtracking on some portion of the recent policy announcement, although Truss said as recently as yesterday that she will stay the course. The most recent YouGov political poll release yesterday shows the Conservatives trailing Labour by a whopping 33 points, the largest gap since the 1990’s. Election in Brazil at the weekendBrazilian voters go to the polls on Sunday, with left-leaning former president Lula leading strongly in the polls over the incumbent right-populist Bolsonaro, but with many fearing the risk of disorder and violence as Bolsonaro has already made claims of election fraud and has hinted at not wanting to leave office. A run-off election between the two candidates will be held on October 30 if neither gets more than half the popular vote this weekend. The Brazilian real is at the weak end of the recent range versus the US dollar. Fed preferred inflation measure, US PCE, on the radar today The data point is for August and comes nearly three weeks after the BLS CPI data for the month. It will likely echo the same message as given by the last strong CPI number which has made the Fed even more hawkish in the last few weeks since the Jackson Hole. Headline numbers may be lower due to the decline in gasoline prices, but the price pressure on services side will likely broaden further. At last week’s FOMC meeting, the Fed also raised its forecasts for inflation, with the central bank now seeing core PCE at 4.5% by the end of this year (it previously projected 4.3%), moderating to 3.1% next year and at 2.1% at the end of its forecast horizon in 2025, but thinks that headline PCE prices will be at its 2% target by then. Earnings calendar this week Today’s earnings release to watch is from Carnival which is expected to deliver strong results but there are significant downside risks to the outlook from fuel costs, staffing costs and the cost-of-living crisis hurting disposable income. Today: Carnival (postponed from last week), Nitori Economic calendar highlights for today (times GMT) 0755 – Germany Sep. Unemployment Change/Rate 0800 – Poland Sep. Flash CPI 0800 – Norway Daily FX Purchases 0830 – UK Aug. Mortgage Approvals 0900 – Eurozone Sep. Flash CPI 1230 – US Aug. PCE Deflator/Core Deflator 1300 – US Fed Vice Chair Brainard to speak at Fed conference on Financial Stability. 1345 – US Sep. Chicago PMI 1400 – US Final University of Michigan Sentiment Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: https://www.home.saxo/content/articles/macro/market-quick-take-sep-30-2022-30092022
Bank of England survey highlights easing price pressures

The UK Assets Will Be Pressured| Japan And Its A Huge Foreign Debt

Saxo Bank Saxo Bank 30.09.2022 09:54
Summary:  While the Bank of England’s emergency bond-buying has propped up the sterling recently, there are hardly any reasons to turn positive on UK assets in general unless the government changes course on its fiscal policy roadmap. In fact, Japanese authorities remain better placed to defend their currency than the UK, given their better reserves position. While UK’s pain is self-inflicted, the overarching theme of tighter global liquidity conditions continues to pose threats of wider market disruptions. The Fed’s aggressive monetary policy tightening and the unrelenting surge in the US dollar this year is now tightening global financial conditions, with effects reverberating through global financial markets. Still, the degree to which this can be blamed for what is happening in the UK remains under the scanner. Despite the Fed tightening remaining an overarching theme, UK’s pain is largely self-inflicted. While bond buying by the Bank of England (BOE) is somewhat on the lines of what the Bank of Japan (BOJ) has been, the motives are completely different and the impact is likely to vary as well from here. The motives BoJ’s wider bond-buying operations are a reflection of its desire to stoke inflation. Japan’s headline inflation has averaged under 1% in the last two decades with the core print being in negative territory. The latest print for August was 3%, above the BOJ’s 2% goal, but wage pressures still remain subdued. UK’s inflation, on the contrary, is running at nearly three times that, and the BOE’s plan to begin purchasing long-dated gilts was a forced emergency measure to support pension funds that may be on the verge of a default due to the jump in gilt yields stemming from fiscal concerns after the announcement of the new government’s mini-budget. The vulnerabilities Japan’s fiscal and current account are also not in great shape, and it has a huge foreign debt. But it has huge FX reserves of the order of over $1.2 trillion as of end-August. This equates to 20% of GDP and over 18 months of import cover. Of this, about $136bn is deposits with foreign central banks that can be used immediately to intervene. So, while the Japanese yen remains vulnerable due to its twin deficits and high debt levels, the huge FX war chest still gives Japanese authorities some ammunition to intervene against excessive pace of yen decline. Meanwhile, UK’s problem is not just in its high inflation but also its twin deficits and weak FX reserves position. Foreign currency debt levels in the UK are more contained, however, and that may be one of the reasons why FX reserves are low. As we noted in a previous piece, UK’s net forex reserves of $100bn are also enough to only cover two months of imports, or roughly equal to 3% of GDP as compared to Japan’s 20% and Switzerland’s 115%. This gives the UK policymakers less room to prop up the sterling. Threats to Sterling and UK assets Sterling has undoubtedly regained some strength since the massive selloff on the fiscal plan announcement. It has been ‘temporarily’ supported by the BOE’s bond purchase program, which has led to the global reprieve in yields. Also, the month-end/quarter-end rebalancing has possibly helped cap dollar gains after massive USD strength seen in the quarter. To be clear, BOE didn’t ‘pivot’, rather it acted as the lender of last resort for the domestic pension funds, and there is hardly anything to be bullish about, or turn positive on UK assets. The UK assets will likely continue to be pressured until the UK government remains in denial. Even an emergency rate hike, at this point, seems unlikely to be able to support the sterling or gilts, as it would signify panic and a divergence in fiscal and monetary policies, further weighing on general confidence in the economy and its policies. Meanwhile, markets are currently pricing in a close to 150bps rate hike from the BOE at the November 3 meeting. That’s massive, and will mean significant pain to the UK economy. Threat of global contagion The UK is becoming a major credit risk not only for GBP assets but also for the rest of the world, primarily the eurozone as my colleague Chris Dembik noted in his piece. We see some kind of contagion effect in the eurozone credit market. There’s also risk of more markets succumbing to evaporating liquidity, and it is inevitable to ponder over who could be next? The Chinese currency has also weakened dramatically lately, but the PBoC has numerous tools available and credit impulse in China is also turning positive. South Korea has already intervened to prop up its currency, and more economies are likely to follow that path if things continue like this. The G20 meetings on November 15-16 will be particularly important to watch not just for geopolitical updates, but also for possible collective concerns on the impact of global tightening and the strong dollar. Atleast until then, if not longer, there is not enough reason for the US Treasury to intervene to buoy the battered pound or yen or another faltering currency. Most US officials, including Treasury secretary Yellen, expressed no urgency to act. Wider market disruptions and increasing risks to global financial stability, beyond the financial turmoil emanating from Britain and Japan, therefore remain likely.   Source: https://www.home.saxo/content/articles/macro/macro-insights-bank-of-england-bank-of-japan-and-the-risks-of-wider-market-disruptions-30092022
Rates Spark: Riding the hawkish wave while it lasts

Economists Are Concerned About The Future Fed Decision

InstaForex Analysis InstaForex Analysis 30.09.2022 10:09
Fast and furious tightening by the Federal Reserve risks plunging the economy into recession, and economists fear the central bank is making another mistake after a recent slow response to runaway inflation. A string of massive interest rate hikes of 75 basis points, with at least one more expected in November, according to experts, means that officials are not going to wait for the effect of their actions before acting again. The risk of an aggressive policy without analysis of the actions of Fed officials could drive the economy into a much deeper recession than expected. Given the lag of some inflation data, this is already a concern for many politicians. Let me remind you that Fed officials started raising rates from almost zero only in March, after the price pressure had already reached a significant level. After their delay, they are now ramping up the burden on the economy at a record pace to catch up, with the price of a mistake being the future economic pain caused by inflation-suppressing actions. The Fed has already raised rates by 3 percentage points this year, with the bulk of the increase coming in the summer, and has vowed to keep raising rates until it sees clear signs of lower inflation. According to the latest reports, inflation in the US resumed its growth in August, which forced the Fed to return to discussions on the topic of maintaining a further aggressive policy. The Fed's current actions have already pushed up the cost of borrowing on everything from home loans to cars, but the full impact of these moves on the economy will only be known in the next few months, given the time it takes for current changes to take hold across all areas. Experts say that without creating the respite that many traders and investors hoped for in the early fall of this year, politicians risk causing a larger slowdown in the economy than necessary, as well as potentially damaging the labor market more than anticipated. At their meeting later this month, Fed officials said they would raise rates by another 1.25 percentage points this year, which could mean another 75 basis point hike in November and a half-percentage increase in December. According to the Fed's median forecast, next year rates will rise by another quarter of a point. All this supports the dollar and puts pressure on risky assets, especially in the face of a deteriorating geopolitical situation. As for the technical picture of EURUSD, the bulls have regained their advantage and the market under their control, which they lost at the beginning of the week, and now they are aiming to break through the nearest resistance at 0.9840. This is necessary if they expect a continuation of the upward correction at the end of this month. The breakdown of 0.9840 will take the trading instrument even higher to the area of 0.9890 and 0.9950. But despite the good upward prospects, the bulls' main task is to protect the immediate support of 0.9780. Its breakthrough will push the euro to a low of 0.9730, but in this situation there will be nothing critical, since the lower border of the new rising channel passes there. You can start to get nervous only if you miss 0.9730, as the pair will easily fall to the area of 0.9680 and 0.9640. The pound continues to win back positions one by one thanks to the support of the Bank of England. Now the bulls are focused on the resistance at 1.1200, the breakthrough of which will open the prospects for further recovery in the area of 1.1260 and 1.1320. It will be possible to talk about the return of pressure on the trading instrument only after the bears take control of 1.1070, but this will not cause serious damage to the bull market observed since the middle of the week. Only a breakthrough of 1.1070 will push the GBPUSD back to 1.1010 and 1.0950.   Relevance up to 08:00 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/323102
WTI Oil Shows Signs of Short-Term Uptrend Amid Medium-Term Uptrend Phase

The Euro (EUR) And The British Pound (GBP) Continue To Strengthen Their Positions Against The US Dollar (USD)

InstaForex Analysis InstaForex Analysis 30.09.2022 10:47
And while the euro is gaining ground against the US dollar, and the British pound is making its way to another weekly highs amid increased optimism, supported by the actions of the Bank of England, the president of the Federal Reserve Bank of Atlanta, Rafael Bostic, said he supports raising rates by another 1.25 percentage points by the end of this year to counter inflation, which turned out to be worse, than he expected. "The lack of progress so far makes me think much more that we should take a moderately restrictive position," he told reporters during a conference call. "For me, acceptable rates are in the range from 4.25% to 4.5%. I prefer that we get to this level by the end of the year." Such aggressive statements by representatives of the Fed are not news this week. Fed officials raised interest rates by 75 basis points at the September 21 meeting, bringing the federal funds rate target from 3% to 3.25%. Immediately after that, policymakers continued to prepare the markets for further changes in the cost of borrowing, and median forecasts already show that Fed officials are laying on a rate of 4.5% by the end of this year. "Inflation is still high and too high and not moving fast enough back towards our 2% target," Bostic said, adding that he expected to see an improvement in supply chain imbalances in early summer that would help ease price pressures. "The forecasts did not come true, and the situation on the energy market has not changed, which forced me to adjust my political thinking," he said. The head of the Federal Reserve Bank of Atlanta still hopes that the US economy will be able to avoid a recession or a much higher unemployment rate. According to his forecasts, unemployment will rise to about 4.1% from 3.7% — a small increase that will continue to keep the labor market at a fairly strong level. "I still don't think the recession is a settled issue. Yes, we may have some weakening in the economy, but I don't think that at this stage it will lead us to a historical crisis." Despite such hawkish statements by other American politicians, the euro and the British pound continue to strengthen their positions against the US dollar, taking advantage of sufficient optimism after the recent intervention of the BoE in the situation on the currency and bond market. As for the technical picture of EURUSD, the bulls have regained their advantage and the market under their control, which they lost at the beginning of the week, and are now aiming to break through the nearest resistance of 0.9840. It is necessary to do this if they expect the upward correction to continue at the end of this month. A breakdown of 0.9840 will take the trading instrument even higher to the area of 0.9890 and 0.9950. But despite the good upward prospects, protecting the nearest support of 0.9780 is still an important task for the bulls. Its breakthrough will push the euro to a low of 0.9730, but there will be nothing critical in this situation either, since there is the lower boundary of the new ascending channel. Only after missing 0.9730 will it be possible to start getting nervous, as the pair will easily fall into the area of 0.9680 and 0.9640. The pound continues to win back positions one by one thanks to the BoE's support. Now bulls are focused on the 1.1200 resistance, the breakthrough of which will open up prospects for further recovery in the area of 1.1260 and 1.1320. It will be possible to talk about the return of pressure on the trading instrument only after the bears take control of 1.1070, but this will not cause serious damage to the bull market observed since the middle of the week. Only a breakthrough of 1.1070 will push GBPUSD back to 1.1010 and 1.0950.       Relevance up to 08:00 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/323104
Britain's Rishi Sunak And EU's Ursula Von Der Leyen Will Meet Today To Finalize The Northern Ireland Drama

The Growth Of EUR/USD And GBP/USD Pairs Will Be Limited As The Economic Situation In Both Europe And The UK Are Not Good

InstaForex Analysis InstaForex Analysis 30.09.2022 11:26
The rebound in financial markets was short-lived due to unstable support from statistics. Also, market sentiment noticeably worsened as the UK bond market collapsed amid the government's plan to launch a new program to stimulate the economy. This caused pound to fall to 1985 lows, while bond yields jumped to 2008 levels as fears of a more vigorous rate hike increased. Now, with the potential rate hike, GBP/USD rose above 1.1000 and traded at 1.1140. EUR/USD also increased as rising inflation in Germany point to more aggressive climb of ECB rates. Reportedly, the consumer price index in the country rose to 10% y/y and 1.9% m/m. The expected rate hike may intensify if consumer inflation in the whole Euro area rises to 9.7%. But growth will be limited as the economic situation in both Europe and the UK are not good. Although the energy crisis, decline in production and incomes of citizens could develop a decrease in inflation, these regions are poorly attractive for investment. As such, demand for dollar will continue, while risk appetite will go down, which is negative for euro and pound. Forecasts for today: GBP/USD Although demand rose because of potential rate hikes by the Bank of England, growth will be limited, especially if the pair does not rise above 1.1180. And if it falls below 1.1070, the price will collapse to 1.0915. EUR/USD Demand surged because of the potential rate hike by the ECB. If inflation in the Euro area turns out to be higher than expected, the pair will hit 0.9875, then fall to 0.9700.   Relevance up to 08:00 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/323108
The Bank Of Canada Paused Rates Hiking, The ADP Employment Report Had A 242K Increase In Jobs

The Data Will Affect The USD And Provide A Fresh Impetus To The USD/CAD Pair

TeleTrade Comments TeleTrade Comments 30.09.2022 13:04
USD/CAD gains traction for the second straight day, though lacks follow-through. Subdued crude oil prices undermine the loonie and act as a tailwind for the pair. Retreating US bond yields, a positive risk tone weighs on the USD and caps gains. The USD/CAD pair attracts some dip-buying in the vicinity of the mid-1.3600s and sticks to modest intraday gains through the first half of the European session. The pair maintains its bid tone for the second successive day and is currently trading just above the 1.3700 mark, well within this week's broader trading band. A combination of factors drags the US dollar to a one-week low, which, in turn, acts as a headwind for the USD/CAD pair. The spill-over effect of the UK central bank's move to calm the markets drags the benchmark 10-year US Treasury note away from a 12-year high touched on Wednesday. Apart from this, a goodish recovery in the global risk sentiment further weighs on the safe-haven greenback. That said, subdued price action around crude oil prices undermines the commodity-linked loonie and continues to lend some support to the USD/CAD pair, at least for the time being. Worries that a deeper global economic downturn will dent fuel demand offset global supply concerns and fail to assist the black liquid to capitalize on this week's goodish recovery from the lowest level since January 2022. Furthermore, firming expectations for a more aggressive policy tightening by the Fed should limit the fall in the US bond yields and favours the USD bulls. Investors seem convinced that the US central bank will hike interest rates at a faster pace to curb inflation. Hence, the focus remains on the release of the US Personal Consumption Expenditures. (PCE) - the Fed's preferred inflation gauge. Friday's US economic docket also features the release of the Chicago PMI and the revised Michigan Consumer Sentiment Index. The data, along with the US bond yields and the broader risk sentiment, will influence the USD and provide a fresh impetus to the USD/CAD pair. Traders will further take cues from oil price dynamics to grab short-term opportunities on the last day of the week
FX Daily: Testing the easing pushback

The Euro-US Dollar (EUR/USD) Pair: Sales Will Become Relevant Again

InstaForex Analysis InstaForex Analysis 03.10.2022 08:15
The EUR/USD currency pair was trading upwards on Friday, as it had been for the previous two days. It can be seen that traders made a pretty good leap up, but are they ready to continue buying the euro currency, or was it only a partial fixation of short positions by bears? So far, the euro has managed to rise in price by "as much as" 300 points, which is very little to talk about the beginning of a new upward trend. So formally, the trend changed to an upward one. Still, we recall that before the beginning of the last round of the upward movement, the euro currency fell significantly, so now we can talk about another round of technical correction. If this is the case, the fall of the euro currency may well resume since the fundamental global background has not changed for the euro and the dollar, and the geopolitical one has worsened, which is primarily dangerous for the euro currency. The pair had previously been fixed from time to time above the moving average, but this did not even lead to significant corrections. We still believe that it will be possible to count on the serious growth of the euro currency no earlier than the end of 2022, when the Fed, in theory, should announce a slowdown in the increase in the key rate or a refusal to increase it further. In this case, there will be fundamental reasons to expect a rise in the euro. But at the same time, we do not know and cannot know what will happen to geopolitics by that time. We have already mentioned that three of the four strands of the Nord Stream pipeline were blown up last week. It is still unclear who is behind this terrorist attack. One thing is clear – the European Union will suffer from it. Gas supplies from Russia have been stopped and are unlikely to be resumed in the near future. Recall that the main plan of Brussels was to fill gas storage facilities as much as possible before gas supplies from the Russian Federation stopped to spend the current winter without problems and then solve the problem with gas over the next year. However, either the Kremlin has escalated the "gas conflict," or Washington has thus decided to accelerate the increase in LNG supplies from the United States to the EU. Still, the fact remains that the Nord Stream is not functioning, and if it is not repaired in the near future, it will never function. The European economy will start to stall without Russian gas. There will be practically no macroeconomic statistics in the EU next week. Of the relatively important events, we can single out only the indices of business activity in the service and manufacturing sectors, another speech by Christine Lagarde, and a report on retail sales. The market is now primarily interested not in macroeconomics but in geopolitics. Therefore, it will play an important role in the prospects of the euro/dollar pair. From our point of view, the situation may deteriorate dramatically in October. First, Moscow and Kyiv have taken the path of escalation of the military conflict. The Kremlin said that any strike on the territory recognized by it would be regarded as an encroachment on the integrity and security of the Russian Federation, so a tactical nuclear strike could follow in response. Kyiv immediately responded with an application to join NATO, and NATO itself announced the principle of an open door. The AFU took the strategically important city of Liman the next day, so, as we see, the Ukrainian side continues to go on a counter-offensive. Consequently, the deterioration of the geopolitical situation is a very likely development of events, given the mobilization of several hundred thousand Russians. And this means that there will be new missile strikes, bloody battles, new Western sanctions, and so on. In addition, the European Union energy crisis may become a catastrophe when gas supplies from the Russian Federation can only be carried out by sea and through Ukraine. It is unclear how long the pipeline, which passes through Ukrainian territories, will live now, given the terrorist attacks in the North Sea. But one way or another, the EU may be left without gas this winter, which will affect its industrial production, GDP, and the satisfaction of European citizens. Based on all of the above factors, we believe that the euro currency may resume depreciation against the US currency. The average volatility of the euro/dollar currency pair over the last five trading days as of October 3 is 160 points and is characterized as "very high." Thus, on Monday, we expect the pair to move between 0.9644 and 0.9964 levels. A reversal of the Heiken Ashi indicator upwards will signal a new round of upward movement. Nearest support levels: S1 – 0.9766 S2 – 0.9644 S3 – 0.9521 Nearest resistance levels: R1 – 0.9888 R2 – 1.0010 R3 – 1.0132 Trading Recommendations: The EUR/USD pair has consolidated above the moving average line and may continue to move up. Thus, now we should consider new long positions with targets of 0.9888 and 0.9964 if we see a price rebound from the moving average and a reversal of the Heiken Ashi indicator upwards. Sales will become relevant again no earlier than fixing the price below the moving average with a target of 0.9644. Explanations of the illustrations: Linear regression channels – help determine the current trend. The trend is strong if both are directed in the same direction. The moving average line (settings 20.0, smoothed) identifies the short-term trend and the direction in which trading should be conducted now. Murray levels are target levels for movements and corrections. Based on current volatility indicators, volatility levels (red lines) are the likely price channel in which the pair will spend the next day. The CCI indicator – its entry into the oversold area (below -250) or into the overbought area (above +250) means that a trend reversal in the opposite direction is approaching.   Relevance up to 02:00 2022-10-04 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/323202
Ed Moya and Jonny Hart talk the US Q3 GDP, crude oil and crypto

OPEC Members Have Started Talking About Cuts With Russia| Markets Continue To Be Beaten Out And More

Saxo Bank Saxo Bank 03.10.2022 08:46
Summary:  There are some big macro worries as we enter the final quarter of the year. We are looking at not just how the UK crisis could develop further, but also which other country/market could succumb to the US yields or dollar strength as market disruptions are likely to widen. Geopolitics also remains a key focus amid Putin’s military losses, as this could mean he could further try to choke Europe and the world of key supplies. A significant production cut from OPEC+ is already making headlines, but China markets are away for the Golden Week. Reserve Bank of Australia may need to delay slowing down its pace of rate hikes, and brace for more profit warnings as well ahead of the Q3 earnings season which goes into full swing in two weeks.   US ISM indices and payrolls data to continue the economic optimism, spurring risk off in the markets As the US economy continues to stay strong despite the aggressive Fed tightening, markets continue to be beaten out. Some respite was seen in the US yields and the US dollar last week, but data due this week could bring further risk-off with markets starting to price out some rate hike expectations for next year with the risks emerging from crisis in UK and possibly more crisis coming due to the run higher in US yields and USD. Data will likely show continued strength in the US economy and labor markets, especially ahead of the midterm elections. ISM manufacturing for September is due in the US session today, and Bloomberg consensus estimates signal some signs of a slowdown to 52.1 in September from 52.8 in August – that should likely be underpinned by improving supply chains, while new orders should remain upbeat and keep the sentiment positive. ISM services follows on Wednesday, and may also moderate as the services sector cools down from a peak, but will stay robust. Finally, the payrolls data on Friday is set for another positive surprise after sub-200k weekly jobless claims last week. Bloomberg consensus estimate as of now stand at gains of 250k for September from 315k last month, with unemployment rate and average hourly earnings steady at 3.7% and 0.3% respectively. Russia’s counter-attack risks Less than a day after Russia’s annexation of four Ukrainian cities and claims for these to be Russian territory, parts of these cities have been recaptured by Ukraine over the weekend. That is another military setback for Russia, and would possibly mean that Putin would be keen to press Europe’s energy nerves further as winter demand for energy starts to flow in. There are two key risks to highlight here: 1) Russia could cut supplies from Ukraine as well further to choke Europe and the world of energy and food supplies; and 2) there is an imminent threat of use of some low-yield nuclear weapons given how desperate Russia is now. Any of these moves could spur further risk off in the markets this week, and potentially, the effect will spill over to energy and agriculture markets, so think oil, gas, wheat, soybeans and the likes. OPEC+ meeting on October 5 may bring production cuts Oil prices were supported at the end of last week amid hopes of a production cut by OPEC+ members at their meeting this week. There were some reports that OPEC members have started talking about cuts with Russia proposing a 1 mln barrels per day cut, a reduction towards which they are unlikely to contribute much as they are already producing below their quota. At its last meeting on September 5, the group agreed a token reduction of 100,000 barrels a day for October, despite calls from consuming nations to help tame rampant inflation by keeping the taps open. With gasoline prices retreating in the US, some of that external pressure may now be easing, and that further raises the prospects of some price-supportive action. Reserve Bank of Australia may step away from moving to a slower rate hike pace The Reserve Bank of Australia is scheduled to announce its next rate decision on Tuesday, October 4. Governor Lowe had previously signalled that the pace of rate hikes is likely to slow from here after four consecutive rate hikes of the magnitude of 50bps. However, money markets and Bloomberg consensus forecast is still calling for another 50bps rate hike at the October meeting suggesting that RBA may delay taking the foot off the pedal just yet. The recent slide in the Australian dollar and worries over a turmoil in global financial markets may prompt the policymakers to front-load more of the rate hikes while the economy is still holding up. Retail sales data last week was upbeat while the first monthly inflation data reading at 6.8% is only slightly off the 7% levels seen in the preceding month. So, even as a monthly meeting can ensure a steady pace of rate hikes even with a smaller 25bps rate move, policymakers would possibly prefer to make a larger move this week to provide some support to the AUD. Likewise, the Reserve Bank of New Zealand is also expected to hike rates by another 50bps at their October 6 meeting. Japan’s Tokyo CPI to see impact of reopening Japan’s inflationary pressures are likely to continue to reign amid higher global prices of food, electricity as well as a weak yen propping up import prices. Bloomberg consensus estimates point to a slightly softer headline print of 2.7% YoY from 2.9% YoY previously, but the core is pinned higher at 2.8% YoY from 2.6% YoY previously. Further, the reopening of the economic from the pandemic curbs likely means demand side pressures are also broadening, and services inflation will potentially pick up as well. Slow earnings week but watch for further profit warnings ahead of the Q3 reporting season Last week, Biogen and its Japanese partner Eisai announced positive results in a phase-3 study on a treatment that slows Alzheimer’s disease. Analysts are eager to learn more about the treatment from the company’s presentation of more data at the Clinical Trails on Alzheimer’s Disease conference on Nov 29. For Q3 results, analysts expect Biogen’s revenue and adj. EPS to fall by around 11% to 12% Y/Y. Analysts are expecting beverage company, Constellation Brands’ (STZ:xnys) revenues to grow at 5.6% Y/Y in the quarter ending Aug 31, led by its core bear portfolio of Modelo Especial and Corona Extra which recent channel surveys from Beverage Bytes and Nielsen suggested outperformance. The consensus estimate is optimistic and anticipates over 18% Y/Y growth on Adj. EPS with margin expansion. Tesco’s (TSCO:xlon) FY23 1H results (ending Aug 31), scheduled to release this week, are worth watching it can let us have a glimpse of the state of U.K. consumers and some insights into the latest development in the inflation in the U.K. Analysts are expecting the U.K. grocer to report margin compression as a result of high energy costs and wage increases.    Key economic releases & central bank meetings this week Monday, Oct 3 Japan Tankan survey (Q3)ISM US manufacturing survey (Sep)Indonesia inflation (Sep) Tuesday, Oct 4 Australia home loans, building permits (Aug)Australia RBA policy decisionEurozone PPI (Aug)US factory orders, JOLTS (Aug) Wednesday, Oct 5 ISM US non-manufacturing survey (Sep)S Korea inflation (Sep)New Zealand RBNZ policy decisionPhilippines inflation (Sep)Thailand inflation (Sep)Australia retail sales (Aug)Germany trade balance (Aug)ECB non-monetary policy meetingUS MBA mortgage applications/30-year mortgage rateUS trade balance (Aug), ADP employment (Sep)Canada trade balance, building permits (Aug) Thursday, Oct 6 Australia trade balance (Aug)Taiwan inflation (Sep)Germany factory orders (Aug)UK & eurozone construction PMIs (Sep)Eurozone retail sales (Aug)US jobless claims Friday, Oct 7 Japan household spending (Aug)Germany industrial production (Aug)UK Halifax house prices (Sep)Canada labour market statistics (Sep)US employment report (Sep)US consumer credit, wholesale inventories (Aug)   Key earnings releases this week   Tuesday: Biogen Wednesday: Keurig Dr Pepper, Aeon, Lamb Weston, Tesco, RPM International Thursday: Seven & I, Conagra Brands, Constellation Brands, McCormick & Co   Source: https://www.home.saxo/content/articles/macro/saxo-spotlight-3-oct-2022-03102022
BSP Maintains Rates Amid Moderate Inflation; Eyes Further Tightening if Needed

US Dollar: Federal Reserve May Hike The Rate By 75bp In November

ING Economics ING Economics 03.10.2022 08:58
We've written a lot about the downturn in the housing market posing major risks for US economic activity, but the August personal income and spending report suggests the weakness is already broadening. With inflation pressures remaining intense we see the Fed hiking another 75bp in November, implying more economic pain to come Inflation ticks higher than expected In terms of today's US data flow, the Federal Reserve's favoured measure of inflation has come in higher than expected, which will keep the hawkish comments coming from Fed officials and reinforce expectations of a fourth consecutive 75bp interest rate hike on November 2nd. The August core personal consumer expenditure deflator rose 0.6%MoM/4.9%YoY (from an upwardly revised 4.7% year-on-year in July), above the consensus expectation of 0.5%/4.7%. This is a broader measure of inflation than the core CPI measure and we suspect it will stay close to these sorts of levels for another month or two. However, with inflation expectations numbers looking much softer and corporate pricing plans also heading lower (based on National Federation of Independent Business data in the chart below), we remain hopeful that a weakening growth environment will have the positive effect of taking some heat out of price inflation from early 2023. NFIB price plans & core PCE deflator YoY% Source: Macrobond, ING While consumer spending looks much weaker In addition to the inflation number, the monthly personal income and spending report is important for modelling US GDP growth forecasts. Consumer spending makes up around 70% of all economic activity in the US (versus, say 55-60% in most European economies). The monthly profile for US consumer spending is weaker than hoped in today's report with downward revisions to July real consumer spending (to -0.1% month-on-month from the initially reported +0.2% growth rate) while August spending came in at +0.1% MoM versus expectations of +0.2%. This is a surprise given high frequency people movement/restaurant diner/air passenger numbers and is not a great story for 3Q GDP at all. In fact it is so weak it could mean some analysts predicting a possible third consecutive negative GDP print. We think we will avoid it given a strong contribution from trade, business capex and inventory building, but with residential investment set to be a big drag and consumer spending seemingly flagging it isn't looking to be as strong as we would have liked. As such we are left with a  broader sense of a slowing growth trajectory, but with lingering inflation, which only implies more rate hikes and more economic pain to come. Read this article on THINK TagsUS Recession Inflation Consumer spending Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
A Softer Labour Market In Australia And Its Possible Consequences

Will The Depreciation Of The Australian Dollar (AUD) Against The US Dollar (USD) Forces An Interest Rate Hike By 50 bp?

TeleTrade Comments TeleTrade Comments 03.10.2022 09:22
Analysts at Scotiabank lean towards a 25 bps rate hike announcement from the Reserve Bank of Australia (RBA) on Tuesday, although the depreciation of the Australian dollar against the US dollar could press the RBA to deliver a 50 bps lift-off. Key quotes “Minutes to the September 6th meeting ... indicated that there was discussion around both a 25bps hike and the 50bps increase they opted for which fans the impression that there may be rising appetite for slowing the pace of hikes especially given the reference to how “They acknowledged that monetary policy operates with a lag and that interest rates had been increased quite quickly and were getting closer to normal settings.” “A few days before the release of the minutes but after the meeting itself, Governor Lowe said he hoped that the cash rate would come to rest within a 2.5–3.5% rate with ‘a few’ more rate increases over coming meetings. This suggests that there is considerably more work to be done with the 2.35% current rate below the bottom of the range.” “The fly in the ointment is that both developments preceded the Federal Reserve’s more aggressive actions on September 21st with much of the emphasis placed upon the more hawkish dot plot.“ “The Australian dollar has been among the casualties in the face of the US dollar’s broadly based strength and has shed another couple of cents since then along a long-term declining trend from about 76 cents in April to roughly 65 cents now. This development might suggest a more pressing need for a bigger 50bps hike given the implications of ongoing currency weakening for import price pressures.”
Market Sentiment and Fed Policy Uncertainty: Impact on August Performance

The Third Quarter Ends With Losses, U.S. Dollar (USD) Strength Is Worrying

Swissquote Bank Swissquote Bank 03.10.2022 10:21
We spent the weekend talking about whether Credit Suisse will finally go bust or not. The share price is down below 4 francs a share, and the credit default swaps are going through the roof. The 5-year CDS for Credit Suisse spiked to 250 from around 60 at the start of the year. It means that the market is aggressively pricing a default for one of the biggest Swiss banks. Is it possible? Yes, it is possible, but it is highly unlikely. A negative note Zooming out, the third quarter ends with losses, even though we thought that the summer rally could’ve given something. But no. The S&P500 finished the 3rd quarter having slipped to the lowest levels this year. The same is true for Nasdaq and the Dow Jones. $24 trillion have been wiped out of the stocks so far this year. And the last quarter begins with aggressive rate hike expectations from the Federal Reserve (Fed), but also from the European Central Bank (ECB) and the Bank of England (BoE) to fight inflation and the dollar strength.Nike has been the latest company warning investors of falling profits due to mountains of stockpiles that they inherited from the pandemic times – and which brought the company to make nice price discounts -, and the strong dollar. Waiting for tesla reactions This week, we will watch how Tesla will react to the latest delivery report, the OPEC decision and the US jobs figures… and hope that this week’s jobs data doesn’t reveal strong job additions, and solid salary growth in the US. Watch the full episode to find out more! 0:00 Intro 0:21 What will happen to Credit Suisse? 3:14 Q3 ends on a negative note… 5:36 USD strength to become a major headache for next earnings season 6:51 What to watch this week? Tesla deliveries, OPEC decision & US jobs 7:50 Econ101 minute: Why the Fed must destroy jobs to fight inflation?   Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #CreditSuisse #Q4 #Nike #earnings #strongUSD #USD #EUR #GBP #Tesla #OPEC #US #jobs #Fed #BoE #ECB #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH
The US Has Again Benefited From Military Conflicts In Other Parts Of The World, The Capital From Europe And Other Regions Goes To The US

The US Has Again Benefited From Military Conflicts In Other Parts Of The World, The Capital From Europe And Other Regions Goes To The US

InstaForex Analysis InstaForex Analysis 03.10.2022 10:48
The end of September was a complete disaster for the global markets. Traders hoped that the US Federal Reserve would at least ease the pace of rate hikes. But this never happened. On the contrary, the Fed officials and its chairman reiterated that they see a further rate increase as their priority aimed at slowing down galloping inflation. All hopes were destroyed last month, resulting in the biggest decline in the stock market and the surge in demand for safe-haven assets. Over the past decades, the US dollar has been traditionally viewed as a reliable store of value in times of economic turmoil. The already serious economic crisis is aggravated by high geopolitical tensions which is the main reason why the capital from Europe and other regions goes to the US. Notably, the US has again benefited from military conflicts in other parts of the world just as it happened 80 years ago. The Fed's recent forecast for GDP, inflation, and unemployment as well as its plan to hike rates that were announced at its latest September meeting signaled that the regulator braces for more headwinds next year. This means that the stock market will largely depend on high rates while the US dollar will continue to strengthen despite the process of monetary tightening launched by other global central banks. So, what to expect in the market today and in the week ahead? Most likely, stock markets will still be focused on rate hikes and geopolitical tensions between Russia and the Western coalition led by the US. The broad-based S&P 500 index is expected to decline to the level of 3,000.00 after passing the interim support of 3,300.00. The European and Russian stock markets are likely to follow a similar trajectory. On Forex, we may observe a short-term consolidation phase ahead of the RBA and RBNZ monetary policy meetings this week as well as an important jobs report in the US. Any negative news, especially from the US, will boost the demand for the US dollar. So, after a quick fall, USD may recover again, being a preferred safe-haven asset in these uncertain times. As for today, the weak data on Manufacturing PPI in the US may serve as a signal to buy the US dollar after its short decline in the Asian and European sessions. Daily forecast: GBP/USD The pair is going through a consolidation phase under 1.1225 ahead of the Manufacturing PPI data release in the UK and US. The downbeat data in both countries may stop the pair from a breakout. Instead, it may reverse and move down to 1.0915. USD/JPY The pair is testing the level of 145.00. Consolidation above this range will open the way towards the upper target of 145.90, the recent high formed on September 22.   Relevance up to 09:00 2022-10-05 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/323222
The South America Are Looking For Alternatives To The US Currency

Forex: Friday's NFP Release May Support US Dollar (USD). EUR/USD May Reach 0.95

ING Economics ING Economics 04.10.2022 09:07
DXY has dropped nearly 3.0% since last week's highs, as global risk sentiment recovered and ISM manufacturing numbers disappointed. Still, the medium-term story remains USD-positive in our view, also due to the grim outlook for Europe. The fiscal U-turn in the UK may not offer sustained support to the pound, while the RBA may keep hiking by 25bp from now on USD: Correction not very sustainable The dollar has remained in correction mode at the start of this week, with DXY now trading nearly 3.0% off its 28 September peak. In our view, this has not been accompanied by a radical change in the medium-term narrative that has backed the dollar rally so far: despite somewhat weaker-than-expected ISM manufacturing figures yesterday, the US domestic story remains rather solid, leaving the Fed tightening prospects alive even if markets have recently revised the expected terminal rate to sub 4.50% levels. We see Friday’s payrolls report as a potential trigger for a fresh hawkish re-pricing, and a positive event for the dollar. Indeed, the fiscal developments in the UK (more in the GBP section below) appear to be having a rather widespread impact on global risk sentiment and have likely favoured a rebound in risk assets and bonds. There is still, however, a long way to go for European assets to regain the market’s favour given the energy crisis and concerning geopolitical developments, so we continue to see any dollar contraction driven by a recovery in European sentiment as likely short-lived. It is likely that after the ISM manufacturing miss, markets will increase scrutiny on incoming US data to gauge any downward trend in the economic outlook. Today’s data is quite outdated (factory orders and JOLTS job openings for August), which could favour a slightly calmer market environment, but a lot of focus will be on tomorrow’s ISM services index and ADP employment figures. We also have a rather long list of Fed speakers today. We think the DXY downtrend will soon run out of steam, and some stronger support may already emerge at the 111.00 level. We struggle to see the macroeconomic justification for an extension of the drop below 110.00 at the moment.     Francesco Pesole EUR: No idiosyncratic support EUR/USD has largely benefitted from the improvement in global risk sentiment, the dollar correction and some positive spillovers from the fiscal U-turn in the UK, but the euro has still failed to show any substantial idiosyncratic bullish push. This is hardly surprising given the still very challenging outlook for the eurozone and elevated uncertainty about the energy crisis heading into the cold months. Today’s data calendar is quite light in the eurozone, with only the acceleration in August PPI inflation to keep an eye on. More focus should instead be on European Central Bank speakers as President Christine Lagarde will deliver some remarks this afternoon, following speeches by both Pablo de Cos and Mario Centeno. In our view, the EUR/USD recovery is looking quite fragile, which means that any slight dollar recovery could trigger a wider correction in the pair. We still see a high risk of a return to 0.9500 over the coming weeks. Francesco Pesole GBP: Downside risks remain elevated Cable has climbed back to the levels it was trading at before the mini-Budget announcement, but we struggle to see the current rally as sustainable. Firstly, our economics team does not see the fiscal U-turn as a game changer in terms of the country’s finances, and the damage done by delivering ideological – and hardly justifiable economically – tax cuts in the first place is hard to repair. Secondly, there is still an elevated risk that the UK will face a rating downgrade. There is undoubtedly an ongoing effort by the government to calm markets, and it’s been reported this morning that Chancellor Kwasi Kwarteng is expected to bring forward his medium-term fiscal plan announcement, which was initially due on 23 November. However, the exact date hasn’t been revealed just yet. We think, however, the pound continues to face very significant downside risks as the large twin deficit, low market confidence in the new government and a grim outlook for Europe heading into winter all point to the unsustainability of 1.10+ levels in GBP/USD. Francesco Pesole AUD: RBA turns more cautious The Reserve Bank of Australia hiked by 25bp this morning, surprising markets on the dovish side (expectations were for a half-point move). We don’t see this as particularly surprising, as the RBA meets more than other developed central banks (once a month), which allows greater flexibility based on incoming data and global economic/financial conditions. Indeed, the Bank highlighted how uncertainty over the economic outlook has increased and appeared somewhat concerned (not alarmed) about how Australian households will respond to tighter financial conditions, although the assessment of the domestic outlook has remained rather upbeat. Fears of a sharp housing market downturn are certainly on the rise. We get two key data releases before the next RBA meeting on 1 November: employment figures for September and even more importantly the 3Q inflation report. Large surprises on the upside on both releases may open the way for a 50bp hike in November, but 25bp increases seem more likely from now on. The AUD/USD negative reaction after the RBA announcement was quite short-lived, in line with the recent detachment of monetary policy and FX dynamics. The pair remains quite vulnerable at current levels given the risks of a USD restrengthening and challenging global risk outlook.   Francesco Pesole Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
"Private investors will be required to increase their gilt exposure by at least £268bn in FY2023-24"

The Weakening Of Confidence In The British Government| Oil Prices Extended Gains And More

Saxo Bank Saxo Bank 04.10.2022 09:09
Summary:  After a series of positive surprises on US economic data last week, the disappointment from the ISM manufacturing was a big deal for the markets. US Treasury yields slumped, with rising expectations of an earlier Fed pivot which we think may be premature. But that helped equity markets close higher, more a signal of positioning rather than expectations. UK’s tax cut U-turn instilled a fresh bid in sterling, but further impeded confidence in the government. Oil prices extended gains and Gold also reclaimed the $1700-mark. On watch today will be how the Reserve Bank of Australia transitions to a slower rate hike pace. What is happening in markets? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) rally over 2% US stocks rallied for the first day of the quarter with the Nasdaq100 up almost 2.4%, and the S&P500 up about 2.6%, which is the best gain since July 27. It comes as the 10-year US Treasury yield rolled over to trade at around 3.65% (after topping 4% at one-point last week). The risk-on mood was fueled by several things; firstly, the UK government did a U-turn and will reverse plans to scrap the top rate of income tax. Secondly, the United Nations called on the Fed and other central banks to halt interest rates hikes. And thirdly, what also boosted sentiment was that two Fed speakers at the weekend, Brainard and Daly were reportedly discussing the downside of hiking too fast. And fourthly, weaker than expected US economic news came out with; US manufacturing falling for the third time in four months. As for the S&P500, the technical indicators; the MACD and the RSI also remain in oversold territory, which supports the notion that some investors believe a short-term rebound may be seen perhaps amid the risk-on mood. However, caution still remains in the air ahead of further Fed's hikes. U.S. treasury yields (TLT:xnas, IEF:xnas, SHY:xnas) The US Treasury yields retreated on Monday as a subdued ISM manufacturing print led to calls of slower Fed tightening and an earlier Fed pivot, which had already been building last week as well due to the risk of wider market disruptions as things have started to break. The reversal of the UK tax cut also supported Gilts, and some pass-through was seen to the US Treasuries. 2-year yields declined over 16bps to 4.11%, while the 10-year was down 19bps to 3.63%. Australia’s ASX200 (ASXSP200.1) poised to raise 1.5% with a focus on oil stocks Commodities will be focus on the ASX today with Oil and LNG stocks like Woodside (WDS), Santos (STO) set to see some action after the oil and gas prices jumped 5%. Other stocks to watch include Worley (WOR) who services the energy sector. Iron ore companies will be watched as well, supported higher by the iron ore price jumping 1.8% to US$94.50. So it’s worth watching if BHP, RIO and CIA can extend their short-term uptrend. AUDUSD rallies back to 0.6516 ahead of RBA’s expected 0.5% hike Australia’s RBA is likely to make another jumbo rate hike and take rates up by 50 bps (0.5%) to 2.85% on Tuesday (which is what consensus thinking is). And then after that, the RBA is likely to move in smaller increments, according to interest rate futures and what RBA Governor Phillip Lowe signaled he wants. With the majority of Australian mortgages at floating-rates, and wage growth being stronger, the RBA’s thinking is that most Aussies will be able to sustain the higher rates as a lot of Australian made extra mortgage repayments amid the lockdowns, as pulled back on discretionary spending. However there are about 2.5 million Aussies who have no buffer. And 9.8 million Aussies have mortgages. So we still think a property pull back might be on the cards. It’s the magnitude of the pull back that is being questioned. The technical indicator, the MACD suggests the AUDUSD could rally if the RBA proceeds with a likely 0.5% hike. However over the long term, our house view remains bearish on the AUDUSD until Fed hikes cool, and commodity demand picks up from China. GBPUSD made a strong recovery, will it last? Cable was seen advancing above the 1.13 handle in early Asian hours on Tuesday as it extended Monday’s gains following announcement of plans to scarp the tax cut by the UK government. A softer dollar also supported pound’s gains, amid a slide in US Treasury yields. However, more Fed tightening is still in the cards and the lack of trust in the new UK government cannot be ignored even if the tax policy has been reversed for now. Focus on the BOE meeting on November 3 where 115bps rate hike is priced in, lower than last week’s pricing of 150bps. However, a full-budget statement will be released before that and further austerity measures, if included, can bring fresh downside for the sterling. EURGBP slid below 0.8700. Crude oil (CLX2 & LCOX2) extends gains on OPEC+ chatter Crude oil trades higher ahead of Wednesday’s OPEC+ meeting in Vienna as the alliance is considering a production cut of more than 1 million barrels/day to support prices following a 25% slump during Q3 2022. That would be the biggest cut since the pandemic with OPEC+ slashed production by 10 million barrels/day as demand collapsed. WTI futures rose above $83/barrel while Brent was close to $90. With several OPEC+ producers, including Russia, producing below target, and only Saudi Arabia may be able to limit production without a loss in additional market share. Meanwhile, expectations of an earlier Fed pivot also stabilized demand weakness expectations. Gold (XAUUSD) reclaims 1700 on lower US yields Gold extended recent gains as yields on Treasuries continued to decline. After the 10-year yields were seen topping the 4% level at one point last week, they are now off about 40bps to end at 3.63% yesterday. Meanwhile, a softer dollar and rising geopolitical tensions have also brought back investor demand for the yellow metal. A weaker ISM manufacturing print yesterday (read below) has also increased calls for an earlier Fed pivot, which we think may be premature. But the increasing calls for a recession have meant gains for Gold which was last seen back at $1,700/oz.   What to consider? US ISM manufacturing disappoints The headline for September’s US ISM manufacturing came in weaker than expectations at 50.9 from the prior month’s 52.8 and expected 52.2. Both employment and new orders both dropped into contractionary territory printing 48.7 (exp. 53.0, prev. 54.2) and 47.1 (prev. 41.3), respectively. The report showed that higher interest rates are starting to weigh on business investment sentiment, at least in the interest rate sensitive sectors. Still, the inflationary gauge of prices paid declined to 51.7 (exp. 51.9, prev. 52.5) falling for the sixth straight month. Supplier delivery times suggested some easing on the supply chains, but overall the report indicated the case of a slowdown in the US economy as rapid Fed tightening continues. UK scraps plans to cut taxes The UK government confirmed reports it will not go ahead with the abolition of the 45p rate of income tax but they are committed to borrowing extra over the winter to help with the ongoing energy crisis. The Chancellor told BBC the proposal was "drowning out a strong package", which includes support for energy bills, cuts to the basic rate of income tax, and the scrapped increase in corporation tax. However, he saw the abolition of 45p tax rate as a distraction from the overriding mission, and thus decided to remove it. This puts water on the Bank of England’s bond-buying, and exposes further the cracks in UK policymaking, thus suggesting that the UK assets are not out of the woods. A full-budget, which has now been brought forward to before the next BOE meeting on November 3, could include more tax cuts. Fed pushes back on an earlier pivot Fed’s NY President John Williams repeated inflation is too high and the Fed's job is not done, also saying that the monetary policy is still not in restrictive zone, pushing back on some calls for an earlier Fed pivot. He acknowledged signs of a slowdown in the housing sector or the consumer and business investment spending, but nothing that could deter the Fed from fighting inflation. On forecasts, he sees inflation likely down to 3% by next year (median view for Core PCE 3.1%), and the US is likely to see unemployment rise to 4.5% by end of 2023 (median view 4.4%). Thomas Barkin (2024 voter) made the case for more inflation in the post-pandemic world, noting that the Fed must consider global developments, but the focus is on the US. Japan’s Tokyo inflation accelerates further Japan’s September Tokyo CPI came in at 2.8% YoY, a notch softer than last month’s 2.9% YoY and in-line with expectations, but the core-core (ex-fresh food and energy) print accelerated to 1.7% YoY from 1.4% YoY, also coming in ahead of expectations at 1.4% YoY. Higher global food and energy prices along with a record weak yen has brought import price pressures on Japan’s economy, and this print hints at further gains in CPI on the horizon. While the pressure on the Bank of Japan to hike rates may have eased for now as US yields are easing, but there is still more Fed tightening in the pipeline and fresh pressures cannot be ignored. Reserve Bank of Australia may step away from moving to a slower rate hike pace The Reserve Bank of Australia is scheduled to announce its next rate decision on Tuesday, October 4. Governor Lowe had previously signalled that the pace of rate hikes is likely to slow from here after four consecutive rate hikes of the magnitude of 50bps. However, money markets and Bloomberg consensus forecast is still calling for another 50bps rate hike at the October meeting suggesting that RBA may delay taking the foot off the pedal just yet. The recent slide in the Australian dollar and worries over a turmoil in global financial markets may prompt the policymakers to front-load more of the rate hikes while the economy is still holding up. Retail sales data last week was upbeat while the first monthly inflation data reading at 6.8% is only slightly off the 7% levels seen in the preceding month. So, even as a monthly meeting can ensure a steady pace of rate hikes even with a smaller 25bps rate move, policymakers would possibly prefer to make a larger move this week to provide some support to the AUD. Likewise, the Reserve Bank of New Zealand is also expected to hike rates by another 50bps at their October 6 meeting.   For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: https://www.home.saxo/content/articles/equities/market-insights-today-4-oct-04102022
Reserve Bank of New Zealand: Kenny Fisher says he expects a 25bp rate hike on May 24th

Soaring Hawkish RBNZ Bets Are Strengthening The Kiwi (NZD) Bulls

TeleTrade Comments TeleTrade Comments 04.10.2022 10:10
NZD/USD is eyeing to test the weekly highs at 0.5750 as the RBNZ is expected to sound hawkish. A fifth consecutive 50 bps rate hike is expected by the RBNZ to continue the fight against inflation. The DXY is declining towards 111.00 amid lower projections for the US NFP data. The NZD/USD pair has bounced back sharply after dropping to near 0.5682 in the Tokyo session. The asset is broadly oscillating in a 0.5680-0.5726 range and is expected to deliver an upside break of the same. A north-side explosion will drive the asset towards weekly highs at around 0.5750. Weaker performance from the US dollar index (DXY) and soaring hawkish Reserve Bank of New Zealand (RBNZ) bets are strengthening the kiwi bulls. Wednesday’s monetary policy decision by the RBNZ is going to provide a decisive move to the antipodean. RBNZ Governor Adrian Orr is expected to announce a 50 bps rate hike consecutively for the fifth time. The inflationary pressures in the kiwi region have not cooled down yet, therefore, scaling down the ‘hawkish’ tone won’t be a fruitful option.  An announcement of the fifth 50 bps rate hike will push the Official Cash Rate (OCR) to 3.5%. Meanwhile, the DXY has printed a fresh weekly low at 111.44 in the early European session. The DXY is eyeing more weakness towards 111.00. Investors are dumping the DXY ahead of the US Nonfarm Payrolls (NFP) data. As expected, the US economy created 250k jobs in September, lower than the August reading of 315k. The US economy has been maintaining full employment levels, therefore, space for generating more employment is extremely less. Adding to that, the escalating Federal Reserve (Fed)’s interest rates are also restricting the corporate to continue their hiring programs with sheer pace.
UK Labor Market Shows Signs of Loosening as Unemployment Rises: ONS Report

The New Quarter (Q4) Kicked Off On A Volatile In Positive Way

Swissquote Bank Swissquote Bank 04.10.2022 10:35
The new week, the new month and the new quarter kicked off on a volatile, but a positive note. Credit Suisse closed a very ugly session with 0.90% loss only. Stocks  European indices gained, while the US indices rallied as softer-than-expected US ISM manufacturing index gave a positive spin to the market. The Dow Jones jumped the most on Monday, as oil stocks literally roared on the back of firmer oil prices. Oil bulls are betting that OPEC will announce an output cut of around a million barrels per day to ‘stabilize’ oil prices. FX Update In the FX, the US dollar retreat almost 3% since its September peak. The dollar lost more than 4.50% against the Brazilian real, as Cable rallied past the 1.13 level, after Liz Truss government took a ‘mini’ step back from their terribly unpopular fiscal spending plan, and said that they will not reduce taxes on big salaries. Elsewhere, the Reserve Bank of Australia lifted its interest rates by 25bp only, versus 50bp expected by analysts. Today's report Today, we will be watching the job openings data in the US, and hope to see a smaller number, as the Fed sees the job openings as a factor that could ease the pressure in the US jobs market. Then, will follow the ADP report on Wednesday, and the NFP, unemployment rate and the wages growth on Friday. Investors are praying for softish numbers this week to continue the rally. Watch the full episode to find out more! 0:00 Intro 0:22 Stocks rebound 1:23 Oil stocks rally on firmer oil 4:44 …but Tesla slumps 5:55 FX update: USD down, BRL & GBP up 6:33 … but Brits want to see Liz spend less 8:16 RBA cuts less & investors need soft US data to cheer up Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #CreditSuisse #Tesla #Brazil #election #Bolsonaro #Lula #BRL #USD #GBP #OPEC #output #cut #crude #oil #US #jobs #Fed #BoE #Liz #Truss #mini #budget #SMI #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH
Germany's Economic Déjà Vu: A Look Back and a Leap Forward

Podcast: Bears In The Stock Market, US Treasury Yields Lower And More

Saxo Bank Saxo Bank 04.10.2022 13:02
Summary:  Today we look at the market celebrating a weak September US ISM Manufacturing data point taking long US treasury yields lower, with noise from the commentariat suggesting a Fed pivot may be near possibly adding energy to the squeeze on equity market bears yesterday. At the same time we note further hawkish noise from key Fed officials, include Vice Chair Williams. Elsewhere, we look at financial conditions, unusual behaviour in sectors that normally would have performed better yesterday, possibly on Tesla's very bad day. Crude oil, a huge surge in silver, gold pushing on resistance and more also on today's pod, which features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are found via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: https://www.home.saxo/content/articles/podcast/podcast-oct-4-2022-04102022
Ethereum Market Is Showing Bullish Signals

Ethereum Market Is Showing Bullish Signals

InstaForex Analysis InstaForex Analysis 04.10.2022 13:32
The situation in the crypto market has been difficult since the end of August. However, there are more and more reasons to expect a local upward trend in cryptocurrencies on the market. And there is no doubt that ETH will be one of the main beneficiaries of the bullish move. The main reason for the likely upward movement of the crypto market is the start of a protracted correction of the US dollar index. In addition, there were rumors on the financial markets about a possible curtailment of the Fed's aggressive policy. Market players attribute this to the European crisis and the bankruptcy of Credit Suisse. If the combination of these factors works, then the cryptocurrency and Ethereum market is waiting for a local upward trend and a gradual fading of the liquidity crisis. For the main altcoin, this is especially good in light of recent negative events. Negative background around Ethereum Recently, an article was released where the future of Ethereum is being questioned after the Merge update. The authors believe that the growing number of competitors and the parallel increase in the number of ETH fork are diverting significant investment from the altcoin. After the merge, the centralization of Ethereum and the percentage of transaction censorship also increased. Due to the decrease in trading activity, the deflationary mechanism of ETH also does not work properly. All this leads to a decrease in investment in the main altcoin and its gradual extinction. There is some truth in the study, but it is incorrect to say that ETH has reached its peak and is moving to the bottom. Even aside from the liquidity issues due to the crypto winter, there are other factors pointing to Ethereum's potential. The Merge update was only 55% complete and there are several important updates ahead of the altcoin before all the algorithms work as they should. ETH/USD Analysis In addition, the approaching bullish momentum will show how Ethereum is ready for growth. Over the past day, the asset has risen in price by 4% and as of October 4, the altcoin is trading around $1,350. The coin managed to gain a foothold above $1,320, which allowed it to build on the bullish success. In the next two days, ETH/USD will begin to consolidate above the $1,350 level for further movement towards $1,430. Most likely, there will be a local rebound here due to high sales volumes. Everything will depend on the trading activity in the asset network and its dynamics in the coming days. Ethereum on-chain activity showed a powerful surge following the results of yesterday's trading day. As of October 4, address activity and transaction volumes are below average. At the same time, technical metrics continue to grow, which indicates a dangerous divergence for growth. While the on-chain numbers are declining, the RSI and stochastic on the daily timeframe maintain a strong upward trend. If on-chain metrics do not show a growing interest in Ethereum after the opening of the US markets, then the growth of ETH will be unjustified. It is also important to note that a "triangle" pattern is forming on the daily chart. In a bearish scenario, a breakout of the pattern will bring the price down to the $1,2000–$1,250 area. If buying activity recovers to yesterday's volumes, the price will continue to move towards $1,430. Conclusions Ethereum is showing bullish signals that do not correlate with buying activity. This is fraught with a further decline and a retest of $1,200. At the same time, the general situation is conducive to growth, therefore, even in the event of a local price drop, ETH will resume bullish movement at least to the range of $1,530–$1,670.   Relevance up to 09:00 2022-10-05 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/323338
Bitcoin Stagnates at $30,000 Level, Awaits US Bitcoin ETF Update and Fed Meeting

Tesco Has Decided To Lock Everyday Items |The US Dollar (USD) Continued To Weaken

Saxo Bank Saxo Bank 05.10.2022 09:32
Summary:  Another banner day for equity markets, which surged further on hopes that central banks will be increasingly easing off the gas pedal in coming weeks and months on signs that the impact of their tightening is wearing on economic growth. It’s counterintuitive and remains to be seen how equity markets will eventually greet recessionary outcomes for earnings and revenue in the quarters ahead. For now, the focus is tactical, particularly on whether the remaining US data this week through Friday’s jobs report will confirm this most recent narrative.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities continued their rebound yesterday with S&P 500 futures hitting the big 3,800 level, but the index futures are coming down a bit this morning trading around the 3,785 level. The significant declines in US bond yields and chatter about a Fed pivot, this still has a low probability at this point, have been the catalyst behind the rebound and the fact that markets were very stretched added to size of the rebound as short covering have been taking place. In today’s session the ADP employment change and ISM Services Index are the key macro events that could add some fresh energy to the downside. Yesterday’s biggest negative change on record in the JOLTS Report suggests that the labour market is beginning to cool down. Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) The Hong Seng Index soared over 5% to catch up with the S&P 500 Index’s 5.7% rally over the past two days after Hong Kong returned from a public holiday. Weaker U.S. economic data recently have helped fuel the notion of peak tightening from the Fed and contributed to the turnaround in global stocks this week. Index heavy-weights jumped, HSBC (00005:xhkg) up 6.3%, AIA (01299:xhkg) up 6.7%, Tencent (000700:xhkg) up 5.8%, Meituan (03690:xhkg) up 7.6%, and Alibaba (09988:xhkg) up 8.2%. BYD (01211:xhkg) soared nearly 10% after the Chinese automaker reported record sales of over 200,000 electric and hybrid vehicles in September, a growth of 183% from last year, and the seventh consecutive month of sales growth. The mainland exchanges remain closed for the rest of the week for the National Day golden week holiday. USD and US yields/risk sentiment The US dollar continued to weaken yesterday, particularly against European currencies as EURUSD touched parity briefly and as GBPUSD rose close to 1.1500 on a further change of tune from UK Chancellor Kwarteng, who is making noises about plans to bring forward debt-cutting measures in the new budget he will present later this month. An important test for the greenback lies ahead through the end of this week on macro data and its impact on US treasury yields, as noted below, as well as on risk sentiment. Gold (XAUUSD) and silver (XAGUSD) rise further Hopes that central banks will begin to ease away from the tightening of the last many months after a deceleration from the ECB and at least one weak US data point this week, saw yields a bit lower and precious metals surging, with Gold rushing higher yesterday after the break above the key 1,680-1,700 from Monday was solidified with a move above 1,725 at one point yesterday. Silver’s enormous jump on Monday was only followed up with a much smaller move yesterday. Next area of focus in gold will be the 1,734 area and then the major 1,800 zone. The strength in US macro data and direction of US yields key through Friday’s US jobs report (weak data and lower yields most gold supportive.) Crude oil (CLX2 & LCOX2) higher on larger OPEC cut expectations Crude oil prices rose further amid speculation that OPEC is considering an even larger cut to production than first thought. The group is said to be considering a cut of up to 2mb/d, according to media reports. It is also being reported that the cuts will be made from current production levels and not the quotas as most members are already producing below their quota. That, if true, will likely tighten the market especially as European sanctions will kick in from December and US is also pausing the release from its strategic reserves. This tightness could be exacerbated by a rebound in Chinese demand if it can contain outbreaks of COVID-19. WTI futures rose above $86/barrel while Brent crossed the key $90-mark. A significant draw was also reported in API inventories, with crude stocks down 1.77mn. US treasuries (TLT, IEF) US treasury yields recovered slightly after a further drop yesterday that took the 10-year benchmark to 3.56% at the lows, just ahead of the key 3.50% area former cycle high from June. Key data this week, including the ISM Services (far more important for the current status of the US economy than the ISM Manufacturing that garnered such a strong reaction on Monday) and the US September jobs report are likely to set the tone. What is going on? Twitter (TWTR:xnas) shares rose more than 20% as Elon Musk agrees to original takeover terms The shares of Tesla (TSLA:xnas) were down sharply on one point on the news before these in turn recovered to positive territory in a torrid rally for US equities yesterday. With Twitter’s closing price yesterday being close to the takeover price at $54.20 the downside risk remains now for Tesla shares in the event that Elon Musk is forced to sell more Tesla shares to finance the deal. US JOLTS job openings surveys signals that the tightness in the labor market may be moderating US JOLTs data was out with a weaker than expected number, declining to 10.1 million in August, the lowest since June 2021, and below expectations of 11.1 million and after 11.2 million in July. The job openings rate was down to 6.2% from 6.9% in July, and puts the focus on the ADP data due today in the run up to the nonfarm payrolls change data on Friday. New Zealand’s RBNZ hikes 50 basis points as expected This was the fifth consecutive meeting to bring a half-point hike and took the official cash rate to 3.5%. The bank signaled more tightening to come in its statement, as it noted that “core consumer price inflation is too high and labor resources are scarce. Still, short NZ rates continue to trade lower, if not falling as rapidly as for Australia after the RBA surprised with only a 25 basis point hike yesterday. The AUDNZD rate dropped below 1.1250 at one point overnight from the 1.1350 range before the announcement. Tesco 1H revenue beats estimate The largest Uk grocery retailer reports like-for-like UK revenue of +0.7% vs est. -0.1% but the company says that cost inflation is still significant. Tesco has also decided to lock over 1,000 everyday items at low prices until 2023 which could be negative for operating margin in the short-term. What are we watching next? Risk sentiment brightens – how far can it extend? Quite a short squeeze on bearish risk sentiment as global equities have backed up sharply, in many cases after touching new bear market lows – is this a bullish reversal with legs or will it fade quickly? Two prior bear market rallies in March and especially June-August impressed. For now, the tactical focus higher in the US equity market would be on the 3,800-3,900 zone, the next hurdle for establishing whether this squeeze will develop into something more, with the most immediate sentiment test likely the ISM Services survey today (more below) in the US and especially the jobs (and earnings) data on Friday, as it appears this rally was kicked off by a soft September ISM Manufacturing survey on Monday. UK Prime Minister Truss to deliver address at Tory conference today This is an important speech after the recent volatility in UK gilt markets, mostly attributable to policymaking from the Truss government, including generous caps on energy prices and tax cuts, that suggest little interest in maintaining long term credibility in government debt. US ISM services will be key to watch today With chatter on a Fed pivot gaining momentum out of a miss in one ISM manufacturing print, possibly also underpinned by the turmoil in the financial system on contagion from the wipeout and recovery in UK gilt markets over the last ten days, it will become more key to watch the services sector data out today. Consensus expects the number to be 56, down from 56.9, as higher interest rates and high inflation begin to eat into services spending after a solid post-pandemic rebound. Earnings to watch We had highlighted that Biogen would report earnings yesterday, but our earnings date data was incorrect, and the date is now set for the 18 October. Tesco has already reported earnings (see review above), so today’s remaining earnings focus is Lamb Weston which is a large US food company with analyst expecting FY23 Q1 (ending 31 August) revenue growth of 16% y/y and stable operating margin. Today: Lamb Weston, Tesco, RPM International Thursday: Seven & I, Conagra Brands, Constellation Brands, McCormick & Co Economic calendar highlights for today (times GMT) 0715-0800 – Eurozone final Sep. Services PMI 0830 – UK final Sep. Services PMI Poland Central Bank Rate Announcement 1215 – US Sep. ADP Employment Change 1230 – US Aug. Trade Balance 1230 – Canada Aug. Building Permits 1230 – Canada Aug. International Merchandise Trade 1400 – US Sep. ISM Services 1430 – US Weekly DoE Crude Oil and Product Inventories 2000 – US Fed’s Bostic (non-voter) to speak 0030 – Australia Aug. Trade Balance Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: https://www.home.saxo/content/articles/macro/market-quick-take-oct-5-2022-05102022
Hawkish Fed Minutes Spark US Market Decline to One-Month Lows on August 17, 2023

It Is Still Premature To Expect A Fed Pivot

Saxo Bank Saxo Bank 05.10.2022 11:23
Summary:  A bunch of different factors are coming together, putting more weight on the argument of an early Fed pivot and a peak in global central bank hawkishness. These have included somewhat softer economic data out of the US this week, plus the financial instability risks, and the pivot from Reserve Bank of Australia to a slower pace of rate hikes lately. We put all this in perspective, and how it is still premature to expect a Fed pivot unless we see clear signs of disinflation. Why do we have increasing calls for a Fed pivot lately? A slight weakness in US economic data this week has been quite a turn from the upbeat data that we have been getting out for the economy until last week. US consumer confidence data rose to 108 in September, smashing expectations, with both present situation and expectations marching higher. Thereafter, we had the first sub-200k weekly jobless claims print since May, suggesting that the labor market remains tight. But this week, the tables turned with a weaker-than-expected ISM manufacturing print and a sluggish JOLTs job openings which hinted at the tightness of the labor market moderating. But these few data points do not confirm any change in trend, or the Fed policy. RBA pivot fueling calls for a peak in global central bank hawkishness When one of the G7 central banks pivot, shock waves are expected. But the case for the Reserve Bank of Australia is somewhat more unique. It’s signal to slow down the pace of rate hikes has stemmed from concerns about the impact on housing market and household budgets. Also, the market pricing for RBA was aggressive with a 4% peak priced in. The US economy is more domestic driven, especially with lower dependence on China’s activity levels, and therefore has significantly higher room to whether the central bank tightening. It is also worth keeping in mind that the RBA meets every month, so it can get a lot of tightening done even with 25bps rate hike every month, compared to some of the other central banks that meet less often. The Reserve Bank of New Zealand’s 50bps rate hike today has rather confirmed that we are still some way off from a pivot from the Fed or other global central banks. Some things are breaking Well, we have often heard the saying that Fed will hike until something breaks. And things are breaking, from a slow break of the Japanese yen to the quick crash of the UK Gilts market. Potentially, something breaking in the financial markets could make the Fed pivot faster than the domestic economy breaking, as it appears now. It will be important to monitor the broader measures of financial stress, such as the ECB Systemic Risk Indicator as highlighted by my colleague here. For now, we do not see any systemic risks, and a larger pool of money than say the UK pension fund industry, will have to be in trouble to really spell pivot for central banks. Fed is in the “Volcker” mindset Fed’s Chair Powell has invoked his inner Volcker with his message at Jackson Hole getting sharper about inflation. It is clear that persistently high inflation is damaging to central bank credibility and so they will want to know inflation is well and truly crushed before making any moves to pivot, thereby avoiding any mistakes of the past where an early Fed pivot made the fight against inflation that much harder. History has shown that pivoting too early can lead to resurgent inflation as was the case in the 1970s (see chart below). Unlike his predecessors, Fed Chair Volcker kept interest rates at elevated levels after inflation peaked, and only pivoted in 1982, having started raising rates in 1979. The Fed officials have been giving out a clear message lately on the goal of getting inflation under control, without being concerned about the domestic economy or the turmoil in the global financial markets. While the two key indicators, Friday’s monthly payroll report and the monthly CPI data on October 13, could still distort the market pricing of the Fed’s message, that would make the Fed’s job that much harder. Source: https://www.home.saxo/content/articles/macro/macro-insights-is-an-early-fed-pivot-likely-05102022
Gold Has Extreme Bullish Condition

Glod And Its Trading Plan For The Next Few Hours

InstaForex Analysis InstaForex Analysis 06.10.2022 08:35
Gold (XAU/USD) is trading at around 1,720, above 7/8 Murray (1,718), above the 200 EMA, and the 21 SMA, providing a strong positive signal. If the metal keeps trading above this area in the next few hours, it could reach the strong resistance of 8/8 Murray located at 1,750. Yesterday in the American session, XAU/USD came under strong bearish pressure. As a result, it failed to consolidate above the strong resistance of 1,735. We can see that gold found support around the 200 EMA on the 4-hour chart. Around this area is the psychological level of 1,700 which could offer a positive outlook in the coming days. The US dollar index resumed its bullish cycle on expectations of an aggressive tightening by the FED. Markets are pricing in a 70% chance of an increase of 0.75% in interest rate in November. Strengthening of the US dollar is benefitting Treasury bond yields which is a situation that means gold could once again come under bearish pressure. According to the 4-hour chart, Gold reached the top of the uptrend channel. During a technical correction, the price printed a low of 1,700. From that level, XAU/USD rose again and could now gain momentum and reach 1,750. On the contrary, in case gold falls below the psychological level of 1,700 and consolidates below the 200 EMA and below the 6/8 Murray, it could mean that the bearish pressure has resumed and could be a negative sign. In this case, gold could reach 5/8 Murray at 1,656 and could even drop to the psychological level of 1,600. A sustained break above strong resistance at 1,735 is needed to challenge the 1,750 level. On the downside, critical support is seen between 1,700-1,687. A break of this level could change the trend and gold could turn bearish. The strong support at $1,680 will be the last line of defence for the gold bulls. This level is located at 6/8 Murray (1,687). The price could drop towards 1,656 and 1,615 if it closes below this level. Our trading plan for the next few hours is to buy above 7/8 Murray, with targets at 1,750. On the other hand, to grasp a good opportunity to buy, we should wait for a technical bounce around the 200 EMA located at 1,700, with targets at 1,718 and at 1,750. The eagle indicator is showing overbought signals. So, if gold fails to stay above 7/8 Murray, it will be a clear signal to sell below 1,718 with targets at 1,697 and 1,685. Relevance up to 06:00 2022-10-11 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/295656
Hong Kong’s Hang Seng Had Its Best Month | EU Inflation Slowed

Beijing Marathon Came Back, The New Zealand Dollar (NZD) Rose Sharply

Saxo Bank Saxo Bank 06.10.2022 09:04
Summary:  Markets gyrated rather wildly yesterday as a strong September ISM Services saw US treasury yields jumping back higher and challenging the narrative that has developed this week of “central bank pivot.” Alas, equities and sentiment were able to overcome the surge in yields and the US dollar interestingly followed the direction of sentiment rather than yields. The next test for sentiment, the US dollar and global yields will be tomorrow’s US September jobs report ahead of earnings season, which will kick off next week.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities were selling off yesterday with S&P 500 futures declining as much as 1.8% before erasing most of the losses which was a strong given the US 10-year yield rallied higher to 3.75%. The ISM Services Index was incredibly strong yesterday suggesting the US services sector remaining robust despite tighter financial conditions which maybe reduces the risk of negative earnings surprises during the Q3 earnings season. This morning S&P 500 futures are trading above the 3,800 level again with the 3,820 level being the natural resistance level on the upside to watch. Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) Hang Seng Index took a pause after yesterday’s 5.9% rally. I traded lower in the morning but pared losses after returning from the mid-day break to little change from the previous close. Wharf Real Estate (01997:xhkg) and Cathay Pacific (0293:xhhg) were among the best performers, up by 4.8% and 3.5% respectively. Automakers were laggards, with leading names falling from 2.5% to 7%. The stock markets in Shanghai and Shenzhen remain closed for a national holiday. USD and US yields/risk sentiment The US dollar very correlated with the direction in risk sentiment yesterday, and less so with the direction in treasury yields, which rose quite sharply yesterday, at first helping to support the greenback as sentiment was spooked by the comeback in yields as strong data challenges the “central bank pivot” narrative afoot this week. But the big USD weakened later in the session as US equities closed near the highs and followed through weaker still overnight on a further brightening of sentiment. EURUSD is a microcosm of the general USD direction and will be a bellwether pair to watch after parity was nearly touched over the last couple of sessions before the action swooned to below 0.9850 briefly yesterday and a subsequent rally retraced about half of the sell-off into this morning. Gold (XAUUSD) Gold trades higher after briefly dipping to and finding support at $1700 during Wednesday’s round of fresh dollar strength. Supported by hopes that central banks will begin to ease away from the tightening of the last many months after at least one weak US data point this week, saw yields a bit lower and precious metals surging. The move through the key 1,680-1,700 area on Monday will be further solidified on a break above 1,725, the 50-day moving average, and not least the recent high at 1735. OPEC’s decision to cut production thereby forcing prices of energy higher will only add to concerns about central banks' ability to get inflation under control before an economic slowdown forces a rethink on rates, a development that may end up adding additional support to gold and silver. Crude oil (CLX2 & LCOX2) Crude oil rallied after OPEC+ producers as speculated, decided to cut their baseline production by 2 million barrels per day. A decision that given the undercompliance from several major producers, including Russia, Nigeria and Angola would likely translate into a somewhat lower impact of around 1 million barrels per day. Cutting production at this time is somewhat controversial given the fact the price has not fallen much below the 90-100 Brent range that seems to be acceptable to most producers. What makes this cut even more difficult to understand from a supply and demand perspective is the comment from Novak that Russian production may fall further over the coming months. This decision risks agitating the US while potentially leading the FOMC to keep tightening for longer as inflation will become stickier. The result being a global economic slowdown that may end up taking longer to reverse. HG Copper (HGZ2) Copper as well as zinc trade higher after the London Metal Exchange said it would restrict deliveries from Ural Mining & Metallurgical. The industry has been grappling with the question of how to handle supplies from Russia - a major producer of aluminum, nickel and copper - since the invasion of Ukraine in February, and the debate has intensified over the past month.  Copper traded in New York trades near a one-month high at $3.57 with the news offsetting continued worries about demand amid a global economic slowdown, not least in China and Europe. Next level of interest being the September high at $3.69. US treasuries (TLT, IEF) US treasury yields jumped above 3.75% at one point yesterday, up 20 bps from the recent lows, in the wake of a stronger than expected Sep. US ISM Services survey and as the private ADP payrolls came in solidly in line with expectations, with upward revisions. The cycle high of 4.00% that was posted during the wipeout in the UK gilt market is the next focus if the bond market remains weak. What is going on? NZD jumps overnight after mixed reaction to latest RBNZ rate hike The NZD rose sharply against the US dollar, challenging the 0.5800 area this morning after a pump-and-dump reaction to the RBNZ’s latest 50 basis point rate hike. Likewise, AUDNZD traded heavily and back toward the pivotal 1.1250 area that was a major resistance point on the way up. Improved global sentiment may be a driver here, as was a rather rosy speech on the prospects for New Zealand avoiding a recession from NZ Deputy Prime Minister Robertson overnight. Better than expected US September ADP payrolls change…but this does not matter much In September, U.S. businesses added 208k jobs according to the ADP report. This is more than the consensus of +200k and higher than in August (revised up from +132k to +185k). The biggest gain was in trade, transportation and utilities (147k) ahead of professional and business services and education. On the downside, annual pay growth for job changers went through its biggest deceleration in the three-year history of the data (from 16.2 % to 15.7 %). Should we be worried about this data? Not much. The ADP report hasn’t been the best gauge of the U.S. labor market (even with the recent change in the methodology). Strong September US ISM Services survey challenges “pivot” narrative US ISM services softened slightly to 56.7 in September from 56.9 previously, but was far better than expectations of 56.0. New orders slowed to 60.6 from 61.8, but that is a very strong reading. Two of the more positive points in the survey were: the ISM Services employment jumped in September, from 50.20 in August to 53 points. The second one: the services Prices Paid has fallen six months in a row, to the lowest level since January 2021. This means inflation is likely to move lower. This is a rather positive report after a number of negative statistics earlier this week (sharp drop in ISM Manufacturing employment, much lower job openings and bad construction spending).  Hawkish Fed refrain remains the same The Fed's Daly (voter in 2024) noted that the Fed is resolute at increasing rates into restrictive territory before holding rates there for a while, pushing back on talk of a Fed pivot. She added that she doesn’t see a rate cut happening next year “at all”. Raphael Bostic (2024 voter) sounded similar notes, saying he favors lifting the benchmark to between 4% and 4.5% by the end of this year, and hold it there. The November 6 Beijing Marathon marks the return of large public events The 2022 Beijing Marathon is scheduled for November 6 and registration has started. The event will allow 30,000 runners to compete in Beijing after being canceled in 2020 and 2021. It will be the largest public event being held in the Chinese capital city since the Winter Olympics. Residents from other mainland Chinese cities other than Beijing however are not allowed to attend. Residents of Taiwan, Hong Kong, and Macao, and foreigners plus invited “elite” athletes are allowed to participate. The US plans to further restrict China’s access to its semiconductor technology It is reported that the US Commerce Department will launch additional regulations this week to further restrict the exports of semiconductor technologies to China. What are we watching next? Risk sentiment recovers despite new surge in yields on strong US data – next test for treasuries/USD/risk sentiment is on September jobs report tomorrow Equity markets launched an impressive recovery yesterday despite the fresh surge in US treasury yields after the release of the strong ISM Services survey. It's hard to believe the comeback can extend aggressively if strong jobs data tomorrow leads to a further surge in yields. The Sep. Nonfarm payrolls change is expected at +260k after +315k in August and the Average Hourly Earnings are seen rising +0.3% MoM and +5.0% YoY – the latter would be the slowest pace of wage growth since December. Fed speakers up this evening Fed members have been rather consistent with a drumbeat of calls for staying on course with further rate tightening. In light of the recent batch of mixed data that has helped push US 2-year treasury yields some 20 basis points lower from their nearly 4.25% peak, it will be interesting to watch the next few Fed speakers of note, which today includes two FOMC voters who are speaking more generally on the economic outlook, including Cleveland Fed President Mester and the Board of Governors’ Waller – see calendar below. Earnings to watch Today’s earnings focus is Conagra Brands which is US processed foods company. Analysts expect revenue growth of 7% y/y in FY23 Q1 (31 August) and stable operating margin of 17.6%. The company has seen its growth rate slowly increase over the previous quarters and with the ongoing cost-of-living crisis there might be an upside surprise in today’s earnings result. Today: Seven & I, Conagra Brands, Constellation Brands, McCormick & Co Economic calendar highlights for today (times GMT) 0830 – UK Sep. Construction PMI 1130 – US Sep. Challenger Job Cuts 1130 – ECB Meeting Minutes 1230 – US Weekly Initial Jobless Claims 1250 – US Fed’s Mester (Voter) to speak 1300 – Poland Central Bank governor Glapinski press conference 1315 – US Fed’s Kashkari (voter in 2023) to speak 1400 – Canada Sep. Ivey PMI 1430 – US Weekly Natural Gas Storage Change 1535 – Canada Bank of Canada Governor Macklem to speak 1700 – US Fed  Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app:   Source: https://www.home.saxo/content/articles/macro/market-quick-take-oct-6-2022-06102022
Oanda's Kenny Fisher talks US dollar against Canadian dollar

Be Careful With Bearish Bets Around The USD/CAD Pair

TeleTrade Comments TeleTrade Comments 06.10.2022 10:01
USD/CAD meets with a fresh supply on Thursday amid the emergence of some USD selling. The overnight rally in oil prices underpins the loonie and further contributes to the downtick. Hawkish Fed expectations could act as a tailwind for the buck and lend support to the pair. The USD/CAD pair extends the overnight pullback from the vicinity of the 1.3700 mark and edges lower through the first half of trading on Thursday. The pair is currently placed near the lower end of its daily trading range, around the 1.3570-1.3575 region, down nearly 0.30% for the day. The US dollar struggles to capitalize on the previous day's solid bounce from a two-week low and meets with a fresh supply, which, in turn, exerts pressure on the USD/CAD pair. A modest downtick in the US Treasury bond yields, along with a recovery in the risk sentiment, further drives flows away from the safe-haven greenback. Apart from this, the recent bullish run in crude oil prices underpins the commodity-linked loonie and contributes to the offered tone surrounding the USD/CAD pair. The black liquid shot to a three-week high after OPEC+ agreed to tighten the global supply and slash production by about 2 million bpd - the largest reduction since 2020. That said, concerns that a deeper global economic downturn will dent fuel demand keep a lid on any further gains for the black liquid. Furthermore, expectations for a more aggressive policy tightening by the Fed should act as a tailwind for the US bond yields and the buck, which, in turn, should offer support to the USD/CAD pair. Fed officials reiterated the US central bank's commitment to getting inflation under control and reaffirmed bets for another supersized 75 bps rate hike at the November FOMC meeting. This warrants caution before placing bearish bets around the USD/CAD pair ahead of the monthly employment details from the US and Canada on Friday. In the meantime, traders on Thursday will take cues from the release of the US Weekly Initial Jobless Claims data and Canadian Ivey PMI. Apart from this, speeches by FOMC members and the Bank of Canada Governor Tiff Macklem should provide some meaningful impetus to the USD/CAD pair later during the early North American session.
EUR: Stagflation Returns Amid Weaker Growth and Sticky Inflation

Scary Forecast For The Global Trade And OPEC Cut Production

Swissquote Bank Swissquote Bank 06.10.2022 10:52
It has been another volatile and undecided trading session yesterday. OPEC did cut its oil production target by 2 million barrels per day. It was the biggest cut since 2020, it was expected, it saw a morose reaction by Joe Biden - who said it was ‘shortsighted’, but a well better enthusiasm than what I expected by the oil bulls. Forecast for the global trade and US crude The barrel of US crude ended the session 1.90% higher, yet, the 50-DMA offers haven’t been cleared just yet. The World Trade Organization gave a scary forecast for the global trade next year. The WTO raised its trade growth estimate from 3 to 3.5% for this year, but they slashed their expectation for next year to 1%, from around 3-4%. Yesterday's market sentiment Yesterday, the investor sentiment was rather bearish. The major indices were under a decent selling pressure, following a strong two-day rally. The data from the US was not very Fed-friendly, but it was ok. The ISM services index showed a faster than expected expansion in the US services sector, and the ADP report printed a slightly higher number than the expectations. Now all eyes are on Friday’s NFP number, and wages growth data. In the FX, the dollar index rebounded, the EURUSD and Cable eased. Watch the full episode to find out more! 0:00 Intro 0:26 OPEC cuts, oil rallies… 2:46 …but WTO spoils rally 3:55 US deficit falls on higher exports despite strong oil 5:15 Market update: waiting for the next critical data 8:07 Morgan Stanley maintains overweight for Rivian Ipek Ozkardeskaya  Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #OPEC #Russia #output #cut #energy #crisis #crude #oil #natgas #stocks #XOM #Cheniere #Chesapeake #US #jobs #ADP #NFP #USD #EUR #GBP #Rivian #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH
Assessing 'Significant Upside Risks to Inflation': Insights from FOMC Minutes

Will There Be A Signal That The Fed May Reduce The Pace Of Rate Growth

InstaForex Analysis InstaForex Analysis 06.10.2022 11:28
Although the employment report from ADP showed that the number of new jobs in the US is increasing, indicating the strength of the economy, stock markets declined as this could mean that the Fed may not ease the pace of interest rate hikes in the coming months. Earlier, many have considered the idea that the state of the labor market could change the stance of the central bank regarding monetary policy. They believe that if the number of new jobs fall steadily, the Fed will see that the economy has slowed down enough for them to start turning down the pace of interest rate increases. But yesterday's data showed non-farm payrolls climbing to 208,000 in September, up from an estimate of 200,000 and August figure of 185,000. Of course, the values from ADP are not official and the market will really act after the release of data from the US Department of Labor tomorrow. But the growth in the number of new jobs will be perceived by the market as a signal that the Fed may reduce the pace of rate growth. In terms of today's market dynamics, there may be a consolidation until the employment data tomorrow show whether the US labor market is still strong or has already begun to experience problems amid high interest rates . Forecasts for today: EUR/USD The pair has not yet overcome the 1.0000 mark. It is likely that before the release of employment data in the US, there will be a consolidation around 0.9830-1.0000. AUD/USD The pair is trading above 0.6520. It may rise to 0.6580 if positive sentiment prevails on markets today.   Relevance up to 08:00 2022-10-07 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/323555
The Downside Of The US Dollar Index Remains Limited

Lots Of Economic Data Would Support The US Dollar (USD)

TeleTrade Comments TeleTrade Comments 06.10.2022 11:34
The US Dollar Index (DXY) hit a 20-year high recently. In the view of economists at HSBC, the USD is likely to continue to be resilient. Fed to continue hiking “Many central banks have delivered rate hikes to fight inflation. In particular, the Federal Reserve delivered its third straight 75 bps hike in September and signalled further sizeable hikes are likely to follow.”  “We believe high US yields, weak global growth, and a fragile risk appetite are likely to remain supportive for the USD.”
FX Daily: Asymmetrical upside risks for the dollar today

Forex: US Dollar May Go Up, EUR/USD Expected To Stay Below 1.00

ING Economics ING Economics 06.10.2022 11:59
The dollar downtrend appears to be running out of steam. In our view, a further USD recovery is likely from current levels as markets show reluctance to fully jump in on bets of a Fed pivot. We expect EUR/USD to remain below parity. Elsewhere, central banks in central and eastern Europe have continued to deliver hawkish and dovish surprises Source: Shutterstock USD: Room for further recovery As we had expected, the dollar downtrend has started to prove unsustainable, and we saw a counter-correction in DXY to the 111/112 area yesterday before a stabilisation at 111.00 during a good Asian session for risk. It’s hard to see a clear trigger for the reversal in risk sentiment yesterday, and it probably boiled down to markets not being ready to bet heavily on the Fed pivot story. Markets are also keeping an eye on some “test cases” in the central bank sphere. While the Reserve Bank of Australia slowed the pace of hiking on Tuesday, the Reserve Bank of New Zealand stuck to 50bp increases yesterday, signalling that a 75bp move was considered and that more hikes are on the way. In our view, the latter – hawkish – narrative should prevail for the Fed, ultimately capping the recovery in risk assets and offering widespread support to the dollar. The data calendar in the US is quite light today after yesterday’s ISM Services beat expectations (and partly offset the Manufacturing miss) and ADP labour numbers for September came in at 208k (exp. 200k). While that marks an acceleration from the revised 185k reading for August, it looks like the updated methodology still hasn’t closed the gap with the official payrolls figures, hence limiting the ADP’s predictability power. We have quite a long list of Fed speakers to keep an eye on today: Charles Evans, Lisa Cook, Christopher Waller and Loretta Mester are all set to touch upon the economic and monetary policy outlook in scheduled remarks. We don’t see why the Fed would want to endorse any of the recent dovish re-pricing in tightening expectations – if anything, we could see some comments aimed at pushing back against any pivot speculation. We expect a further dollar recovery into the weekend, with upside risks particularly concentrated around tomorrow’s payrolls release, when DXY may extend gains into the 112-113 area.  Francesco Pesole EUR: Parity is an increasingly relevant level EUR/USD showed some resistance at the 1.0000 level yesterday before falling back down on the dollar’s recovery. Despite the pair having crossed the parity line multiple times recently, that may have increasingly been interpreted as a benchmark level for the broader dollar trend. Considering the reluctance to turn more bullish on the euro into what should be a challenging winter for the eurozone, a sustained recovery to levels above parity in EUR/USD might now only be driven by markets buying more aggressively into the Fed pivot story and/or other drivers offering sustained support to risk assets. For now, we feel comfortable in reiterating our call for EUR/USD to stay pressured into the 0.90-0.95 in the last months of the year. The new pack of sanctions by the EU likely suggest a prolonged stand-off with Russia, while markets await more details on the proposed oil price cap. Today’s European Central Bank minutes will be quite interesting for European rates as they might shed some light on the quantitative tightening discussion and the size of the next rate hike. Still, the meeting-by-meeting approach may reduce the informative power of the minutes today. Francesco Pesole GBP: Tentative signs of normality It looks like the pound has continued to realign with the moves in other European and high-beta currencies, although still displaying residual signs of above-average volatility. If sterling absorbed a large share of the negative news during the post-tax event UK market turmoil, it now appears to be trading a bit too much on the strong side, especially considering that gilt yields and GB credit default swaps remain well above mid-September levels. Today, markets will keep an eye on the Bank of England Decision Maker Panel survey, which collects inflation expectations from company executives, and on a speech by MPC member Jonathan Haskel. We mostly see downside risks for cable from current levels, and expect a drop below 1.10 in the near term. In EUR/GBP, 0.8700 may emerge as an increasingly solid floor over the coming weeks. Francesco Pesole CEE: A region that never ceases to surprise The Polish central bank yesterday decided to leave rates unchanged at 6.75% despite market expectations of a 25bp rate hike. Given the hawkish expectations we discussed yesterday, the Polish zloty has come under pressure and we expect more to come today. The interest rate differential fell by 20bp during yesterday's session alone and we expect today's press conference by governor Adam Glapinski to confirm the dovish tone and increase pressure on FX. We expect the zloty to move higher into the 4.85-4.90 EUR/PLN range. Moreover, the global environment is also negative for the CEE. After a longer period of time, we saw gas prices rising again yesterday, which is not helping the whole region and EUR/USD moved lower again after briefly touching parity. The Romanian central bank, on the other hand, surprised on the hawkish side by delivering a 75bp hike to 6.25% instead of the expected 50bp. The published statement suggests that the central bank is concerned about higher inflation despite a slowing economy, the risks of which have moved up from the August meeting. On the FX side, the Romanian leu saw a slight strengthening in response to the decision, but we do not expect this to make a difference and expect a return to the standard level of just below 4.95 EUR/RON. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
ADP Non-farm payrolls jobs market data show a growth of 127K, much less than the previous print

US Indices - S&P 500 And Nasdaq Decreased A Bit. EUR/USD Was Quite Close To Touch 1.00. Fed Members Speak Today

ING Economics ING Economics 06.10.2022 12:42
Rising bond yields may cut short the recent rally in sentiment Source: shutterstock Macro Outlook Global Markets: The US equity rally ran out of steam yesterday just as equity futures had indicated. Both the S&P500 and NASDAQ fell by about 0.2%, but the initial fall on opening was mostly rallied away until late trading saw profit taking and a small fall at the close. Futures are looking positive again today, and that may be the dominant theme ahead of tomorrow’s payrolls. EURUSD got to 0.999, but didn’t have the conviction to push through to parity and came off to settle at 0.9895 now. The AUD was more or less flat at 0.65, though it looked more interested in going down than up, which may be the more likely direction of travel today. Cable has drifted back from nearly 1.15 yesterday to only 1.1336 now and the JPY is also slightly weaker at 144.48.  The KRW was Asia’s best-performing currency yesterday, dropping back all the way to 1410. Other Asian currencies made smaller gains. Bond yields rose again, which could start to sour market sentiment today. 2Y US Treasury yields rose 5.6bp, but 10Y US Treasury yields rose 12bp to 3.75%. There were more considerable increases in European bonds, German 10Y bund yields rose 16bp, and Italian 10Y bond yields rose 29bp. Anxiety about the ECB beginning quantitative tightening seems to be causing these jitters and Moody’s also warned that Italy needed pro-growth reforms. G-7 Macro: The main data focus yesterday would have been the ADP employment survey – the least bad of a bunch of monthly indicators for US non-farm payrolls. The headline figure was 208,000 jobs created, just ahead of the 200,000 forecast, and slightly up on last month’s 185,000. For what it is worth, the consensus estimate for payroll job growth tomorrow is 260,000. That would represent a small decline from the 315,000 job growth recorded in August, but would still represent fairly decent employment gains. The unemployment rate is expected to remain at 3.7%. Maybe of more interest than these employment figures was the September 30 MBA mortgage applications figure, which showed a 14.2% decline from the previous week, the biggest drop since pandemic-affected March 2020. Australia: Trade data for August delivered a smaller surplus than had been expected as imports grew by 4% from July, instead of the 1% decline predicted. Exports were slightly stronger, growing 3% MoM against expectations for a 2% gain. The surplus came in at AUD8.324m, slightly lower than July’s AUD8733m. The AUD has shrugged off the data. Philippines:  The August jobs report is out today.  Unemployment is expected to inch lower as economic activity improves. The underemployment rate, however, could stay elevated at double digits as workers seek higher wages. The improving jobs market could suggest robust consumption. But high inflation should cap spending ahead of the holiday season with inflation hitting 6% YoY in September.   What to look out for: US initial jobless claims Australia trade balance (6 October) Philippines unemployment rate (6 October) Taiwan CPI inflation (6 October) US initial jobless claims (6 October) Fed’s Evans, Cook, Mester speaking events (6 October) South Korea BoP current account (7 October) Regional GIR data (7 October) US non-farm payrolls (7 October) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
FX Daily: Hawkish Powell lends his wings to the dollar

USA: Striking Jobs Market Picture. There Are 4 Million Vacancies!

ING Economics ING Economics 06.10.2022 14:30
The jobs market remains tight with 4 million more job vacancies than there are unemployed Americans to fill them. Nonetheless, the 1mn drop in vacancies is an early warning that corporate sentiment is shifting with the uncertain economic outlook prompting fims to instigate hiring freezes. With more pain to come job losses are on the cards for 2023 Job losses are on the cards for 2023 Job vacancies starting to be pulled The US JOLTS (Job Opening and Labour Turnover Statistics) data shows firms are starting to pull vacancies as a deteriorating global growth outlook prompts caution in corporate boardrooms. The number of job openings falling from 11.2mn in July to 10.053mn in August, the biggest drop since April 2020 when the pandemic resulted in the economy grinding to a halt. The consensus had predicted little change – 11.1mn. This data echoes the headlines from this morning’s KPMG CEO survey whereby 39% of top CEOs have reportedly instigated hiring freezes. It also means that the ratio of job vacancies to the number of unemployed Americans falls from 1.97 to 1.67. Nonetheless, we have to remember that even after today’s drop there are still 4mn more job vacancies than there are unemployed American while the job opening/unemployed Americans ratio is still more than double the average 0.6 figure seen over the past 20 years. Hence there are still plenty of jobs out there and people are still prepared to move roles for better pay and conditions, with the quit rate staying at 2.7%. Ratio of job vacancies to the number of unemployed Americans Source: Macrobond, ING Momentum is weakening with job losses a threat for 2023 As such the jobs market is still incredibly tight, but the Fed will take some satisfaction in today’s direction of travel. While business caution is likely to spread, firings are still a way off – note last week's initial and continuing claims remain very low by historical standards. Payrolls are still set to post a decent increase on Friday – the market is looking for 265,000 – but with the ISM employment index back in contraction territory and the vacancy data softening the momentum will weaken further in coming months. The Fed has acknowledged the need for a weaker labour market to get inflation back to target with their median prediction for the unemployment rate rising to 4.4% next year from 3.65% in August in their September update. Assuming labour supply remains unchanged this equates to around 1.2mn people losing their job over the next year – obviously less if labour supply suddenly accelerates. As such with the Fed seeking to tighten financial conditions even further it points to more economic pain ahead and a high chance that the Fed eventually switches to rate cuts in the second half of 2023. Read this article on THINK TagsVacancies US Jobs Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Warsaw Stock Exchange SA Approves Dividend Payout: Neutral Impact Expected

The US Dollar's (USD) Upward Momentum Continues

InstaForex Analysis InstaForex Analysis 06.10.2022 14:27
American macro statistics published on Wednesday turned out to be positive and managed to support the dollar. It rose on Wednesday, and its DXY index added 0.85% on the trading day. As of this writing, DXY futures are trading near 111.10, up 114 points from Tuesday's low this week. According to Automatic Data Processing (ADP), U.S. private sector employment rose by 208,000 in September against market expectations of +200,000 growth and the previous value for August of +185,000, revised from +132,000. The ADP commented on the data, stating that "those who stayed at work saw a rise in wages, while those who changed jobs saw a decrease in annual wage growth in September compared to August." Although the ADP report does not have a direct correlation with Non-Farm Payrolls, it still has a fairly strong influence on the dollar dynamics, and the growth of its indicators has a positive effect on the quotes of the American currency. Other reports (from S&P Global and ISM) were also positive for the dollar. According to the data presented, business activity in the US services sector continued to grow in September, although slightly slower than in August. The Services PMI (from ISM), although it fell to 56.7 from 56.9, was better than market expectations at 56. The Employment Index (by ISM) improved to 53 from 50.2. According to the ISM Services Business Survey Committee, "the services sector saw a slight slowdown in September due to slower business activity and new orders," but "improvements are being seen in terms of supply chain efficiency, operating capacity and availability of materials "—indicators remain "less than ideal". In turn, S&P Global said that "in September, there were encouraging signals that business conditions may begin to improve." Now, market participants will wait for the publication on Friday (at the beginning of the American trading session) of the report of the Department of Labor with data on the US labor market for September. Previous report values (average hourly wages / new jobs created outside the agricultural sector / unemployment rate): +0.3% in August, +0.5% in July, +0.3% in June, May and April , +0.4% in March, 0% in February, +0.7% in January 2022 / 0.315 million in August, +0.528 million in July, +0.372 million in June, +0.390 million in May, +0.428 million in April, +0.431 million, +0.678 million in February, +0.467 million in January 2022 / 3.7% in August, 3.5% in July, 3.6% in June, May, April and March, 3, 8% in February, 4.0% in January 2022. Forecast for September: +0.3% / +0.250 million / 3.7%, respectively. The indicators can be called, if not strong, then very positive. At the same time, unemployment remains at minimal levels. It should be noted that market participants are waiting for further decisive steps from the Fed towards tightening monetary policy. Recent hawkish comments from Fed officials have revived expectations for another big rate hike in November. The US dollar index (DXY) remains bullish, and market participants, according to CME Group, estimate the likelihood of a 75 basis point Fed hike in November at almost 70%. Today's economic calendar will include new speeches by FOMC officials and a report from the Department of Labor with data on the dynamics of the number of applications for unemployment benefits. Therefore, the volatility in dollar quotes will increase again at 12:30, 12:50, 17:00, 21:00, 22:30. As we noted in our recent review, "the range of DXY fluctuation over the past partial 2 weeks was 4.34%. This is a fairly strong downward correction of the dollar." Now the dollar index (reflected as CFD #USDX in the MT4 trading terminal) is trying to resume its upward momentum, pushing off a 2-week low below 110.00. Despite a rather strong correction, the dollar's upward momentum continues, pushing the DXY towards more than 20-year highs near 120.00, 121.00. The breakdown of short-term resistance levels 111.07, 111.75 will be the first signal that the dollar and the DXY index will return to growth. Support levels: 111.00, 111.07, 110.26, 109.40, 105.55, 103.80 Resistance levels: 111.75, 112.50, 114.00, 114.74, 115.00   Relevance up to 12:00 2022-10-08 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/323603
The RBA Will Continue At A 25bp Pace At Coming Meetings

Australian Dollar: Retail Sales Decreased. Probable Fed's 75bp Hike May Weaken AUD

Kenny Fisher Kenny Fisher 06.10.2022 15:37
AUD/USD started the week with huge gains, but has been in calm waters since then. In the European session, the Australian dollar is trading at 0.6478, up 0.17%. Retail sales points to slowing economy The RBA’s sharp tightening is having an effect on economic growth. There was no surprise as retail sales slowed to 0.6% in August, down sharply from 1.6% in July and matching the consensus. The fall in retail sales can be seen as a vindication for the RBA, which surprised the markets with a modest hike of 0.25% this week. Most analysts had expected one more 0.50% increase before the RBA started to ease up on rates. The central bank was late to join the global dance to raise rates, as Governor Lowe insisted that inflation was transient before he finally started to raise rates. Inflation has not let up, running at 6.1%. The RBA statement acknowledged that inflation has not yet peaked and is expected to rise to 7.75% in 2002 before dropping to 4.0% in 2023. Given that the RBA’s number one priority is lowering inflation, the 0.25% hike caught the markets off guard. When it comes to loosening policy, the RBA has taken the lead, with an eye to guide the economy to a soft landing and avoid a recession. Lowe again is marching to his own tune, as the Federal Reserve is expected to deliver at least one more oversized hike of 0.75%. This will widen the US/Australia rate differential and likely put strong pressure on the Australian dollar, which had a disastrous September, declining 6.4%. The markets are keeping a close eye on US nonfarm payrolls, which will be released on Friday. The ADP employment report showed a slight improvement at 208,000, up from 185,000 (200,000 est.) ADP is using a new methodology to calculate its readings, but it’s too early to tell if this will improve its reliability in forecasting the official nonfarm payrolls report. The markets are bracing for a decline in NFP to 250,000, down from 315,000 prior. AUD/USD Technical AUD/USD tested resistance at 0.6503 in the Asian session. The next resistance line is 0.6607 There is support at 0.6433 and 0.6329 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
The Data May Keep The British Pound (GBP) From Rising

Kenny Fisher (Oanda) Comments On GBP/USD And Its Realties

Kenny Fisher Kenny Fisher 06.10.2022 23:11
GBP/USD is down sharply today. In the North American session, GBP/USD is trading at 1.1150 down a massive 1.58%. The pound continues to exhibit sharp volatility, with swings of over 1% every day this week. Fitch downgrades UK debt outlook The fallout surrounding Chancellor Kwarteng’s ill-fated mini-budget just won’t go away. After immense pressure, Kwarteng abolished the tax breaks for the top 1% earners in a humiliating U-turn that has badly damaged the credibility of the new government. The fiasco sent the pound to a record low and forced the Bank of England to step in after the bond market was close to crashing. On Wednesday, the Fitch ratings agency lowered its outlook for UK debt from “stable” to “negative”, following a similar move by Standard & Poor’s after the mini-budget. Fitch did maintain the UK’s credit rating of AA-, but the lower outlook will not help Prime Minister Truss’ beleaguered government. The pound was pummelled in September, losing 3.9%. The outlook for the pound does not look good, with soaring inflation and the new government’s serious missteps after only a few weeks in office. Manufacturing PMI remained below 50, which indicates contraction. Today’s Construction PMI rose to 52.3, up from 49.2, but much of the improvement was due to an easing in supply shortages, and new orders fell to their lowest level since May 2020. In the US, the spotlight will be on Friday’s nonfarm payroll report. The reading is an important bellwether of the health of the US economy and can provide insights into the Federal Reserve’s future rate policy. On Wednesday, the ADP employment report showed a slight improvement at 208,000, up from 185,000 (200,000 est.) The ADP release is not a reliable forecaster of the official NFP release, but ADP is now using a new methodology, which hopefully will improve its reliability. Non-farm payrolls are expected to decline to 250,000 in September, down from 315,000 in August. A reading that is well off the estimate could trigger volatility from the US dollar – a strong reading will raise expectations that the Fed will stay very aggressive, while a soft release could mean the Fed has to pivot earlier than it expected. GBP/USD Technical GBP/USD is testing support at 1.1206. The next support line is at 1.1085 There is resistance at 1.1350 and 1.1486 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. GBP/USD slides after Fitch's downgrade - MarketPulseMarketPulse
Assessment Of The Chances Of A Future Rate Hike By The ECB| Lowering GDP Forecasts

Assessment Of The Chances Of A Future Rate Hike By The ECB| Lowering GDP Forecasts

Saxo Bank Saxo Bank 07.10.2022 09:06
Summary:  U.S. stocks and bonds sold off after Fed officials reiterated the Fed’s determination to raise rates and keep rates restrictive. USDJPY returned to trade above 145, testing the Japanese authorities’ resolve to defend the yen and its yield curve control policy. AMD’s miss in Q3 revenue pre-announcement, followed by Samsung’s profit warning, is a precursor to what’s to come in the upcoming earnings season. Today, all eyes are on the U.S. employment report as a next test for the Fed pivot narrative that had developed this week before the pushback seen from Fed commentaries. What is happening in markets? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) declined in a light volume session U.S. stocks declined on Thursday, giving back further the rally earlier in the week. S&P500 dropped 1%, with 10 out of 11 sectors in the red with the exception of the energy sector which benefited from a 1.4% rise in WTI crude to USD89.1. Tech-heavy Nasdaq 100 was down 0.8%.  Hawkish Fed official commentaries kept investors cautious of taking on risks ahead of the employment report today and the CPI release next week.  The trading volume was light.  Twitter (TWTR:xnys) fell 3.7% as investors awaiting Musk’s acquisition of the company to complete. Social networking site Pinterest (PINS:xnys) surged 4.8% and game software developer Take-Two Interactive (TTWO:xnas) climbed 3.5% on analyst upgrades. Advanced Micro Devices (AMD:xnas) plunged nearly 4% during the extended-hour trading after the chip maker announced preliminary Q3 sales missing expectations.  U.S. treasury yields (TLT:xnas, IEF:xnas, SHY:xnas) cheapened on hawkish Fed official commentaries U.S. treasuries bear flattened on Thursday as the front end of the curve got cheaper on more pushbacks from the Fed’s Cook, Kashkari, and Waller to the idea of a Fed pivot.  Traders have taken the terminal Fed Fund rate expectation back up to 4.57% and a 77% probability of a 75bp rate hike in the November FOMC. 2-year yields surged 11bps to 4.26% and 10-year yields climbed 7bps to 3.82%.  Hong Kong’s Hang Seng (HSIU2) took a pause after a strong rally the day before The Hang Seng Index took a pause after yesterday’s 5.9% rally, trading side-way throughout the day and finished 0.4% lower after a failed attempt to climb to positive territory in the early afternoon.  In anticipation of eventually removing all pandemic control restrictions for people arriving in Hong Kong, shopping malls, retailers, and airlines gained. In addition, the Hong Kong Government plans to give away 500,000 free air tickets to attract travellers to visit Hong Kong. Wharf Real Estate (01997:xhkg), which owns commercial properties, gained 4.7% and was the best performer in the benchmark index.  Chow Tai Fook, a jewelry retailer, climbed 1.4%. Cathay Pacific (0293:xhhg) gained 3.5% and China Eastern Airlines (00670:xhkg), China Southern Airlines (01055:xhkg), and China Airlines (00753:xhkg) surged from 5.7% to 6.9%. Automakers were laggards, with leading names falling from 2.5% to 7%. Despite the latest research note from a major U.S. investment bank forecasting a 30% drop in Hong Kong’s residential property prices on higher interest rates, shares of local developers finished the day with modest gains.  On the other hand, CIFI (00884:xhkg) tumbled 15.3% as the mainland China developer is in discussion with banks about posting an interest payment.  Alibaba (09988:xhkg) shed 1.2% following the news that the Shanghai Municipal Government removed Alipay from its list of high-tech companies which are entitled to tax benefits because Alipay failed to meet the requirement on spending on research and development.  The dollar rose on higher bond yields The DXY rose 0.9% to 112.2 on higher U.S. bond yields, gaining against G10 currencies.  The Aussie dollar sold off to 0.6410, approaching its September 28 ow of 0.6363. USDJPY moved back up to above 145, testing the Ministry of Finance’s resolve to cap the depreciation of the Yen. Crude oil (CLX2 & LCOX2) The energy market tightness concerns continued to underpin further gains in the oil market, with WTI futures now rising towards $89/barrel and Brent above $94 following a 2 million barrels/day cut announced by OPEC+. Other supply issues are also at play with European sanctions on Russian oil coming into effect this quarter, but the US may opt to release more from its strategic reserves to offset some of this decline in supply. Metals gain as LME places restrictions on Russian copper, zinc and aluminium The London Metal Exchange said it will restrict deliveries of some Russian metal. Starting immediately, metal from UMMC or its Chelyabinsk Zinc unit can only be delivered to LME warehouses if the owner can prove it won’t constitute a breach of recent sanctions on the firm’s co-founder, Iskandar Makhmudov. The industry has been grappling with the question of how to handle supplies from Russia - a major producer of aluminium, nickel and copper - since the invasion of Ukraine in February, and the debate has intensified over the past month. HG Copper (HGZ2) rose to a near one-month high of $3.59 before reversing gains later as a strong dollar weighed on investor appetite.   What to consider?   Fed officials reiterated hawkish comments With the markets anticipating a Fed pivot sooner rather than later, Fed members continue to send stronger hawkish signals with the clear message being higher for longer interest rates. Minneapolis President Kashkari (2023 voter) said the Fed is “quite a ways away form a pause in rate hikes” and “not seeing evidence that underlying inflation peaked”. Governor Cook said “restoring price stability likely will require ongoing rate hikes and then keeping policy restrictive for some time”. Fed Governor Waller joined the chorus saying that the Fed needs to continue to raise rates into early 2023. Charles Evans also reiterated that the Fed is heading to 4.5-4.75% by spring, and another 125bps of rate hikes is seen over the next two meetings. ECB minutes suggest inflation concerns The ECB minutes from the September 7-8 meeting were released, and suggested that another big rate hike after the last month’s 75bps move is in the cards. There was broad consensus that the key policy rates are still below neutral. While the assessment of economic performance sounded bleak, taming inflation remained the overarching objective and therefore further tightening is still expected. Markets currently fully price a 50bps rate hike for October, and an increasing chance of another 75bps move as well. Hong Kong’s PMI fell to the contractionary territory in September The S&P Global Hong Kong PMI fell to 48.0 in September from 51.2 in August, returning to the contractionary territory for the first time since March this year when Hong Kong was hit hard by an outbreak of COVID-19.  The S&P Global Hong Kong PMI surveys activities in manufacturing, wholesale, retail and services, and construction.  Among the sub-indices, the new order sub-index fell the most to 46.1 in September from 51.3 in August.  The new export orders sub-index deteriorated further to 45.9 from 47.4 in the prior month.  The output sub-index fell to 47.3 from 52.2 and the employment sub-index declined to 48.3 from 48.6.  Advanced Micro Devices (AMD:xnas) announced preliminary Q3 sales missing expectations AMD pre-announced Q3 revenues at around USD5.6 billion, much below its previous guidance of about USD6.7 billion. The company cited weaker demand for PC and a build-up of inventory in the PC supply chain for the poor performance. Later on, in the Asian session, Samsung pre-announced a weaker profit for Q3 as well, signalling the margin squeeze that is likely to become broader into the Q3 earnings season. Samsung said Q3 profit is likely to fall 32% as demand slumped. The World Bank cut India’s growth forecast by 1% point to 6.5% The World Bank reduced its forecast for India’s GDP growth in the year to March 2023 by 1% to 6.5%, citing a slowdown in the global economy and rising interest rates. This comes despite a double-digit growth in the April-June quarter and RBI’s 7% growth forecast for FY 2023, and generally reflects the tough global macro environment, along with some pullback in consumption as RBI raises rates. US NFP data key for markets The payrolls data is due in the US today, and it is likely to give out further signals on the tightness in the labor market even if we see some slight cooling in the headline print. Bloomberg consensus estimate stand at gains of 255k for September from 315k last month, with unemployment rate and average hourly earnings steady at 3.7% and 0.3% respectively. The annual rate of wage growth is expected to cool a notch. Initial jobless claims rose to 219k after a sub-200k print last week, but it does not feed directly into the NFP. With markets at the edge on whether to price in further Fed tightening or not, even a slight miss in the NFP data could result in some more calls of a Fed pivot, and greater Fed pushback will be needed to pushback easing expectations from 2023 market pricing.     For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: https://www.home.saxo/content/articles/equities/market-insights-today-7-oct-2022-07102022
As more central banks continue to catch up with the FED's policy, we could be seeing a shift in the balance of power in the currency market says XTB's Walid Koudmani

Today's NFP Release Is A Big Deal. Forex: EUR/USD And GBP/USD Down

ING Economics ING Economics 07.10.2022 09:54
Pushback against the pivot from Fed officials ahead of payrolls Source: shutterstock Macro outlook Global Markets: Wednesday’s pause in the equity rally turned into a trickle of selling on Thursday, and it remains to be seen if this turns into a flood later today. And what is likely to be the catalyst for such a move would be the non-farm payrolls figure later today. What the market seems to be crying out for, is a Fed pivot, and anything in the numbers later that supports that case may be enough to bolster these ideas. That means that the market probably needs to see a much weaker payrolls figure than the 315,000 registered last month, though the consensus 255,000 expectation may not be sufficient. For its part, the Fed is sticking its  “higher for longer” mantra. This was repeated in various forms by the Fed’s Waller, Mester, Evans, Kashkari, and Cook yesterday, so even if the data is on the soft side, the Fed is unlikely to sanction a market move to price in 2023 rate cuts, at least not for a good while yet. Equity futures are showing a small negative as of writing. The EUR has resumed its slide again and is now down to 0.9795, and that has helped bring down Cable to 1.1162, and the AUD to 0.6414. the JPY is just below 145 at 144.96, which could set the scene for some BoJ intervention later on.  Within Asian FX, the INR stands out as one of the weaker currencies, not helped by the news that inclusion into the JP Morgan global bond index has been shunted back into next year. Otherwise, yesterday saw further gains for the KRW, which got back below 1400 at one point, but settled a bit higher and is at 1402 now. Today, Asian FX may struggle with the risk tone more subdued and caution ahead of payrolls. Bond yields meanwhile continue to rise, and it doesn’t feel as if risk assets or currencies have caught up with resurgent yields yet. 2Y US Treasury yields rose nearly 11bp to 4.258%, while the yield on the 10Y US Treasury rose 7.1bp  to 3.824%. Bond markets at least seem to be listening to Fed speakers at the moment, though we are likely to see sentiment waver to and fro over the coming weeks and months as the hawkish rhetoric meets increasingly gloomy activity data. G-7 Macro: As mentioned, US non-farm payrolls is the key release of the month so far, and the consensus is for a rise in employment of 255,000. Average hourly earnings are forecast to ease back to 5.0%YoY from 5.2%, and the unemployment rate to remain at 3.7%. Here is also a link to our new monthly, including articles on China’s economy, and a comparison of Asia now against the 1997/98 financial crisis.  What to look out for: US jobs report South Korea BoP current account (7 October) Regional GIR data (7 October) US non-farm payrolls (7 October) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Commodities Feed: Stronger Oil Prices Boost US Oil Production and Supply

What Would Be The Best Cocktail Of US Job Data Today That Investors Wish For

Swissquote Bank Swissquote Bank 07.10.2022 10:21
Equities retreated, the US yields and the US dollar rebounded as more Federal Reserve (Fed) members threw hawkish comments to defend their fight against inflation. Shell warns of weak Q3 The S&P500 closed 1% lower, while Nasdaq slid 0.68% despite being more sensitive to rate hikes. The US short-term yields rose, and the dollar index gained. Gold eased, while oil extended gains. Yet the rising oil prices fuel inflation and Fed expectations and certainly don’t do good to the overall market mood. Also, Shell warned investors that the Q3 results won’t be as breathtaking as the Q2, as the weaker gas trading and weaker refining will be reflected in the latest quarter earnings. Today, the US will announce its latest jobs data in a tense and volatile environment of energy crisis, persistent inflation, Fed members insisting that what they are doing is right, and markets crying that what they are doing is maybe a bit too much.   A mix of soft data Investors will be watching three main elements. The NFP data, the unemployment and participation rates, and the wages growth. Expectation for today is a NFP read of around 250K, unemployment rate at 3.7%, and wages growth of around 0.3% over the month. A mix of soft data will likely see a bullish kneejerk reaction, as investors are turning more concerned about the aggressive Fed tightening and are ready to bet that the rate hikes would slow down in the next few meetings and even stop, while a strong data could trigger a further selloff, as it would fail to keep the aggressive Fed hawks at bay. Watch the full episode to find out more! 0:00 Intro 0:34 Market update 2:00 Shell warns of weak Q3 2:54 Twitter jitters weigh on Tesla, but… 4:06 What’s the tasty mix of US jobs data look like? 9:03 BoFA thinks S&P500 valuations remain high 10:12 And the rising sovereign debt levels? Ipek Ozkardeskaya  Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #US #jobs #data #NFP #unemployment #wages #Fed #USD #Gold #XAU #crude #oil #Shell #XOM #OccidentalPetroleum #Twitter #Tesla #ElonMusk #GBP #UK #gilt #LizTruss #BoE #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH
Hungary's Budget Deficit Grows, Raising Concerns Over Fiscal Targets

Samsung And Its Decline In Operating Income| Credit Suisse Is Trying To Buy Back Credit

Saxo Bank Saxo Bank 07.10.2022 11:08
Summary:  Risk sentiment was wobbly yesterday, as yields continued to rise, with late Fed speakers in the US yesterday continuing to deliver a hawkish message. The US dollar has come roaring back, especially against the smaller currencies, ahead of today’s September US jobs report. Given Fed forecasts that it will continue to tighten even if unemployment were to begin rising, we may be some months from a pivot in the Fed’s message.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities retreated yesterday with S&P 500 futures declining 1% yesterday as US bond yields are coming back higher towards the 4% as the US economy is still looking robust despite tighter financial conditions. S&P 500 futures are continuing lower this morning trading around the 3,740 level with the 3,700 level being the next natural gravitational point for the market on the downside. US Nonfarm Payrolls for September is of course today’s main event but it will probably not move much unless we see a big surprise to average hourly earnings figure m/m. Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) Hang Seng Index sank for the second day in a row after the sharp rally on Wednesday. Chinese EV stocks tanked, with Li Auto (02015:xhkg) tumbling 16.1%, and Nio (09866:xhkg) and XPeng (09868:xhkg) down from 7% to nearly 9%. Investors were concerned about the severe competition in the EV industry with new entrants to the market and rising battery costs. China developer names plunged from 2% to 11% across the board as sentiment was clouded by CIFI’s (00884:xhkg) discussion with banks about posting an interest payment and a 2-notch downgrade to Caa1 by Moody’s for the developer’s senior unsecured debts. Hang Seng Index lost more than 1% by mid-day. Shanghai and Shenzhen exchanges are closed for a national holiday and will return on Monday. USD and US yields/risk sentiment The US dollar bounced back strongly yesterday on the supportive combination of weak risk sentiment and higher US treasury yields, with EURUSD all the way back to 0.9800 this morning after flirting with parity just a couple of sessions ago. The USD strength was most pronounced against the smaller currencies with a pair like AUDUSD trading near the cycle low below 0.6400 ahead of the US jobs data. That combination of higher US yields and weak risk sentiment provides the strongest support for the greenback, with a strong US jobs report the most likely spark for a further rise. Very interesting ahead of the weekend that USDJPY remains pinned near the critical 145.00 level ahead of the US jobs data – will we see a volatility event and official intervention if strong US jobs data sends the pair over the edge? Gold (XAUUSD) Gold eased back lower on the fresh rise in US treasury yields and a stronger US dollar, but the retracement of the recent massive rally off the cycle low of 1,1615 has been fairly shallow, with the first support zone of note into 1,680-1,700 area. The most significant challenge to gold would be a strong US jobs report and further USD strength, but a full reversal of the latest rally wave would require a significant plunge. To the upside, the next resistance of note is the 1,1734 level (61.8% retracement of the big sell-off wave into the lows) and then the huge 1,800 area and pivot high of 1,808 in August. Crude oil (CLX2 & LCOX2) The energy market tightness concerns continued to underpin further gains in the oil market, with WTI futures now rising towards $89/barrel and Brent above $94 following a 2 million barrels/day cut announced by OPEC+. Other supply issues are also at play with European sanctions on Russian oil coming into effect this quarter, but the US may opt to release more from its strategic reserves to offset some of this decline in supply. US treasuries (TLT, IEF) US treasury yields rose all along the curve ahead of today’s important September US jobs report and the market’s attempts to express hope over the last week that the Fed is set to deliver a pivot to less hawkish guidance. The US 10-year benchmark traded this morning aove 3.80%, less than 20 basis points from the significant 4.00% level that was briefly touched during the UK gilt market wipeout that saw some contagion even into US treasuries. What is going on? AMD blasted on ugly outlook and Samsung shows 11% in operating income Advanced Micro Devices revealed preliminary Q3 sales yesterday ahead of its earnings report in coming weeks. These were at $5.6 billion versus company and analyst estimates of $6.7 billion, an enormous miss.  Weaker demand in the PC market was cited, with writedowns in inventories also playing a role. Shares traded more than 3% lower after hours late yesterday after having lost some 60% from late 2021 highs. Samsung is also part of the semiconductor industry has announced its preliminary Q3 results this morning showing operating income declined 11% as demand for consumer electronics is coming down hard. Fed officials reiterated hawkish comments With the markets anticipating a Fed pivot sooner rather than later, Fed members continue to send stronger hawkish signals with the clear message being higher for longer interest rates. Minneapolis President Kashkari (2023 voter) said the Fed is “quite a ways away from a pause in rate hikes” and “not seeing evidence that underlying inflation peaked”. Fed Governor Cook said “restoring price stability likely will require ongoing rate hikes and then keeping policy restrictive for some time”. Fed Governor Waller joined the chorus saying that the Fed needs to continue to raise rates into early 2023. The Chicago Fed’s Charles Evans (Voter 2023) also reiterated that the Fed is heading to 4.5-4.75% by spring, and another 125bps of rate hikes is seen over the next two meetings. Credit Suisse is trying to bolster sentiment by buying back credit The Swiss-based bank is offering this morning to buy back its own debt up to CHF 3bn. ECB minutes suggest inflation concerns The ECB minutes from the September 7-8 meeting were released yesterday and suggested that another big rate hike after the last month’s 75bps move is in the cards. There was broad consensus that the key policy rates are still below neutral. While the assessment of economic performance sounded bleak, taming inflation remained the overarching objective and therefore further tightening is still expected. Markets currently price heavy odds that the ECB will deliver a 75 bp hike. Hong Kong’s PMI fell to the contractionary territory in September The S&P Global Hong Kong PMI fell to 48.0 in September from 51.2 in August, returning to the contractionary territory for the first time since March this year when Hong Kong was hit hard by an outbreak of COVID-19. The S&P Global Hong Kong PMI surveys activities in manufacturing, wholesale, retail and services, and construction. Among the sub-indices, the new order sub-index fell the most to 46.1 in September from 51.3 in August. The new export orders sub-index deteriorated further to 45.9 from 47.4 in the prior month. The output sub-index fell to 47.3 from 52.2 and the employment sub-index declined to 48.3 from 48.6. What are we watching next? Today's US September jobs report and the fate of the “pivot” narrative Fed speakers of late, including those late yesterday, continue to deliver a consistent message of continuing the current tightening regime, and given the Fed’s forecast that it will continue to tighten even as unemployment begins to rise (September forecasted a rise to a 4.4% unemployment rate next year vs. 3.7% currently), we are likely at least many months from the Fed blinking due to a softening labor market. The Sep. Nonfarm payrolls change is expected near +260k after +315k in August and the Average Hourly Earnings are seen rising +0.3% MoM and +5.0% YoY – the latter would be the slowest pace of wage growth since December. Earnings to watch The Q3 earnings season kicks off next week with the most important day being Friday with seven large US financial institutions reporting. The key focus points will be to what extent US banks are able to increase their net interest margin and the levels of credit provisions. Wednesday: PepsiCo Thursday: Progressive, Fast Retailing, Tryg, Walgreen Boots Alliance, Fastanal, BlackRock, Delta Air Lines, Domino’s Pizza Friday: Shanghai Putailai New Energy, YTO Express Group, PNC Financial Services, JPMorgan Chase, Morgan Stanley, Citigroup, UnitedHealth Group, Wells Fargo, US Bancorp, First Republic Bank Economic calendar highlights for today (times GMT) 1100 – Mexico Sep. CPI 1230 – US Sep. Nonfarm Payrolls Change 1230 – US Sep. Unemployment Rate 1230 – US Sep. Average Hourly Earnings 1230 – Canada Sep. Employment Change/Unemployment Rate 1400 – US Fed’s Williams (Voter) to speak 1500 – US Fed’s Kashkari (Voter 2023) to speak 1600 – US Fed’s Bostic (Voter 2024) to speak Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: https://www.home.saxo/content/articles/macro/market-quick-take-oct-7-2022-07102022
The President Of El Salvador Continues To Promote Bitcoin

The Current Decline In The Cryptocurrency Market Is Directly Related To The Monetary Policy Of The Fed

InstaForex Analysis InstaForex Analysis 07.10.2022 11:21
Bitcoin closed the trading session almost unchanged on Thursday - at a level slightly above $20,000. At the time of writing, the cost of BTC is balanced at $19,983. The day before, the first cryptocurrency was in strong demand in the Asian session, but later lost all its achievements amid a spectacular fall in US stock indices and the strengthening of the US dollar. So, on Thursday, the Dow Jones Industrial Average sank by 1.15%, the S&P 500 lost 1.02%, and the NASDAQ Composite fell by 0.68%. The main reason for the negative on the US stock exchanges was the decision of OPEC+ to reduce quotas for oil production. Thus, the Organization of the Petroleum Exporting Countries agreed to reduce production by 2 million barrels per day in November in order to support falling prices. In the near future, investors are confident that this OPEC+ decision will push global inflation to a steady growth. By the way, since the beginning of 2022, analysts have increasingly begun to emphasize the high level of correlation between the US securities market and virtual assets amid intense expectation by both of the consequences of the geopolitical conflict in eastern Europe and the next steps of the US Federal Reserve. Earlier, analysts of the investment company Arcane Research have already stated that the correlation of BTC and technology securities has peaked since July 2020. In addition, economists of the analytics platform TradingView said that the relationship of the cryptocurrency market with the US stock market in the last quarter reached 70%. The current situation looks rather ironic, because since the advent of cryptocurrency, it has been positioned as the main means to protect against inflation and price volatility in traditional markets. However, in recent months, digital assets have increasingly correlated with stock markets, which makes one doubt the success of virtual coins. On Thursday, analysts from the American investment company Ark Invest reported that, since spring, holders have accumulated a record amount of bitcoin, buying up an asset at a falling price. At the moment, they control about 13.7 million BTC – 71.5% of the total coin supply. This state of affairs, Ark Invest says, significantly eases the pressure on the main cryptocurrency. No less optimistic forecasts regarding cryptocurrencies are also held by experts of the financial company DappRadar, who stated that in the third quarter of 2022, the digital asset market entered a long phase of consolidation. The recovery of virtual coins, DappRadar is certain, began in September. At the same time, in the period from July to September, the value of digital currencies collapsed by 8.5%. The first signs of recovery appeared only at the end of last month. One of the most important events of this was the renewal of Ethereum. So, on the morning of September 15, the Ethereum network successfully migrated from the Proof-of-Work (PoW) algorithm to Proof-of-Stake (PoS), which does not require mining. The migration happened as part of a major update of The Merge. At the same time, in the first hours after the transition of ETN to the Proof-of-Stake algorithm, a powerful influx of altcoins to centralized exchanges was observed. On the same day, the founder of the ETH network Vitalik Buterin confirmed its successful transition to PoS and the absence of failures or errors in the update process. By the way, earlier the Canadian-Russian programmer stated that the transition of the network to Proof-of-Stake will increase the popularity of digital assets for everyday payments by reducing the commission to 2 cents. According to Buterin, the popularity of crypto payments fell after 2018 amid high transaction fees. To date, ETN continues to be the leader in the ranking of blockchains in terms of the number of deployed DeFi projects. The cost of funds in protocols placed on the basis of ETH by the end of September exceeded $ 48 billion. The focus of crypto investors on Friday is the report on employment in the non-agricultural sector of the United States (NFP), which will help the Federal Reserve determine the future path of the country's monetary policy. According to preliminary forecasts of analysts, 250,000 jobs were created in the non-agricultural sector of America in September - less than in the previous month, but enough to continue the hard line of the US central bank. By the way, the current decline in the cryptocurrency market is directly related to the monetary policy of the Fed. So, recently, experts of the analytical company Kaiko reported that the volatility of BTC significantly depends on the results of meetings of members of the US central bank. According to analysts from Kaiko, the high correlation of bitcoin with the Fed's decisions was recorded in the summer of 2021, which indicates that the cryptocurrency market has long been influenced by key macroeconomic indicators.   Relevance up to 09:00 2022-10-08 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/323696
Nasdaq 100 Faces Bearish Breakdown Below Ascending Wedge and RSI Momentum Indicator

Podcast: Eyes On US Job Report, US Treasury Yields Rose And The US Dollar (USD) Roared Back Higher

Saxo Bank Saxo Bank 07.10.2022 12:46
Summary:  Today we note a fresh weakening in sentiment as US treasury yields rose and the US dollar roared back higher, particularly against the smaller currencies. Also, a look at today's US jobs report and whether it can move the needle much, given the drumbeat of Fed rhetoric staying on the unified tightening-and-not-pivoting message, which will likely require many months of weakening inflation and a weakening jobs market to drive a shift. That means the surprise side is a very strong jobs and earnings report today. Discussion of AMD's shock revenue miss for Q3 reported after hours yesterday, the week ahead in earnings as earnings season get under way, the macro calendar points of note next week and more also on today's pod, which features Peter Garnry on equities, with John J. Hardy hosting and on FX. Listen to today’s podcast - slides are found via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean engraver If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com. Source: https://www.home.saxo/content/articles/podcast/podcast-oct-7-2022-07102022
ECB's Tenth Consecutive Rate Hike: The Final Move in the Current Cycle

Fed Vice Chair Brainard Said Tighter Policy Will Not Stop

InstaForex Analysis InstaForex Analysis 07.10.2022 13:27
US Treasury Secretary Janet Yellen called on key central banks to continue the fight against inflation, pointing out the problems that await the global economy in the future. Fed members statement Yellen previously headed the Federal Reserve and was forced to change the course of policy in response to global changes in the world economy. Her comments now coincide with the proposed reforms by the World Bank and regional development banks, as well as with the views of several Fed representatives. Fed Vice Chair Lael Brainard also said recently that they won't shy away from tighter policy, but warned that there is a need to look at the spillovers that could have a negative impact on the financial system as interest rates rise. These words were perceived by investors as a signal for a softer policy next year, which provoked the weakening of dollar and a rally in the stock markets. In the futures market, expectations were revised even though most politicians tried to convince market participants that no one is going to loosen their grip and only the most effective fight against inflation is ahead. EUR/USD Talking about EUR/USD, a lot depends on 0.9810 because a break above it will lead to a rise to 0.9840 and 0.9880. Meanwhile, a fall below 0.9760 will ramp up pressure, which will result in a further decline to 0.9725, 0.9680 and 0.9640. GBP/USD In GBP/USD, a lot depends on 1.1190 because its breakdown will lead to a rise to 1.1250 and 1.1310. A fall below 1.1115, meanwhile, will result in a drop to 1.1030 and 1.0950.   Relevance up to 09:00 2022-10-08 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/323700
Riksbank's Potential Rate Hike Amid Economic Challenges: Analysis and Outlook

USA: Highly Awaited US NFP And Unemployment Rate Are Released Today!

Kamila Szypuła Kamila Szypuła 07.10.2022 10:32
The market is waiting for important reports. Most of the reports will be on the workforce. These types of reports can create confusion in currency pair situations. So what can we expect? Japanese Household Spending Japan released the Japanese Household Spending results at 1:30 CET. The reading was not as expected and was much lower. The current reading was -1.7%, while it was expected to drop from -1.4 to 0.2%. This is the second time in a row that the value of all expenditures by consumers decreased. This means that, once again, Japanese consumers have spent significantly less. The current reading is taken as negative. Switzerland Unemployment Rate n.s.a. At 7:45 CET, Switzerland published a report on the number of unemployed as a percentage of the workforce. The Unemployment Rate was expected to remain at the level of the previous reading (2.0%). The current reading is slightly better than expected, Unemployment Rate n.s.a. is 1.9% On the other hand, Switzerland Unemployment Rate u.s.a. reached the level forecasted, ie 2.1%. Forecasts for this indicator were that the level would remain. EU Leaders Summit The EU Leaders Summit will take place at 12:30 CET. EU leaders usually meet in Brussels, in the Europa building. This time the meeting will be held in Prague. The third of the four scheduled meetings is to provide strategic guidelines on euro area economic policy. he leaders of the EU member states are set to discuss the Russia-Ukraine conflict, the rising costs of energy and its economic ramifications. Check out our video comment: Speeches Today we are waiting for speeches from different banks. The Bank of England Monetary Policy Committee (MPC) Member David Ramsden will speak at 12:25 CET. His public engagements are often used to drop subtle clues regarding future monetary policy. The next speech will be on the other side of the ocean. FOMC Member Williams will give a speech at 16:00 CET. U.S. Nonfarm Payrolls The forecast for new jobs in the non-agricultural sector is 250K, which is a very good indicator with an unemployment rate of 3.7%. In March, Nonfarm Payrolls it reached its highest level, then it began to decline. Another highest level after declines was recorded in July and they will start to decline again at the same time. Also at 14:30 CET, a report will also appear on the percentage of the total work force that is unemployed and actively seeking employment during the previous month. The expectations for this indicator are that its level from the previous reading will remain, i.e. the unemployment rate will be at the level of 3.7% Canada’s Employment Change and Unemployment Rate Canada at 14:30 CET publishes data on the number of people employed. The recent reading was negative and expectations for the current reading are positive. This number is expected to increase from -39.7K to 20.0K Read next: Terra's Worker Arrested! White House Comment On The OPEC Decision And Success of Deutsche Bank | FXMAG.COM The next report from Canada will be on the unemployment rate. The last reading was at 5.4% and it is projected to be at this level again this time. Summary 1:30 CET Japanese Household Spending (MoM) (Aug) 7:45 CET Switzerland Unemployment Rate n.s.a. (Sep) 12:00 CET EU Leaders Summit 12:25 CET MPC Member Ramsden Speaks 14:30 CET U.S. Nonfarm Payrolls (Sep) 14:30 CET U.S. Unemployment Rate (Sep) 14:30 CET Canada’s Employment Change (Sep) 14:30 CET Canada’s Unemployment Rate (Sep) 16:00 CET FOMC Member Williams Speaks Source: https://www.investing.com/economic-calendar/
GBP: BoE Stands Firm on Bank Rate and Mortgage Interest Relief, EUR/GBP Drifts Lower

Forex Interventions: Central Banks Of Japan, England, Czech And More! It's Unbelievable How Many Central Banks Stepped In To Fight With Powerful US Dollar (USD)

Alex Kuptsikevich Alex Kuptsikevich 07.10.2022 14:21
More and more of the worlds central banks are turning to currency interventions to keep their currencies from weakening. While each central bank is saving its currency, they are all working together to undermine the Dollars value by increasing its global supply. Bank of Japan protecting USD/JPY  For the last two weeks, Japan has been protecting the yen from further weakening by keeping the USDJPY above 145. At the same time, the Bank of Japan is not changing its ultra-soft monetary policy. Given Japans deep pocket of more than 1 trillion US treasuries, this promises to be an extended play, attracting speculators interest in buying into the pair on the downside. British Pound supported The Bank of England reportedly entered the market last week to keep the pound from collapsing. Record lows in the Indian rupee also forced the countrys central bank to intervene in the market. There is little information on China, but there is also a large force there, reversing the rate on the rise above 7.20, as it has done since 2019. Hong Kong and the Czech Republic have been injecting dollars into the markets. Bloomberg's analysis Bloomberg calculates that global foreign exchange reserves have fallen by 1 trillion to 12 trillion since the start of the year, only about half of which is due to a rising dollar, with the other half coming from dollar sales. We are seeing more and more countries standing up to national currencies in an attempt to contain inflation. If this trend continues to gather momentum, multiple streams promise to become a full-flowing river, raising the overall level of dollar liquidity. Check out our comment on RBA: Interestingly, the trend towards defensive interventions is detrimental to Fed policy, so the latter can only strengthen and extend its active steps to tighten monetary policy. And this game is against the interests of the majority in the world, so developments promise to be fascinating. Even if a host of smaller central banks fail to prevent the Dollar from renewing the highs reached at the end of last month, further US currency growth promises to be much more complex and slower. The 16-month dollar growth trend promises to stop being a one-way street.
The South America Are Looking For Alternatives To The US Currency

Forex: NFP Is Almost Here. What Could Support US Dollar (USD)?

ING Economics ING Economics 07.10.2022 14:56
We expect today's US payrolls to decelerate from the August figure but to come in at around 200-250k, with the unemployment rate holding at 3.7%. This may be enough to let markets drift further away from any Fed-pivot rhetoric and keep the dollar supported. Jobs data will be published in Canada too, but the implications for the BoC policy should be limited USD: Staying bid on payrolls The dollar rebound has gained further steam into today’s nonfarm payrolls risk event. Along with a generalised narrative that continues to favour the dollar (a hawkish Fed, lack of alternatives to USD, choppy risk environment), the risks of an escalation in the US-OPEC+ stand-off on oil prices may have added to the market’s concerns about elevated inflation and the need for aggressive tightening by global central banks. Today’s focus will obviously be on the US, as investors will look for any hint that the jobs market is starting to turn. We think it’s too early for that, and our economists are in line with consensus in expecting the unemployment rate to stay at 3.7% with payrolls slowing but staying above 200k (consensus 250k). We think the dollar rally in the past two sessions was simply a reversal of the previous correction, and not necessarily linked to rising expectations around a very strong jobs report today. We therefore see more room for USD appreciation today after the payrolls release as markets drift further away from Fed-pivot speculation. DXY could find its way back into the 113.00-114.00 region. Francesco Pesole EUR: Downtrend has further to go The ECB minutes failed to materially stir the market’s rate expectations yesterday, and the OIS curve continues to indicate a 75bp rate hike is cementing as a consensus view for investors. After industrial production figures (which dropped more than expected) in Germany were released this morning, there are no major data releases to watch in the eurozone today, and we would expect little deviation from the current hawkish rhetoric by the two scheduled ECB speakers: Mario Centeno and Philip Lane. EUR/USD has broken back below 0.9800 as the USD recovery added pressure. Today, as we see upside risks for the dollar after the payrolls release, another leg lower in EUR/USD is our base case. We currently expect the downtrend in the pair will extend to the 0.95-0.96 area in the very near term, and to the 0.90-0.94 area by year-end. Francesco Pesole Elsewhere in Poland, National Bank of Poland governor Adam Glapinski yesterday announced a pause in the hiking cycle, following the Czech National Bank and National Bank of Hungary. He did not rule out further rate hikes, but the next decision will depend on the central bank's new macroeconomic forecast. Our Warsaw team expects further rate hikes later this year, but also in early 2023. For now, however, the main thing to watch will be the zloty, which is coming under increasing pressure with yesterday's move above 4.85 EUR/PLN. Moreover, global developments are not playing in favour of the CEE region either. EUR/USD is lower for the second day in a row and today's US payrolls may add to the pressure. Overall, the zloty is likely to test the 4.90 level, the weakest since March. Frantisek Taborsky GBP: Looking unsustainable above 1.10 While moving largely in line with other European currencies, the pound continues to show a higher beta to risk sentiment compared to only a few weeks ago. This is likely a legacy of the late-September meltdown that is there to stay.   We still deem the pound’s current levels as unsustainable given the fragility in the bond market and the UK’s deteriorated fiscal and current account position. A return to sub-1.10 levels in Cable is a question of when rather than if, in our view, and today’s US payrolls may favour a more rapid descent. The UK calendar is empty today, but markets will remain aware of any comments by government officials. Yesterday, Chancellor Kwasi Kwarteng held (emergency?) talks with UK lenders to help ease the strains in the mortgage market. A potentially fast acceleration in the UK housing market correction has surely become a more relevant theme for the government, and likely another downside risk for the pound. Francesco Pesole CAD: BoC to stay hawkish despite jobs jitter Bank of Canada’s governor Tiff Macklem delivered some quite hawkish remarks yesterday as he claimed the Bank is not ready for a more finely balanced policy, that there is still plenty to be done to curb inflation given lingering excess demand and largely accepting the prospect of a quite hard landing for the economy. The comments were likely aimed at curbing any speculation that the recent not-so-good data flow in Canada may warrant a less aggressive stance by the BoC on tightening. Like many other central banks now, the BoC is stirring away from any dovish turn given the risk of losing control of inflation expectations. In this sense, yesterday’s comments may have worked as a “hedge” against another potential job data disappointment today. After three consecutive negative payroll figures, the consensus is centred around a 20k increase for September, with the unemployment rate staying at 5.4%. We expect the US payrolls impact on USD to be larger than Canada’s jobs data impact on CAD, and see USD/CAD upside risks today even if Canada’s figures come in positive. A re-test of the 1.3830 highs in USD/CAD is a material risk over the coming weeks. Francesco Pesole Read this article on THINK TagsFederal Reserve Bank of Canada Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
S&P 500 ended the session 1.4% higher. This evening Japan's inflation goes public

USA: What Does The US Jobs Market Mean For US Dollar (USD)?

ING Economics ING Economics 07.10.2022 16:11
The US added 263,000 jobs in September while the unemployment rate dropped back to just 3.5%. A lack of suitable workers continues to constrain the economy with job vacancies exceeding the number of unemployed Americans by more than 4mn and with core inflation set to rise further next week a 75 basis point Fed hike on 2 November is virtually assured  263,000 Jobs created in September   Strong job creation continues The US added 263k jobs in September with 11k of upward revisions to the past 2 months – close to the consensus 255k. The payrolls data shows solid gains in most areas with manufacturing rising 22k despite the ISM employment index moving into contraction territory. Construction rose 19k while private service providing firms increased payrolls by 244k. Within services it was a little more mixed with retail (-1k), financial (-8k) and trade/transport (+3k) well down on recent months job gains while leisure and hospitality (+83k) and education/health (+90k) look strong. Government is a drag once again, losing 25k jobs. This leaves total payrolls at 153.0mn, a new record high and half a million above the February 2020 pre-pandemic high. US non-farm payrolls level (mn) Source: Macrobond, ING But it could have been even stronger with demand still exceeding supply Meanwhile, the household survey shows the unemployment rate dropped back to 3.5% from 3.7% thanks to the combination of rising employment (+204k) on this survey’s calculations and people leaving the workforce (-57k). We had suspected the unemployment rate would fall given the big rise in the participation rate last month of 0.3pp to 62.4% is rarely ever held onto in the subsequent month. The 3.5% unemployment rate matches the low seen in July. The chart shows the weakness in participation is primarily due to older (55+) workers not having returned to the workforce, which suggests early retirements or possible health worries remain a major factor behind the lack of workers to fill vacant job positions. Change in participation rate by age (percentage points since Dec 2019) Source: Macrobond, ING   Rounding out the report, wages were in line with consensus at 5% year-on-year, down from 5.2% in August and the average work week remained at 34.5 hours. Inflation pressures remain strong so another 75bp is on its way The report is on the stronger side of expectations overall, with payrolls growth more constrained by a lack of suitable workers to fill positions rather than any meaningful downturn in hiring intentions – there are still 4mn more vacancies that there are unemployed Americans to fill the positions. This indicates that the Fed has more work to do to slow the economy in order to get inflation under control. In this regard note next week’s core CPI inflation rate (published 13 October) is expected to RISE to 6.5% from 6.3% next week. We were down at “only” 5.9% in June and July and this unfavourable shift when the labour market remains so tight means that a 75bp hike at the 2 November Federal Open Market Committee meeting remains the obvious call. Read this article on THINK TagsWages US Unemployment Jobs Federal Reserve Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

The Chances Of The Fed For 75bp Rate Hike Increased After The Strong Report|European Stock Indices Are In A Downtrend

InstaForex Analysis InstaForex Analysis 08.10.2022 08:06
Stocks opened lower and Treasury yields rose as the strong report reaffirmed bets that the central bank would continue to be aggressive with its tightening campaign. Odds of a 75-basis point hike increased to a certainty following the report. Aside from the anxiety that usually precedes these numbers, traders had to digest remarks from a raft of Federal Reserve speakers who sounded unequivocally committed to crushing inflation with rate hikes. The hawkish rhetoric helped push the S&P 500 to its second straight day of losses, while lifting the dollar and Treasury yields. Oil topped $88 a barrel. European stock indices are in a downtrend with the target of updating year lows: This is the last jobs report Fed officials will have before their November policy meeting as they consider a fourth-straight 75-basis point interest rate hike. Fresh inflation data coming out next week will also play a fundamental role in their decision making. The report is projected to show the depth and breadth of the Fed's inflation problem, with a key indicator of consumer prices potentially worsening. The Moscow Exchange Index failed to hold above 2,000 and continued its decline: Key events this week: US unemployment, wholesale inventories, non-farm payrolls, Friday Bank of England Deputy Governor Dave Ramsden speaks at event, Friday Fed's John Williams speaks at event, Friday   Relevance up to 17:00 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/323750
The Commodities Digest: US Crude Oil Inventories Decline Amidst Growing Supply Risks

Another Busy Week: Fed Speeches And Inflation Data Ahead

Craig Erlam Craig Erlam 08.10.2022 08:34
US It is now all about inflation data.  The focus was temporarily on the labour market but everyone knows that the Fed is primarily concerned with what is happening with inflation.  Wall Street will first get a look at producer prices on Wednesday and then CPI the next day. August data showed high inflation remains well-entrenched as shelter and food prices surged, while gas prices softened. Expectations for the September inflation report are for inflation pressures to remain hot.  The consumer price index is expected to increase by 0.2% for the month and 8.1% over the past year.    Traders will also pay close attention to the FOMC minutes that should show a consistent hawkish stance to fight persistently high inflation. It will also be another busy week of Fed speak as seven FOMC members will be making appearances.  Evans and Brainard speak on Monday. On Tuesday, Mester speaks to the Economics Club of NY.  Wednesday sees Kashkari and Barr speak before the minutes are released. Cook makes the last Fed appearance on Friday.  Earnings season also begins with the big banks.  This earnings season will likely be filled with hiring freezes/layoff announcements, cost-cutting saving measures, and mostly downbeat outlooks.  The health of the consumer is weakening, and Wall Street will want to see how bad banks assess the health of the consumer.   EU  Three weeks to go until the next ECB meeting and it’s still not clear whether the central bank will opt for 75 basis points or 100. The decision to super-charge the tightening cycle is not an easy one as policymakers are desperately concerned about the economic ramifications and the risk of going too far too quickly. Final inflation readings combined with various ECB appearances – including President Christine Lagarde – could shed further light on which way the central bank is currently leaning. UK  Where do we begin? The key event next week may well be the expiry of the BoE’s gilt-buying intervention on 14 October which some fear could spark another exodus from UK government bonds as the backstop is removed. Those fears may be overblown but investors may only be able to relax again once successfully removed. We’ll hear from a variety of BoE policymakers next week, all of whom will likely face a barrage of questions related to its bond-buying, the government and its mini-budget and of course the economy. On top of that, there’s a selection of economic data including the jobs report on Tuesday, and GDP and industrial production on Wednesday.  Another week of question dodging and scripted “answers” is on the cards for the government as it desperately scrambles to clear up the mess it so rapidly created.  Russia The focus remains on Ukraine as Russia continues to lose ground in territories it previously captured. Meanwhile, the West is working towards fresh sanctions and potential caps on Russian energy prices in response to the illegal annexation of four regions it currently partially controls in Ukraine.  South Africa Another quiet week with only tier three data scheduled for release. Turkey It’s that time of the week when I rant about Turkey’s ridiculous monetary policy experiment and its damaging consequences at a time of global tightening. Inflation rose above 83% in September, a victory for President Erdogan no doubt as forecasts put it closer to 85%. Next week we’ll get labour market figures on Monday and current account on Tuesday (spoiler, it hasn’t been fixed by soaring inflation and the weakest ever exchange rate). Switzerland Further rate hikes are coming, the question is when and how much. Markets are pricing in a coin flip between 50 and 75 basis points but will the SNB wait until 15 December to pull the trigger? Inflation eased to 3.3% in September, a level Chairman Thomas Jordan suggested the central bank won’t tolerate (anything above target, in fact). We’ll hear from him again on Tuesday.  China Next Friday, China’s CPI data will be released and is expected to be around 2.5%, comfortably within target. Against the backdrop of a sharp correction from a recent peak in the US dollar, USD/CNH fell by 3.44%, easing pressure on the currency. The 20th National Congress of China will be held next Sunday, 16 October. The market generally expects that adjusting the pandemic prevention and control policy may be one of the important themes of this meeting. India WPI inflation data for September is expected to show price pressures easing next week, which could enable the RBI to consider slowing its tightening cycle.  Australia A quiet week following the RBA decision to slow the pace of tightening last week with a 25 basis point hike. This was below market expectations of 50bps and made the RBA the first major central bank to ease off the brake. Consumer inflation expectations on Thursday may be of some interest. New Zealand In New Zealand the central bank did not ease off the brake, opting instead to maintain its pace with another 50bps hike, taking the cash rate to 3.5%. The market expects the central bank’s final interest rate target for this round to be around 4.5% according to the Refinitiv rate probability tracker. A tight labour market and lower immigration are creating more sustained domestic inflation pressures and the RBNZ believes there’s still more work to do. On the data front, the BusinessNZ manufacturing index will be released on Thursday. Japan Japanese FX intervention is a hot topic once more as it trades around 145 to the dollar. This is just shy of where the Ministry of Finance intervened a couple of weeks ago and around the level the BoJ conducted a rate check the week prior. Another hot US jobs report on Friday may have made intervention more likely. The BoJ is unlikely to tweak its yield curve control policy any time soon. Governor Haruhiko Kuroda said it would continue to adhere to the easing policy and keep the yield curve ceiling at 0.25% and the benchmark interest rate at -0.1 %. No changes are expected until after Kuroda’s term ends in March 2023. Still, PPI data on Thursday may be of interest.  Singapore GDP data on Friday is the only notable economic release. Growth is seen slowing to 3.4% in Q3. Economic Calendar Sunday, Oct. 9 Economic Data/Events China aggregate financing, money supply, new yuan loans expected this week Austria holds its presidential election Monday, Oct. 10 Economic Data/Events US bond market is closed in observance of Columbus Day/Indigenous People’s Day. The stock market will be open. Norway CPI Greece CPI Australia foreign reserves Singapore MAS monetary policy statement, GDP Canadian financial markets are closed in observance of Thanksgiving China’s financial markets open after Golden Week Holiday The 2022 annual meetings of the International Monetary Fund and World Bank kick off in Washington. Through Oct. 16 Fed’s Brainard and Evans speak at the NABE annual meeting in Chicago ECB chief economist Lane gives opening remarks at the online ECB Conference on Monetary Policy ECB’s Centeno speaks at a meeting in Lisbon of central banks from Portuguese-speaking countries Scotland’s First Minister Sturgeon delivers the keynote speech to Scottish National Party’s National Conference in Aberdeen Tuesday, Oct. 11 Economic Data/Events Australia consumer confidence, business conditions, household spending China FDI Italy industrial production Japan BoP current account Mexico international reserves New Zealand truckometer heavy traffic index, card spending South Africa manufacturing production Turkey current account UK jobless claims, unemployment IMF publishes its World Economic Outlook and Global Financial Stability Report Fed’s Mester speaks at a webinar hosted by the Economic Club of New York BOE Governor Bailey speaks at the Institute of International Finance annual meeting in Washington. Deputy Governor Jon Cunliffe speaks on a panel on global payments at the IIF meeting ECB chief economist Lane delivers the keynote speech at the 7th SUERF, CGEG, EIB and Societe Generale conference on “EU and US Perspectives: New Directions for Economic Policy” in New York SNB President Jordan delivers the annual O. John Olcay Lecture at the Peterson Institute in Washington The Bretton Woods Committee International Council meeting begins. Through Oct. 14 BOJ announces the outright purchase amount of government securities Wednesday, Oct. 12 Economic Data/Events US PPI, FOMC minutes, mortgage applications Eurozone industrial production India CPI, industrial production Japan machinery orders Mexico industrial production New Zealand home sales, net migration Thailand foreign reserves, forward contracts Turkey industrial production UK industrial production, trade, monthly GDP IMF publishes its Fiscal Monitor report The OPEC Monthly Oil Market Report is published EU energy ministers meet in Prague Fed’s Bowman speaks at a Money Marketeers event in New York Fed’s Kashkari participates in a town hall discussion at an economic development summit in Rhinelander, Wisconsin ECB’s Christine Lagarde, de Cos and Knot speak at the IIF annual meeting in Washington. Knot also speaks at the IMF meeting in Washington BOE’s Haskel delivers the keynote speech at the 7th World KLEMS conference in investment and productivity at the University of Manchester BOE’s Mann speaks at a webinar hosted by the Canadian Association for Business Economics titled “Global Macro Conjuncture and Challenges Facing Small Open Economies.” BOE chief economist Pill speaks at an event hosted by the Scottish Council for Development and Industry in Glasgow RBA’s Ellis speaks at Citi Australia & New Zealand Investment Conference in Sydney Hong Kong Chief Executive John Lee delivers the opening keynote speech at the two-day BritCham Hong Kong Summit Bloomberg Invest New York two-day conference begins Thursday, Oct. 13 Economic Data/Events US CPI, initial jobless claims Germany CPI Sweden CPI Australia inflation expectations  China medium-term lending Japan PPI New Zealand food prices Mexico central bank releases minutes from its Sept. 29 meeting ECB’s de Guindos speaks at the “Mercado de Fusiones y Adquisiciones en España y Europa” conference organized by PwC and Expansión Riksbank’s Breman speaks in a roundtable on the economic outlook for Sweden at the Citi Macro Forum in Washington G-20 finance ministers and central bankers meet in Washington Italy’s newly elected parliament convenes for the first time IEA publishes its oil market report EIA oil inventory report Friday, Oct. 14 Economic Data/Events US retail sales, business inventories, University of Michigan consumer sentiment US banks kick off earnings season: JPMorgan, Wells Fargo, and Morgan Stanley report China CPI, PPI, trade France CPI Poland CPI  Canada existing home sales, manufacturing sales India wholesale prices, trade Japan money stock New Zealand PMI Philippines overseas remittances UK RICS home prices BOE emergency bond buying is set to end BOE publishes its quarterly bulletin ECB’S Holzmann speaks at a conference hosted by the OECD and Austrian National Bank in Vienna Australia ends mandatory Covid-19 isolation requirements Sovereign Rating Updates Czech Republic (S&P) This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
FX Markets React to Rising US Rates: Implications and Outlook

News For A Potential Slowdown In US Inflation

ING Economics ING Economics 09.10.2022 09:39
This has been a disappointing year for the US economy with two consecutive quarters of falling output. It will be worse in 2023. Consumer spending and business capital expenditure look set to fall and unemployment will rise in response to the rapidly tightening financial conditions caused by dollar strength, rising rates and widening credit spreads In this article Tougher conditions ahead for consumers and businesses Housing market set for sustained weakness Labour market shows signs of softening Inflation will soon turn lower Fed rate hikes to give way to cuts in the second half of 2023 Source: Shutterstock Tougher conditions ahead for consumers and businesses The Federal Reserve’s delayed response to the obvious inflation threat means it is playing catch-up and raising interest rates faster than at any time since the late 1980s. This is contributing to considerable dollar strength while prompting rapid rises in borrowing costs throughout the economy. This significant tightening of financial conditions is a clear headwind to growth and comes at a time when consumer and business confidence is already under immense pressure from the rising cost of living and falling equity, bond and real estate prices. Housing market set for sustained weakness Unfortunately, our worst fears about falling transactions and the prospect of sharp price falls in the US residential property market appear to be coming true. Mortgage rates have doubled since the start of the year leading to a 44% collapse in mortgage applications for home purchases while the supply of new and existing homes is up 64% and 50% from their respective lows. Ratio of US existing home prices to median household income ratios (1999-2022) Source: Macrobond, ING   This rapidly changing dynamic means the 45% jump in home prices since the start of the pandemic looks unsustainable. After all, the median house price-to-income ratio is more stretched than at the peak of the 2005/06 housing bubble. Consequently, July’s first monthly price fall in more than 10 years looks set to be the start of many with even Fed Chair Jerome Powell publicly acknowledging the need for a correction. This will be bad news for construction activity as well as spending on furniture, furnishings, electronics and building supplies. Labour market shows signs of softening Consumer weakness is already spreading beyond the property market. We had hoped the plunge in gasoline prices would free up cash that would translate into stronger consumer activity elsewhere. There was a temporary lift to restaurant dining numbers, air passenger traffic and google mobility data, but it hasn’t shown up in consumer spending more broadly. On top of this, we are seeing a growing number of firms freeze hiring plans with job vacancies falling by more than one million in August. The one consolation is that most firms are experiencing labour shortages so there will be a reluctance to fire staff. The Fed is predicting a 0.9ppt rise in the unemployment rate over the next year, which would work out as 1.2 million people losing their jobs assuming the labour supply remains unchanged. Inflation will soon turn lower While core inflation rates have been moving higher recently, we are increasingly confident in our call that we could see inflation head towards 2% by the end of 2023 as recessionary forces erode corporate pricing power. The chart below of the National Federation of Independent Businesses’ price plan series is already offering very encouraging news for a potential slowdown in US inflation with fewer firms anticipating price hikes due to weakening sales growth and rising inventories. Corporate pricing power appears to be weakening: NFIB price plans and the core PCE deflator inflation measure Source: Macrobond, ING   Moreover, weightings for shelter costs and vehicle prices are far, far higher in the US inflation calculation than in Europe – a combined 40% for the US basket of goods and services versus 12% for Europe. With the US housing rent components lagging house price changes by around 12-14 months, we expect to see shelter go from contributing more than 2ppt to the headline inflation rate to contributing nothing next year. Meanwhile, auction prices for used cars are down 15% from their peak and are set to fall sharply as the supply of new vehicles ramps up now as supply chain strains are easing. Fed rate hikes to give way to cuts in the second half of 2023 We are forecasting that the Federal Reserve will raise the policy rate by another 75bp in November, but the intensifying economic headwinds look set to result in a more modest 50bp hike in December which will mark the peak at 4.25-4.5%. This would mean real interest rates turning positive in the second quarter based on our inflation forecast – a key metric that the Fed wants to achieve. Once the Fed has hit the pause button on rate hikes the market will swiftly move to anticipate rate cuts. We expect them to start coming through from the third quarter of 2023 as the Fed seeks to prevent a more prolonged downturn that could result in inflation falling well below 2% over the medium term. Robust household balance sheets and a still-tight labour market offer hope that once lower borrowing costs materialise and risk assets stabilise, the recovery can come relatively quickly and vigorously. TagsUS Recession Housing Federal Reserve   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
China’s Foreign Minister Qin Gang Downplayed Russia’s Invasion Into Ukraine

Putin's Reaction To The Outbreak | 36.4% Less Passenger Travel In China

Saxo Bank Saxo Bank 10.10.2022 09:22
Summary:  S&P 500 plunged 2.8% following a decline of U.S. unemployment to 3.5% in September, signing a tight labor market and providing cover for the Fed to front-load larger rate hikes. U.S. treasury yields and the dollar continued to charge higher. The AUD dollar fell to a 2.5-year low. WTI crude jumped 5.4% as the OPEC+ production quota cut continued to linger. The U.S. tightened its restrictions on the export of semiconductor technology to China. Putin called an emergency meeting with his Security Council. What is happening in markets?   Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) retreated on a hot labour market After a stronger-than-expected payroll report and a decline in the unemployment rate to 3.5%, U.S. stocks slid throughout the session and managed only to bounce slightly from the lows toward the market close.  S&P 500 plunged 2.8%, with all 11 sectors of the benchmark declining.  The information technology and consumer discretionary sectors fell the most, down 4.1% and 3.5% respectively. On the back of a 5.4% jump in crude oil prices during the day, the energy sector was the best performer, losing only 0.7%. Nasdaq 100 tumbled 3.9%.  Advanced Micro Devices (AMD:xnas) fell the most among the NDX constituents, down 13.9%, following slashing over USD1 billion from its revenue guidance for Q3. Close behind was another semiconductor name, Marvel Technology, falling 11.7%. Intel (INTC:xnas) and NVIDIA (NVDA:xnas) plunged 5.4% and 8% respectively.  The Biden administration issued new rules to restrict American companies from exporting advanced chip equipment to China.  CVS Health (CVS:xnys) plunged 10.5% after being downgraded to a worse-than-average quality rating from Medicare Advantage’s Star Ratings and on its plan to acquire Cano Health (CANO:xnys).  Trading desk talks suggested large short-selling initiated in financials while short-covering was prevailing in the energy space. This week could be another pivotal moment for markets with the U.S. earnings season kicking off, the September FOMC minutes, and the US CPI. U.S. treasury yields (TLT:xnas, IEF:xnas, SHY:xnas) climbed from 5bps to 7bps across the curve on the fall in the unemployment rate to 3.5% U.S. treasuries sold off on the larger-than-expected +263K print of the non-farm payrolls and the 3.5% unemployment rate (vs 3.7% expected), with the belly of the curve being hit most.  5-year yields jumped 7bps to 4.14%, while 2-year yields climbed 5bps to 4.31% and 10-year yields moved up 6pbs to 3.88%.  The money market curve now prices in a 75bp hike almost a done deal for the November FOMC. The cash treasury bond market is closed on Monday for Columbus Day (but U.S. stock exchanges are open).  Hong Kong’s Hang Seng (HSIU2) fell in light volume with China property and EV stocks underperforming Hang Seng Index sank for the second day in a row after the sharp rally on Wednesday, falling 1.5%. Chinese EV stocks tanked, with Li Auto (02015:xhkg) tumbling 14.8%, Nio (09866:xhkg) plunging 10.5%, and XPeng (09868:xhkg) moving down 6%. The collapse of EV stock prices contributed significantly to the 3.3% decline of the Hang Sent Tech Index (HSTECH.I).  Investors were concerned about the severe competition in the EV industry with new entrants to the market and rising battery costs.  China developer names plunged from 2% to 9% across the board as sentiment was clouded by CIFI’s (00884:xhkg) discussion with banks about posting an interest payment and a 2-notch downgrade to B3 (long-term rating) and Caa1 (senior unsecured debts) by Moody’s. CIFI and Longfor (00960:xhkg), each tumbled over 8%.  Turnover in the Stock Exchange of Hong Kong hit a new 2022 low at HKD57 billion. Shanghai and Shenzhen exchanges were closed for the National Day holiday the whole last week and are returning today.   Australia’s ASX200 (ASXSP200.1) tipped to open the week lower, while focus remains on commodities The ASX200 charged 4.5% last week outperforming global markets, with the rally being supported by commodity prices moving higher, including iron ore. On Monday the Futures indicate the market could fall 0.9% following Wall Street. Trading screens will likely be in the green (black) in the commodity sector, after the oil price rallied 4.7% to $92.62. A focus will also be on iron ore companies as after China’s markets reopen after a weeklong holiday, and China is the largest buyer of iron ore. It’s also worth noting the US listed BHP closed just 0.8% lower on Friday, outperforming US equites. Other stocks to watch might include; Karoon Energy (KAR), after Brazil agreed to lower the royalty rate on the company’s Bauna project. Core Lithium (CXO) and NRW Holdings (NWH) will also be in focus after NRW’s Primero won a contract for Core Lithium’s plant. And Tabcorp (TAH) will also be in view for traders, after investing $33 million for a 20% equity stake in Dabble Sports.  The U.S. dollar climbed modestly on higher bond yields Higher bond yields lifted the dollar, seeing DXY 0.4% higher to 112.795.  USDJPY hovered above 145 but is yet to make a decisive upward move again to test the resolve of Japan’s Ministry of Finance.  EURUSD weakened -.5% to 0.9744 and GBPUSD declined 0.7% to 1.1089. The Australian dollar (AUDUSD) fell to a 2.5-year low, as the Fed gained more ammunition to hike   The AUD/USD fell 0.7% to 0.6361, which is its lowest level since April 2020. This follows the US jobs report coming out on Friday, which gives the Fed more ammunition to rise rates. Keep in mind, a currency generally appreciates when its central bank rises rates. This is in deeded one of the key reasons why the USD is marching up. And when you compare the Fed’s hawkishness to the RBA’s fresh dovish tone, it makes this currency pair an interesting one to watch, particularly with this week’s US economic data and Fed speeches on tap. On the weekly chart it could worth watching the support level at perhaps 0.61670.   Crude oil (CLX2 & LCOX2) surged more than 5% The front-month contract of WTI crude gained 5.4% to USD92.64 despite a modestly higher U.S. dollar. The production quota cut last Wednesday continued to provide support to crude prices.  Since OPEC+ announced the production quota cut, WTI crude oil prices have risen 7.7%.  While many news headlines say it is a production cut of 2 million barrels, we want to clarify here that the 2 million barrels number is referring to the quota, not production.  However, 15 out of the 23 oil-producing countries involved produced below their current levels of allocated quotas in September 2022. 13 of these oil-producing countries produced less oil in the last month than the reduced quotas to be implemented in November.  In other words, the reduced quotas will cut oil production in 10 countries if they adhere to cap the quota.  Having said that, the cut will still be about 1.3 million barrels a day effectively and it is still substantial, from Saudi Arabia (552,000 barrels), UAE (171,000 barrels), Iran (150,000 barrels), Kuwait (144,000 barrels), Libya (100,000 barrels), Iraq (69,000 barrels), Algeria (43,000 barrels), Gabon (28,000 barrels), South Sudan (21,000 barrels, and Oman (21,000 barrels).   What to consider?   US Unemployment Rate fell 0.2 percentage points to 3.5% Nonfarm payroll growth lowered to +263K in September, down from August’s +315K but slightly above the median forecast of +255K of Bloomberg’s survey.  Major areas of strength in the establishment report (i.e. payrolls) were healthcare, leisure, and hospitality while trade and transportation employment was weak. The market moving part in the cluster of data was the 0.2pp decline in the unemployment rate to 3.5% in September from 3.7% in August which the market had expected unchanged at 3.7%.  Part of the fall in the unemployment rate was attributed to a 0.1pp decline in the labor force participation rate to 62.3% from 62.4%. Investors and trades are concerned about the inability of the participation rate to sustain its rally toward 63 or higher so as to dampen upward pressure on wages. Average hourly earnings came in as expected at +0.3% M/M and +5% Y/Y.  FedEx’s ground delivery unit expects a slower volume ahead FedEx Ground, the ground delivery unit of FedEx (FDX:xnys) said in a statement that they are expecting “weakening macroeconomic conditions are causing volume softness. The unit is working with its customers on the latter’s projected shipping needs and making adjustments.  The U.S. tightened restrictions on exporting semiconductor equipment, components, and high-end chips to China The U.S. Department of Commerce rolled out new regulations last Friday to prohibit American companies from exporting to Chinese companies advanced semiconductor equipment and components that can be used to make equipment without first applying for a license from the Department of Commerce effective immediately. The Department of Commerce’s new rules bans U.S. persons from providing support to the development or production of semiconductors at Chinese semiconductor facilities without a license from the Department of Commerce.  The Department of Commerce also tightened the Foreign Direct Product Rule to restrict China from obtaining advanced microchips that can be used in supercomputers and artificial intelligence applications from American companies as well as foreign companies that rely on American technologies. Tourism data was weak for the National Day Golden Week holiday in China According to data from the Ministry of Culture and Tourism, domestic trips and revenues for the period from Oct 1 to 7 were 18.2% and 26.2% lower than those in the same period last year respectively.  According to estimates from the Ministry of Transport, the aggregate number of passenger trips via roads, railways, waterways and aviation from Oct 1 to 7 was 255.5 million trips or 36.5 million trips per day on average, which was 36.4% lower than that in 2021. Putin is chairing a meeting with his Security Council on Monday Russian President Putin is going to chair a meeting with the permanent members of the Russian Security Council today. It was apparently in response to the explosion two days ago that seriously damaged the Kerch bridge which links Crimea with Russia.   For a global look at markets – tune into our Podcast.   Source: https://www.home.saxo/content/articles/equities/market-insights-today-10-oct-10102022
Turbulent Times Ahead: Poland's Central Bank Signals Easing Measures

The US Energy Sector Has Delivered The Strongest Earnings Growth

Saxo Bank Saxo Bank 10.10.2022 09:23
Summary:  It will be a huge week for markets with, with equities on a knife edge awaiting key US CPI data and quarterly earnings season kicking off. Without the star-Energy earnings this season, what can you expect? Plus, on the macro front; US inflation data is out on Thursday, as well as the FOMC meeting minutes, which could set the path ahead for US yields and the US dollar. China releases its CPI and financing data, with both expected to rise. In Singapore Q3 GPD data is on tap, while Australia’s economic calendar is light, the focus is on Australian corporate AGMs. US CPI key this week, Fed minutes also due US inflation data out on Thursday be the next catalyst to test the Fed’s pivot narrative, and the path ahead for US yields and US dollar. Headline inflation is expected to fall slightly but stay above 8%. Bloomberg consensus expectations are at 8.1% y/y from 8.3% y/y in August, but the m/m print is expected higher at 0.2% from 0.1% previously. The core measure is also likely to swell further, and come in at 6.5% y/y from 6.3% in August. While market reaction to CPI print cannot be ignored as pricing for Fed’s path remains volatile, Fed members have been clear about their intent to keep rates high until inflation comes down materially. This suggests that even if we see further rate cut pricing for 2023, we will get a stronger pushback from Fed members and the markets will need to revise their thinking eventually. FOMC meeting minutes will be released on Thursday October 13, from the September 21 meeting and will likely continue to send out hawkish signals. China’s aggregate financing data is expected to rise in September China’s New loans, aggregate financing, and money supply data are scheduled to release sometime in this week.  The median forecast of RMB new loans in September as per Bloomberg’s survey is RMB1,800 billion, much above the RMB1,250 billion in August and the RMB1,660 billion a year ago in September 2021. New aggregate financing in September is expected to rise to RMB2,750 billion from RMB2,430 billion in August, but below the RMB2,903 billion in September 2021. The instructions as well as window guidance from the regulators to urge banks to lend to infrastructure projects and industries deemed important to the real economy were likely to have lifted the amount of new loans.  China’s CPI is expected to rise in September China is releasing CPI and PPI data on Friday. The median forecast in the Bloomberg survey is expecting the CPI to rise to 2.9% Y/Y in September from 2.5% Y/Y in August.  The rise is likely to attribute to higher food prices, including pork prices during the month.  PPI is expected to fall to 1.0% Y/Y in September from 2.3% in August, helped by a high base last year.  Singapore’s Q3 GDP and MAS policy decision due this week Singapore reports advance estimate of Q3 GDP, along with the Monetary Authority of Singapore’s (MAS) policy decision, on October 14. Bloomberg estimates suggest some weakening, with the median consensus estimate at 3.4% y/y, from GDP growth of 4.4% y/y in the second quarter. However, q/q growth is expected to turn positive at 0.7% from -0.2% previously, thereby avoiding a technical recession. Inflation, meanwhile, has breached the 7%-mark and broad-based price pressures mean higher-for-longer inflation. This suggests MAS will continue to tighten the monetary policy, and a re-centring of the S$NEER policy band to its prevailing level can be expected. Still, the boost to the SGD may remain limited as potentially more USD gains remain likely for now. If the MAS increases the slope of the band also alongside, that could mean slightly more hawkishness suggesting some near-term gains in SGD. Earnings season kicks off; Here is what to expect this week US Q3 earnings reporting season kicks off this week with several leading US banks revealing results on Friday. The market will focus on JPMorganChase (JPM:xnys), Morgan Stanley (MS:xnys) and Citigroup (C:xnys). The key things to watch are the investment banks ability to increase their net interest margin and if the quality of their loan books have deteriorated or improved. Consumer brands such as Pepsi (PEP:xnas), Walgreens Boots Alliance (WBA;xnas), and Delta Air Lines (DAL:xnys) will also be important earnings to watch, which will give clues as to how the consumer is spending amid the cost-of-living crisis. The three major themes to watch this US Corporate earnings season Firstly; it’s important to reflect that this year the Energy sector has delivered the strongest earnings growth (in Q1 and Q2), which has held up overall S&P500 earnings figures. But now, Q3 Energy earnings will likely buck that trend; with oil earnings likely to fall after the oil price pulled back with the WTI price falling about 24% from July to September. Last week, Shell highlighted it’s bracing for profit-hits from lower refining margins; which could also signal the end of rising profits from oil giants overall in Q3. Shell expects its oil-refining margin to nearly halve to $15 a barrel in the Q3, from $28 a barrel in the prior quarter. Shell is one of the most traded stocks at Saxo this month, with the majority of its transactions last week being sells and or shorts. (For a technical on Shell, click here.) But weaker earnings for energy for one quarter, don’t spell the end of a trend necessarily. So far this month, and quarter (Q4), the oil price has risen ~13%. So if oil continues to move up amid the lack of oil supply fears, Q4 could earnings for energy could shine once more (if oil moves up for the rest of the year that is). Secondly, the other likely theme to play out in Q3, will also be a drop in overall earnings caused by a higher US dollar, and higher wages. Thirdly, unrealistic earnings expectations might not be met  as well, with ‘negative surprises’ to pop up everywhere, as written by Peter here. And finally, when it comes to earnings season, keep in mind a company’s shares can often move if their earnings results and outlook is stronger than expected, or weaker than expected. So keep abreast of the latest Saxo insights.   Key economic releases & central bank meetings this week   Monday, Oct 10 US: Columbus Day - bond markets closed (stock markets opened) Eurozone: Sentix Investor Confidence (Oct)Japan: Health-Sports Day holiday Tuesday, Oct 11 US: New York Fed Survey of Consumer Expectations US: 3-year treasury note auction UK: Labour Market Report (Sep) Japan: Current Account (Aug) Japan: Current Economic Conditions Wednesday, Oct 12 US: PPI (Sep) US: Atlanta Fed Business Inflation Expectations (Oct) US: 10-year treasury note auction US: FOMC Minutes (Sep) UK: Monthly GDP (Aug) UK: Industrial Production (Aug) Eurozone: Industrial production (Aug) Japan: Machinery Orders (Aug) Korea: Bank of Korea meeting India: CPI (Sep) India: Industrial Production (Aug) Thursday, Oct 13 US: Jobless claims (weekly) US: CPI (Sep) US: 30-year bond auction Germany: CPI (Sep-final) Japan: PPI (Sep) Friday, Oct 14 US: Retail Sales (Sep) US: U of Michigan Consumer Sentiment Survey (Oct-preliminary) Japan: M2 (Sep) China: PPI (Sep) China: CPI (Sep) China: Trade Data (Sep) Singapore: Monetary Authority of Singapore meeting Singapore: GDP (Q3) Sometime in the week China: Aggregate Financing (Sep)   Key company earnings releases this week   Wednesday: Pepsi (PEP:xnas) Thursday: Progressive (PGR:xnys), Fast Retailing (9983:xtks), Trivago (TRVG:xnas), Walgreens Boots Alliance (WBA;xnas), Fastenal (FAST:xnas) , BlackRock (BLK:xnys), Delta Airlines (DAL:xnys), Domino’s Pizza (DOM:xlon) Friday: Shanghai Putailai New Energy (603659:xssc), YTO Express (06123:xhkg), PNC Financial (PNC:xnys), JPMorganChase (JPM:xnys), Morgan Stanley (MS:xnys), Citigroup (C:xnys), UnitedHealth (UEEC:xnas), Wells Fargo (WFC:xnys), US Bancorp (USB:xnys) , First Republic Bank (FRC:xnyc) For a global look at markets – tune into our Podcast.     Source: https://www.home.saxo/content/articles/macro/saxo-spotlight-10-14-october-2022-10102022
Share of Russian metal grows in LME warehouses

Copper Trade Unchanged But There May Be A Supply Problem| Dozens Of Grain-Hauling Vessels Are Already Backing Up

Saxo Bank Saxo Bank 10.10.2022 09:31
Summary:  Markets remained in a risk-off mood on Friday as US equities sold off steeply in the wake of in-line US employment data for September that discourages the notion that the Fed is set to let up on the tightening pressure any time soon. Sentiment has not picked up to start the week in the Asian session overnight as China is back from a long holiday. The macro calendar highlight of the coming week is Thursday’s US September CPI data, while the large US banks will kick off the Q3 earnings season late this week.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US stocks fell sharply on Friday, closing back toward the cycle lows and wiping out most of the rally from the previous Friday’s cycle-low close. The sell-off Friday was triggered by the stronger than expected US jobs report: payrolls growth was in-line with expectations, but the unemployment rate dropped back to the modern record low of 3.5%, taking US yields higher as the market fears sustained further tightening pressure from the Fed. With the price action now back near the bear market lows, this week could prove pivotal for markets as we await the key US September CPI data on Thursday and as quarterly earnings season is set to kick off late this week with the large US banks reporting Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) China returned from a week-long holiday today and declined moderately with CSI300 off 0.9%.  EV, semiconductor, and tourism names retreated.  Domestic trips and revenues, as well as traffic data for the period from Oct 1 to 7, were substantially below the levels during the same period last year.  Last Friday, the Biden Administration rolled out new rules to restrict China’s access to semiconductor equipment.  Oil and gas, poultry, and pig farming stocks gained in the A-share market. Hong Kong’s Hang Seng Index continued to plunge on Monday, falling by more than 2.5%.  Chip makers, SMIC (00981:xhkg) and Hua Hong Semiconductor (01347:xhkg) plunged 29% and 9.9% respectively.  China internet stocks moved lower, with leading names falling from 3% to 8%. USD and US yields/risk sentiment Cratering risk sentiment on Friday took the US dollar higher as the September US jobs report failed to show any negative surprise that might bring some relief in the Fed’s tightening regime, and as the unemployment rate falling back to the modern record low of 3.5% took US yields back toward cycle highs.  The first USD pairs to push to new cycle extremes include AUDUSD overnight, as the pair tested levels below 0.6350, and USDJPY edged further above the 145.00 area as traders wonder if and when the Bank of Japan/Ministry of Finance will intervene again. EURUSD has more room to run before hitting the cycle lows below 0.9600. The key coincident indicators are likely to remain US treasury yields as the front end of the yield curve is pushing on the cycle highs near 4.35%, and on risk sentiment if US equity indices spill to new lows after nearly hitting the cycle lows overnight. Gold (XAUUSD) Gold trades back below $1700 and back on the defensive after Fridays stronger-than-expected US jobs report added a renewed bid to the dollar and yields on raised concerns the Federal Reserve will continue to hike rates aggressively. The latest COT report covering the week to last Tuesday when gold, supported by a temporary slump in the dollar and yields, jumped by around 6% showed that most of the buying that week was due to short covering.  Overall, the net position jumped 46k lots from the biggest short in almost four years to a small net long. With renewed dollar strength in focus the risk of fresh albeit more muted short selling exists with gold’s renewed upside push unlikely until the market feels convinced that the Fed has reached peak hawkishness. Focus this week on US PPI and CPI prints. Crude oil (CLX2 & LCOX2) pauses after +15% weekly jump Crude oil traded softer in Asia as demand concerns resurfaced in response to worries about a global economic slowdown made worse by central banks continuing to hike rates. Despite worries about supply disruptions the OPEC+ group of producers last week agreed to cut production from November, a move that sent prices sharply higher and will likely prolong central banks battle against inflation and with that the risk of a deeper economic contraction. China meanwhile continues its battle with local virus outbreaks further delaying a pickup in demand from the world's largest importer. Ahead of last week’s OPEC decision hedge funds had increased bullish oil bets to a ten-week high, the bulk of the change being driven by short covering. Focus this week being monthly oil market reports from EIA and OPEC on Wednesday followed by the IEA on Thursday. HG Copper Copper trades flat after a two-day sell off ahead of the weekend eroded earlier strong gains led by dollar weakness and supply worries. However, supply risks are looming with a possible ban of Russian supplies to the London Metal Exchange potentially cutting off some of the world's biggest companies impacting supply of key metals from nickel, aluminum, copper and zinc. In addition, China reopening after a weeklong holiday to report a smaller than expected build in copper stockpiles compared with last year. Speculators cut their net short in HG copper to just 2.5k lots in the week to October 4, the lowest conviction in four months that prices will fall further.  US treasuries (TLT, IEF) US treasury yields lifted all along the curve Friday in the wake of the US September jobs report, which saw the unemployment rate dropping back to the modern record low of 3.5% (in part on a slight drop in the participation rate). The 2-year yield overnight hit the cycle high of 4.34%, while the 10-year yields has yet to break back above the cycle high just north of 4.00% that was posted during the UK gilt wipeout before the BoE brought emergency intervention. Focus this week on FOMC minutes on Wednesday and the US September CPI data point on Thursday. What is going on?   The U.S. tightened restrictions on exporting semiconductor equipment, components, and high-end chips to China. The U.S. Department of Commerce rolled out new regulations last Friday to prohibit American companies from exporting advanced semiconductor equipment and components to Chinese companies that can be used to make equipment without first applying for a license from the Department of Commerce effective immediately. The Department of Commerce’s new rules bans U.S. persons from providing support to the development or production of semiconductors at Chinese semiconductor facilities without a license from the Department of Commerce.  The Department of Commerce also tightened the Foreign Direct Product Rule to restrict China from obtaining advanced microchips that can be used in supercomputers and artificial intelligence applications from American companies as well as foreign companies that rely on American technologies. Germany says severing of cables that disrupted train networks Saturday was highly “professional”, although no suspects were identified and no known person or organization has claimed responsibility for the operation, which shut down much of train travel across northern Germany for several hours. Russian leader Putin calls Security Council for a meeting today after Crimean bridge attack. A truck bomb heavily damaged the only bridge link between Russian territory and Crimea, a move dubbed a terrorist attack by Putin and one that could bring more reprisals on Ukrainian infrastructure, with considerable focus on Europe’s largest nuclear power plant Zaporizhzhia, where intense fighting has at times disrupted power to the plant in recent days. Iron Ore (SCOc1) price hits a three-week high after China returns from week-long holiday. The price of the key streel ingredient, Iron Ore (SOCA,SCOX2) rose 2.4% $96.25 in Asia today after China’s markets reopened after a week long holiday. The 2.4% jump in the iron ore is the biggest one day advance in three weeks. The Iron Ore remains 50% lower than its all-time high of $211 after China curbed imports and lockdowns continue to linger. Iron ore is finding it hard to break out of a bear market, despite, US steel giant, Nucor announced two weeks ago its pushing ahead with plans to expand steel production, with its newest line to open in mid-2025. However, shares in BHP (BHP:xasx) listed in Australia have rallied off their lows and trade 15% away from record high-territory, with the miner benefiting from rising cash flows from its other businesses (coal and oil). Chicago wheat futures jumped nearly 3% in early trading, underpinned by concerns over the Russia-Ukraine war slowing grain shipments from the Black Sea region. This after Putin accused Ukraine of orchestrating the explosion on the bridge over the Kerch Strait, a key prestige project for the Russian President. The developments cast even more uncertainty over shipments to the world market through Ukraine’s export corridor in the Black Sea, which comes up for renewal next month. Dozens of grain-hauling vessels are already backing up while awaiting inspection at Istanbul under the terms of the deal.  What are we watching next? The economic calendar for the week picks up on Wednesday with the latest set of FOMC minutes, but the highlight of the week will be Thursday’s US September CPI report, after the August data surprised with significantly higher than expected inflation. Friday we get a look at US September retail sales after core spending has been on a declining trend for the last several months. Earnings to watch The Q3 earnings season kicks off this week, with the most important day being Friday, as seven large US financial institutions reporting. The key focus points will be to what extent US banks are able to increase their net interest margin and the levels of credit provisions. Wednesday: PepsiCo Thursday: Progressive, Fast Retailing, Tryg, Walgreen Boots Alliance, Fastanal, BlackRock, Delta Air Lines, Domino’s Pizza Friday: Shanghai Putailai New Energy, YTO Express Group, PNC Financial Services, JPMorgan Chase, Morgan Stanley, Citigroup, UnitedHealth Group, Wells Fargo, US Bancorp, First Republic Bank Economic calendar highlights for today (times GMT)US Bank Holiday (treasury market closed, equity market open)0815 – ECB's Centeno to speak1030 – ECB's de Cos to speak1300 – US Fed’s Evans (voter 2023) to speak1300 – ECB Chief Economist Lane to speak1700 – US Fed Vice Chair Brainard to speak2200 – Australia Sep. CBA Household Spending2330 – Australia Oct. Westpac Consumer Confidence Index0030 – Australia Sep. NAB Business Conditions/Confidence Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: https://www.home.saxo/content/articles/macro/market-quick-take-oct-10-2022-10102022
Navigating Financial Markets: Insights on Central Bank Decisions and Currency Quotes

USD/TRY Pair: The Bulls Are Likely To Keep The Reins As The CBRT Diverges From The Fed

TeleTrade Comments TeleTrade Comments 10.10.2022 09:51
USD/TRY grinds near the all-time high during a sluggish start to the key week. Turkish President Erdogan pledged to keep cutting rates as long as he is in power. Hawkish Fed bets, firmer US data also favor the pair buyers. Off in the US, light calendar elsewhere probe buyers. USD/TRY seesaws around 18.60 during early Monday morning in Europe as the fears of more rate cuts from Turkey contrasts with the hawkish Fed bets. That said, holidays in the US, Canada and Japan restricts the Turkish lira (TRY) pair’s immediate upside moves. Turkish President Tayyip Erdogan vowed on Saturday that the central bank would continue to cut its policy interest rates every month for as long as he stayed in power, after it surprised markets by cutting rates twice in the last two months, per Reuters. It’s worth noting that the record high inflation in Turkiye pushes the Central Bank of the Republic of Türkiye (CBRT) towards rate hikes but the policymakers’ resistance for the same weighs on the TRY prices of late. On the contrary, the US Dollar Index (DXY) struggles around a one-week high after rising for the last three consecutive days. In doing so, the greenback gauge pauses the previous week’s reversal of the 20-year high, marked late in September. Unlike the Turkish policymakers, the Fed members keep favoring the rate hikes even at the cost of a short-term economic slowdown. Also fueling the hawkish Fed bets is the latest US jobs report for September. On Friday, the headline Nonfarm Payrolls (NFP) rose to 265K versus the 250K expected. Also portraying the strength of the US employment conditions, as well as weighing on the market’s mood, was an unexpected fall in the Unemployment Rate to 3.5% compared to forecasts suggesting no change in the 3.7% prior. Following that, the CME’s FedWatch tool signals the 78% chance for the US central bank’s 75 bps rate hike in November. In addition to the Fed-inspired bids, the DXY also cheers the risk-off mood amid pessimism surrounding the economic slowdown due to the Russia-Ukraine and the Sino-American tussles. Against this backdrop, the Wall Street benchmarks closed in the red while the S&P 500 Futures dropped for the fourth consecutive day while poking the monthly low near 3,630, down 0.40% intraday at the latest. That said, the US 10- Treasury yields rose for eight consecutive weeks in the last before pausing around 3.90%. Looking forward, Turkey has second-tier economics like Industrial Production and Unemployment Rate up for publishing but Wednesday’s Federal Open Market Committee (FOMC) Minutes and Thursday’s US Consumer Price Index (CPI) will be crucial for short-term directions. That said, the bulls are likely to keep the reins as the CBRT diverges from the Fed when it comes the monetary policy actions. Technical analysis Unless breaking the 10-DMA level surrounding 18.55, not even the short-term USD/TRY sellers might risk taking entries.
Bank Indonesia Maintains Unchanged Rates Amidst Inflation Stability and IDR Pressure

The Hawkish Stance Of The Fed Helps Keep The US Dollar (USD) Strong

TeleTrade Comments TeleTrade Comments 10.10.2022 10:53
Strong data supports the status quo. Therefore, economists at Commerzbank expect the US dollar to remain strong as the Federal Reserve is set to retain a hawkish stance. Nothing to stop dollar-strength “The market is therefore now expecting that the Fed will hike its rates significantly over the coming months and will then keep them at these levels for a longer period.” “The US economy and/or US inflation would probably have to weaken significantly over a short period of time for the Fed to sound less hawkish, a development that seems rather unlikely. That means there is little to prevent dollar strength at present.”
Czech National Bank Prepares for Possible Rate Cut in November

After Robust US Jobs Data Focus Shifts To US Inflation Data

Swissquote Bank Swissquote Bank 10.10.2022 11:06
Friday’s US jobs data wasn’t exactly what investors had wished for. The US unemployment rate printed last Friday was the lowest number since 1969 and came as another proof that whatever the Fed does, the US jobs data remains robust. As a result, the Fed hawks came back in force following the US jobs data on Friday. The US yields and the US dollar rose, equities and gold fell. Investors are focused on US inflation data this week. Elsewhere, crude oil continues rising whereas Joe Biden tries everything to reverse the rally, and the US earnings season kicks off with US big bank earnings. TSM will also reveal its Q3 results, but expectations are soft after Samsung announced 32% drop in its operating income and AMD warned they will miss estimates. Watch the full episode to find out more! 0:00 Intro 0:33 US jobs data was too robust… 2:41 Focus shifts to US inflation data 4:48 Swiss franc, gold down 5:40 Crude oil up 7:32 US earnings season kicks off with big bank, TSM earnings Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #US #jobs #data #NFP #unemployment #wages #Fed #USD #EUR #GBP #Gold #XAU #crude #oil #XOM #Tilray #pot #stocks #Biden #US #bank #earnings #season #AMD #TSM #Nvidia #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH
Rising Fuel Prices Are Also Bad News For The Fed

Rising Fuel Prices Are Also Bad News For The Fed

InstaForex Analysis InstaForex Analysis 10.10.2022 12:54
The euro-dollar pair is phlegmatically declining, trading within the 97th figure, after a sharp 250-point decline last week. The downward dynamics slowed down ahead of important inflation reports. Note that on Wednesday, the US producer price index will be published, and on Thursday—the consumer price index. Despite the relatively passive position of the bears, buyers are also in no hurry to rush into battle: longs look too risky against the backdrop of fairly strong non-farm payrolls report, published Friday. The ISM Services Index, which came out in the "green zone" last week, also supported the greenback. Therefore, market participants found themselves in a stalemate at the start of the new week: both sellers and buyers of EUR/USD need an additional newsbreak to decide on the vector of further price movement. In my opinion, the situation will develop in favor of the US currency in the near term, as the flywheel of inflation will only spin up. According to some experts, the latest developments in the oil market will hit the pockets of many Americans quite noticeably. Last week, OPEC+ members decided to reduce the production of "black gold" by 2 million barrels per day. The resonant decision was made by the Cartel despite pressure from the United States. After all, the expected consequences of such a step are negative for the United States (and the consequences are not only economic, but also political). First, the decline in oil production will affect the cost of gasoline in the United States. According to preliminary calculations, it will rise in price by 30–50 cents per gallon. Secondly, the OPEC+ decision will hit those US residents who independently heat their homes in winter. Fuel oil, which is used for individual heating in the United States, will rise in price. For US President Joe Biden, and the Democratic Party as a whole, this is bad news, since the Cartel made its odious decision on the eve of the November congressional elections. According to CNN, it will be extremely difficult for Biden to solve this problem, "given the poor relations of the White House with representatives of the American oil industry." In turn, JP Morgan sources report that Washington may take countermeasures by freeing up additional oil reserves. However, how effective these responses will be is an open question. Rising fuel prices are also bad news for the Fed, which is trying in vain to curb inflation. The rise in fuel prices will pull along many other components, which will affect the dynamics of the consumer price index. We will most likely see the echoes of the OPEC+ decision in November–December (if the Biden administration does not stop this problem). But the dollar may receive additional support as early as this Thursday if September inflation exceeds forecast levels. Moreover, experts' forecasts are quite bold: according to most analysts, the general consumer price index will rise to 8.1% in annual terms, and will grow by 0.2% in monthly terms. The core CPI, excluding food and energy prices, could jump to 6.6%. If the core index comes out at least at the predicted level, it will update the 40-year high, thereby strengthening the positions of dollar bulls. But the euro is not able to reverse the situation in its favor. And although inflation in the Eurozone in September once again updated its historical record, reaching the target of 10.0%, this fact turned out to be essentially useless for EUR/USD buyers. The rhetoric of the ECB representatives tightened even before the publication of the latest inflation data. Back in September, many representatives of the European regulator announced that at the October meeting it was necessary to consider the option of a 75-point increase. Therefore, this fundamental factor is already largely taken into account in prices. For example, speeches by ECB representatives—Bundesbank President Joachim Nagel and ECB chief economist Philip Lane—are expected today. In the light of recent releases, they will certainly sound hawkish rhetoric. However, this fundamental factor is unlikely to affect the EUR/USD pair, even in the context of a corrective pullback. But the increase in geopolitical tensions will only increase the demand for a safe greenback. Anti-risk sentiment in the markets is growing again, supporting the dollar bulls. Thus, several fundamental factors play in favor of EUR/USD bears at once. The technical side of the issue also speaks about the priority of short positions: on the daily chart, the price is located between the middle and lower lines of the Bollinger Bands indicator, as well as under all the lines of the Ichimoku indicator, which shows a bearish "parade of line" signal. The first, and so far the main target of the downward movement at the moment is the 0.9570 mark (the lower line of the Bollinger Bands indicator, on the D1 timeframe). If this target is overcome, it will be possible to talk about a decline to the base of the 95th figure.     search   g_translate    
BSP Maintains Rates Amid Moderate Inflation; Eyes Further Tightening if Needed

US Dollar: The US NFP Hits 263K And Unemployement Rate Reaches 3.5% What Leads To Predictions That Fed Will Hike The Rate By 75bp

Alex Kuptsikevich Alex Kuptsikevich 10.10.2022 13:31
The US economy added 263K jobs in September - slightly above forecasts for growth of 250K-255K. The unemployment rate has returned to 3.5% after 3.7%, reversing concerns that there was already a sustained upward trend in the rate. We recall that the Fed expects unemployment to rise to 4% by the end of the year, calling for economic pain to be accepted to suppress inflation. CME Fed Watch Reading Impressive job growth and falling unemployment rates are fuelling speculation that the Fed will once again raise the rate by 75 points in early November. CME's FedWatch tool indicates that markets have an 82% chance of such an outcome. A week ago, the odds of such an outcome were below 57%, and this shift is lying behind the latest boost to the dollar and the decline in equities. Read next: Crude Oil Amid OPEC+ Decision. Would Supplies From Russia Be Banned On London Metal Exchange?| FXMAG.COM However, the situation is not clear-cut, as rising employment almost paradoxically leads to slower wage growth. After adding 0.3% for the month, hourly earnings added 5.0% y/y against 5.2% a month earlier and a peak of 5.6% in March. Job growth would allow the Fed to take another big step towards a rate hike without fear of bringing down the economy. But already in November, we should expect signals of a further reduction in the pace of rate hikes, which limits the medium-term potential for a stronger dollar and weaker stock markets.
The EUR/USD Pair Maintains The Bullish Sentiment

Be Like Federal Reserve: Would European Central Bank Introduce Quantitive Tightening?

ING Economics ING Economics 10.10.2022 14:10
The European Central Bank looks determined to follow in the Federal Reserve's footsteps. After the start of aggressive rate hikes, and with no end in sight yet, the next milestone is a reduction of its bond portfolio. However, we think the ECB's hawkishness might be premature. Quantitative tightening will come but not now QT is on the ECB's radar but still a distant prospect The minutes of the ECB's September meeting delivered a couple of interesting insights: the decision to hike rates by 75bp was not taken unanimously, so 75bp increments should not be the new normal. However, the ECB was clearly determined to continue hiking rates significantly. Also, looking beyond the configuration of the key ECB interest rates, the minutes underlined that the Eurosystem's large balance sheet was continuing to provide significant monetary policy accommodation by compressing term premia. The Governing Council felt it appropriate to reiterate that it stood ready to adjust all of the instruments within its mandate to ensure that inflation returned to its medium-term target of 2%. This is a clear signal that reducing the ECB's balance sheet has become an issue. Quantitative tightening (QT) - how to reduce the size of the balance sheet - was also apparently on the agenda at this week's non-monetary policy meeting in Cyprus. However, so far, no information has been leaked from this meeting. Bond yields have already increased significantly in recent months without any quantitative tightening A discussion is one thing, an actual decision another. Just a little more than a week ago, ECB President Christine Lagarde said that the ECB would only start to consider QT when the ECB had completed its monetary policy normalisation. At the same time, bond yields have already increased significantly in recent months without any QT. Also, given the very uncertain economic outlook and more pressure on governments to deliver additional fiscal stimulus, QT at the current juncture could trigger an unwarranted widening of bond spreads, a.k.a, a new euro crisis. This is something the ECB clearly does not want. A premature QT decision also has other risks. It could raise the bar for triggering the Transmission Protection Instrument (TPI) even higher, a development that could actually spark a new euro crisis. As such, an actual decision on QT is very unlikely as it would add to financial stress and uncertainty. However, it's good to at least have a plan for when this is really needed.             How the ECB's QT could work Though quantitative tightening currently looks unlikely, it will come eventually. Given the complicated structure of the ECB's bond purchases across countries, sectors and durations, an outright selling of the bond portfolio will not be an easy one without disturbing markets. Also, don't forget that the ECB's balance sheet not only comprises the bond portfolio but also the series of liquidity operations to support bank lending. These bank lending operations (TLTROs) will be repaid by banks, automatically reducing the balance sheet. Still, when financial markets think of QT, they think of reversing the ECB's asset purchases. In this regard, the option of gradually and more passively reducing its asset portfolio looks the most attractive.   The option of gradually and more passively reducing its asset portfolio looks the most attractive A possible first step would be to (gradually) stop the reinvestments of the Asset Purchase Programme (APP). One way to phase in QT would be to first cap APP reinvestments at 50% of their normal amount during, say, the second and third quarters before ending them in the fourth. In this scenario, the resulting balance sheet reduction would be a manageable €155bn in 2023, doubling to €300bn in 2024. The next step would be to end the reinvestments under the Pandemic Emergency Purchase Programme (PEPP). These would add to the balance sheet reduction in 2025, leading to a total reduction of €388bn (along with the APP reductions). In addition, the ECB could speed up the process with outright sales but we doubt peripheral bond markets would be able to stomach the impact (see next sections). In terms of timing, we take Christine Lagarde's recent comments for granted and expect a gradual end to the APP reinvestments between 2Q and 4Q next year. PEPP reinvestments will stop by the end of 2024. QT could reduce the ECB's balance sheet by €155bn in 2023 and €300bn in 2024 Source: Refinitiv, ING   Whenever it happens, we expect QT to be felt across three dimensions of rates markets: duration, credit (and sovereign) premia, and money markets (through the price of liquidity).  Impact on core yields: moderate at the start One of the channels through which QE influenced markets was by suppressing the compensation for a certain number of risks, including duration risk. At face value, this means that, when the ECB reduces its balance sheet, long-dated yields will rise. So far so good. There is empirical evidence for that. For reference, we find that a €155bn reduction in the ECB's bond portfolio size in 2023 would push 10Y Bund yields up by only 7bp, and a €300bn reduction in 2024 would reduce them by 14bp. If this sounds unimpressive, note that without the €5tn of ECB purchases, 10Y Bund yields would be 230bp higher by this, admittedly rough, estimate. Note also that QT would add to the amount of debt that private markets would have to absorb if European governments were to significantly increase their borrowing to finance energy support packages. This is another argument for a delayed start to QT. A €155bn reduction in the ECB’s bond portfolio size in 2023 would push 10Y Bund yields up by only 7bp What is much more difficult to track is the impact this will have on the shape of the yield curve. On paper, the longer the maturity point, the more QE suppresses yields. We're not expecting a re-steepening as a result of QT, however. The experience of the US and UK has shown that yield curves can invert even in the context of QT. The reason is that other factors have a greater influence, namely that base rates are going above their long-term neutral levels. In short, we're still expecting a German curve inversion next year irrespective of QT. Without QE 10Y German Bund yields would be over 200bp higher Source: Refinitiv, ING Sovereign spreads: adding fuel to the fire When one moves away from so-called ‘risk-free’ markets, the main impact of QE is suppressing credit compensation. In the case of sovereign bonds, QE was instrumental in suppressing eurozone break-up risk in the sovereign crisis of 2010-12, and in subsequent periods of market stress. Our analysis of German yields above implies that the stock, rather than the flow of purchases is the relevant variable to assess market impact. This isn’t so simple for sovereign spreads, where both variables matter. In plain English, we think the impact of QT on sovereign spreads will occur a lot faster than on core yields, once flows turn negative. This explains why spreads already started widening before QT was even discussed, as QE purchases drew to a close in mid-2022. We fear the ECB following through with QT would compound the worries of already stressed financial markets. We struggle to see how peripheral markets would cope with rising interest rates and QT at the same time We struggle to see how peripheral markets would cope with rising interest rates and QT at the same time. This is a key reason why we expect QT to start only once the phase of rising base interest rates is over. Additionally, the ECB keeping spread-support programmes, such as the TPI, at hand would go some way to reassuring markets. It would also mean a slower reduction in the ECB's bond portfolio if it is forced to temporarily buy peripheral bonds. QT will reduce excess liquidity and help widen money market spreads, such as Euribor Source: Refinitiv, ING Money markets: taking away the comfort blanket A large chunk of money market rates also has a credit and duration component, which we covered in the sections above. But the compensation in money markets is even more heavily suppressed by the tide of ECB Excess Liquidity (EL) introduced during successive rounds of QE and loans to banks (TLTROs). As QT begins, EL will shrink by the same amount. In 2023, the estimated €155bn reduction in excess liquidity from QT will pale in comparison to the nearly €2tn reduction coming from targeted longer-term refinancing operations (TLTRO) loan repayments. Each incremental reduction in liquidity will make money market rates more sensitive to other risk factors After that date, however, each incremental reduction in liquidity will make money market rates more sensitive to other risk factors. The widening of money market spreads, for instance Euribor fixings compared to overnight index swaps (OIS), is not linear. The first €2tn reduction will probably have little effect. After that, at the latest after mid-2023, the impact of EL reduction will accelerate. This effect could even be magnified if the ECB decides to effectively lock away a portion of EL using tiered bank reserve remunerations (see our article on that topic). Read this article on THINK TagsQuantitative tightening Interest Rates ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
S&P 500 ended the session 1.4% higher. This evening Japan's inflation goes public

Stock Market Picture After The Friday's Labour Market Data

Conotoxia Comments Conotoxia Comments 10.10.2022 15:45
It would seem that good data from the US labor market could be a reason for satisfaction, optimism and calming down the already nervous situation on the financial markets. However, this did not happen after Friday's publication, where the stock indices plunged. Good data from the labor market and falls in the US stock market US stock Futures extended losses on Monday, after stronger- than expected US employment data could cause an escape from the stock market. At the end of the US session on Friday, the Dow Jones fell by 2.11 percent, the S&P 500 by 2.8 percent and the Nasdaq Composite by 3.8 percent. Total non-farm payroll employment rose 263,000 in September, the U.S. Department of Labor reported on Friday. This figure was a slight decrease compared to the previous month's increase of 315,000, but it exceeded market expectations. The unemployment rate fell by 0.2 percentage points compared to August and returned to the July reading of 3.5%. The professional activity rate was 62.3%. The leisure and hospitality sector recorded the largest number of new jobs in September (83,000), followed by healthcare (60,000) and professional and business services (46,000), according to BLS data compiled by BBN. Source: Conotoxia MT5, US500, M30 Good data is bad data? The market seems to be returning to the conclusion that good data from the economy may be bad for the financial markets, as it may mean higher interest rates. In an environment where inflation is at its highest in decades and the labor market is strong, the Fed may not have any brakes on these rate hikes. The market is estimating that at the beginning of November the Federal Reserve may decide on another hike by 75 bp. For Wall Street institutions, this could mean a higher cost of capital and could also lead to further deleveraging. Additionally, the valuation of US equities at 16x (forward P / E for the S & P500) seems to be high with the expectation that the US dollar may bear interest at nearly 5%. in a quarter. Additionally, investments in stocks may not be encouraged by the high level of the VIX fear index, which is in the region of 30 points. To sum up, investors in the stock market may receive increasingly expensive financing at higher risk, while at the same time competition in the form of bonds or even deposits in US dollars could literally grow from the meeting to the Fed meeting. What awaits US stock markets this week? This week, in turn, there may be some important data on inflation in the United States. They may also affect the market expectations as to the strength and scale of possible further interest rate hikes in the US. The data will be released on Thursday 10/13/2022 at 2:30 PM GMT + 2. Did you know that CFDs allow you to trade both lows and increases in price? CFDs allow you to open buy and sell positions, and thus invest with both rising and falling quotes. At Conotoxia, you can choose from CFDs and DMA CFDs on over 4,000 stocks of listed companies around the world. If you want to find CFDs or DMA CFDs per share, just follow 4 simple steps: To access Trading Universe - a modern center of financial, information, investment and social products and services with one Smart Account, register here. Click "Platforms" in the "Invest & Forex" section. Choose one of the accounts: demo or live On the MT5 search for the CFD or CFD DMA action you are looking for and drag it to the chart window. Use the one-click trade option or open a new order with the right mouse button. Daniel Kostecki, director of the Polish branch of Conotoxia Ltd. (Cinkciarz.pl investment service) The above commercial publication does not constitute an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of April 16, 2014. It has been prepared for information purposes and should not constitute the basis for making investment decisions. Neither the author of the study nor Conotoxia Ltd. are responsible for investment decisions made on the basis of the information contained in this publication. Copying or reproducing this work without the written consent of Conotoxia Ltd. is prohibited.
The US Dollar Index Price Is Looking Higher From Here Soon

USA: Dow Jones, Nasdaq, S&P 500 And Gold Price Afftected By The Last Friday's NFP

InstaForex Analysis InstaForex Analysis 10.10.2022 17:02
  Friday's September jobs report showed a decline in monthly growth, with 263,000 new jobs added last month, down from the previous month's 315,000.     The profound impact it had on nearly every asset class in the financial markets was not due to low numbers, but rather to the Federal Reserve's hope that those numbers would be even lower. The Fed was hoping Friday's report would show slower growth because that would be the reason for the Fed's progress in bringing inflation down. Inflation is still holding at 40-year highs, even after the Federal Reserve has raised interest rates at every FOMC meeting since March. The Fed raised rates by 25 basis points in March, by 50 basis points in May, and by 75 basis points in June, July, and September. It also raised the benchmark fund rate from 0–25 basis points in February to 300–325 basis points in September. While Friday's report points to a slowdown in job growth, it is believed that this reduction is not enough for the Federal Reserve to slow the current pace of interest rate hikes.     According to the CME FedWatch tool, the week before last there was a 56.5% chance of an interest rate hike, on Thursday there was a 75.2% chance, which increased to an 82.3% chance on Friday that the Federal Reserve would raise rates by 75 basis points in for the fourth time in a row in November. This probability indicator predicts the likelihood of a FOMC rate change using 30-day Fed Funds futures price data. Friday's report had a profound effect on US equities. The Dow fell 2.22%:     The NASDAQ is down about 415 points:     And the S&P was down 106.16 points, or 2.90%:     Friday's report also had a strong impact on gold prices:     So what does this mean for the future of gold pricing? While this report is extremely important in the dataset that the Federal Reserve will use at its November 2 FOMC meeting, the CPI inflation report for September this week will be far more important. But in terms of the Fed's long-term impact on gold prices, it's highly likely that if the Fed continues to raise rates and inflation remains robust, at some point market participants will have to focus on high inflation rather than focusing on growth. rates. If this assumption is correct, the price of gold could rise significantly. But it is also likely that there will be more pain ahead.   Relevance up to 11:00 2022-10-13 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/323838
Revised Forecasts for the National Bank of Hungary: Interest Rate Changes and Monetary Policy Outlook

The USA Is In The Eye Of The Hurricane Triggered By The Releases Of NFP, Inflation Prints And More

Craig Erlam Craig Erlam 10.10.2022 19:41
Struggling to bounce back We’re seeing mild risk aversion in the markets at the start of the week, perhaps some apprehension ahead of what could be a big few days for the US. Read next: Elon Musk Is Getting Into Geopolitics| Russia And Another Attack| FXMAG.COM The jobs report on Friday remained strong which supports the view that the Fed won’t yet ease off the brake, much to the dismay of equity investors. They may still be hoping that this week’s inflation data will swing the central bank but given previous comments, that doesn’t appear realistic unless we see a significant miss to the downside. ​ It’s a big week for the US, with the Fed minutes also being released on Wednesday and retail sales on Friday. Earnings season also kicks off later this week which will offer crucial insight into how corporate America views aggressive monetary tightening and the outlook for the economy. I don’t expect it will be a particularly upbeat few weeks. Another PR blunder The UK government has unsuccessfully sought to bring some calm to the markets by announcing it will bring the budget forward to 31st October. A bit of a PR own goal if it turns into a horror show, with the Halloween headlines writing themselves. As if there wasn’t already enough pressure on the new Chancellor to deliver. Markets clearly aren’t feeling optimistic, with the pound trending lower once more and bond yields on the rise. Yields on 10 and 30-year debt are now not far from the post-mini-budget peaks which is hardly a vote of confidence in the Chancellor to deliver. Bank of England interest rate expectations have been pared back though, with markets viewing the meeting on 3 November as a coin flip between 1% and 1.25%. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. A flat start to the week - MarketPulseMarketPulse
UK GDP Already Falling And Continuing To Do So For This Calendar Year, Copper Is Still Within A Tightening Range

Forex: What Can We Expect From GBP/USD? - 10/10/22

InstaForex Analysis InstaForex Analysis 10.10.2022 21:53
Previously, the GBP/USD pair remained under bearish pressure to challenge the lower limit of the channel around 1.3000 which failed to hold prices above. Shortly after, a new daily low was established around 1.2150 which was bypassed few days after. However, considerable support zone existed around 1.1850-1.1900 which has prevented further bearish decline for sometime. However, as bullish momentum started to fade away, more bearish visits were expected to challenge these historical low levels. Shortly after, Quick bearish decline was executed towards 1.1075 & 1.0860 where significant Fibonacci Expansion levels are located. Based on the upcoming price action and the next weekly candlestick closure, the next target level for the GBP/USD pair can be determined. If the current bullish movement above 1.0600 is maintained for some time, there would be a high chance for further bullish continuatio at least towards 1.1765. Otherwise, another bearish pullback towards 1.0600 should be expected for another BUY Entry. Relevance up to 18:00 2022-10-11 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/296187
CNH Finds Support Amid Battle for Funding in Money Markets

The General Pessimism On The World Markets| The Leading Companies In Europe STOXX Europe 600 Sank By 0.68%

InstaForex Analysis InstaForex Analysis 11.10.2022 08:07
On Monday, the leading stock indicators of Western Europe show a decline against the background of the negative dynamics of stock exchanges in the Asia-Pacific region. The general pessimism on the world markets was also provoked by investors' concern about further tightening of the monetary policy of the US Federal Reserve in the context of permanently rising inflation. In addition, the tense situation in Ukraine has returned to the agenda. Thus, at the time of writing, the composite index of the leading companies in Europe STOXX Europe 600 sank by 0.68% - to 389.21 points, reaching a weekly low. Meanwhile, the French CAC 40 shed 0.53%, the German DAX rose a symbolic 0.05% and the UK FTSE 100 shed 0.45%. Rising and falling leaders The value of securities of the French oil and gas company TotalEnergies SE sank by 1.5%. On the eve of the company's management proposed to organize annual negotiations on employee salaries with trade unions in France ahead of the scheduled date, provided that strikes at refineries are completed The quotes of the British online retailer THG PLC fell by 7.8%. The market capitalization of the German energy company Uniper SE decreased by 7.5%. The share price of the Austrian manufacturer of sensors, semiconductor components and lighting equipment ams-OSRAM AG fell by 6.7%. The value of the securities of the French automotive corporation Renault SA sank by 3.1% after the company's management confirmed that it was negotiating an alliance with Japanese Nissan about future investments in Renault's new electric vehicle business. Quotes of the French bank Societe Generale SA rose by 0.8% on the news that the company's chief operating officer, Gall Olivier, will leave his post at the end of 2022 due to management reshuffles. Market sentiment The focus of attention of participants in the European stock market on Monday is concerns about the consequences of rocket attacks in Ukraine over the weekend. In addition, investors continue to worry about the decisive steps of the world's central banks in the field of monetary policy. So, this morning it became known that the Bank of England will increase the maximum volume of daily auctions for the redemption of government bonds under the temporary program. The British central bank announced the start of the program on September 28. At the same time, the British central bank plans to fully complete the repurchase of government securities on Friday, October 14. Since the launch of the program, the BoE has held 8 auctions. In total, the central bank bought bonds for $ 5.5 billion, although it had previously stated that it was ready to buy securities for 40 billion pounds. Last Friday, a stronger-than-expected labor market report was published in the United States. As a result, the September figures from the US Department of Labor increased investors' concern that the Fed will continue to increase the interest rate in an attempt to cope with record inflation. On Monday, world media reported that Russian President Vladimir Putin plans to meet with representatives of the Security Council after the attack on a major bridge between Russia and Crimea. Following the results of Monday's trading, the stock exchanges of the Asia-Pacific region collapsed sharply. At the same time, trading volumes were insignificant due to the holidays in Japan and South Korea. Thus, the Shanghai Shenzhen CSI 300 stock indicator sank by 2.21%, and the Shanghai Composite lost 1.66%. The main factor of pressure on the Asia-Pacific exchanges on Monday was the securities of chip manufacturers. Thus, the quotes of Anji Microelectronics Tech and Chengdu Xuguang Electronics companies fell by 20% and 10%, respectively, after the White House introduced export control measures. Under the new rules, Chinese companies will no longer have access to some semiconductor materials produced on United States equipment. Such a decisive step by the American authorities, experts suggest, could provoke a tangible deterioration in trade relations between the United States and China and have serious economic consequences if the PRC takes retaliatory measures. Another factor of pressure on Asian stock markets was the release of fresh data that by the end of September, the country's services sector declined amid permanent disruptions related to the consequences of the coronavirus pandemic. This week, European traders will be waiting for the publication of statistical data on consumer prices in the United States. According to preliminary forecasts of experts, by the end of September, annual inflation in America slowed to 8.1% from August's 8.3%.   Relevance up to 20:00 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/323903
Bestway Might Have Larger Designs On The UK's Second Biggest Supermarket

UK Results Higher Than Expected And The Day Is Full Of Speeches

Kamila Szypuła Kamila Szypuła 11.10.2022 09:21
There will be few reports today, but they are important. We are also awaiting the speeches of many bank representatives. Reports form United Kingdom UK reports showed positive results and were higher than expected. The results for August with Average Earnings ex Bonus reached 5.4% and were 0.1% higher than expected, and increased compared to the previous reading. The unemployment rate also turned out to be positive and was lower than expected. The current reading of the unemployment rate was at 3.5% and it was expected to keep the previous level of 3.6%. Despite positive results, the change in the number of unemployed people in the U.K. during the reported month turned out to be much higher than expected. The current Claimant Count Change reading is 25.5K. The last reading was at the level of 1.1K, which means a significant increase in jobseekers. Read more: UK Results Higher Than Expected And The Day Is Full Of Speeches| FXMAG.COM The Brazilian Consumer Price Index (CPI) Today Brazil publishes inflation data for September. YoY's CPI is expected to hit 7.10%, a decline from the previous reading of 8.73%. If the forecast is correct, it means that the index has been falling since July. As for the MoM CPI, it is also expected to decline from -0.36% to -0.34%. And just like CPI YoY will decline from July. Speeches of the day In addition to UK earnings data and Brazilian inflation data, we expect a lot of speeches. We are waiting for two speeches from a German bank. The first at 14:00 CET, which also starts with all the speeches today. The speaker will be Burkhard Balz Member of the Executive Board of the Deutsche Bundesbank. The next speech will be German Buba Wuermeling Speaks which is set at 17:00 CET, traders may see the immediate global market impact. There will also be speeches by representatives of the European Central Bank (ECB) today. The first is scheduled for 14:45 CET. The speaker will be Philip R. Lane, member of the Executive Board of the European Central Bank. The next one will take place a quarter of an hour later, with a speech by Andrea Enria, Chair of Supervisory Board of the European Central Bank. The last speakers from the old continent will be representatives of a British bank. Bank of England (BOE) Monetary Policy Committee (MPC) Member Sir Jon Cunliffe will speak at 17:00 CET. Andrew Bailey, head of the BOE's Monetary Policy Committee will speak at 20:35 CET. This speech will be the most important of the day because it will have the greatest impact on the currency of the country (British Pound, GBP) and thus on the entire currency market. Today also FOMC members will take the floor. Federal Reserve Bank of Philadelphia President Patrick Harker is set to speak at 17:30 CET. His public engagements are often used to drop subtle clues regarding future monetary policy. Another speech will be made half an hour after this with Loretta J. Mester. Summary 8:00 CET UK Average Earnings Index +Bonus (Aug) 8:00 CET UK Claimant Count Change (Sep) 8:00 CET UK Unemployment Rate (Aug) 14:00 CET German Buba Balz Speaks 14: 00 CET Brazilian CPI (YoY) (Sep) 14:45 CET ECB's Lane Speaks 15:00 CET ECB's Enria Speaks 17:00 CET BoE MPC Member Cunliffe Speaks 17:00 CET German Buba Wuermeling Speaks 17:30 CET FOMC Member Harker Speaks 18:00 CET FOMC Member Mester Speaks 20:00 CET ECB's Lane Speaks 20:35 CET BoE Gov Bailey Speaks Source: https://www.investing.com/economic-calendar/
UK PMI Weakness Supports Pause in Bank of England's Tightening Cycle

Inflation Data Will Be An Additional Stimulus For The Fed To Further Raise Interest Rates

InstaForex Analysis InstaForex Analysis 11.10.2022 12:49
Analysts at Goldman Sachs say it is too early to assess a dovish turn in Fed policy as the economic outlook is not bad enough yet and the rate markets remain too volatile. They added that significant rate fluctuations mean that expectations of higher stock returns over relatively safer assets are likely to be lowered. Speculation that the Fed's policy would become more equity-friendly has led to the S&P 500 rising from time to time over the past 12 months. But those rallies have all been sold out and the indicator hit new lows each time. The central bank also appears to be on track to fulfill its fourth straight 75 bp rise at its November meeting. Now, the US stock market is just a few points away from closing at its lowest level since November 2020. It has already fallen 24% this year. Tighter financial conditions, a potential escalation in geopolitical risks, and the current mix of economic growth and inflation have increased downside risk for the stock. Meanwhile, 2-year Treasury yields rose to 4.35% on Tuesday, its highest level since 2007. The reason is fears that US inflation data this week will add more incentive for the Fed to keep raising interest rates. There is also a possible government split in the US midterm elections, but this could lead to stocks performing well after the event as political uncertainty subsides.   Relevance up to 09:00 2022-10-12 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/323963
Bank Of France (BoF) Expects Lower GBP For Q3 And The Situation On Phosphate Fertilizer Mining Industry

Bank Of France (BoF) Expects Lower GBP For Q3 And The Situation On Phosphate Fertilizer Mining Industry

Saxo Bank Saxo Bank 11.10.2022 13:05
Summary:  Sentiment remains wobbly as US equity markets edged toward the cycle lows yesterday, with the interest rate sensitive Nasdaq 100 index even posting a new bear market low as US yields lifted higher once again. Fed Vice Chair Brainard voiced the first cautious comments we have seen in a while on the effects of the Fed’s policy tightening even as she argued that tightening will continue. Ahead of the largest US banks kicking off earnings season on Friday, JP Morgan CEO Jamie Dimon says he expects a US recession in six to nine months.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities continued lower yesterday with S&P 500 futures touching the 3,600 level again before bouncing back a bit into the close. This morning the index futures are trading around the 3,608 level with the 3,593 level being the key level on the downside to watch. With the US 10-year yield back at the 4% level this morning we expect the pressure to continue in US equities and our thesis is also that the upcoming Q3 earnings season starting this week will lead to earnings downgrades and disappointments in the outlook. Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) Stocks traded in Shanghai and Shenzhen bourses stabilized and traded little changed from yesterday’s closes, with power generation and lithium producers gaining. Guangzhou Tinci Materials (002709:xsec) was 10% limit up and CATL (300750:xsec) rose 5%. CATL preannounced Q3 net income surging 169-200% Y/Y to RMB8.8-9.8 billion. China National Nuclear Power (601985:xssc) surged 7.2% after the company reported a 7.2% Y/Y electricity output growth in the first 9 months of the year. Hong Kong’s Hang Seng Index continued to slide, falling around 2% with China Internet names leading the charge lower. Alibiba(09988:xhkg), Tencent (00700:xhkg), JD.COM (09618:xhkg), Meituan (03690:xhkg), Bilibili (09626:xhkg) declined from 3% to nearly 9%. USD and US yields/risk sentiment USD strength continues as risk sentiment remains wobbly and the entire US treasury yield curve lifted once again, taking the 10-year treasury yield back to the key 4.00% cycle high area. USDJPY continued its tentative move above 145.00, closing in on 146.00 with no official response yet, while AUDUSD posted impressive new lows near 0.6250 overnight and USDCNH is pushing on the 7.20 level once again – the former range top from 2019 and 2020. EURUSD and especially GBPUSD have some more range to work with before posting cycle lows. The next test for the US dollar will be tomorrow’s FOMC minutes, but the event risk of the week will be Thursday’s September US CPI data point and whether traders feel a single month’s data can meaningfully shift the Fed’s stance, given evidence of a still very tight labor market. Gold (XAUUSD) Gold’s short-covering driven rally from last week continues to fade as the dollar regains strength and the US bond yields return to their recent peaks as the prospect for further and aggressive monetary-policy tightening weighs on the market. The latest COT report covering the week to October 4 showed funds changing their net position from the biggest short in almost four years to a small net long. With renewed dollar strength in focus the risk of fresh albeit more muted short selling exists with gold’s renewed upside push unlikely until the market feels convinced that the Fed has reached peak hawkishness. Support at $1658 with a break below signaling the risk of an even deeper retreat. Focus this week on US PPI and CPI prints. Crude oil (CLX2 & LCOZ2) trades lower on renewed demand concerns Last week’s OPEC driven price jump faded further overnight with the risk sentiment once again souring across markets on worries the global economy, including the US, will face a very challenging 2023. In addition, the authorities in China have signaled there will be no letup in their steadfast belief in the nation’s Covid zero policy, thereby potentially prolonging a slump in demand from the world’s biggest importer. For now, the time spreads in Brent continue to signal tightness with the December contract trading 9% above the June 2023 contract. Monthly oil market reports from the EIA and OPEC on Wednesday and the IEA on Thursday will be watched closely for any changes in the supply and demand outlook. Wheat futures (ZWZ2 & WHEATDEC22) jump to a three-month high The December benchmark wheat contract in Chicago surged to near the daily limit on Monday amid worsening Russia/Ukraine tensions and a worsening US crop outlook. Any slowdown in shipments of high protein wheat from the Black Sea may boost prices further and before the latest escalation shipments from Ukraine are already being delayed as the backlog of outbound vessels awaiting inspection in Istanbul has increased. The Ukraine grain export agreement comes up for renewal next month and with Russia losing the war the risk of further desperate measures may put the deal at risk. The rally in December wheat ran out of steam above $9.45 and may now pause ahead of a key crop report from the US Department of Agriculture on Wednesday. US treasuries (TLT, IEF) US treasury yields continued lifting late yesterday and overnight after a the bank holiday in the US yesterday. This has taken the 10-year treasury benchmark yield back close to the round 4.00% level that is a significant psychological milestone and near the 14-year high for the benchmark. Yields rose even as Fed Vice Chair Brainard voiced the first cautious notes we have heard in a while from an important Fed figure (see more below). The next key test for yields as we believe we are nearing “peak hawkishness” from the Fed soon, is more Thursday’s US CPI data point than tomorrow’s FOMC minutes, which may contain few surprises, given nearly all Fed members are on the same page in supporting the current tightening regime. What is going on? The UK government brings forward its budget plans to 31 October The UK government will announce its fiscal plan at the end of this month, more than three weeks earlier than initially scheduled. The plan is built on the ‘mini-budget’ of 45 billion pounds presented in September. It triggered a rout in financial markets which forced the Bank of England to step in the market. The advance release is aimed to appease markets and to provide insights on how the government will pay for tax cuts and what their long-term impact would be. On 31 October, the Office for Budget Responsibility will also publish its latest forecasts, including an impartial assessment of the macroeconomic consequences of the ‘mini-budget’. Fed Vice Chair Brainard signals peak hawkishness approaching, but still higher for longer rates Lael Brainard sounded a small note of caution on Fed’s tightening, saying that it will take time for rate hikes to bring inflation down while also highlighting slowing growth, cooling labor market and financial vulnerabilities. Still, she reaffirmed that monetary policy will be restrictive for some time. Charles Evans remained in favor of front loading, saying that the Fed should quickly reach levels where policymakers feel comfortable pausing to reduce the risk of overshooting. BoE on course to end buyback operations but announced fresh liquidity measures The Bank of England announced it remains on course to end its temporary buy-back auctions at the end of the week and is switching to liquidity support via expanded collateral repos, also for a limited period to help banks with customers that are not entirely hedged against LDI exposure. Gilts plunged as investors remained worried, with 30-year yields rising above 4.7% and 20-year touching a high of 4.9%. Meanwhile, the medium-term fiscal plan is to be published on October 31, just before the next MPC rate meeting, which at the least means a more informed decision may be possible. The Bank of France lowers its Q3 GDP forecast Yesterday, the Bank of France lowered its Q3 GDP forecast to 0.25 % versus prior 0.3% mostly due to poor industrial activity. Without much surprise, industrial companies are in a tough spot because of the energy crisis, supply chain disruptions, and a tight labour market. So far, the recession is not the central bank’s baseline. However, most economists expect France will not avoid a recession next year (with a drop of GDP between -0.2 % and -0.7 % in 2023 depending on the forecasting institutes). Chicago wheat futures jumped nearly 3% in early trading ... underpinned by concerns over the Russia-Ukraine war slowing grain shipments from the Black Sea region. This after Putin accused Ukraine of orchestrating the explosion on the bridge over the Kerch Strait, a key prestige project for the Russian President. The developments cast even more uncertainty over shipments to the world market through Ukraine’s export corridor in the Black Sea, which comes up for renewal next month. Dozens of grain-hauling vessels are already backing up while awaiting inspection at Istanbul under the terms of the deal. TSMC shares down 8% on more US restrictions on semiconductors The US has added new restrictions on exports of semiconductors used in AI and supercomputing, in addition to new restrictions on equipment used in semiconductor manufacturing to any Chinese companies. It is estimated that that the new restrictions will cost the company 5-8% of its revenue. Paul Tudor Jones is getting ready for a recession The famous macro trader said in an interview yesterday that his trading firm is getting ready to deploy its recession playbook. The key dynamics according to Tudor Jones are recessions last 300 days, equities fall 10% on average, short-term bond yields will start to go down before bottom in equities, term premium will increase both in equities and bonds, earnings multiples will compress, and the Fed will either halt or slow rate hikings. JPMorgan Chase CEO Jamie Dimon joins recession crowd In a speech yesterday Jamie Dimon added a negative jolt to the market saying that a global recession was likely in the next 6-9 months due to the rising interest rates and the war in Ukraine. What are we watching next? Fertilizer supply at risk amid fresh Russian tensions and Hurricane Ian aftermath Amid fresh tension from Russian upon Ukraine, fertilizer producers have once again been put in the spotlight on supply concerns. Equities in APAC involved in phosphate/fertilizers rose today as a result; so, it’s worth watching stocks in the sector across Europe and the US. The phosphate fertilizer mining industry’s supply has already been put at risk after Hurricane Ian hit Florida, impacting more than 1 billion ‘stacks’ of supply. Russia is the world’s largest supplier of nitrogen-based fertilizers; however, its supply was slimmed from embargoes after launching attacks against Ukraine. The economic calendar for the week picks up on Wednesday ... with the latest set of FOMC minutes, but the highlight of the week will be Thursday’s US September CPI report, after the August data surprised with significantly higher than expected inflation. Friday we get a look at US September retail sales after core spending has been on a declining trend, measured month-on-month, since early this year. Earnings to watch The Q3 earnings season kicks off this week, with the most important day being Friday, as seven large US financial institutions reporting. The key focus points will be to what extent US banks are able to increase their net interest margin, which they did in Q2, and the levels of credit provisions in Q3. Wednesday: PepsiCo Thursday: Progressive, Fast Retailing, Tryg, Walgreen Boots Alliance, Fastenal, BlackRock, Delta Air Lines, Domino’s Pizza Friday: Shanghai Putailai New Energy, YTO Express Group, PNC Financial Services, JPMorgan Chase, Morgan Stanley, Citigroup, UnitedHealth Group, Wells Fargo, US Bancorp, First Republic Bank Economic calendar highlights for today (times GMT) 0700 – Czechia Sep. CPI 1000 – US Sep. NFIB Small Business Optimism 1245 – ECB Chief Economist Lane to speak 1600 – US Fed’s Mester (Voter 2022) to speak 1645 – Switzerland SNB Chair Jordan to speak 1700 – US 3-year Treasury Auction 1800 – UK Bank of England’s Cunliffe to speak 1835 – UK Bank of England Governor Bailey to speak Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: https://www.home.saxo/content/articles/macro/market-quick-take-oct-11-2022-11102022
Positive Start Expected as Nvidia's Strong Performance Boosts Market Confidence

The Large Banks' Massive Unrealized Losses On Bond And Stock Market Situation

Saxo Bank Saxo Bank 11.10.2022 13:13
Summary:  Today we look at equity markets back at the cycle lows just ahead of earnings season as treasury yields and a strong US dollar continue to pressure. We also discuss unrealistic earnings expectations for the coming batch of earnings reports, the large banks' massive unrealized losses on bond portfolios that will hamper buyback programs and dividend generosity, the ongoing dicey situation for UK gilts and sterling as sentiment and policymaker credibility continue to struggle, crude oil & gas, FX focus, TSMC's ugly day and more. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting an on FX. Listen to today’s podcast - slides are found via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com. Source: https://www.home.saxo/content/articles/podcast/podcast-oct-11-2022-11102022
Forex: US dollar against Japanese yen amid volatility and macroeconomics

Jamie Dimon (JP Morgan Chase) Comments On The US Economy On CNBC

Conotoxia Comments Conotoxia Comments 11.10.2022 20:05
The word recession is starting to appear more and more often not only in the media, but also in the statements of the most important institutions and people in the world. Recently, the International Monetary Fund and the World Bank warned of a global recession, and now also the CEOs of the largest banks are echoing. Recession in the USA? JPMorgan Chase CEO Jamie Dimon told CNBC on Monday that the US economy "is still doing well" but expects it to enter a recession in the next nine months, BBN reported. Dimon warned that high inflation and rising interest rates, as well as the uncertainty surrounding the war in Ukraine, are "very, very serious things that I think will probably push the United States and the world - I mean Europe is already in recession - and they're likely to put the United States into some kind of recession six to nine months from now. " Several US Federal Reserve officials said that the US could still avoid recession, and some stressed that even if the economy slipped into a recession, the bank should not stop at rate hikes. Source: Conotoxia MT5, US500, Weekly What do Fed officials say about economic growth? Federal Reserve vice chairwoman Lael Brainard said on Monday that the US central bank's move to tighten monetary policy would have a full impact on economic activity "in the coming quarters" and its pressure on prices "may take longer," the BBN news service said. "The transmission of tightening policies is most evident in highly interest-rate-sensitive sectors such as housing," but the "moderate demand" that the Fed wants to see across the US economy, "so far has materialized only partially," she explained in a speech out of 64. The annual meeting of the National Association for Business Economics in Chicago, Illinois. Due to rising interest rates and changes in general financial conditions, "rebound in the second half of the year will be limited" and "real GDP growth will be broadly flat this year," Brainard said in a statement quoted by the BBN. Recession -what could it mean for the markets? Looking at business cycles, the documented economic recession phase could be characteristic of the late bear market phase. This may mean, in turn, that previously markets were in a bear market awaiting a recession. When this one actually shows up, the bear market may be in its final stage. Nevertheless, the bottom of a bearish market may also depend on how long the recession will last, how many quarters it will take, and how deep it will be.   Daniel Kostecki, director of the Polish branch of Conotoxia Ltd. (Cinkciarz.pl investment service) The above commercial publication does not constitute an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of April 16, 2014. It has been prepared for information purposes and should not constitute the basis for making investment decisions. Neither the author of the study nor Conotoxia Ltd. are responsible for investment decisions made on the basis of the information contained in this publication. Copying or reproducing this work without the written consent of Conotoxia Ltd. is prohibited. Read more on Conotoxia
Previous Fed Hikes Didn't Trigger Bitcoin To Fall, But...

Previous Fed Hikes Didn't Trigger Bitcoin To Fall, But...

InstaForex Analysis InstaForex Analysis 11.10.2022 21:13
  Bitcoin continues to trade in almost absolute flat. It hasn't moved much in the last few weeks. In the last few days, it has been moving along the downward trend line on the 24-hour TF, so there is still hope that this line will remain relevant, and with it, the downward trend has been maintained for almost a year. However, this requires the cryptocurrency to overcome the $18,500 level. There have been several attempts to go below this level, but none have succeeded. If the price nevertheless overcomes the trend line, we remind you, this will not be considered a buy signal, since this signal will be formed in a total flat. In this case, the price will remain inside the side channel of $ 18,500-$24,350. Therefore, the side channel will be the priority. There will not be many important events this week that can affect the movement of the entire cryptocurrency market, particularly bitcoin. We have already said that the ordinary news of the cryptocurrency sphere does not affect the "bitcoin" movement. Therefore, it doesn't even make much sense to analyze them. Global events and reports can move bitcoin from the "dead point" to which American inflation can be attributed. Recall that in the last two months it has been showing a slowdown, which is a positive effect that gives market participants hope for the completion of an aggressive Fed rate hike over the next 6 months. However, this is still a very long period during which the rate will increase.     Most experts, including us, agree that at the next Fed meeting, the rate will rise by 0.75% for the fourth time in a row. Inflation has slowed down too weakly to talk about a softening monetary approach. By the way, the last two Fed rate hikes did not provoke the collapse of bitcoin. But at the same time, the euro and the pound, along with the US stock market, continue to fall. Therefore, there is a feeling that a new fall in bitcoin will happen in the near future. Thus, we are still waiting for the quotes of the first cryptocurrency in the world to reach $ 12,426. In the 24-hour timeframe, the quotes of "bitcoin" could not overcome the $ 24,350, but they also could not yet overcome the $18,500 (127.2% Fibonacci). Thus, we have a side channel and it is unclear how much time Bitcoin will spend in it. We recommend not rushing to open positions. It is better to wait for the price to exit this channel, and only then open the corresponding transactions. Overcoming the $18,500 level will take you to the $12,426 level.   Relevance up to 17:00 2022-10-12 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/324013
Assessing 'Significant Upside Risks to Inflation': Insights from FOMC Minutes

The Actions Of The US Central Bank (Fed) Continue To Guide The Market

InstaForex Analysis InstaForex Analysis 12.10.2022 08:26
The attention of markets is now riveted not to the ECB or the Bank of England, but to the Fed. This is because even though the UK was the first to start raising interest rates, much more importance is paid to the Fed than other banks. That is why it is not surprising that the actions of the US central bank continue to guide the market, especially since at this time there is not a single hint that Fed rates will stop increasing in the foreseeable future. Of course, rates will decrease sooner or later, but it is unlikely to happen before the figure hits 4.5%. Almost all FOMC representatives agree that monetary policy needs to be tightened further in order to curb inflation. Yesterday, Fed Vice President Lael Brainard delivered a speech, confirming the fact that the bank will continue to do everything to stabilize prices. In particular, Brainard said that inflation is a serious problem and requires a clear, balanced approach. Supply remains fairly low and demand high, creating imbalances that are still pushing inflation higher. The labor market is likely to remain in a weaker state than before the pandemic. The economy may face a new shock associated with rising food and fuel prices due to the military conflict in Ukraine. Brainard also noted that the risks of a new rise in inflation remain due to OPEC's actions to reduce oil production, which could cause a new rise in prices in the energy market. The Fed is yet to consider easing the pace of rate hike as it intends to closely monitor economic data in order to clearly understand how the rate increase affects the economy and inflation. Selling securities off the Fed's balance sheet is a good way to raise rates in the end goal. These are the main statements of Lael Brainard, from which only one thing can be understood: the Fed will raise interest rates for at least a few more months, which could lead to a new increase in demand in dollar. Together with the difficult geopolitical situation in the world, which in itself increases the demand for dollar, these factors may be enough for euro and pound to fall further. And even though the ECB and the Bank of England will raise rates at the same time, the market will react to it very reservedly. Little will also depend on the US inflation report this Thursday as the value of the indicator is still too high for the Fed to even slow down the pace of monetary policy tightening. Based on this analysis, it is likely that the downward trend in EUR/USD will continue, but could end at any time. There may be an upward corrective wave, so it is best to sell up to the 423.6% retracement level of 0.9397. There is also need for caution as it is not clear how much longer the decline in euro will continue.   Relevance up to 06:00 2022-10-13 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/324047
Analysis And Trips For Trading The GBP/USD Pair In Short And Long Positions

There Are Hardly Any Positives In The British Assets Market

Saxo Bank Saxo Bank 12.10.2022 08:41
Summary:  Bank of England’s warning to end intervention sent an offered tone to bonds and equities towards the overnight session close, and added to the tightening risks that are being seen globally. Fed’s Mester reiterated hawkish comments as well, sending yields and dollar higher at the Asia open. USDJPY blew past 146, raising intervention threat again although yen crosses remain lower. Crude oil prices also plunged amid dollar strength and China lockdown concerns. Sterling and other UK assets look poised for a tough day ahead, and FOMC minutes are also due, which might mean ripples across global markets. What’s happening in markets? The Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) indices declined for the 5th day US stocks erased earlier gains as bond yield rose and incoming Q3 earnings and the CPI on Thursday added to the risk-off sentiment. The S&P500 skidded for the 5th day on further tech selling, ending 0.65% down, while the Nasdaq 100 index fell 1.2%. As for the biggest laggards in the S&P 500 sectors, for the second day in row, both the Casino and Gaming and Semiconductor sectors were among the biggest losers down ~4.7% and ~4.3% respectively, gaining downside momentum. Meanwhile, investors continued to top up defensive sectors, buying into the Food Retail and Drugs sectors for the second day in a typical risk-off fashion. Noteworthy US company news and moves General Motors (GM) plans to compete with Tesla’s (TSLA) solar Powerwall business by offering its own sun-generated storage system starting late next year. Tesla shares fell 2.9%, while GM closed almost unchanged. Also making headlines, Uber (UBER) and Lyft (LYFT) plunged 10% and 12% respectively after the US Department of Labor proposed to tweak the way it determines if workers are classified as employees or contractors. Amgen (AMGN:xnas) rose 5.7% after an analyst upgrade citing the potential of its experimental weight-loss drug. Chip maker, KLA (KLAC: xnas) plunged 6.2% after saying the company will stop sales to China-based customers form Wednesday, including South Korea’s SK Hynix’s operations in China. U.S. treasury yields (TLT:xnas, IEF:xnas, SHY:xnas) finished a choppy session with long-end yields higher After reaching 4% during Asian hours, the 10-year yields retraced to as low as 3.87% at around mid-day New York before bouncing back to finish the day 7bps higher at 3.95%.  The move higher in yields in the afternoon was first triggered by the Bank of England Governor Baily pushing back on calls to extend the emergency bond-buying programme and repeated the BoE’s prior day announcement to stick to the Oct 14 end day of the programme.  He told the audience at the Institute of International Finance annual meeting in Washington that he had warned U.K. pension funds that only three were left to wind up positions. In addition, poor 3-year U.S. treasury note auction results in the afternoon caused some traders to adjust their positions ahead of the 10-year and 30-year auctions on Wednesday and Thursday. 2-year yields finished the day unchanged at 4.31% and the 2-10 year curve bear steepened to -36. Hong Kong’s Hang Seng (HSIU2) retreated as China’s CSI300 (03188:xhkg) stabilized Stocks traded in Shanghai and Shenzhen bourses stabilized and traded little changed from yesterday’s closes, with power generation and lithium producers gaining. CATL rose 6% and led the share prices of the lithium space higher after the company preannounced Q3 net income surging 169-200% Y/Y to RMB8.8-9.8 billion. Eve Energy (300014:xsec) gained 6.2% and Guangzhou Tinci Materials (002709:xsec) soared 10% limit up. China National Nuclear Power (601985:xssc) surged 7.3% after the company reported a 7.2% Y/Y electricity output growth in the first 9 months of the year. On the other hand, Hong Kong’s Hang Seng Index continued to slide, falling 2.2% with financials, China Internet names, EV makers, and China property developers dragging down the benchmark.  The tightening of pandemic control in large cities including Shanghai and the editorials on the mouthpiece People’s Daily reiterating the country’s adherence to the Dynamic-Covid-Zero policy two days in a row dashed the notion of reopening held by some analysts and investors. Airline stocks dropped from 1.4% to 9.1%. Macao casino stocks plunged from 3% to over 5%. Reportedly short selling increased in China Internet names, with Alibaba (09988:xhkg), Tencent (00700:xhkg), JD.COM (09618:xhkg), Meituan (03690:xhkg), Bilibili (09626:xhkg) declining from 3% to more than 9%. Chinese developers, Country Garden (02007:xhkg ) and Longfor (00960:xhkg) were the two largest losers in the Hang Seng Index. Australia’s ASX200 (ASXSP200.1) is tipped to fall 0.3% (futures). Focus on Bank of Queensland results, fertilizer companies and oil So far this week, the ASX200 has fallen 1.7% outperforming global markets, with the most selling in the Tech Sector, while the most gains have been in Consumer Staples, Materials and Industrials, with fertilizer and agricultural stocks rising the most on supply concerns. The Bank of Queensland (BOQ) reported a 5% drop its cash profit for the full year, while the closely watched metric of banking profits, its net interest margin reduced to 1.74% with the bank blaming increased competition on its margin falling. Loan growth in housing rose 7%. The group also declared an impairment of $13 million. That being said, the BOQ and other regional banks are seeing more loan growth when compared to the big four banks year on year. Elsewhere, it’s worth watching oil stocks today after the oil price fell back to $88 after the USD roared up again. Also keep an eye on gold stocks that are likely to come under further selling. While iron ore companies could be worth a look after a strike in Africa hit the countries top iron ore port. Yen past the previous intervention level, GBPUSD dropped below 1.10 USDJPY was seen rising above 146 in early Asian trading hours after the US yields surged higher overnight after BOE’s Governor Bailey warned on end to intervention (read below). The gilt market was closed by the time his comments came, but the US treasuries reacted to it and so the response from the yen could be expected. The Japanese yen has been trapped below this intervention threat level for weeks, but the pressure to the upside will continue to soar amid fresh surge in dollar and yields as dollar’s safe haven bid continues to play. Other yen crosses, however, remain below at sub-142 levels vs. 144 at the time of September intervention and AUDJPY below 92 vs. 97-levels previously. Response on Bailey’s comments was also seen in the sterling which dropped below 1.10 for the first time in October. Crude oil (CLX2 & LCOZ2) down about 3% Oil prices slumped on Tuesday amid further gains in the US dollar towards the NY session close and reports on China’s fresh lockdowns ahead of its key Communist Party meeting that begins later this week. WTI futures slid below $90/barrel, while Brent was below $94 after touching $98+ levels on Monday. Geopolitical tensions however appear to be escalating, with Putin warning further missile attacks on Ukraine. Meanwhile, US-Saudi tensions also remain key to monitor after the OPEC+ production cut announced last week.   What to consider? Bank of England’s Bailey warns intervention to end on Friday Bank of England Governor Bailey gave a “three day” deadline to investors to wind up their positions that they can’t maintain because the central bank will halt its intervention at the end of this week as planned. There had been some expectations that the BoE might extend the purchases to quell financial instability in the UK, but Bailey did not give way on those. This also comes as a hint that QT may begin later this month as planned. There is hardly any silver lining visible for UK assets at this point. Fed’s Mester stays hawkish, FOMC minutes ahead Cleveland President Loretta Mester (2022 voter) reiterated the hawkish rhetoric saying that the Fed has yet to make any progress on lowering inflation and policy needs to be moved to restrictive levels and the biggest policy risk is that the Fed does not hike enough. She does not expect Fed rate cuts in 2023. As we have been saying, she also remarked that “at this point the larger risks come from tightening too little.” FOMC meeting minutes from the September 21 meeting will be released today and will likely continue to send out hawkish signals. China’s outstanding RMB loans grew at 11.2% Y/Y in September, above expectations China released its September credit data last evening. New aggregate financing in September came in at RMB3,530 billion, much stronger than the RMB2,750 billion expected (Bloomberg Survey) and RMB2,430 billion in August as well as the RMB2,903 billion in September 2021. It brought the growth rate of the aggregate financing to 10.6% Y/Y, higher than the 10.5% in August.  New RMB loans rose to RMB2,470 billion, above RMB1,800 billion expected and RMB1,250 billion in August.  An acceleration in loans to the corporate sector, which rose to RMB1,910 billion in September from RMB875 billion, drove the overall loan growth.  Outstanding RMB loans in September grew 11.2% from a year ago. The instructions as well as window guidance from the regulators to urge banks to lend to infrastructure projects, manufacturing industries, and the property sector contributed to the better-than-expected growth in corporate loans. IMF’s warning on global growth After recession threats from Jamie Dimon and Paul Tudor Jones, now the IMF has said there is a growing risk that the global economy will slide into recession next year as households and businesses in most countries face “stormy waters” and the “worst is yet to come”. The institute has said that global growth will slow from 6.0% in 2021 to 2.7% in 2023, being the weakest growth since 2001. The IMF also warned of an increased risk of rapid, disorderly repricing in financial markets, which is exacerbated by existing vulnerabilities and a lack of liquidity. China signaling it will stick with the Dynamic Covid Zero policy after the CCP’s national congress People’s Daily published for the third day in a row this week to reiterate the Chinese authorities’ determination to adhere to the “Dynamic Covid Zero” policy and pledge not to “lie down” passively. It warns that any relaxation of pandemic control would result in a large number of inflection and death and a collapse in the healthcare system so the insistence on Dynamic Covid Zero is the best way to protect people’s lives and health which are of utmost importance. The series of articles is apparently to dash the speculation of relaxation of pandemic control after the Chinese Communist Party’s national congress next week. In the meantime, as Covid cases bounced above 2,000 after the National Day golden week holiday during which many people travelled around the country. Large cities, including Shanghai and Shenzhen tightened pandemic control measures somewhat. Fertilizer supply at risk amid fresh Russian tensions and Hurricane Ian aftermath Amid fresh tension from Russian upon Ukraine, fertilizer producers have once again been put in the spotlight on supply concerns. Equities in APAC involved in phosphate/fertilizers rallied yesterday as a result. So perhaps it’s worth watching stocks in the sector again today, such as Nufarm (NUF), and Orica (ORI) which are this weeks best performers on the ASX. The phosphate fertilizer mining industry’s supply has already been put at risk after Hurricane Ian hit Florida, impacting more than 1 billion ‘stacks’ of supply. And recall that Russia is the world’s largest supplier of nitrogen-based fertilizers, but its supply has slimmed from embargoes after launching attacks against Ukraine. Perhaps the market is thinking more development are to come, so it's worth watching to see how this space develops.    For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast.     Source: https://www.home.saxo/content/articles/equities/market-insights-today-12-oct-12102022
Easing In Chinese Covid Measures | Crypto Distress Continues | Markets Trade Joyfully

Large Cities In China Tightened Pandemic Control Measures Somewhat | Intel Is Forced To Reduce The Number Of Employees

Saxo Bank Saxo Bank 12.10.2022 09:02
Summary:  A rocky ride for markets yesterday, which were trying to post a rally until a steep sell-off developed late in the session as Bank of England Governor Andrew Bailey warned that UK pensions must get their house in order by Friday, sticking with the end date of the Bank of England’s emergency intervention. Then this morning, the FT reports that the Bank of England may be willing to extend those measures, helping to stabilize sentiment.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities slid again yesterday with S&P 500 futures closing below the 3,600 level for the first time since November 2020, but the index futures are bouncing back a bit this morning trading around the 3,623 level. The fragile situation in the UK Gilt market is a fresh source of negativity with BoE Governor Bailey’s comments yesterday adding to nervousness (see more detailed summary below). Later today the market will get US September PPI figures which are expected to remain at 0.3% m/m excluding energy and food. PepsiCo is the first big US company to report full Q3 earnings with the results expected before the market opens. Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) The tightening of pandemic control in large cities including Shanghai and Shenzhen plus and the mouthpiece People’s Daily reiterating the country’s adherence to the Dynamic-Covid-Zero policy for the third day in a row this week to the notion of reopening held by some analysts and investors continued to linger over stocks in the Hong Kong and mainland bourses. The IMF cut China’s growth forecasts to 3.2% in 2022 and 4.4% in 2023.  Hang Seng Index dropped 2% to the level last seen in October 2011. The China Internet, China consumption, China developers, and Macao casino names were among the worst performers. CSI300 fell 1.4% to make a new 2.5-year low. While SMIC (00981:xhkg) fell nearly 4%, other semiconductor stocks managed to bounce off their low, with Hua Hong Semiconductors (01347:xhkg) up 2.7%, SG Micro (300661:xsec) up 3%. China’s September credit data came in better than expected with acceleration in loans to corporate. GBP and USD focus after chaotic Surely Andrew Bailey’s days as Bank of England governor are numbered if BoE does indeed end up extending the QE programme (as the FT reports this morning) that Bailey was out warning yesterday would end on schedule this Friday? GBPUSD has traded all over the map and has correlated with general risk sentiment on the issue, pumping to nearly 1.1200 yesterday before dumping to the low 1.0900’s late yesterday and back to 1.1000 this morning. Any announcement of Bailey’s departure might see short-term upside for sterling. Eventually, the US dollar should steal back the limelight as we get a look at tonight’s FOMC minutes and tomorrow’s US September CPI data: even if the data point is somewhat weaker than expected, will the markets be willing to celebrate a single data point when the US labor market remains so tight and perhaps a large driver of inflation risks at this point in the cycle? Note the upside pressure in USDJPY, which traded to new 24-year highs above 146.00 as traders feel emboldened on the absence of official intervention. Gold (XAUUSD) Gold has settled into a tight but nervous trading range around $1670 and following last week's aggressive short squeeze, potential short sellers have turning more cautious at this stage where the market has been left pondering how close we are to seeing peak hawkishness, a development that may signal a low in gold. The first potential sign came on Monday when Federal Reserve Vice Chair Lael Brainard laid out the case for exercising caution, noting that the previous increases are still working through the economy at a time of high global and financial uncertainty. Key support at $1658, the 61.8% retracement of the recent correction, with the market focusing on Thursday’s US CPI print for direction. Crude oil (CLX2 & LCOZ2) trades lower for a third day as recession concerns once again offsets last week's OPEC production cut, and after China continues to reiterate its firm belief in the nation’s Covid zero policy, thereby potentially prolonging a slump in demand from the world’s biggest importer. Prices have also responded to a growing chorus of analysts predicting a hard landing in the US while the IMF has downgraded global growth for next year saying that policies to tame high inflation may add risks to the global economy. Monthly oil market reports from the EIA and OPEC today and the IEA on Thursday will be watched closely for any changes in the supply and demand outlook. US treasuries (TLT, IEF) US treasury yields trading fairly steadily just below the key cycle high of 4.00% for the 10-year treasury benchmark and ahead of the macro event risk of the week, tomorrow’s US September CPI data. A three-year treasury auction yesterday was seen as somewhat weak on tepid foreign demand. A 10-year treasury auction is up later today and a 30-year T-bond auction tomorrow. What is going on? China signaled it sticks with the Dynamic Covid Zero policy  For a third day this week, the People's Daily published an article reiterating the Chinese authorities’ determination to adhere to the “Dynamic Covid Zero” policy and pledge not to “lie down” passively.  It warns that any relaxation of pandemic control would result in many infections and death and a collapse in the healthcare system so the insistence on Dynamic Covid Zero is the best way to protect people’s lives and health which are of utmost importance. The series of articles is apparently to dash the speculation of relaxation of pandemic control after the Chinese Communist Party’s national congress next week.  In the meantime, Covid cases bounced above 2,000 after the National Day golden week holiday during which many people traveled around the country.  Large cities, including Shanghai and Shenzhen, tightened pandemic control measures somewhat.  Biden warns of ‘consequences’ for Saudi Arabia after OPEC+ cut The US is not pleased with Saudi Arabia’s decision to allow OPEC+ to cut oil production by 2mn barrels per day amid the ongoing energy crisis. Biden said in an interview Tuesday night that there will be consequences and the speculation is that there could be restrictions on defence contracts.  LVMH organic growth in Q3 beats estimates While consumption patterns are weakening in key consumer categories such as consumer electronics and clothing, the high-end luxury market is in decent shape. LVMH reports organic revenue growth of 19% y/y in Q3 vs estimates of 14.4% y/y driven by strong performance in its Fashion & Leather division.  Intel is planning large job cuts The PC market is facing severe headwinds post the pandemic demand boom and the ongoing cost-of-living crisis in the world. This is forcing Intel to significantly cut the number of employees with sales and marketing potentially seeing a 20% cut. What are we watching next?  US grain futures fall ahead of key report Chicago wheat futures dropped on Tuesday after Russia having produced a bumper crop, may abolish its quotas on grain exports. This a day after prices jumped to a three-month high on worries about the viability of the Ukraine grain corridor following Russia’s latest attacks on Ukraine cities. Corn meanwhile trades near a four-month high ahead of today’s important WASDE report from the US Department of Agriculture, which will offer traders insights about the current outlook on world supply and demand for key crops. The report is likely to show lower US corn and wheat stocks while the drop in global stockpiles is expected to be smaller due to a pickup in production elsewhere.  Volatility risks in the FX market through the end of the week As noted above, the Bank of England messaging on its emergency QE programme and the fate of UK pension funds is a proper mess that the already very shaky Truss government can ill afford and could mean changes to the BoE’s leadership (or “should” mean?). Elsewhere, note that USDJPY has slipped to new 24-year highs, with the question of intervention hanging over the market as the price action works higher. The economic calendar for the week picks up today The economic calendar will increase momentum with the latest set of FOMC minutes, but the highlight of the week will be tomorrow's US September CPI report, after the August data surprised with significantly higher than expected inflation. Friday we get a look at US September retail sales after core spending has been on a declining trend, measured month-on-month, since early this year. Earnings to watch Today’s earnings focus is PepsiCo which is scheduled to report Q3 earnings figures before the market opens with analysts expecting 3.1% y/y revenue growth and slightly lower EBITDA margin q/q providing the first signs of whether a margin compression theme is building. PepsiCo has a broad product portfolio, and we expect it to have delivered robust results from the company. Wednesday: PepsiCo Thursday: Progressive, Fast Retailing, Tryg, Walgreen Boots Alliance, Fastenal, BlackRock, Delta Air Lines, Domino’s Pizza Friday: Shanghai Putailai New Energy, YTO Express Group, PNC Financial Services, JPMorgan Chase, Morgan Stanley, Citigroup, UnitedHealth Group, Wells Fargo, US Bancorp, First Republic Bank Economic calendar highlights for today (times GMT) 1135 – UK Bank of England’s Pill to speak 1230 – US Sep. PPI 1330 – ECB President Lagarde to speak 1400 – US Fed’s Kashkari (voter 2023) to speak 1600 – EIA's Short-Term Energy Outlook 1600 -  USDA’s Monthly World Agriculture Supply & Demand Estimates 1700 – UK Bank of England’s Catherine Mann to speak 1700 – US 10-year Treasury Auction 1800 – US Fed’s FOMC Minutes 2030 – API's Weekly US Oil inventory report 2230 – US Fed’s Bowman (voter) to speak on forward guidance as policy tool 2301 – UK Sep. RICS House Price Balance During the day: OPEC’s Monthly Oil Market Report   Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: https://www.home.saxo/content/articles/macro/market-quick-take-oct-12-2022-12102022
Oil Prices Rise as OPEC Cuts Output and API Reports Significant Inventory Drawdown

Bank Of England (BoE) Interventions Ineffective | The USD/JPY Pair Spiked Above The 146 Level For The First Time In 24 Years

Swissquote Bank Swissquote Bank 12.10.2022 10:37
We are only Wednesday, and the Bank of England (BoE) already intervened twice this week, to cool down the unbearable negative pressure on the British sovereign bonds. But the BoE Governor Bailey’s lack of tact sent all efforts up in smoke. The UK sovereign and sterling remain under a decent selling pressure. All eyes are on FOMC minutes and the US inflation data Beyond Britain, all eyes are on FOMC minutes and the US inflation data. Today, the minutes from the FOMC’s latest meeting will reveal if some Federal Reserve (Fed) members are concerned about going ‘too fast’ in terms of rate hikes. US will also reveal the latest producer price index for the month of September. The US factory-gate prices are expected to have slowed from 8.7% to around 8.4%. Then tomorrow, we will have a better insight about the situation in consumer prices. The headline CPI is expected to have slowed from 8.3% to 8.1%, but core inflation may have spiked higher, which is bad news for those praying for the Fed to slow down the pace of its rate tightening. Elsewhere, the IMF cut its global growth forecast for next year to 2.7%, from 2.9% in July, and from 3.8% in January, and said that there’s 25% probability that growth will slow to less than 2%. In the euro area, the GDP could rise just 0.5% next year. Forex Market The EURUSD remains under a decent pressure of the strong dollar, and only a soft inflation data from the US could help the euro bears take a pause. In Japan, things are not necessarily better. The USDJPY spiked above the 146 level for the first time in 24 years, and investors couldn’t trade the 10-year JGBs for three days, because the BoJ broke the system by buying just too much of the 10-year bonds to conduct a yield curve control strategy. Swap traders are now betting that the BoJ can’t carry on with abnormally low interest rates for so long, and will be forced to hike its rates at some point. Watch the full episode to find out more! 0:00 Intro 0:37 It’s not time for a gaffe, Mr. Bailey! 3:31 Jamie Dimon sees another 20% drop in S&P500 4:23 But it all depends on US inflation and the Fed policy! 6:27 Intel crops jobs 7:32 IMF cuts global growth forecast 8:04 EURUSD under pressure 8:38 US crude slips below $90pb 8:47 BoJ will soon be forced to act on rates to stop yen depreciation Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #UK #GBP #gilt #Bailey #Liz #Truss #sovereign #crisis #FOMC #minutes #USD #inflation #PPI #CPI #crude #oil #Intel #IMF #growth #forecast #JPY #BoJ #FTSE #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH
Japan: 4Q22 GDP rebounded, but less than expected

It Is Expected, That The Japanese Government Intervenes In The Market At The End Of This Week

InstaForex Analysis InstaForex Analysis 12.10.2022 10:59
On Wednesday morning, the Japanese currency was covered by a strong tsunami caused by the USD. Paired with the dollar, the yen crossed the red line at 145.90 and collapsed to a new 24-year low. The dollar has dispersed Today's culminating event in the foreign exchange market should be the release of the minutes of the September FOMC meeting. Recall that last month, as part of the current tightening cycle, the US central bank raised the interest rate by 75 bps for the third consecutive time and signaled the continuation of an aggressive course in order to curb inflation faster. Now traders hope that the Federal Reserve's minutes will shed light on the central bank's future plans regarding rates. If the report turns out to be more hawkish, it will strengthen expectations for another increase in the indicator by 75 bps. This development is an excellent driver for the yield of 10-year US government bonds. Ahead of the release of the FOMC minutes, the indicator soared to a 14-year high at 4.006%. The jump in yields contributed to the dollar's growth in all directions. At the start of Wednesday, the DXY index rose by 0.16% and tested a 2-week high at 113.54. At the same time, the greenback showed the best dynamics against the yen, which is absolutely logical. Among all the currencies of the Group of 10, the JPY is particularly sensitive to the growth of long-term US bond yields, since the same Japanese indicator is still near zero. The growing monetary divergence of Japan and the United States has led to the fact that this year the yen has sunk against the dollar by more than 20%. And this morning, the yen set another anti-record. The USD/JPY pair jumped by more than 0.3% and touched the level of 146.35. The last time the quote was traded at this level was in August 1998. Is the intervention close? Of course, the fact that dollar bulls crossed the red line again further increased the risk of repeated currency intervention by the Japanese authorities. Recall that the Japanese government intervened in the market for the first time in 24 years three weeks ago, when the USD/JPY pair reached the level of 145.90. Now, when the quote turned out to be much higher than this level, many traders are afraid of a repeat of the September scenario in the near future. However, this time Japanese politicians will most likely not focus on any particular red line. At this stage, the more important indicator will be the rate of change in the exchange rate. This was announced this morning by Japanese Finance Minister Shunichi Suzuki. "If the yen falls rapidly, it will force the Japanese government to push the red button again," Commonwealth Bank of Australia strategist Joseph Capurso shared his opinion. Meanwhile, many analysts warn that in the short term, the dollar's growth may accelerate significantly on all fronts, including against the yen. Today's FOMC minutes is far from the only obvious driver for the dollar. The real rocket fuel for the USD may be tomorrow's release of statistics on inflation in the United States for September. If the market sees that consumer price growth is still steady, it is likely to reignite a wave of speculation about an even sharper rate hike in America. In this case, the dollar may demonstrate another parabolic growth. Then Japan will simply have no other choice but to re-intervene. The yen is doomed anyway According to Kapurso, the Japanese government will intervene in the market by the end of this week. However, as in September, the effect of the intervention will be short-lived. Any fluctuations caused by the intervention of the USD/JPY pair will stop within a few weeks, the analyst is certain. The quote will be able to recover fairly quickly, since the dollar now has very strong support: the Fed's November meeting is ahead, which means the next round of rate hikes. The asset has excellent growth potential in the longer term. Even if in the future the Fed starts to slow down the pace of tightening its monetary rate a bit, the Bank of Japan policy will still remain ultra-soft. This should support the US currency. We expect that the dollar will remain strong at least until next spring, and we maintain our 3-month forecast for the USD/JPY pair at 147.00, Rabobank analysts said.   Relevance up to 09:00 2022-10-14 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/324071
FX Markets React to Rising US Rates: Implications and Outlook

The Fed Is Ready To Sacrifice Whatever It Takes To Contain Inflation

InstaForex Analysis InstaForex Analysis 12.10.2022 11:07
Risk appetite continues to fall as expectations for softer policy are decreasing more and more. Cleveland Fed President Loretta Mester has recently said that the bank has a lot of work to do to curb inflation, so it currently sees no reason to slow the pace of interest rate hikes. Fight fed with inflation Fed officials are now raising interest rates at the fastest pace seen in decades. In this way, they are trying to suppress stubbornly high inflation, which continues to grow and is in the region of a forty-year high. And since the Fed raised rates by 75 basis points last month to a target range of 3.25%, most likely, it will hit 4.4% by the end of this year, which means that there will be 1.25% increase at the November and December meetings. Mester reiterated that the US central bank will have to raise rates slightly higher than expected as high inflation continues despite efforts. It is difficult to doubt this, especially after the recent report on the state of the labor market, where the unemployment rate has fallen to almost historical lows, and new jobs have been created and continue to be created. Nevertheless, lowering inflation is the top priority as many are now suffering from having to spend more money on necessities like gasoline and food. The Fed also stressed that they will do everything possible to curb inflation even if their efforts hurt the economy. So far, this is not so noticeable yet as retail sales remain at a fairly high level. Fed officials predict that the unemployment rate could rise to 4.4% from the current level of 3.5%. In addition to raising rates, the Fed is also getting rid of its bloated balance sheet. Mester thinks the process is going smoothly. EUR/USD Talking about EUR/USD, quotes have reached the support level of 0.9680, but now there is a slight correction ahead of an important inflation report in the US. To resume growth, it is necessary to break above 0.9730, as only that will push the quotes to 0.9775 and 0.9810. Meanwhile, a break of 0.9680 will restore pressure on the pair and push it to 0.9640, 0.9590 and 0.9540. GBP/USD As for GBP/USD, it continues to decline, so buyers are focused on defending the support level of 1.0930 and resistance level of 1.1050. Only the breakdown of the latter will open the path to 1.1120, 1.1180 and 1.1215. Meanwhile, a return of pressure and move under 1.0930 will push GBP/USD down to 1.0870 and 1.0800.   Relevance up to 09:00 2022-10-13 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/324075
Hungary's Temporary Inflation Uptick: Food Price Caps and Fuel Costs in Focus

Morgan Stanley Talks Stock Market | Fiserv - Newest Payments Company In German Market

Kamila Szypuła Kamila Szypuła 12.10.2022 13:12
Reports, speeches are taking place this week, but not only. Meetings of people from different industries also take place and are as important as the data. From tweets, we can also learn about the situation on the stock market, as well as about new companies. In this article: Investors Conference Stock Market A new company in the payments market Meeting with various industries Discussion on Fed activities Pleasant and useful In his latest tweet, J.P. Morgan announces a conference where investors will respond to their findings and will perform a charity action collecting money to fight poverty.   Some of the brightest minds in business are gathered at @RobinHoodNYC Investors Conference to share insights and raise money to fight poverty. pic.twitter.com/mvCKa6fXnJ — J.P. Morgan (@jpmorgan) October 11, 2022 Being among the brightest business minds does not mean being false and does not mean that we are always up to date. Meetings like this will have many benefits for business people. The exchange of observations and discussion can give each of them a new perspective and thus many advantages on the market. Charity fundraisers are held more and more often at such meetings. And it is so this time. This time, investors want to spend money on fighting poverty. Such information may put investors in a positive light, as most people outside the sector believe that they are only thinking about their own profits. Outlook of Stock Market Morgan Stanley tweets about situation on the stock market.   Last week stocks rallied quickly but dropped just as fast as markets continue to hope for a more dovish Fed, but will this 2-way risk continue as evidence for a drop in earnings continues to accumulate? Read more about this episode: https://t.co/wk9YrJNbFj pic.twitter.com/DPN4GLNLIs — Morgan Stanley (@MorganStanley) October 11, 2022 The stock markets are mainly experiencing declines. And the economic or geopolitical situation is not conducive to improving or reducing the unfavorable situation. Taking a closer look at the prevailing situation in this area can help existing and new investors reduce losses. Germany’s newest payments company Deutsche Bank announces in its tweet the inclusion of Germany's newest payments company.   Deutsche Bank and @Fiserv launch Vert, Germany’s newest payments company. Vert offers full-service payment acceptance solutions for merchants via mobile devices, apps and at the checkout. https://t.co/vuqHcBCPN6 pic.twitter.com/R1bbnWhMrU — Deutsche Bank (@DeutscheBank) October 12, 2022 Technology is constantly evolving, even in the payment sector. Consumers still expect new solutions that will make their payments easier. A new business can mean new opportunities as well as new ideas. Getting to know a new company and its strategy may not only become closer to consumers, but also use word-of-mouth marketing, which will help position the company. Annual GS Innovators Summit Goldman Sachs in his post, he presents Builders and Innovators, who will participate in the GS Innovators Summit.   Meet our 2022 Builders and Innovators: Melissa Hanna of @getmahmee and Jason Ballard of @ICON3DTech, are just some of the exceptional entrepreneurs joining us at our annual #GSInnovators Summit. 💡We're excited to see where ideas start! Learn more: https://t.co/6PHlgcSS0p pic.twitter.com/VxkpfNEQn9 — Goldman Sachs (@GoldmanSachs) October 11, 2022 Every year, the Goldman Sachs Builders + Innovators Summit brings together the minds of outstanding entrepreneurs from various industries. The meeting brings together 100 of the most intriguing entrepreneurs from various industries, which allows for the exchange of experience ideas, as well as creating new ones in cooperation between various industries. It also allows you to understand other sectors. The longer we stay in a given industry, we think that nothing new will appear, but people who do not work and use the products may have new ideas or opinions about what should be discussed. What is more, such meetings are not a waste of time, and indeed intersect not only in interpersonal relations, they can help but also in the future development. Does the Fed have a plan? Charles Schwab Corp informs Chief Investment Strategist about the discussion, Liz Ann Sonderswith Mike Townsend on Fed activities.   Schwab's Chief Investment Strategist, @LizAnnSonders, joins @MikeTownsendCS to discuss whether the Fed actually has a plan. https://t.co/NICnc53tt7 — Charles Schwab Corp (@CharlesSchwab) October 11, 2022 Every central bank tries to bring inflation down to 2%, including the Fed. The Fed's actions have a significant impact not only on the American economy, but also on the global situation. Another rate hike did not help reduce inflation, and Fed representatives want to bring inflation down at all prices. Traders, investors wonder if there is any specific plan in this. The experts supported in the Charles Schwab Corp tweet will also consider it. Getting to know the opinions of experts may or may not calm the moods of market participants.
bybit-news1

Inflation: The Time Has Come... There Are Two Crucial Releases In The USA This Week!

Conotoxia Comments Conotoxia Comments 12.10.2022 14:03
Financial markets, especially in the United States, which appear less affected by the energy crisis than Europe's, seem to be waiting for important inflation data. Today, information will be published showing the price increases faced by producers (PPI inflation), while tomorrow there will be data on consumer inflation (CPI). Inflation data and expectations Before we move on to the discussion of the latest inflation data or the market consensus for the current reading, we can take a look at several other data, the task of which may be to express an opinion on the expected future inflation. The Federal Reserve Bank of New York reported that the median of one-year inflation expectations fell by 0.3 percentage points to 5.4 percent, the lowest value since September 2021. A survey of consumer expectations conducted by the New York Fed in September 2022 also showed that the three-year inflation expectations rose by 0.1 percentage point to 2.9 percent, and the five-year one rose by 0.2 percentage point to 2.2 percent, the BBN website reported. Household spending expectations, on the other hand, have plunged sharply, recording the largest one-month decline since the franchise was launched in June 2013, the New York Fed wrote in a report. Source: Conotoxia MT5, XLY, W1 Limited disposable income and its possible impact on the market The US economy appears to be largely based on consumption, including consumption on credit. Currently , such consumption seems to be slowing down due to the increase in food prices or higher costs of maintaining a household. In turn, Americans' disposable income has decreased. This may mean that consumers shift their spending from goods that they do not need to live, towards basic necessities. This could be also seen in the strong weakness of the ETF DMA quotations on the XLY Consumer Discretionary, i.e. the ETF with exposure to companies producing so-called discretionary goods. In other words, they are goods without which we can live in worse times, and they make our lives easier in better times. XLY fell 35% from its peak to yesterday's close, more than the broad S&P500 index, which fell 25%. Source: Conotoxia MT5, W1 This may quite show that high inflation may inhibit purchases of unnecessary goods, and its fall could fuel this demand again. We will find out about inflation in the US in September tomorrow at 14:30 GMT + 2. This may be one of the most awaited macroeconomic data of the week. Today, in turn, apart from the publication of PPI inflation, the market will learn in the evening the minutes of the last FOMC meeting (20:00 GMT + 2). Daniel Kostecki, director of the Polish branch of Conotoxia Ltd. (Cinkciarz.pl investment service) The above commercial publication does not constitute an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of April 16, 2014. It has been prepared for information purposes and should not constitute the basis for making investment decisions. Neither the author of the study nor Conotoxia Ltd. are responsible for investment decisions made on the basis of the information contained in this publication. Copying or reproducing this work without the written consent of Conotoxia Ltd. is prohibited. Read more on Conotoxia
Economic Calendar Details and Trading Analysis - August 7 & 8

The USD/INR Pair May Portray A Sideways To Positive Move Ahead Of The US CPI

TeleTrade Comments TeleTrade Comments 13.10.2022 08:58
USD/INR snaps three-day downtrend amid firmer yields, US dollar. Five-month high India inflation fails to push RBI hawks. US Dollar’s safe-haven demand, upbeat US fundamentals versus India favor pair buyers. Any disappointment from US CPI will have limited repercussions on DXY’s broad fundamental strength. USD/INR picks up bids to 82.32 while paring the first weekly loss in four ahead of Thursday’s European session. In doing so, the Indian rupee (INR) pair traces firmer US Treasury yields ahead of the US inflation numbers for September. Other than the pre-data anxiety, hawkish Fed bets and the recent Federal Open Market Committee (FOMC) Meeting Minutes, as well as the US data, could also be linked to the USD/INR pair’s run-up. The latest Fed Minutes mentioned that the policymakers are concerned about inflation and fear doing too little. With this, the CME’s FedWatch Tool prints a nearly 85% chance of the Fed’s 75 bps rate hike in November. On the other hand, the US action to increase hardships for Chinese chipmakers also propels the pair prices. On the contrary, Chinese media chatters suggesting the government’s plan to buy houses as a part of the stimulus seemed to have put an immediate floor under the riskier assets, which in turn negatively affect the US dollar. Additionally, the softer US inflation expectations, as per the 10-year and 5-year breakeven inflation rates per the St. Louis Federal Reserve (FRED) data, also probe the greenback buyers. At home, India's retail inflation accelerated in September to a five-month high of 7.41% year-on-year as food prices surged, raising fears of further interest-rate hikes when the central bank meets for its next policy review in December, reported Reuters on Wednesday. With this, the odds of the Reserve Bank of India's (RBI) 35 bps rate hike in December appear more lucrative. However, the volume of rate increase and the time distance portray a more hawkish scenario for the Fed than the RBI, which in turn favors the USD/INR bulls. Moving on, USD/INR may portray a sideways to positive move ahead of the US CPI, expected to ease to 8.1% YoY versus 8.3% prior. However, the more important CPI ex Food & Energy is likely to increase to 6.5% YoY from 6.3% prior and can favor more upside considering the recession woes. Technical analysis One-month-old support line, around 82.15 by the press time, restricts short-term USD/INR downside amid bullish MACD signals.
The Challenge to the Dollar: De-dollarisation and Geopolitical Shifts

The Fed Is Likely To Be Reluctant To Cut Key Rates Again Quickly

TeleTrade Comments TeleTrade Comments 13.10.2022 09:56
The Federal Reserve in September raised key interest rates by 75 basis points for the third time in a row. The upper bound of the target corridor now stands at 3.25%. The Fed is expected to raise it to 5.0% by the end of the first quarter, according to economists at Commerzbank. Fed is stepping on the brakes hard “We expect another big 75 bps rate hike at the meeting in early November. By the end of the year, the key interest rate should stand at 4.50% and peak at 5.00% in the first quarter of 2023. We have thus raised our forecasts for the fed funds terminal rate.” “Despite the recession expected in the US in the first half of 2023, the Fed is likely to be reluctant to cut key rates again quickly due to stubborn inflation. We do not expect this until towards the end of 2023.”
All Eyes On Capitol Hill, Jerome Powell Will Appear Before The Senate Banking Committee

The US Dollar (USD) Is Steadily Growing Amid Monetary Tightening

InstaForex Analysis InstaForex Analysis 13.10.2022 10:03
As I mentioned in yesterday's article, the Fed's key rate decisions are in the spotlight. If earlier some traders expected a shift to a softer stance, now everyone is betting on further tightening. The regulator is likely to raise the interest rate at least 3 more times at its meetings. Some analysts reckon the Fed may continue to hike rates in 2023. At the start of this year, the Fed planned to raise the benchmark rate to 3.5%. Now, many Fed officials expressed the need to hike the key rate to 4.5%. If inflation does not begin to decline at the pace set by the central bank, the watchdog may switch to aggressive tightening. The Fed's top priority is to tame inflation to 2%. However, the central bank admits that it may take years. Notably, inflation is not only an economic issue but also a political one. If Joe Biden's administration fails to slow down soaring consumer prices, the Democrats may lose their majority in the Senate and Congress. This is why Joe Biden and the Democratic Party need to push inflation down as soon as possible. The Fed is an independent organization. Yet, it should also achieve some positive shifts in the fight against inflation as confidence in the central bank has declined sharply during the pandemic and in the years after the pandemic. The inflation report is due tomorrow. Analysts do not expect a noticeable slowdown. The reading is likely to decline by 0.1-0.2% on an annual basis. Yesterday, Cleveland Fed President Loretta Mester said that the Fed is still unable to cap galloping inflation. "Unacceptably high and persistent inflation remains the key challenge facing the US economy. Despite some moderation on the demand side of the economy and nascent signs of improvement in supply-side conditions, there has been no progress on inflation," Mester said. When inflation comes down, the Fed will hold interest rates at high levels for some time to assess the cumulative impact of what the Fed has done. "Monetary policy is moving into restrictive territory and will need to be there for some time in order to put inflation on a sustained downward path to our 2% goal," she said, adding "I do not anticipate any cuts in the fed funds target range next year." In my opinion, the Fed is ready to raise the interest rate even above 4.5%. If this scenario comes true, demand for the US currency may climb even more. The US dollar is steadily growing amid monetary tightening. So, it may rise even higher amid sharper rate hikes. If traders have already priced in the likelihood of the rate increase to 4.5%, they may factor in a bigger rate increase. If investors have ignored two ECB rate hikes and seven Fed rate hikes, then they may continue to do so in the coming months. I believe that the US currency is likely to reach new highs. In this case, the current wave markup of the euro/dollar pair is correct. However, the wave markup of the pound/dollar pair needs adjustments with the construction of a downward trend section. I believe that there is a construction of a downward trend section now but it may end at any moment. The instrument could complete another upward correction wave. So, I advise selling with the target level located near 0.9397, the Fibonacci level of 423.6%. The MACD indicator is pointed downward. It is better to be cautious as it is unclear how long the euro may decline.     Relevance up to 06:00 2022-10-14 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/324167
Saxo Bank Podcast: A Massive Collapse In Yields, Fed's Tightening Cycle And More

The US Inflation Data Will Influence Fed Decisions

InstaForex Analysis InstaForex Analysis 13.10.2022 11:09
The Federal Reserve is faithful to aggressive monetary tightening despite cooling down in the labor market and a slowdown in the US economic growth. The Fed's minutes of the September policy meeting released on Wednesday confirms the case that the Federal Reserve would continue its aggressive monetary policy on track in the long term until inflation declines to the annual target rate of around 2%. In this context, the US inflation data which is due today will determine the next Fed's policy move in terms of the rate hike's degree. According to the consensus, the annual CPI is expected to edge down in September to 8.1% following an 8.3% increase in August. On the contrary, the CPI could have climbed 0.2% on month following a 0.1% uptick in August. The actual CPI readings will be on tap tonight. The factory inflation data released on Wednesday was dismal. Instead of the expected decline to 8.4% on year from 8.7% in the previous month, the actual PPI slipped to 8.5% in September. Besides, the PPI grew to 0.4% on month against the expected 0.2% rise. How are financial markets and the currency market in particular likely to respond to the data on consumer inflation? I assume that if the actual score reveals a similar dynamic as the factory inflation, namely a notably increase in September and the annual print higher than expected, the stock market will respond with a new wave of sell-offs. The commodity market will also be hit by selling. In contrast, the US dollar will again receive support as a safe haven asset. In turn, stock indices will creep down because stocks will come under pressure from rising borrowing costs. Commodities can be also weighed down by the fact that the global economy is on the verge of a recession. Yields of the benchmark 10-year Treasuries could surpass the landmark level of 4% and grow higher which is another serious factor to reinforce the greenback's strength. Intraday outlook EUR/USD The currency pair is consolidating slightly above 0.9670. The news of inflation acceleration in the US could boost demand for the US dollar. As a result, EUR/USD could break this level and fall to 0.9550. USD/CAD The currency pair is trading with minor fluctuations and might extend its growth to 1.3950 after the level of 1.3850 is broken after the release of the US inflation data.   Relevance up to 08:00 2022-10-15 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade Read more: https://www.instaforex.eu/forex_analysis/324181
Growth Of The USD/JPY Pair Is Hampered By Resistance

An Ultra-Soft Monetary Policy Of The Bank Of Japan And Its Consequences

InstaForex Analysis InstaForex Analysis 13.10.2022 11:14
The Japanese currency in a perfect storm    The yen continues to experience the most dramatic fall since 1998. On Thursday night, JPY collapsed against the dollar to almost 147. It was pushed to a new low by a dovish speech by the head of the Bank of Japan. The Japanese currency is once again caught in a perfect storm. On the one hand, the yen is now under strong pressure from expectations of more hawkish actions from the Federal Reserve, and on the other hand, the usual dovish mantras of the BOJ. Yesterday, the JPY fell against the greenback to a new 24-year low at 146.80. The release of the US producer price index for September weighed on the dollar-yen pair. The statistics The statistics did not justify the forecasts of economists, who expected an increase of 0.2%. In reality, the PPI rose more - by 0.4%, which increased traders' fears about a more sustainable growth in consumer prices. US inflation data for last month will be released today. The consumer price index for September is expected to show a slight slowdown (to 8.1% year on year). However, let's not forget about the unexpected turn of events last month, when the statistics for August turned out to be worse than expected. This significantly strengthened the hawkish determination of the Fed and caused a jump in the USD/JPY pair. "If the US CPI rises above economists' estimate again, selling of the yen could pick up, making intervention more likely," said Yoshifumi Takechi, an analyst. Recall that in September the Japanese government intervened in the market for the first time since 1998, when the JPY fell against the dollar to 145.90. Yesterday, the yen fell well below this red line and set a new anti-record, but there was no intervention. Now the Japanese authorities have chosen a different tactic, focusing not on a certain price threshold, but on the speed of the JPY fall. US dollar growth is a global problem This was announced on Wednesday morning by Japanese Finance Minister Shunichi Suzuki, and a little later his words were confirmed by BOJ Governor Haruhiko Kuroda. In addition, Kuroda stressed yesterday that the widespread growth of the dollar is a global problem that needs to be addressed together. According to Kuroda, many economies have already come to an understanding of this and are ready to discuss this issue at the meetings of the G20 and the International Monetary Fund, which are taking place these days in Washington. In fact, Kuroda hinted at the possibility of a coordinated intervention against the dollar, but the market ignored his threat. After Kuroda's speech, the US currency, on the contrary, received an even more powerful impetus. By trying to support the yen, the official only made things worse as he couldn't help but make dovish comments. The discrepancies in the monetary policy The head of the BOJ once again confirmed his commitment to an ultra-soft monetary policy and keeping interest rates at an ultra-low level. The main arguments in favor of a dovish strategy are still the same: the Japanese economy has not yet recovered to its pre-pandemic levels, and inflation in the country is still relatively modest compared to the stalemate in the West. Kuroda's comment once again convinced traders that the discrepancies in the monetary policy of the Fed and the BOJ will grow, especially since now the markets expect an increase in rates in America by at least 150 bps by the first quarter of 2023. The Fed will continue its aggressive fight against inflation, and this will help further strengthen the already strong dollar this year. USD/JPY now On Thursday night, the yen hit a low of 146.98 against the dollar, but USD/JPY sank slightly in the morning. At the time of writing, the asset fluctuated within a narrow range of 146.67-146.90. Amid the expectation of a key inflation report in the US, the USD/JPY pair remains upward, but fears of a potential intervention by the BOJ are forcing traders to be cautious. In any case, analysts predict increased volatility of the asset in today's trading. The main target for the bulls will be the level of 147, while the bears need to fall below 146.66 to seize the initiative.   Relevance up to 08:00 2022-10-15 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/324191
Central Bank Policies: Hawkish Fed vs. Dovish Others"

Bank Of England, The UK Economy Indicators, FOMC Minutes And More Discussed In the Latest Episode Of Oanda Market Insights Podcast

Craig Erlam Craig Erlam 13.10.2022 11:33
OANDA Senior Market Analyst Craig Erlam reviews the latest market news with Jonny Hart. They discuss the Bank of England, UK GDP, Bank of Korea rate decision and preview the Fed minutes. http://www.subscribeonandroid.com/audioboom.com/channels/4947364.rss This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
The Commodities Feed: China's GDP Disappoints, Adding Pressure to the Complex

Wave Of Demand Coming For Nuclear Power | Expensive American Wheat

Saxo Bank Saxo Bank 13.10.2022 11:35
Summary:  Markets traded sideways yesterday as we await today’s US September CPI data. The FOMC minutes out last night generally failed to move the needle as Fed members generally indicated they feared doing too little to get ahead of inflation more than doing too much. USDJPY traded to new 24-year highs, so far failing to elicit a response or intervention from the Bank of Japan, which intervened previously against JPY weakness at a lower USDJPY level some three weeks ago.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) The decline in US equities continued yesterday with S&P 500 futures closing at a new low for this drawdown cycle and this morning the index futures are trading around the 3,590 level. Today’s US September CPI figures are the key event today with a negative surprise (worse than expected inflation) adding to worsening sentiment in US equities as the market in that case would price a higher policy rate. The Q3 earnings season is also ongoing with PepsiCo reporting yesterday (see summary below) and earnings today from Walgreens Boots Alliance and Delta Air Lines. The levels in S&P 500 futures are still standing at the edge of the cliff and under the right circumstances US equities could slide lower in a fast clip. Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) Hong Kong and mainland China equities retreated, Hang Sent Index down 1% but mid-day and CSI300 lower by 0.3%. HSBC (00005:xhkg) outperformed and gained 0.7%. Worst performers in Hong Kong included China developers, Chinese banks, sportswear, electronic hardware, and China Internet names. In A shares, technology and healthcare stocks outperformed. The Chinese Communist Party (CCP) concluded yesterday a 4-day session in preparation for its 20th national congress, in a communique, the CCP said it had established comrade Xi’s core position on the party and hailed the party’s pandemic control strategy a success. In its first National Security Strategy white paper, the US Biden Administration named China as the only competitor with both the intent and the power to reshape the international order. USD remains near highs as USDJPY punches higher still Traders abandoned their reluctance to take USDJPY higher and risk a fresh blast of intervention from the Bank of Japan/Ministry of Finance yesterday, taking the pair to new 24-year highs just shy of 147.00. The 147.66 level from 1998 is the highest level for the pair since the early 1990’s. The USD action was generally muted elsewhere as EURUSD is finding the 0.9700 area sticky and GBPUSD bobs around near 1.1100, with the market mulling what will happen after the Bank of England halts its emergency QE measures, supposedly on Friday. (more below). The next event risk is the September US CPI release later today and whether it moves the sentiment needle and more importantly, US treasuries, where yields have consolidated below the cycle highs of two weeks ago and near 4.00%. Gold (XAUUSD) Gold remains rangebound around $1670 ahead of today’s important US CPI print, and following last week's aggressive short squeeze, potential sellers have turning more cautious at this stage where the market has been left pondering how close we are to seeing peak hawkishness, a development that may signal a low in gold. In our latest gold update we highlight the reasons behind our medium-term bullish outlook but also why the ducks are not yet lined up properly for the recovery to begin. Support at $1658, the 61.8% retracement of the recent correction, with resistance at $1687 and $1695. Crude oil (CLX2 & LCOZ2) Crude oil traded steady overnight after falling for a third day on Wednesday in response to a report showing a large crude build last week and OPEC and EIA both slashing their demand outlook for 2023. In addition, a hawkish set of minutes from the Federal Reserve also weighed ahead of today’s US CPI print for September. The API reported a 7 million barrel build in crude oil inventories with official data from the EIA following later today. The US led plan to cap prices on Russian oil sales remain a focus with detailed talks about to begin, but the risk it could lead to higher, not lower global prices may still prevent it from being introduced. Following two downbeat oil market updates from OPEC and the EIA, both lowering 2023 demand by around 0.4m b/d, the IEA will publish its report during the European morning. Mixed US crop report with focus on wheat and soybeans Wheat prices in Chicago dropped by 2% on Wednesday after the US Department of Agriculture cut its demand forecast, primarily due to a downgrade in exports to the lowest since 1971. A revision that still left ending stocks at their lowest since 2007 but higher than analyst forecasts. American wheat is too expensive – due to the strong dollar - and sales have been slow, the USDA wrote in its monthly WASDE report. Corn futures (ZCZ2) meanwhile dropped after the report signaled bigger inventories before settling unchanged. Soybeans (ZSX2) jumped sharply before ending up 1.3% with a lowering of US production leading to much lower-than-expected US ending stockpiles. A development being partly offset by increases in Brazil’s soy harvest and export outlook. US treasuries (TLT, IEF) US treasury yields continue to trade not far below the cycle highs near 4.00% in the 10-year treasury benchmark. An auction of 10-year T-notes yesterday saw tepid demand and lower interest from foreign bidders. A 30-year auction is later today, but the important catalyst of the day is the US September CPI release and whether even a soft print can make much of an impression on the bond market, given that the Fed has indicated it will continue to hike even as economic growth weakens, inflation falls and unemployment begins to rise. What is going on? FOMC minutes show Fed more afraid of doing “too little” to stem inflation risks Not a huge surprise to markets to receive this message late yesterday, as Fed rhetoric has consistently pointed in that direction and the market expectations for Fed policy finally now reflect the Fed’s own “dot plot” forecasts of rates continuing to rise a bit more beyond the end of this year. This came after many months of the market expecting that Fed rates would end next year below their level at the end of this year, likely figuring that the economy would weaken significantly from the policy tightening. “Many participants emphasized that the cost of taking too little action to bring down inflation likely outweighed the cost of taking too much action.” Late yesterday, MIchelle Bowman of the Fed’s Board of Governors argued for continued large rate increases and the early November FOMC meeting is nearly fully priced to deliver a 75 basis point hike, with December’s meeting priced at 50-50 odds of 50 vs. 75 basis points. Sweden’s CPI hits new cycle highs in September … showing how the energy crisis in Europe and the weak krona continue to drive higher inflation. The headline CPI released this morning hit 10.8%, above the 10.5% expected and up from 9.8% in August, while the core inflation level rose to 7.4%,  slightly below the 7.5% expected and up from 6.8% in August. PepsiCo surprises on growth and margin If investors were looking for a negative surprise and evidence of margin compression PepsiCo was not the answer. The beverage and snacks business delivered better than expected revenue and earnings in Q3 and lifted fiscal year organic revenue growth to 12% from previously 10%. PepsiCo experienced a bit of margin compression during the quarter but enough to offset the higher revenue growth. It looks like PepsiCo is a very robust business during inflation. Cameco and Brookfield Renewable to buy Westinghouse The uranium miner Cameco and the renewable energy business Brookfield Renewable Partners are teaming up to buy the nuclear services business Westinghouse as the outlook for nuclear power is improving. Cameco’s CEO said yesterday that he sees a ‘wave’ of demand coming for nuclear power and that Russia’s invasion in Ukraine is a game changer for the industry. What are we watching next? The September US CPI data point and Friday’s Retail Sales data are the next two data points of interest for US yields, the US dollar and likely risk sentiment in general ... although earning season is likely to begin generating more headlines and sentiment shifts in coming days. As noted above, it is questionable how much information value the market can extract from any downside surprise in the CPI print today, given Fed forecasts that it will continue its tightening regime even as the inflation and the economy (presumably) decelerate. Therefore, upside surprises may generate more significant market volatility. Elsewhere, core Retail Sales growth has been anaemic in recent months, but the ISM Services has remained strong, suggesting a still strong services sector. Bank of America’s CEO Brian Moynihan was out yesterday claiming that the US consumer is “in good shape” and spending more than a year ago despite the ominous backdrop. “The consumers basically have more money in their accounts by multiples than they did pre-pandemic.” UK Chancellor Kwarteng to skirt blame for any gilt market volatility if BoE winds down emergency QE on Friday as it has claimed it will on Friday Kwarteng commented that any turmoil “is a matter for the governor”. Could Bailey be made a scapegoat and fired over the recent debacle in the gilt market, which was also in part due to the launch of the government’s “mini-budget”, in which abandoning planned tax rises and introducing new cuts suggested the government was set abandoning any sense of caution on the longer term trajectory of fiscal imbalances. The FT cites “people briefed on the discussion” that the BoE may be forced to continue to support the market after tomorrow. The 30-year gilt yield returned above the 5.00% level it touched before the BoE intervened yesterday before dropping toward 4.8% by the close. The BoE is priced to hike more than 100 basis points at its November 3 meeting and another 100 basis points in December. Xi Jinping speech at party congress on Sunday The speech will be closely watched for the Chinese leader’s response to the current global backdrop, including the recent moves by the US to limit Chinese access to semiconductors, as well as for hints on the domestic agenda, especially the future of the Zero Covid policy. Earnings to watch Today’s earnings focus is Walgreens Boots Alliance due to its large footprint with the US consumer selling everything from pharmacy prescription drugs to shampoo and other hygiene products. Given PepsiCo’s stronger than expected result yesterday Walgreens may also surprise in its Q3 results. Delta Air Lines is another important earnings release to watch as travel and leisure are consumer discretionary activities that could see weakness given the cost-of-living crisis. Today: Progressive, Fast Retailing, Tryg, Walgreens Boots Alliance, Fastenal, BlackRock, Delta Air Lines, Domino’s Pizza Friday: Shanghai Putailai New Energy, YTO Express Group, PNC Financial Services, JPMorgan Chase, Morgan Stanley, Citigroup, UnitedHealth Group, Wells Fargo, US Bancorp, First Republic Bank Economic calendar highlights for today (times GMT) 0800 – IEA Monthly Oil Market Report 1230 – US September CPI 1230 – US Weekly Initial Jobless Claims 1430 – EIA's Natural Gas Storage Change 1500 – EIA's Weekly Crude and Fuel Stock Report 0130 – China Sep. PPI/CPI Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: https://www.home.saxo/content/articles/macro/market-quick-take-oct-13-2022-13102022
The German Purchasing Managers' Index, ZEW Economic Sentiment And More Ahead

Podcast: Europe's Real Troubles Discovered As A Result Of The War In Ukraine

Saxo Bank Saxo Bank 13.10.2022 11:42
Summary:  As we await today's US September CPI and wonder whether a soft surprise can really move the needle, we highlight one of the starkest assessments of Europe's current predicament, which has crystallized since Russia invaded Ukraine earlier this year and is not just about stocking up on enough gas to survive the coming winter, but will require decades to address. A look at burgeoning interest in the nuclear energy, stocks to watch and upcoming earnings reports, crude oil, wheat and a 79-year low in the orange crop in the US and more on today's pod, which features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting an on FX. Listen to today’s podcast - slides are found via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: https://www.home.saxo/content/articles/podcast/podcast-oct-13-2022-13102022
Technical Analysis: Gold/Silver Ratio Still On The Rise

The Best Time For Investors In The Precious Metals Market

InstaForex Analysis InstaForex Analysis 13.10.2022 12:28
The decline in gold prices and the pronounced bearish sentiment have had a strong impact on the mining sector. However, according to one market analyst, now is the best time for investors to find long-term value. Michael Gentile, director and strategic adviser at Radisson Mining Resources, said sentiment in the junior mining sector is worse than it was in 2015, when valuations fell to historic lows. But he added that this is when investors want to enter the market. Although gold and silver prices may still decline, Gentile is confident that the precious metals market is bottoming out, so in the next three to five years, the gold market is poised for significant growth. He also noted that rising US interest rates, which have pushed the dollar to a 20-year high, are starting to push the global economy to a breaking point as major economies are forced to interview their domestic currency and bond markets. "I think the UK intervention was an important signal for the market," he said. "If we don't get closer to the end of the Fed's rate hike cycle, then we could see the end of the tunnel, and that's positive for gold." As for what investors should look for in the mining sector, Gentile said he is looking for companies with good funding and projects.   Relevance up to 11:00 2022-10-18 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/324215
The South America Are Looking For Alternatives To The US Currency

The US Core Inflation Rate Beat The Record From 80s

ING Economics ING Economics 13.10.2022 16:07
US consumer price inflation surprised on the upside once again as rapid increases in housing costs, medical care, food and airline fares offset signs of moderation elsewhere. The Fed has admitted it is prepared to inflict economic pain to get a grip on inflation and today's report will ensure at least another 75bp rate hike in November and 50bp in December 6.6% Highest "core" inflation rate since August 1982   Sticky inflation means the Fed has more work to do Once again US consumer price inflation has come in higher than expected with headline prices up 0.4% month-on-month in September (consensus 0.2%) and core – ex food and energy – up 0.6% MoM (consensus 0.4%). This means the annual headline rate slows to 8.2% from 8.3% while core rises to 6.6% from 6.3%, having been down at "just" 5.9% in July. With core inflation heading in the wrong direction (and at its highest rate since August 1982) and yesterdays’ Fed minutes to the September FOMC meeting warning that doing too little to tame inflation is worse than too much, it confirms that a 75bp interest rate increase on November 2nd is the minimum expectation with markets now pricing in the slight possibility of a 100bp hike. Annual US headline and core inflation rates Source: Macrobond, ING 75bp the minimum for November, but 100bp is only a small chance Looking at the details, housing continues to big a major story with shelter (32.5% weighting) rising 0.7% MoM yet again. while medical care costs, which have been posting some solid price increases over the past six months, rose 0.8%. Airline fares were up 0.8% while food prices increased 0.8% on the month. On the softer side were gasoline (-4.9% MoM) while apparel prices declined 0.3% and used car prices fell for the third month in a row. Recreation and education/communication rose only 0.1% MoM each, weaker than we had expected. It is therefore a slightly more mixed picture than just looking at the headline and core MoM's with pricing power appearing to be softening in some components. Why we favour 50bp in December Nonetheless, the increase in the annual rate of core inflation is not a good story and the Federal Reserve has stated it is willing to inflict economic pain to get inflation moving back to the 2% target. 75bp is indeed the solid call for the November 2nd FOMC meeting, but we are still looking for the Fed to slow the pace to a 50bp in December (market is pricing just over 60bp, indicating a close call as to whether we get a fifth consecutive 75bp move). Our rationale is that the economy is slowing and there is more evidence pointing to weakening corporate pricing power. The National Federation of Independent Business survey shows the proportion of companies looking to raise their prices is moderating quickly to reflect the shifting growth outlook and rising inventory levels, that they don’t want left on their books. Corporate pricing power may be waning Source: Macrobond, ING   Moreover, we think used car prices have much further to fall based on the Manheim car auction price data (4% weighting in the inflation basket) while slowing global chip demand suggesting new vehicle production issues (new vehicles also have a 4% weight) are possibly moderating, paving the way for more supply and less inflation. Shelter could be key to lower inflation The key swing story is going to be shelter though given it is the largest component of inflation. Historically the shelter series lags behind movements in house prices by around 12-14 months, but over the past week rent.com, apartments.com and CoStar Group have all been reporting rent price falls in major cities. House prices only started falling in July so this could imply a quicker transmission. US rent CPI components lag turning points in house prices Source: Macrobond, ING   A possible reason is that rents have risen so much on top of a broad cost of living increase. This is leading to fewer “household formations” – basically people can’t afford rent so are cohabiting with friends/family leading to less demand for apartments and prices are already dropping. We will see how this develops, but like the corporate pricing and the vehicle stories we still think the risks are skewed towards inflation falling more quickly through 2023 than the consensus. Read this article on THINK TagsUS Recession Inflation Federal Reserve Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Bank of England Faces Rate Decision: Uncertainty Surrounds Magnitude of Hike

The US Inflation Increased | US Dollar Touched 113.50, Nasdaq 100 And S&P 500 Down

Alex Kuptsikevich Alex Kuptsikevich 13.10.2022 16:19
U.S. consumer prices added 0.4% in September, versus a forecast of 0.2% and an increase of 0.1% a month earlier. Annual inflation slowed from 8.3% to 8.2% versus the expected 8.1%. Yesterday's more vital producer price readings suggested the possibility of such an outperformance. Record-breaking US inflation However, the continued run-up in core inflation has caused a real market storm. Excluding food and energy prices, inflation accelerated from 6.3% to 6.6%, a new record since 1982. Suddenly it appeared that the peak of consumer inflation had not yet been passed. While the markets viewed the Fed's statements as aggressively hawkish, the inflation update sparked speculation that it could be worse. CME's FedWatch Tool now lays out a 92% chance of a 75-point rate hike in early November, giving the remaining 8% chance of a 100-point tightening. We recall that since last Friday, the market had been pricing in an 18% chance of a 50-point rate hike and an 82% chance of a 75-point hike. Read next: Morgan Stanley Talks Stock Market | Fiserv - Newest Payments Company In German Market FXMAG.COM As a result of the rapid revaluation, Nasdaq100 futures have lost 3% since the beginning of the day and 4.5% from their peaks just before the release. This index has pulled back to July 2020 levels in the 10,500 area. The S&P500 pulled back to 3,500, making a frighteningly decisive move lower under the 200-week moving average. This key benchmark of U.S. markets erased all the gains made since Biden became president. In the foreign exchange market, the dollar index returned to 113.50, a two-week high, 1 per cent below the 20-year highs posted late last month. It once again appears in the markets that inflation data could trigger a new wave of tightening rhetoric from the Fed, prompting everyone to expect higher rates and faster than previously estimated.
OPEC+ Meeting: Saudi Arabia Implements Deeper Voluntary Cuts to Boost Oil Prices

Crude Oil Forecasts Have Risen And The Price Risk Rose As Well

TeleTrade Comments TeleTrade Comments 14.10.2022 09:38
Following a drift lower from the post-OPEC+ production cut high, crude oil prices are once again ready to follow an upward trajectory. Strategists at TD Securities have upgraded their oil forecast. Oil unlikely to be in triple figure territory  “We are comfortable in saying that the most recent production targets from OPEC+ have very convincingly tilted price risks to the upside. For that reason, we have upgraded our Q4-22 WTI forecast to $94/b ($99/b Brent) and the 2023 average to $97/b ($101/b).” “Despite an expected tightening of supply-demand dynamics, a surge into triple digits in the coming months is not yet expected, as it looks increasingly likely that the decline in global demand growth will likely offset much of the OPEC+ cuts.”  “Given tight S-D and historically low inventories, a convincing move into $100+ territory is more probable when market is ready to call when the economy will stabilize and the Fed pivots.”
It's not clear we find out the results of mid-term elections immediately. Binance to buy FTX

The US Core Inflation Soars, Today's Retail Sales Data May Support US Dollar (USD)

ING Economics ING Economics 14.10.2022 11:53
The highest core US inflation since 1982 has seen expectations of the terminal Fed rate push close to 4.90%. Despite the wild and ultimately positive gyrations in asset markets yesterday, the core narrative will remain one of the Fed continuing to push real rates and the dollar higher. A strong US September retail sales figure today should support the $ USD: Highest core inflation in 40 years As James Knightley noted in his review of the September US CPI release, core inflation has not been this high since 1982. This suggests there will be no letup in the Fed's hawkish rhetoric and, consequently, markets are still searching for the terminal rate of this Fed hiking cycle. Those trying to pick a top in the cycle are continuing to be swept away. From pricing the Fed terminal rate at 4.45% barely two weeks ago, 23 March Fed fund futures now price the top near 4.90%. The poor inflation print saw some immediate bearish flattening of the US 2-10 year Treasury curve (US two-year Treasury yields are now 4.45% having started the year at 0.75%) and a broadly stronger dollar – yet the dollar rally quickly reversed as equities turned sharply higher. Presumably, positioning had something to do with this, where buy-side surveys show investors have: a) the most underweight equities ever and b) the most overweight cash (6%) since October 2001. More than $260bn has left equity mutual funds this year and we can only guess that some investors used the CPI event risk as an opportunity to feed money back into equities. Yet the core narrative remains that the Fed will want higher real rates for longer to fight the biggest inflation threat since the early 1980s, and the dollar should continue to find good support on dips. 111.50/112.00 may be enough of a correction for DXY and some decent US data later today may be enough to give the dollar a lift. We have September US retail sales and consumer confidence. James Knightley thinks that retail sales could come in on the strong side given good car sales data and lower gasoline prices. It was also interesting to see JP Morgan chief executive Jamie Dimon say that he felt that US consumer spending could hold up for nine more months, given high savings and low debt levels – sentiments echoed in the recent FOMC minutes. On the subject of US banks, today sees third-quarter earnings releases from JPM, Citi, Wells Fargo and Morgan Stanley. We're no equity strategists, but it seems hard to expect a sustainable equity rally from here given what the Fed is planning to do with real rates. Read next: Cheaper Netflix Is Here!| Jim Cramer Comments On The Shares| FXMAG.COM Chris Turner EUR: Led by sterling EUR/USD is currently being dragged around by UK asset markets and the pound. Reports yesterday that ECB staffers felt that the ECB terminal rate could be somewhere near 2.25% versus the nearly 3% priced by the market had little effect on EUR/USD. Instead, EUR/USD sits comfortably in a bearish channel that has guided it lower all year – running at roughly -5% per quarter! The top of that channel is now around parity and should be the extent of any unforeseen short squeeze here. There is not much eurozone data today but an expected August trade deficit of €45bn is a far cry from the €20bn+ surpluses run in early 2021 and is a reminder that the euro no longer has the backing of a large current account surplus. 0.9850/70 may be the extent of any intra-day EUR/USD correction. Chris Turner GBP: BoE holds government toes to the fire One cannot help but think the Bank of England (BoE) has played the poor hand it has been given quite well in potentially forcing the government into a U-turn on fiscal policy. There is no confirmation of such a policy shift yet, but no doubt Twitter will nearly break today on speculation of a shift in policy or personnel. Central bank independence is hard won and the BoE has clearly not wanted to succumb to accusations of government financing. GBP/USD continues to trade on a super-high one-week realised volatility near 20%. We suspect that GBP/USD may struggle to break the 1.15 area. Will it trade back to 1.20, where it was before fears of a Liz Truss government started to hit the Gilt market? Probably not. Equally, EUR/GBP was trading at 0.84 in early August and we would say the political risk premium and a difficult external investment environment will make it hard for EUR/GBP to sustain a move under 0.8550/8600. Chris Turner  CHF: What to make of USD/CHF at parity? Apart from (reasonably successful) currency floors in EUR/CHF and EUR/CZK over recent years, it is hard to think of any successful 'lines in the sand' in global FX markets. Global capital and trade flows are simply too large for central banks to defend one particular level – as we see with USD/JPY now grinding to 147.50, well above the Bank of Japan's 145.70 intervention level in late September. But what about the 1.00 level in USD/CHF? Yesterday was the third time this year that it reversed sharply from levels just above 1.00. Could the Swiss National Bank (SNB) be at work here? Recall that the dollar is the second-largest weight in the Swiss franc trade-weighted basket and a higher USD/CHF will naturally weaken the nominal trade-weighted Swiss franc – something the SNB wants to avoid as it battles inflation. In fact, SNB president Thomas Jordan is turning into one of the most ardent hawks in the central bank community. We have quite a forthright view on EUR/CHF at the moment that the SNB wants to guide it lower by 5% plus per year. The higher USD/CHF is making the trade-weighted Swiss franc even softer and if we are right in our analysis, the SNB should be even more inclined to drive EUR/CHF down to 0.95 and away from the near 0.98 levels at which spot EUR/CHF trades today. Chris Turner Read this article on THINK TagsFX Dollar CHF Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Commodities Digest: US Crude Oil Inventories Decline Amidst Growing Supply Risks

The US Inflation Has Once Again "Upturned The Markets" | US Dollar (USD) Will Continue To Strengthen

InstaForex Analysis InstaForex Analysis 14.10.2022 11:58
Euro and US Dollar The US currency showed a powerful breakthrough after the release of impressive data on inflation in the US. Later, however, the greenback "slowed down" a bit, evaluating the results. This took advantage of the euro, which grew slightly. However, in the future, the chances of the EUR faded away, as the USD rallied again. A new round of upward  A new round of the greenback's upward spiral was recorded after the release of strong US inflation reports. On Thursday, October 13, the US Department of Labor released data on the Consumer Price Index (CPI) for September. Note that this indicator increased by 0.4% m/m, although it was expected to increase by only 0.2% m/m. At the same time, consumer prices in America soared by 8.2% in September, exceeding the forecast by 8.1%. The increase in consumer prices reflects the rising cost of housing, food and medical care, experts emphasize. At the same time, the increase in this indicator is partially offset by the fall in gasoline prices. US inflation data According to the report, the core consumer price index (Core CPI) in the US, excluding the cost of food and energy, rose by 0.6% in September. At the same time, analysts expected it to increase by 0.5% m/m. Note that the annual growth rate of Core CPI rose to 6.6%. An increase in the base CPI demonstrates an increase in the cost of housing, cars and medical care, as well as an increase in education fees. The US Department of Labor report focuses on the spread of high inflation in all areas of the national economy. In this situation, the standard of living of Americans plunged sharply. Against this background, citizens have to use their savings and credit cards to make ends meet. At the same time, experts expect a slowdown in consumer prices in the US. However, the current situation is unlikely to affect the Federal Reserve's plans for a further increase in the key rate. Following strong US inflation data, USD and Treasury yields surged, while US stock futures plummeted. Against this backdrop, expectations of another increase in the Fed's interest rate intensified. At the moment, the central bank is pursuing a hawkish strategy aimed at combating galloping inflation. At the same time, despite the slowdown in the US labor market, the department intends to continue to raise interest rates. At this rate, according to Commerzbank analysts, in the first quarter of 2023, the Fed rate will peak at 5%. EUR/USD Against this background, the dollar is confidently leading, habitually pushing the euro away from key positions. According to DBS Bank economists, the greenback will continue its upward trend until the end of 2022, and by 2023 it will reach the level of consolidation. The dollar is supported by a long-term increase in Fed rates, the bank emphasizes. As a result, on Friday, October 14, the EUR/USD pair was trading near 0.9784. Against this background, the greenback remained calm, and the euro tried to gain a foothold in the conquered positions. At the same time, the pair remained within the current range. Earlier, Credit Suisse economists believed that after strong US inflation data, the EUR/USD pair would test the 0.9500 mark, but this did not happen. Fed's reaction to inflation According to analysts' estimates, the current inflation in the US has once again "upturned the markets", threatening a new wave of tightening of the Fed's rhetoric. In the current situation, traders and investors expect the next rate hikes, as high inflationary inflation rates do not give a respite to the Fed. As a result, the central bank is forced to be "in an aggressive tightening mode," experts emphasize. According to analysts at Oxford Economics, by the end of 2022, the Fed will raise rates "by at least 125 bps". Most analysts (98%) are convinced that the central bank will raise the rate by 75 bps in November, up to 3.75-4% per annum. Recall that such an increase in rates could be the sixth in a row. Earlier, after three meetings of the Fed, it was raised by an additional 75 bps. At the same time, many investors are confident that core inflation will soon fall, and the Fed will soften its rhetoric a bit. However, this is unlikely, experts say. Against this background, the US currency is stabilizing, reacting to a short-term surge in risk sentiment, recorded at the end of the week. At the same time, large hedge funds still bet on the further growth of the USD. Geopolitical turmoil and fears of an economic downturn have further strengthened the greenback, prompting investors to abandon European assets. Many of them still consider the dollar the safest asset to protect their savings. According to analysts at Citigroup Global Markets Inc, the US currency will continue to strengthen until the global economic slowdown stops. If its growth accelerates, the dollar will give up its positions, experts are certain. However, now this is far away, and the benefits of owning USD outweigh the current risks, Citigroup notes.   Relevance up to 09:00 2022-10-17 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/324316
It Is Quite Possible That The Australian Dollar Is Tired Of Growth

The Australian Dollar To US Dollar (AUD/USD) Pair Remains On Track To Register Losses

InstaForex Analysis InstaForex Analysis 14.10.2022 12:24
AUD/USD struggles to preserve its modest intraday gains amid a pickup in the USD demand. A turnaround in the risk sentiment, aggressive Fed rate hike bets boost the safe-haven buck. Traders now look forward to US macroeconomic releases for some meaningful opportunities. The AUD/USD pair attracts fresh sellers in the vicinity of mid-0.6300s on Friday and surrenders its modest intraday gains to a four-day high. The pair slips below the 0.6300 mark during the first half of the European session and is now flirting with the daily low amid the emergence of some US dollar dip-buying. The latest optimistic move in the equity markets witnessed since the US session on Thursday fizzles out rather quickly amid worries about a deeper global economic downturn. The anti-risk flow helps revive demand for the safe-haven greenback and exerts some downward pressure on the AUD/USD pair. Apart from this, the prospects for a more aggressive policy tightening by the Fed favour the USD bulls. The US Bureau of Labor Statistics reported that the core inflation (excluding food and energy prices) registered the biggest gain since August 1982. The hotter CPI report reinforces bets for the fourth consecutive 75bps Fed rate hike in November. This, along with the potential economic fallout from fresh COVID-related lockdowns in China, validates the near-term negative outlook for the AUD/USD pair. That said, technical indicators on short-term charts are hovering around the oversold territory and warrant some caution for bearish traders. Nevertheless, the AUD/USD pair remains on track to register losses for the fifth successive week. Market participants now look forward to the release of the US monthly Retail Sales figures, due later during the early North American session, for a fresh impetus. Friday's US economic docket also highlights the Prelim Michigan Consumer Sentiment and Inflation Expectations Index. This, along with the US bond yields and speeches by influential FOMC members, will drive the USD demand and provide a fresh impetus to the AUD/USD pair. Traders will further take cues from the broader market risk sentiment to grab short-term opportunities on the last day of the week.
Caixin Services PMI Data Has Helped The Chinese Yuan (CNH)

Is Another Intervention Of The Japanese Ministry Of Finance Coming?

Kenny Fisher Kenny Fisher 14.10.2022 12:42
USD/JPY continues to move edge higher and is up 1.6% this week. In the European session, USD/JPY is trading at 147.67, up 0.25%. The Japanese yen is once again on a downswing, after hugging the key 145 line. The dramatic intervention by Japan’s Ministry of Finance (MoF) in September stemmed the yen’s bleeding, but this move by Tokyo appears to have had a very short shelf-life, as the yen fall to new 24-year lows. Intervention anyone? The burning question is with the yen currently lower than when the MOF stepped in, will it again intervene to prop up the Japanese currency? The first intervention clearly didn’t achieve its desired effect of stabilizing the yen below 145 and Japan’s foreign reserves fell by a record amount in September, around 2.8 trillion yen. The game of cat-and-mouse between the MOF and speculators betting against the yen continues, and another currency intervention could be in the works, but it would likely have to be much larger than the first intervention. The MOF could try to send a stronger warning to the markets, but it’s questionable whether unilateral action by Japan will be enough to change the yen’s downtrend. The Bank of Japan has no intention of capping JGB yields and with the Fed likely to deliver another oversize rate hike in November, the US/Japan rate differential will continue to widen and likely weigh on the Japanese yen. The US posted another hot inflation report for September. Headline inflation ticked lower to 8.2%, down from 8.3% but above the consensus of 8.1%. Core inflation rose to 6.6%, up from 6.3% and higher than the forecast of 6.5%. Inflation clearly is yet to peak despite monetary policy becoming restrictive, and the inflation data cements expectations for a 75 basis point hike at the November meeting. . USD/JPY Technical USD/JPY is testing resistance at 147.50. Above, there is resistance at 148.32 There is support at 147.50 and 146.04 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
ECB's Tenth Consecutive Rate Hike: The Final Move in the Current Cycle

The US Inflation Data Suggest Another Rate Hike | The Euro (EUR) And The British Pound (GBP) Have Regained Their Positions

InstaForex Analysis InstaForex Analysis 14.10.2022 13:38
Although the Federal Reserve is sure to extend its aggressive interest rate hike even longer than expected, the European currency and the British pound have regained their positions against the US dollar after yesterday's inflation report in the US. It overshadowed hopes for a rate cut by the end of next year. Initially, investors reacted to higher-than-expected consumer price levels by buying the US dollar. It emphasized that the Fed would raise rates by 75 basis points at its meeting next month, but then the pressure on risky assets decreased sharply. Nevertheless, futures prices show that the markets expect interest rates to be around 5% next year, which increases the pressure on the Fed even more. Despite the risk of a recession and a sharp spike in unemployment, the Federal Reserve System will continue to act aggressively. The measures it has taken since the spring of this year have not yet brought the desired result – the maximum that has been achieved is a slowdown in inflation growth around a 40-year high. According to a report by the Ministry of Labor published on Thursday, base prices, excluding food and electricity, rose in September by 6.6% compared to last year, which is the highest level since 1982. This continues to cause concern among politicians, as the index also accelerated in August. Yesterday's report also means that the regulator will raise rates by three-quarters of a percentage point at the last two meetings of this year. Several Fed officials have recently pointed to the August spike in core inflation as a sign of alarming rigidity, even among less volatile price categories. Nevertheless, even the most hawkish officials opposed the idea of raising rates by a whole percentage point or more at one meeting. It would be more difficult for the Fed to track the effects of its policy tightening on the economy, increasing the risk of triggering a more serious recession. "Observing how the economy reacts allows us to measure the dosage of future policy changes somewhat while simultaneously continuing to move aggressively," said Neel Kashkari, president of the Federal Reserve of Minneapolis. "If we just raised rates by 2%, 3%, or 4% at a time, it may well be that it would be too much, which would eventually lead to a financial crisis." As noted above, the Fed has been raising rates from zero since March of this year, and now the federal funds rate is at 3.25% – the highest level since 2008. As a result of the slowdown in inflation, albeit not as strong as economists predicted, demand for risky assets has returned, which leaves the same euro buyers to return to parity. EUR/USD As for the technical picture of EURUSD, the bears retreated a little, and the bulls reached the resistance of 0.9800. Before the important data on retail sales in the US, the upward correction of the pair may continue. To continue the growth, it is necessary to break above 0.9800, which will take the trading instrument to the areas of 0.9840 and 0.9880. However, the upward prospects will depend entirely on the US data. A break of 0.9755 will put pressure on the trading instrument and push the euro to a minimum of 0.9713, which will only worsen the situation of buyers of risky assets in the market. Having missed 0.9713, it will be possible to wait for the update of the lows in the area of 0.9680 and 0.9640. GBP/USD The pound continues to recover, but its further direction has not yet been determined. Buyers will focus on protecting the support of 1.1260 and the resistance of 1.1350, limiting the upward potential of the pair. Only a breakthrough of 1.1350 will open prospects for recovery to the area of 1.1420, after which it will be possible to talk about a sharper jerk of the pound up to the area of 1.1480 – the maximum of this month. It is possible to talk about the return of pressure on the trading instrument after the bears take control of 1.1260, which can happen quite quickly in the case of strong US statistics. This will blow the bulls' positions and completely negate the prospects of the bull market observed since September 28. A breakout of 1.1260 will push GBPUSD back to 1.1180 and 1.1100.   Relevance up to 09:00 2022-10-15 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/324322
Forex: US dollar against Japanese yen amid volatility and macroeconomics

It Seems Some See Potential For A 100bp Fed Hike

ING Economics ING Economics 14.10.2022 15:23
Market rates are pointing higher as central banks are under pressure to do more. This is exemplified by the latest upside surprise in the US CPI and, in the eurozone, by the ECB pushing the topic of quantitative tightening on all channels. In the UK it is fiscal policy putting pressure on the BoE, and that stand-off continues to be a major source of volatility  CPI data sends clear signal that the Fed needs to do more The US CPI report came in higher than expected, with the core rate marking a new peak of 6.6% and surpassing the level seen at which the Fed began hiking interest rates in March. The data is a clear signal that the Fed has more to do. In the wake of the Federal Open Market Committee minutes which showed that the Fed sees the cost of doing too little on inflation outweighing those of doing too much, the market has started to attribute a small chance to an even larger 100bp hike in November, and 75bp now looks like the bare minimum. Looking into December markets now see a 50% chance of a further 75bp. Mind you, our economists still think it more likely that the Fed will slow its pace then. Looking beyond the pricing of immediate Fed policy, the CPI report briefly pushed the 10Y Treasury yield above 4% again, the third time within the past two weeks. Eventually a break above 4% for the 10Y now looks inevitable as the Fed is unlikely to signal any inclination to slow its pace near term. Bearish risk: 10Y Treasuries should rise above 4% and real yields push even higher Source: Refinitiv, ING Gilt markets remain a source of extreme volatility The US CPI report saw 10Y US Treasuries spike with an intraday move of almost 24bp. But that move still pales next to the more than 40bp intraday swing in 10Y gilt yields over the course of yesterday’s session. Speculation suggesting a potential U-turn of the government regarding its fiscal plans had been the main driver, leaving 10Y gilts to end the day some 25bp lower at close to 4.2%. The ill-fated long end of the curve saw 30Y gilt yields ending almost 30bp lower. The BoE is still planning to end its gilt market intervention after today While it may seem that the Bank of England could win this stand-off, it does not mean it is the end to the volatility in the market just yet. For now the reports of a potential U-turn are just speculation and officially the government is still sticking to its plans, according to later statements. With the BoE still planning to end its gilt market intervention after today and the government's medium-term fiscal strategy at the end of October, markets could be left on tenterhooks for longer.        Not out fo the woods yet: gilts need BoE support and fiscal U-turn confirmation Source: Refinitiv, ING The October ECB meeting is shaping up to become a busy one The wild gyrations in gilt markets have managed to pull 10Y and longer EUR rates lower, but the front-end rates have pushed higher with the European Central Bank showing resolve in pursuing more policy tightening. Hawks like Belgium’s Wunsch not excluding key rates even above 3% keep up pressure on the front-end pricing of hikes as inflation data continues to surprise to the upside. For October the market is already discounting a more than 80% chance of a 75bp hike. Euro front-end rates have pushed higher with the ECB showing resolve in pursuing more policy tightening But it is the more concrete plans to whittle down the balance sheet that continue to grab the headlines. Reuters had already earlier reported that staff was working on three options to make it less profitable for banks to hold on to their targeted longer-term refinancing operations funds, one of them a likely tiering of bank reserves. A decision in that regard could already be taken at this month's policy setting meeting. But that would only be the first step as we have learned over the past days. Also according to Reuters reporting, the ECB could already be laying the groundwork for the next step, which is quantitative tightening, by changing the wording of the reinvestment guidance already this month as well. This would then leave a decision to actually kick off quantitative tightening for the December or February meetings. The hawks on the ECB council are obviously the ones targeting an early 2023 start to letting the bond portfolios roll off Bloomberg reported. Tiering risk: TLTRO balances and excess liquidity are unevenly distributed in the eurozone Source: ECB, ING Today's events and market view Clearly the data and monetary policy backdrop suggests persistent upward pressure on rates. However, developments in the gilt market remain a wild card. Even more so as today will see the BoE last buying operation in support of long end gilts – unless it were to decide on an extension of the operations the gilt market would be even more exposed to headlines surrounding the government's rethink of its fiscal plans.    In data the focus remains on the US today. Retail sales for September should have received a lift as auto sales rebounded and gasoline should be less of a drag given a recent stabilisation in prices. More closely watched will probably be the University of Michigan consumer confidence survey and in particular the gauges of consumer price expectations. Consensus sees the 1Y inflation expectations receding, but perhaps more worryingly it sees the 5-10Y expected inflation measure inching up a tad to 2.8% from 2.7%. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
GBP: BoE Stands Firm on Bank Rate and Mortgage Interest Relief, EUR/GBP Drifts Lower

Although Today's US Retails Sales Came As Not That Bad Inflation Is Still There

ING Economics ING Economics 14.10.2022 15:50
Today's retail sales report shows that nominal spending is flat to slightly higher, but with inflation running hot, real consumer spending is barely treading water. Third-quarter GDP growth expectations need to be trimmed further and with the Fed still hiking interest rates aggressively the 2023 recession fears are undoubtedly intensifying Spending growth not keeping pace with price increases The US September retail sales report is not terrible, but it doesn’t exactly instill confidence either. Headline sales came in on the softer side at 0% month-on-month versus expectations of a 0.2% increase, but the "control" group, which strips out some of the volatile series and typically better matches with broader consumer spending trends rose 0.4% MoM (consensus 0.3%) and there were some decent upward revisions. The key point though is that this nominal spending growth is not keeping pace with inflation. It implies that volume numbers are under massive pressure and recession risks are growing well before the full effects of Federal Reserve rate hikes are felt. Mixed outcomes by sectors Delving into the details, auto sales fell 0.4% MoM despite volumes rising decently. This is a little odd given this would imply price discounting yet yesterday’s CPI report noted a 0.74% MoM increase in the price of new vehicles. We therefore have to assume people are downsizing to cheaper, more economical vehicles. Miscellaneous stores saw sales fall 2.5%, furniture fell 0.7%, electronics were down 0.8%, gasoline fell 1.4% and sporting goods sales dropped 0.7%. Offsetting this was a 0.5% increase in non-store retail, a 0.5% increase in clothing and health/personal care plus a 0.7% increase in general merchandise. Retail sales breakdown Source: Macrobond, ING GDP expectations continue to be trimmed Nonetheless, remember today’s report is all based on nominal dollar growth figures. Yesterday's inflation number showed prices rising 0.4% MoM (and core 0.6%), so sales growth appears even at the "control" group level to be all down to price rises, implying the real (volume) spending growth is effectively zero. Remember that real consumer spending growth was -0.1% MoM in July, +0.1% in August and if we get a zero for September, this works out at real consumer spending growth of just 0.6% annualised. This would be the weakest reading since the -32% annualised drop in the second quarter of 2020 as the pandemic led to the shutdown of the physical economy and implies more cuts to third quarter GDP expectations. We will be lucky to get 1% growth at this rate. With the Fed still hiking interest rates aggressively officials are right to warn of more economic pain to come. Read this article on THINK TagsUS Retail sales Recession Federal Reserve Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Turkish Central Bank Cut Its Policy Rate by150bp | Credit Suisse Outflows Benefit UBS

Turkey's Central Bank Is Expected To Cut Rates Again | An Active Week Is Coming For China

Craig Erlam Craig Erlam 16.10.2022 09:13
US After a hot inflation report, the focus shifts to how policymakers will change their tune on how aggressive the Fed should now be. On Tuesday, we will hear from the Fed’s Bostic and Kashkari. Wednesday contains the release of the Beige Book and an appearance by Kashkari again, as well as speeches from Evans and Bullard.  On Thursday, we will hear from Jefferson, Cook, and Bowman, while Friday brings an appearance from Williams.       Wall Street will pay close attention to the latest round of Fed regional surveys.  Both the Empire Manufacturing Survey and Philly Fed business outlook are expected to remain in contraction territory and possibly signal some easing of price pressures, but that might be limited as energy costs have rebounded. Another round of housing data should show the market is cooling as mortgage rates surge to the highest level in 20 years. Earnings season heats up as we hear from Bank of America, Goldman Sachs, Netflix, and Tesla. After this round of results, we will have a good handle on how healthy the consumer is and if we are starting to see further signs inflation is easing.   EU  Christine Lagarde will speak at the IMF/World Bank event over the weekend which could shed some light on what we can expect on 27 October. Markets are pricing in a high chance of a 75 basis point rate hike which suggests the possibility of Lagarde saying anything groundbreaking is slim. Final inflation data next week could change things but it’s probably not going to as revisions are not common and when they do come, they’re typically very marginal. UK There’s an abundance of drama in the UK right now and unsurprisingly the markets are not embracing it. In sacking Kwasi Kwarteng and replacing him with Jeremy Hunt as Chancellor, Prime Minister Liz Truss may have been hoping to regain some faith in the markets and take the heat off herself but neither of those has happened. The vultures are circling and Truss faces the near-impossible task of restoring confidence and trust in her leadership. There are also some pretty significant economic data releases next week including inflation on Wednesday which is expected to confirm annual price rises are back into double digits. Retail sales will also be released on Friday. Andrew Bailey is in attendance at the IMF/World Bank meeting and is due to speak on Saturday. Russia No major economic or monetary events next week so the focus will remain on the war in Ukraine. PPI data on Wednesday may be of some interest. South Africa Inflation and retail sales data on Wednesday will be of interest, with the central bank previously hiking by 75 basis points and some policymakers even favouring 100. The tightening cycle is clearly not over yet; the question is how aggressive they still need to be.  Turkey A new “disinformation” law adds a bit of extra spice to writing about Turkey’s economic situation and the unconventional approach of the central bank. With inflation running above 80% – as per official data – the central bank is expected to cut rates by another 100 basis points next week to 11%, as it continues to refuse to accept responsibility for soaring prices. The currency continues to trade near record lows amid these policy moves, with inflation expected to remain extraordinarily high barring a sudden and unlikely change of heart on interest rates.   Switzerland No economic data of note next week but markets are very focused on the next monetary policy meeting on 15 December, with 50 basis points almost fully priced in. The question is whether they’ll wait that long. Chairman Thomas Jordan speaks in Washington on Tuesday. China The focus will shift to the 20th National Congress of the Chinese Communist Party, which starts this weekend. The conference is held every five years and is the most important forward-looking guidance of the Chinese government on economic development, COVID strategies, tech ambitions, and people’s livelihood planning. The PBOC is also expected to keep its one-year medium-term lending facility rate steady at 2.75%.  It will be a busy week with Chinese activity data. Production data is expected to steady, investments to improve, and retail sales to be sluggish.    India No major economic releases or speeches are expected. Australia & New Zealand Australia’s September labour report should show employment trends are moderating.  Expectations are for 20,000 jobs to be created, lower than the prior month’s 35,000 gain.   In New Zealand, the focus will be on third-quarter inflation data that is expected to ease to 6.5%, as gasoline prices declined.  Inflation trends are somewhat mixed as coal and gas prices posted increases.  Price pressures are still high and the RBNZ is expected to remain aggressive with rate increases at the November 23rd policy meeting.    Japan Japan may need to intervene in the FX market again as the yen depreciation continues. Core inflation data is expected to rise, but is unlikely to change the BOJ’s easing stance.    Singapore Markets will continue to digest the MAS tightening and recentering of the currency band.  It will be mostly a quiet week, with the exception of one economic release, domestic export data, which is expected to improve.    Economic Calendar Saturday, Oct. 15 Economic Events The annual meetings of the International Monetary Fund and World Bank continue   Fed’s Bullard and ECB Chief Economist Lane discuss inflation on a panel hosted by the Reinventing Bretton Woods Committee in Washington BOE Governor Bailey gives opening remarks at the Group of 30’s international banking seminar in Washington Sunday, Oct. 16 Economic Events China’s Communist Party kicks off its twice-a-decade Congress in Beijing World Health Summit begins with appearances by German Chancellor Scholz and French President Macron  Monday, Oct. 17 Economic Data/Events US empire manufacturing China medium-term lending Italy CPI Japan tertiary index, industrial production, capacity utilization New Zealand performance services index Singapore trade Turkey budget balance UK Rightmove house prices ECB’s de Guindos gives a speech on the 20th anniversary of the euro, organized by the Consejo General de Economistas in Madrid ECB’s Chief Economist Lane participates in a discussion, “For a New European Fiscal Framework,” organized by Bocconi University and Deutsche Bank in Milan EU foreign ministers meet in Luxembourg   Tuesday, Oct. 18 Economic Data/Events US industrial production, NAHB housing market index, cross-border investment Minutes of RBA policy meeting Canada housing starts China Q3 GDP, retail sales, industrial production, surveyed jobless Eurozone new car registrations Germany ZEW survey expectations Italy trade Mexico international reserves New Zealand CPI Philippines BoP South Korea money supply Spain trade balance Thailand car sales Turkey house prices RBA Deputy Governor Bullock speaks at the Australian Finance Industry Association annual conference in Sydney Fed’s Kashkari discusses the economy at a Women Corporate Directors Minnesota Chapter event Earnings Reports from Goldman Sachs and Netflix Wednesday, Oct. 19 Economic Data/Events US MBA mortgage applications, building permits, housing starts, Fed Beige Book Australia leading index Canada CPI China new home prices Colombia trade Eurozone CPI Russia weekly CPI/monthly PPI South Africa CPI, retail sales UK CPI, PPI, RPI, retail price index, house price index EIA crude oil inventory report Hong Kong Chief Executive John Lee delivers his first policy address BOJ’s Adachi speaks at a meeting with local leaders in Toyama Fed’s Kashkari takes part in a moderated Q&A hosted by Travelers Fed’s Evans discusses the economic outlook during an event hosted by the Jefferson Scholars Foundation in Charlottesville, Virginia Fed’s Bullard gives welcome remarks at the Homer Jones Memorial Lecture hosted by his bank  Thursday, Oct. 20 Economic Data/Events US existing home sales, initial jobless claims, Conference Board leading index Australia unemployment, business confidence China loan prime rates, Swift global payments Germany PPI Hong Kong jobless rate Japan trade Russia FX/gold reserves Taiwan export orders Turkey rate decision: Expected to cut one-week repo rate by 100bps to 11.00% UK GfK consumer confidence European Union leaders summit in Brussels through Friday Norges Bank Governor Wolden Bache speaks at the Centre for Monetary Economics, BI Norwegian Business School Friday, Oct. 21 Economic Data/Events Japan CPI  Canada retail sales Euro area consumer confidence Italy Bank of Italy quarterly economic bulletin New Zealand trade, credit card spending Thailand foreign reserves, forward contracts Turkey consumer confidence UK retail sales Sovereign Rating Updates Czech Republic (Fitch) Germany (Fitch) Greece (S&P) Italy (S&P) Netherlands (S&P) United Kingdom (S&P) United Kingdom (Moody’s) This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Analysis And Trips For Trading The GBP/USD Pair In Short And Long Positions

The Cable Market (GBP/USD) Is Already Located Above The Critical Line

InstaForex Analysis InstaForex Analysis 16.10.2022 09:39
Long-term perspective. The GBP/USD currency pair showed an increase of 100 points during the current week, but it still ended two days out of five in a serious minus. A few weeks ago, the price was fixed above the critical line, and this week – first lower, and then higher again. As a result, it continues to be located just above Kijun-sen, which preserves certain chances for a new upward trend. However, at the same time, after the turn of the upward movement by 1100 points, which happened immediately after the next drop of 1000 points, the pound did not show anything special. Recall that the last "flights" of the pound were associated with the tax initiatives of Liz Truss and Kwasi Kwarteng, the latter of whom has already been dismissed. Clouds are also "gathering" over Liz Truss herself. She is accused of a large-scale depreciation of the British currency as well as a sharp drop in demand for Treasury bonds. Some of the tax initiatives have already been removed from the current "plan", but the market is still in a state of shock. The Bank of England has tried to stabilize the debt market, but we cannot say that it has succeeded well. Thus, the fundamental background for the British pound is now expressed not only by the process of tightening the Fed's monetary policy (traders still pay much less attention to the Bank of England) but also by problems with the financial market in the UK and another political crisis, which may end with a vote of no confidence. Therefore, the pound might be happy to grow, but most factors, including geopolitics, remain on the side of the US dollar. On Thursday, the US inflation report also had a bombshell effect on the market. The US dollar first rose sharply, then fell heavily, and on Friday it rose again. Traders have been working out a slowdown in inflation by 0.1% in annual terms for more than a day. And the 0.1% decline itself means that the Fed is simply obliged to raise the rate very aggressively because inflation has already shown that it will not slow down without support in the form of tightening monetary policy. COT analysis. The latest COT report on the British pound showed a new weakening of the "bearish" mood. During the week, the non-commercial group opened 6,900 buy contracts and closed 3,400 sell contracts. Thus, the net position of non-commercial traders increased by 10.3 thousand, which is quite a lot for the pound. It could be assumed that the actions of major players and the movement of the pound have finally begun to coincide since the pound has grown over the last period of net position growth. However, we are worried that this may once again be a "false alarm." The net position indicator has been growing slightly in recent weeks, but this is not the first time it has been growing, the mood of major players remains "pronounced bearish," and the pound sterling continues to fall in the medium term. And, if we recall the situation with the euro, there are serious doubts that, based on COT reports, we can expect the pair to grow significantly. How can you count on it if the market buys the dollar more than the pound? The non-commercial group has now opened a total of 88 thousand sales contracts and 49 thousand purchase contracts. The difference, as we can see, is still very big. The euro cannot show growth in the "bullish" mood of major players, and the pound will suddenly be able to grow in a "bearish" mood. We remain skeptical about the long-term growth of the British currency, although there are certain technical reasons for this. Analysis of fundamental events. During the current week, quite a lot of different statistical information has been published in the UK, but at the same time, we cannot conclude that it somehow helped the pound. The unemployment rate dropped to 3.5%, which is good, but at the same time, GDP fell by 0.3% in August, and industrial production lost 1.8%. Well, at the end of the week it became known about the dismissal of British Finance Minister Kwasi Kwarteng, who had spent a little more than a month in his position. Thus, Britain continues to be in a fever, and we believe that the overall fundamental background remains negative for the pound. The American statistics were not much better this week. Retail sales showed zero growth in September, and the consumer sentiment index from the University of Michigan rose slightly. Inflation has decreased by only 0.1%, but this factor just works in favor of the US currency. Trading plan for the week of October 17–21: 1) The pound/dollar pair as a whole maintains a long-term downward trend but is already located above the critical line. Therefore, small purchases can now be considered as long as the pair is located above the Kijun-sen. The target is the Senkou Span B line, which runs at 1.1843. There are some reasons for the pair's growth, but there are still a lot of reasons for a new fall. Be careful with your purchases. 2) The pound sterling has made a significant step forward but remains in a position where it is quite difficult to wait for strong growth. If the price fixes back below the Kijun-sen line, then the pair's fall can quickly and cheerfully resume with targets in the area of 1.0632–1.0357. Explanations of the illustrations: Price levels of support and resistance (resistance/support), Fibonacci levels – target levels when opening purchases or sales. Take Profit levels can be placed near them. Ichimoku indicators(standard settings), Bollinger Bands(standard settings), MACD(5, 34, 5). Indicator 1 on the COT charts is the net position size of each category of traders. Indicator 2 on the COT charts is the net position size for the "Non-commercial" group.   Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/324399
The Bears Of The EUR/USD Pair Are Still Poised To Be In Control

The Trend Of The Euro To US Dollar Pair (EUR/USD) Is Again Downward

InstaForex Analysis InstaForex Analysis 17.10.2022 08:02
On Friday, the EUR/USD currency pair began a new round of downward movement, during which it again consolidated below the moving average line. Thus, the price did not spend even one day above the moving average, and the trend is again downward. Both linear regression channels are still directed downwards, so almost all indicators now support a new fall in the European currency. Also, recall that on the 24-hour TF, the price continues to be below the critical line. Therefore, according to all indicators, the European currency should continue to slide down. Of course, sooner or later, the downward trend will be completed. Still, we are asking one very simple question for the umpteenth time: what has changed over the last week (month/day) in the fundamental/geopolitical background so that now we can count not on an ordinary pullback up by 200-400 points, but a new upward trend? Answer: nothing. Consequently, the European currency is still at risk. Moreover, after several statements by Fed representatives last week, they assured us that the increase in the Fed's key rate would continue for some time, and then a high rate would remain for quite a long time. Recall that, at the beginning of this year, statements were repeatedly made that the rate would rise as much as possible to start slowing inflation (at that time, it was a 3.5% rate). And then (next year), a rate cut would begin so the economy could avoid a shock and recession. As you can see, there is no question of any rate reduction in 2023. Inflation is declining so slowly at a 3% rate that it is completely unclear at what level it will have to be raised. Is it worth saying again that any Fed rate hike is just fine for the dollar? The market could already consider future rate increases (planned at the beginning of the year), but did it consider the rate increase to 4.5%? Moreover, the European currency remains 200 points from its 20-year low. If the pound has made at least one serious upward leap, then the euro has not. Inflation in the European Union will be at least 10% in September. By and large, there will be only one more or less significant publication in the new week in the European Union—this is the inflation report for September. However, this report cannot be called "important" upon closer examination. First of all, what does European inflation change now? The ECB, just like the Fed, has set a course for an aggressive rate hike, so until inflation shows a serious slowdown, the regulator will not go off this course. Second, the reaction to European inflation has always been weaker than American inflation. A vivid example of this was last week when both major pairs "flew" in different directions after the publication of the CPI in the USA. Third, this is only the second final inflation value for September; the market is already aware that the indicator has risen to 10%. What else will be interesting in the European Union? Speeches by Luis de Guindos, Isabel Schnabel, and Christine Lagarde. Moreover, the speech of the head of the ECB is scheduled for Saturday, so it will not be able to have any impact on the euro currency during the week. Well, de Guindos and Schnabel are likely to remain true to their previous rhetoric, which implies a further tightening of monetary policy. Thus, nothing will be interesting regarding macroeconomics or foundations in the EU this week. But, unfortunately for the euro currency, there is also geopolitics. As several experts have warned, October will be very "hot." In November, the G-20 summit is due to take place, in which both Vladimir Putin and Vladimir Zelensky can participate. So far, no one understands how this can restore peace in Europe since Moscow and Kyiv have officially stated that they will not negotiate with each other. However, in any case, this event is a landmark, and maybe something will be decided on it. The average volatility of the euro/dollar currency pair over the last five trading days as of October 17 is 103 points and is characterized as "high." Thus, on Monday, we expect the pair to move between 0.9618 and 0.9825. A reversal of the Heiken Ashi indicator upwards will signal a new round of upward correction. Nearest support levels: S1 – 0.9644 S2 – 0.9521 Nearest resistance levels: R1 – 0.9766 R2 – 0.9888 R3 – 1.0010 Trading Recommendations: The EUR/USD pair made an upward leap, which ended very quickly. Thus, now it is necessary to stay in short positions with targets of 0.9644 and 0.9618 until the Heiken Ashi indicator turns up. Purchases will become relevant again no earlier than fixing the price above the moving average with goals of 0.9825 and 0.9888. Explanations of the illustrations: Linear regression channels – help determine the current trend. The trend is strong if both are directed in the same direction. The moving average line (settings 20.0, smoothed) – determines the short-term trend and the direction in which trading should be conducted now. Murray levels are target levels for movements and corrections. Volatility levels (red lines) are the likely price channel in which the pair will spend the next day, based on current volatility indicators. The CCI indicator – its entry into the oversold area (below -250) or into the overbought area (above +250) means that a trend reversal in the opposite direction is approaching.   Relevance up to 02:00 2022-10-18 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/324417
Economists At TD Securities Expect Gold Markets Return To A Downtrend

The Pressure On Gold Will Come From The Fed And Its Policy

InstaForex Analysis InstaForex Analysis 17.10.2022 08:37
Early in the European session, Gold (XAU/USD) is trading at around 1,649, bouncing slightly having bottomed out at 1,639. It is currently trading below the 21 SMA (1,668) and below the 5/8 Murray (1,656). The outlook could remain negative for XAU/USD. In case there is a pullback to the top of the downtrend channel and failure to break, it will be a clear signal to sell with the target at 4/8 Murray located at 1,625. The eagle indicator is approaching a key oversold zone (10-5 points). It is likely that there will still be a bearish sequence in gold in the coming days until it reaches oversold levels. Elevated inflation is likely to keep the Fed in a tightening cycle and this is likely to put pressure on gold as rising interest rates should reinforce the US dollar's strength. A sharp break below 1,639 could quickly drop gold towards the 1,625 support. Around this area, we could expect a technical bounce which could once again provide bullish momentum. On the other hand, a daily close above the 21 SMA and a break of the downtrend channel around 1,670 could mean a rally for gold and it could reach 6/8 Murray at 1,687 and even rally towards the psychological level zone of 1,700 around 7/8 Murray (1,718). According to the 4-hour chart, gold maintains a downtrend channel formed since September 30. This channel is still intact. In case there is a pullback towards the 1,668 area, it is likely to be considered an opportunity to continue selling, with targets at 1,635 and 1,625 (4/8).   Relevance up to 06:00 2022-10-22 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/296996
Caixin Services PMI Data Has Helped The Chinese Yuan (CNH)

The US Dollar To Japanese Yen (USD/JPY) Pair Located At Its Highest Levels Since 1990

TeleTrade Comments TeleTrade Comments 17.10.2022 09:11
USD/JPY retreats from intraday high, prints the first daily loss in nine around 32-year high. Japan PM Kishida assures taking steps to limit speculative FX moves, begin search for replacing BOJ Governor Kuroda. Pullback in yields, light calendar tease sellers around multi-year high. USD/JPY bulls take a breather at the highest levels since 1990, printing mild losses near 148.50 during the early hours of Monday’s European session. In doing so, the yen pair prints the first daily loss in nine amid fears of Japan government’s intervention, as well as amid the Treasury bond yields’ retreat. Recently, Japanese Prime Minister Fumio Kishida mentioned that they “will take steps against speculative FX moves as needed.” Japan PM Kishida also added that rapid forex moves are undesirable. Earlier in the day, the Japanese leader mentioned “Will consider a successor to BOJ Governor Kuroda, taking into account monetary policy foreseeability, coordination with the government.” With this, Japan’s Kishida indirectly strikes the Bank of Japan’s (BOJ) easy money policies and suggests a dislike for the USD/JPY run-up. Also exerting downside pressure on the USD/JPY prices could be the sluggish US Treasury bond yields and the broad US dollar pullback amid a sluggish start to the week. Elsewhere, cautious optimism about the UK’s economy, due to the latest shuffle in the PM’s team, as well as the absence of the market’s wagers on the Fed’s 1.0% rate hike also keep the USD/JPY sellers hopeful at the multi-year high. It should be noted that the Japanese intervention appears imminent and can trigger the much-needed pullback from the highest levels since 1990. However, the pace of the fall depends upon the size and timing of meddling. Even so, the divergence between the monetary policies of the Fed and BOJ can keep the USD/JPY bulls hopeful. Technical analysis A clear pullback from the three-month-old ascending resistance line, at 149.10 by the press time directs USD/JPY sellers towards a three-week-old ascending support line, at 146.30 as we write.
The Commodities Digest: US Crude Oil Inventories Decline Amidst Growing Supply Risks

The Worrying Lack Of A Signal About Weakening Inflation

InstaForex Analysis InstaForex Analysis 17.10.2022 11:50
Latest data The release of the CPI inflation report last week showed that inflation rose 0.4% for September, according to the Bureau of Labor Statistics. The report also showed that the consumer price index in September tanked 0.1% at 8.2% YoY from the previous month's 8.3% YoY. However, the main CPI attracted the most attention. The core consumer price index increased from 6.3% in August to 6.6% in September. Interest rate Interest rate hikes are lagging behind to have any real impact on inflation, and the underlying inflation rate is the preferred data that the Federal Reserve uses to shape its monetary policy. At the same time, the surge in core inflation after the Fed aggressively raised interest rates from almost zero to 300–325 basis points during the last five FOMC meetings this year, including three consecutive rate hikes of 75 basis points each: in June, July and September, clearly shows that the recent rate hike has a nominal the impact on reducing inflation. However, they had a strong impact on the growth of US debt yields. The yield on the 10-year Treasury passed 4% on Friday, and with Friday's gain of 1.68%, it is currently 4.02%. The 30-year US bond yield is not far behind the 3.997% yield. The simple truth is that inflation is showing no signs of easing, and this is worrisome as expectations rise in financial markets that the Fed will raise its domestic federal funds rate to 5% or higher by March next year. According to the CME FedWatch tool, there is a 96.7% chance that the Fed will make another 75 bps rate hike in November and a 66.7% chance they will raise another 75 bps in December, leading to a federal funds rates by the end of 2022 to 450–475 basis points. The aftermath of the recent series of rate hikes has caused extreme volatility in the markets and rising bonds. The speed with which the Fed is trying to catch up is the main mistake of not raising rates in 2021. Inflation in 2021 started at 1.4% in January and was 7% by December, and the Federal Reserve did nothing to curb inflation until March 2022. It is clear that if the regulator implemented a small rate hike in 2021, inflation would be far from its current level. The Federal Reserve has painted itself into a corner, forcing them to reconsider the extremely aggressive rate hikes we are currently experiencing. According to the vast majority of economists, a federal funds rate of 5% or higher will have a devastating effect on the economy. This would have a negative impact on stocks and earnings and lead to more bond sell-offs. In effect, this can make it impossible to make loans from individual loans, such as mortgages or loans to corporations. Even more worrying is that some economists expect federal funds rates to rise to 6% at some point. The consequences could easily exacerbate and accelerate a global recession scenario, causing a severe disruption to the global economy. The sad truth is that this scenario could have been avoided had the Federal Reserve acted in response to rising inflation in 2021. They are certainly not responsible for the pandemic that led to the recession, but they are fully responsible for not acting in a timely and sensible way when it was clear in 2021 that inflation was starting to spiral out of control.     Relevance up to 09:00 2022-10-22 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/324465
Hungary's Budget Deficit Grows, Raising Concerns Over Fiscal Targets

Apple Has Completed Deliveries From A Chinese Company YMTC | Flood In Australia And Its Consequences

Saxo Bank Saxo Bank 17.10.2022 12:09
Summary:  Equity markets fell sharply on Friday, erasing the steep rally of the prior session, as US treasury yields rose and the US dollar closed the week on a strong note. After a retreat on Friday, the pound sterling is attempting a comeback on hopes that the new Chancellor will reverse more of the struggling new government’s original tax cut plans. The focus for the week ahead will likely be on corporate earnings, with Tesla, the world’s most heavily traded stock, set to report Wednesday.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) A steep drop in equities Friday erased the odd-ball rally of the prior session as the US equity market heads into Q3 earnings season on its back foot, trading heavily near the cycle lows. The next focus lower could be on the major high posted pre-pandemic in the S&P 500 near 3,400. For the Nasdaq 100, the equivalent level would be near 9,750, some 1,000 points lower from the current level. The earnings season kicks into gear this week with especially Wednesday being important for sentiment in equities as Tesla and ASML reports earnings. Hong Kong’s Hang Seng (HSIV2) and China’s CSI300 (03188:xhkg) Stocks in Hong Kong and mainland China retreated after the selloff in the US markets last Friday.  In addition, General Secretary Xi’s speech yesterday hailed China’s “Dynamic Zero-Covid” strategy and gave no hint of shifting policy priorities toward economic growth as some investors had hoped for. Hang Seng Index lost 1.1% and CSI300 slid 0.4%. China Internet stocks traded in Hong Kong declined from 2% to 8%. CNOOC (00883:xhkg) climbed 0.7% after preannouncing strong net income, benefiting from higher energy prices. USD comes storming back, sterling tries to stabilize... The US dollar quickly recovered lost ground on Friday after the big correction Thursday, in correlation with the return of weak risk sentiment and a fresh rise in US treasury yields back toward the cycle highs. After Chinese leader Xi Jinping's speech at the party congress this weekend, the USDCNH exchange rate remains pinned near the 7.20 area that was the previous high from 2019 and 2020, USDJPY continues to run higher amidst broad JPY weakness (EURJPY is nearing a multi-year high above 145.00). Elsewhere, EURUSD seems reluctant to make a statement with 0.9800 and 0.9536 the two levels of note there, and GBPUSD has pushed higher on hopes that the recent volatility in UK gilts and sterling will see the government retract its budget-busting policy moves, with likely further political turmoil ahead as Prime Minister Truss fights to stay in office. Crude oil (CLX2 & LCOZ2) Crude oil dropped sharply on Friday after a strong comeback for the US dollar and with little to help sentiment as the week gets under way after Chinese leader Xi doubled down once again on his commitment to Zero Covid policy. The bigger focus in energy markets is on the weak supply situation in diesel amidst concerns of shortages in both Europe and the US. In Europe, strikes at French refineries are aggravating the supply situation, while US storage levels are at their lowest for this time of year ever. US treasuries (TLT, IEF) US treasury yields pulled back higher on Friday to close the week near the highs for the cycle, with the 10-year Treasury yield benchmark near 4.00% once again and a very light US data calendar for the week ahead, although important housing data like the October NAHB Survey is up tomorrow and September Housing Starts/Building Permits data follows on Wednesday. The most interesting auctions this week are a 20-year US Treasury auction on Wednesday and a 5 year TIPS auction on Thursday. What is going on? Xi’s speech at the Chinese Communist Party’s 20th National Congress adhered to current policy priorities General Secretary Xi Jinping made a speech to present the Work Report of the 19th Central Committee to the 20th National Congress.  In the speech, he reiterated the current policies of the new development paradigm, common prosperity, dual circulation, and dynamic zero-Covid, as well as strong language on Taiwan. As we remarked in a recent note, General Secretary Xi is set to continue the key policy priorities that he launched over the past 10 years into the five years ahead. Investors hoping for major shifts in economic policies in China or the Chinese authorities ditching the dynamic Covid-zero strategy after the 20th National Congress will most likely be disappointed. Apple to stop using Chinese memory chips Due to US export restrictions Apple has decided to halt the usage of memory chips from the Chinese company YMTC. The chips are cheaper than other manufacturers of memory chips but were only supposed to have been used for the Chinese market, so the immediate impact on iPhone pricing is low. However, it underscores the long-term risks to inflation from the ongoing reshoring of the global supply chain. Mixed US economic data on Friday On a positive note, the US preliminary October University of Michigan sentiment indicator rose slightly, with the headline at 59.8, up from 58.6 in September. This is the highest print since April 2022. This is partially explained by an easing of supply constraints. But concerns over inflation and the ongoing economic slowdown remain. On a negative note, U.S consumer spending was flat last month. Retail and food services sales were little changed after an increase of 0.4 % in August. This is actually much worse than it looks like. Retail sales numbers are not adjusted for inflation which means that real spending actually retreated for the month. However, it is unlikely to prevent the U.S. Federal Reserve from raising the Fed funds rate by at least 75 basis points at the November FOMC meeting (current market pricing is +78 basis points). La Nina is underway in Australia; floods decimate some wheat crops In the Australian state of Victoria at the weekend floods decimated some wheat crops, which has resulted in the price of Wheat futures contracts for March and May 2023 lifting in anticipation that supply issues will worsen. The Australian Federal Emergency Management Minister said parts of Australia face ‘some serious flooding’ with more rain forecast later this week, with 34,000 homes in Victoria potentially expected to be inundated or isolated. The Bureau of Meteorology forecasts the La Lina event to peak in spring that’s underway in the Southern Hemisphere, before turning to neural conditions early next year. What are we watching next? UK Prime Minister Truss in fight for political life this week … as rumors swirl of a rebellion in the Tory ranks. New Chancellor Jeremy Hunt is scheduled to speak today and may announce further reversals of the budget-busting adjustments to tax policy that got the fledgling government into trouble so quickly and helped trigger the recent turmoil in sterling and the UK gilt market. Sterling has started the week on a hopeful note as we also wait and see how well the gilt market functions after the Bank of England wound down its emergency QE programme last week. The UK CPI data on Wednesday is the data highlight of the week for the UK, with headline CPI expected at 10.0% YoY and core at +6.4%. Earnings to watch This is the first full week for the quarterly earnings cycle, with intense focus on Tesla’s earnings report up on Wednesday as the stock closed a new low for the year on Friday as concerns rise of cracks in the company’s growth story. Given the pressure on the semiconductor industry from US export restrictions earnings from ASML and Lam Research are also our focus on Wednesday. Today: Bank of America, Sandvik Tuesday: Charles Schwab, Johnson & Johnson, Goldman Sachs, Intuitive Surgical, Lockheed Martin, Truist Financial Wednesday: ASML, Elevance Health, Tesla, IBM, Lam Research, P&G, Abbott Laboratories, Atlas Copco Thursday: China Mobile, China Telecom, ABB, Danaher, Investor, Philip Morris, Union Pacific, CSX, AT&T, Blackstone, Marsh & McLennan, Yara International, Nordea, Volvo, Ericsson, Freeport-McMoRan, Dow Friday: CATL, American Express, Schlumberger, Verizon Communications, HCA Healthcare, Sika Economic calendar highlights for today (times GMT) 1200 – Poland Sep. Core CPI 1230 – US Oct. Empire Manufacturing 1430 – UK Chancellor Hunt to speak 1500 – ECB’s Lane to speak 2145 – New Zealand Q3 CPI 0030 – Australia RBA Minutes 0200 – China Sep. Industrial Production 0200 – China Sep. Retail Sales 0200 – China Q3 GDP Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: https://www.home.saxo/content/articles/macro/market-quick-take-oct-17-2022-17102022
Gold Has A Chance For Further Downside Movement - 30.12.2022

The Overall Technical Picture Of Gold Is Rather Bearish

InstaForex Analysis InstaForex Analysis 17.10.2022 13:56
The short-term outlook for gold remains bleak, with analysts overwhelmingly bearish on the precious metal as the $1,650 an ounce level was broken on Friday. The precious metal is down nearly $90 from its October high. The overall technical picture is rather bearish. The main reason complicating the situation with gold is higher than expected inflation, forcing the market to reprice the aggressive expectations of the Federal Reserve's interest rate hike. And this gives the US dollar an additional boost. The results of the weekly survey on gold showed that Wall Street is extremely negative about gold prices this week. Of the nine analysts who took part in the survey, 78% said they expect prices to drop, and only 22% are optimistic. There were no voices expecting lateral movement. The main street side remained bullish, but the bearish segment grew. The survey showed that out of 858 retail participants, 45% expected a price increase, 35% called for a reduction, and 20% remained neutral. Reassessment of Fed rate hike expectations The holding of the US dollar near a 20-year high is driven by expectations of a 99.7% chance of another 75 basis point rise in November and a 74% chance of another 50 basis point rise in December, and possibly a series of small rate hikes in February and March, according to the CME FedWatch Tool. As long as such a macro environment exists, gold will be under pressure.     Relevance up to 09:00 2022-10-20 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/324469
GBP/USD Options Market Anticipates 70 Pip Range on BoE Day

Marc Chandler (MarcToMarket) Comments On (GBP) British Pound, US Dollar (USD), Markets Around The World And Much More! - 17/10/22

Marc Chandler Marc Chandler 17.10.2022 15:16
October 17, 2022  $GBP, $USD, Bank of Canada, BOJ, China, Currency Movement, Federal Reserve, Hungary, Intervention, SNB, UK Overview: The markets have returned from the weekend with a greater appetite for risk. Equities and bonds are rallying, and the dollar is better offered. China, Hong Kong, South Korea, and Indian bourses advanced. Mainland shares edged higher even though Zhengzhou, a city of one million people, near an iPhone manufacturing hub was locked down due to Covid. Europe’s Stoxx 600 is up nearly 0.5% to extend its recovery into a third session. US futures are trading a little more than 1% higher. European benchmark bond yields are 10-12 bp lower and the 10-year US Treasury yield is seven basis points lower to 3.95%. The reversal of the UK’s fiscal policy and a new Chancellor of the Exchequer has seen British Gilts rally strongly. The 30-year Gilt that traded briefly above 5.0% last week is off 34 bp today to 4.44%. A break of 4.25% would target 4.0%. Sterling is leading the major currencies higher today with around a 1% gain. The greenback is trading lower against all the major currencies, though it is virtually flat against the yen. Emerging market currencies are more mixed. Asian currencies are mostly softer, while the South African rand and Mexican peso join the central European currencies moving higher. Gold has stabilized after falling nearly 3% last week. It is approaching $1660, and the nearby cap is seen closer to $1670. December WTI is little changed. It fell 7.3% last week after rallying 16% the previous week on OPEC+ cuts. US natgas is off 3.4%. It gapped lower and is at its lowest level since mid-July. Natgas prices in Europe are tumbling as a cap is being discussed. Europe’s benchmark is at its lowest level since late June. It is down 4% today. It fell 9% last week, for its seventh consecutive weekly decline. Iron ore prices fell 2% today, giving back the pre-weekend gains in full. December copper is about 0.25% firmer, recouping half of what it lost ahead of the weekend. December wheat is starting the new week with a 1.4% advance after tumbling 3.6% at the end of last week. Asia Pacific Xi's speech at the 20th Party Congress in China seemed to offer little but a new confirmation of the current trajectory. In some ways, leaving out the political structure (I know, it is a bit like asking Mrs. Lincoln, "despite that, how was the play?), Xi sounded like many leaders of other countries while underscoring that economic development was the top priority. He talked about "common prosperity" limiting income and wealth inequality, recognizing markets' decisive role in allocating resources, and that housing is "for living not speculating." Reports indicate that in his two-hour speech, Xi had a section on "human capital." Xi's views on welfare are not so different than many liberals and neo-liberals in the US and Europe, and on more than one occasion, he has warned that welfare supports "lazy people."  Xi's emphasis on self-reliance (the word counters say he said it twice after not citing it at all in his 2017's speech) may be a recognition of the US tightening technology noose. Earlier this month, the Biden administration took the strongest steps to block China from developing start-of-the-art semiconductor capabilities, which have dual use--civilian and military. The full ramifications of the latest US controls are still rippling through the industry. Still, it appears that US citizens, including green card holders, cannot support the development or production of semiconductor chips at many (28) Chinese firms, which means employment and sales, shipping, servicing, and support. Taiwan's intelligence estimates that around 200 US passport holders are employed in Chinese semiconductor companies. It will work through third countries too. Even though the US is not the center of chip fabrication that it once did, US software is critical in chip design. Some pundits claim this "coup-de-grace" is a significant blow to this key industry. As the share prices have shown, it will also hurt several US chip companies. There is some speculation that the Bank of Japan may be intervening quietly and read into the BOJ's daily balances, the possibility that it sold a little less than $7 bln dollars to defend the yen. The first intervention last month was a record near $20 bln. To go from trying to muscle the market to quietly offering support to the yen seems unlikely. Moreover, the whipsaw in the exchange rate that is the intervention hypothesis is supposed to explain took place after the stronger than expected US CPI figures on October 13 in the North American session. That said, the Ministry of Finance Kanda did warn last month that "stealth" intervention was possible and that official confirmation would not always be provided. If the BOJ did intervene, which we doubt, did not have much impact. The dollar reached JPY148.85 ahead of the weekend more than a full yen higher than seen on October 13. It is in a little less than half-a-yen range today below JPY148.80. If we are right that intervention in Japan's time zone, then the dollar is likely to make its highs in Europe or North America. The Australian dollar rose to a marginal new high for the week ahead of the weekend before reversing and settling on its low slightly below $0.6200. It is trading with a firmer bias today, though it stalled near $0.6250 in the European morning, where options for A$465 mln expire today. A bit higher, $0.6270 are another set of options for nearly as much (~A$425 mln) will also roll off. The greenback remains firm against the Chinese yuan and is trading above CNY7.20. The high from late September was a little above CNY7.25. As expected, the benchmark Medium-Term Lending Facility rate was unchanged at 2.75%. The PBOC has steadied the daily dollar fix to around CNY7.10 and continued today with a CNY7.1095 reference rates. The median in Bloomberg's survey was for CNY7.1977. This appears to be the widest gap. Reports suggest that Chinese state banks swapped yuan for dollars in the forward market and sold dollars in in the onshore market to support the yuan. Europe The SNB has tapped the Fed's dollar-swap line for the past two weeks. On October 5, nine counterparties took $3.1 bln; last week, 15 institutions got $6.27 bln for a week. There are two general views. The first sees it as troublesome and an expression of the global stress being stoked by the reduction of dollar liquidity and growing systemic risks. A large Swiss bank has been the subject of rumors and speculation for weeks, but the number of counterparties suggests something more/bigger. The second view the use of US swap lines to secure the dollar as part of an arbitrage-like opportunity. Taking the dollars from the SNB's swap line, swapping them for Swiss francs, and depositing them with the SNB is a nearly risk-free pickup of an estimated 40-50 bp. Earlier, a similar type of arbitrage seemed to drive dollar-based investors' demand for Japanese government bonds. Then, the currency swap was greater than the bond's interest rate. Separately, while much of the coverage of central bank intervention has focused on Asia, some suspect the SNB may have quietly sold dollars near CHF1.00. The idea is that the SNB has become particularly hawkish and wants to resist currency weakness. The dollar is the second most important currency for Switzerland. Total sight deposits fell 3% last week, which one would expect amid dollar-selling intervention. Still, as we have previously suggested, it is also consistent with the SNB's efforts to mop up excess liquidity. Total sight deposits have fallen by nearly 20% over the past four weeks or CHF134.7 bln. When the UK government scrapped the cut to the highest marginal tax, many said it was a U-turn. We thought it was a relatively small dilution of its fiscal thrust. The shift before the weekend to embrace the Johnson/Sunak corporate tax increase is more significant and cost Chancellor Kwarteng his job. Hunt, whose fellow MPs rejected his bid to be Prime Minister, is the new Chancellor. Reports suggest he is committed to delivering the fiscal statement on October 31. Hunt may drop the one-percentage point cut in income tax that was to be implemented next year. The focus shifts from taxes to spending. One issue is whether welfare payments will be raised to blunt inflation, as Johnson had promised. Hunt is expected to make a statement late in the UK morning on measures to support fiscal sustainability and then will address the House of Commons a few hours later. Hungary surprised the market before the weekend. Last month, it signaled that it was done lifting rates and would focus on draining liquidity. The central bank introduced a new one-day deposit facility at 18%, compared with the base rate of 13%. It also indicated that it would use reserves to counter the rise in energy prices. That could cost around $1.5 bln a month. As a result, the forint recovered by about 4.2% against the euro ahead of the weekend. There has been no follow-through forint buying today and the euro recovered from about HUF416.35 to HUF419.25 before steadying in the European morning.  The euro held above the pre-weekend low slightly below $0.9710. Then it rallied nearly half a cent through the European morning. A consolidative tone is threatening. Last Thursday and Friday's high were recorded a little above $0.9800 and this remains the nearby cap. Options for almost 1.6 bln euro struck at $0.9800 expire on Thursday. Sterling is up around a cent in the European morning around $1.1275. It did initially slip through the pre-weekend low to dip below $1.1150 but recovered quickly. The high from the end of last week was $1.1365-80 this needs to be overcome to lift the tone and signal a re-test on the $1.1500 area. America The robust September employment data was followed by a stronger-than-expected CPI and respectable retail sales (0.4% core and August revised to 0.2% from 0). Despite the lagged nature of the data points, if the Fed were to say to its critics that after raising the Funds target by 225 bp and doubling the pace of the balance sheet unwind over the past 100 days, we venture that interest medium-and long-term US rates would rise rather than fall. Core CPI is at a new cyclical high. Headline inflation is higher. Frankly, the Federal Reserve seems to be moving in the opposite direction. Encouraged by Bullard, the market will take more seriously the chances of a 75 bp hike in December after a 75 bp hike in early November. The October Empire State manufacturing survey is on tap today (unlikely to be a big market mover), and while no Fed officials are scheduled to speak, the revelation that Bostic may have violated the Fed's trading rules is being discussed by market participants. Bostic and Kashkari speak tomorrow ahead of the Beige Book on Wednesday. The combination of stepped-up hawkish rhetoric by Bank of Canada Governor Macklem, despite words of caution from the IMF about risks of recession from the collective hikes, and the prospects of a more aggressive Fed has lifted expectations for a 75 bp hike next week. After the Reserve Bank of Australia raised rates by a quarter-of-a-point, some observers thought it was a tell for a more moderate pace by Canada. Still, Macklem put that to bed, The market accepted that a 50 bp was most likely, but in recent days, expectations for a 75 bp move have increased. The swaps market now sees about an 78% chance of another three-quarters point move. Firmer equities can help the Canadian dollar pare last week's 1% decline. The Canadian dollar fell to new two-and-a-half-year lows in the middle of last week. Trading remained choppy in the second half of the week and the greenback finished slightly below CAD1.39. It has not been above CAD1.3880 today and there are options for nearly $900 mln at CAD1.3900-05 that expire today. We suspect that they may have been neutralized ahead of the weekend. A break of CAD1.3800 could spur a move toward CAD1.3740-50 today. The greenback is offered against the Mexican peso, and it is approaching the lower end of its recent trading range. It has not traded below MXN19.9350 this month, but a break could signal a move to the bottom of the wider range, which extends to around MXN19.80. It is a quiet week for Mexican data and the highlight is the August retail sales report on Friday. A small rise is expected.    Disclaimer Source: Sterling and UK Debt Market Respond Favorably to the Return of Orthodoxy - Marc to Market
Ed Moya and Jonny Hart talk the US Q3 GDP, crude oil and crypto

US Dollar Is Affecting Crude Oil Price, Which May Be Playing Hide And Seek In The Near Future

Walid Koudmani Walid Koudmani 17.10.2022 21:58
Eyes on the Sterling Pound as new chancellor set to make announcement The pound remains in the spotlight this week as investors await today's speech from the new chancellor Jeremy Hunt where is expected to announce the new budget and tax plans after the recent plans caused a noticeable drop in confidence towards the currency. While there may be a possibility for some surprises in today's statement, expectations remain for a U-turn on several measures previously announced in an attempt to reassure markets about the financial stability of the economy. The pound started the day trading higher reaching 1,125 against the US dollar while the UK FTSE index pulled back slightly after an initial upward move which saw it briefly break above 6900 points and any unpredicted announcement could cause a significant reaction across asset classes. Read next: Netflix Stock Price May Tumble Tomorrow! What Can We Expect From NFLX Earnings? | FXMAG.COM Oil prices attempt to rebound at the start of the week Despite the announcement of a further cut to OPEC+ production in the most recent meeting, oil prices failed to gain momentum and after a brief attempted recovery remained stuck in the previous consolidation area. WTI prices are down around 1,50% after a short upward move this morning which was facilitated by a temporary weakening of the US dollar, which has been putting pressure on commodity prices in recent times. However, the situation appears to be changing as the dollar has once again started to garner some strength and is once again pressuring other currencies as well as commodities like oil. Prices could continue to be volatile in the near future as general economic uncertainty and investor sentiment continue to play a key role in price action while investors await macroeconomic reports and central banker speeches during the week, along with earnings reports from major Wall Street companies. Oil WTI prices are hovering in an interesting technical position as they test a short term support area around $84,50, which managed to limit the most recent downward movement. If this area is broken, it may lead to the start of a bigger move which may result in further speculation regarding the upcoming production targets set by OPEC+.
Rates Reversal: US Long Yields on the Rise as Curve Dis-Inverts

Revival On The American Markets And Growth On The S&P 500 Futures

TeleTrade Comments TeleTrade Comments 18.10.2022 08:45
S&P 500 futures have extended their recovery above 3,740 as the quarterly earnings season kicked off. BOFA released stellar earnings led by upbeat NII numbers. The risk profile is cheerful despite escalating recession fears in the US. The DXY has surrendered the critical support of 112.00 with sheer selling pressure. Global markets are displaying a stellar performance following positive cues from US markets. S&P500 futures have extended their gains after a cheerful Monday, which has infused fresh blood in the global indices. The 500-stocks basket futures have extended their gains above 3,740 after surpassing the critical hurdle of 3,720. The risk-on sentiment has strengthened further as 10-year US Treasury yields have dropped further towards 3.97%. US markets displayed a V-shape recovery on Monday after a bloody Friday as quarterly earnings season kick-started with a bang. Bank of America (Bofa) came out with decent earnings growth supported by upbeat Net Interest Income (NII). The US dollar index (DXY) has surrendered the round-level support of 112.00 as the positive market sentiment has trimmed the safe-haven’s appeal. The odds of a bigger rate hike by the Federal Reserve (Fed) are still solid as the CME FedWatch tool displays 99% chances in favor of the fourth consecutive 75 basis points (bps) rate announcement. Meanwhile, recession fears in the US economy have advanced after negative commentary from J.P. Morgan on financial instruments. Strategists at J.P. Morgan cited that they are cutting back on their delivery longs in equities and trimming their underweight position in bonds due to increased risk that central banks will make a hawkish policy error, reported Reuters. Returns on bonds are scaling higher as the Fed will continue its ultra-hawkish stance despite a slowdown in the inflation rate for several months.
Weaker Crude Oil Prices Undermine The Loonie Pair (USD/CAD)

Fed's Hawkish Policy May Help Contain Deeper Losses On The USD/CAD Pair

TeleTrade Comments TeleTrade Comments 18.10.2022 09:27
USD/CAD drifts lower for the second straight day and is pressured by a combination of factors. An uptick in oil prices underpins the loonie and exerts pressure amid a modest USD weakness. Aggressive Fed rate hike bets, recession fears should limit the USD downside and cap the major. The USD/CAD pair adds to the previous day's heavy losses and remains under some selling pressure for the second successive day on Tuesday. The intraday downfall drags spot prices closer to mid-1.3600s, or a one-and-half-week and is sponsored by a combination of factors. The prevalent risk-on environment - as depicted by a strong follow-through rally in the equity markets - continues to weigh on the safe-haven US dollar. Apart from this, a modest recovery in crude oil prices, bolstered by a softer buck, underpins the commodity-linked loonie and contributes to the offered tone surrounding the USD/CAD pair. That said, the prospects for a more aggressive policy tightening by the Fed should act as a tailwind for the greenback and help limit deeper losses for the USD/CAD pair, at least for the time being. In fact, the markets seem convinced that the Fed will continue to hike interest rates at a faster pace to combat stubbornly high inflation. The fed funds futures indicate a nearly 100% chance of another supersized 75 bps rate increase at the next FOMC policy meeting in November. This remains supportive of elevated US Treasury bond yields and favours the USD bulls. Apart from this, growing recession fears should cap the latest optimism in the markets and benefit the safe-haven buck. Investors remain concerned about economic headwinds stemming from rising borrowing costs, China's zero-COVID policy and geopolitical risks. Furthermore, expectations that a deeper global economic downturn will dent fuel demand should cap the black liquid. This, in turn, supports prospects for the emergence of some dip-buying around the USD/CAD pair. Market participants now look to the US economic docket, featuring the release of Industrial Production data and Capacity Utilization Rate for some impetus later during the early North American session. Traders will further take cues from oil price dynamics for short-term opportunities, though the focus will remain on the Canadian CPI report on Wednesday.
China's Position On The Russo-Ukrainian War Confirmed At The G20 Meeting

The Japanese Yen (JPY) Is The Only G20 Currency Which Have Been Weaken | China Delays Publication Of GDP Report

Saxo Bank Saxo Bank 18.10.2022 10:40
Summary:  Risk sentiment was supported by more U-turns in UK fiscal policy and strong earnings from Bank of America supporting the US banks. Equities rallied and the USD declined, but the Japanese yen failed to ride on the weaker USD and continued to test the authorities’ patience on intervention. Higher NZ CPI boosted bets for RBNZ rate hikes, and the less hawkish RBA meeting minutes brought AUDNZD to fresh lows. EU meetings remain key ahead as the bloc attempts to finalize Russian price caps. What’s happening in markets?   The Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) rally after UK-policy U-turn. So far this reporting season earnings are declining The mood was risk-on amid Monday’s rally; with the major indices charging higher with the S&P500 up 2.7%. The breadth of the rally was so strong that at one point over 99% of the companies in the S&P500 were rising, which pushed the index up away from its 200-week moving average (which it fell below last week). Meanwhile the Nasdaq 100 gained 3.5%. The rally came after the UK made $30 billion pounds worth of savings after scrapping tax cuts (see below for more). It was received well by markets and investors looking for short term relief. Bond yields fell, equities rallied and after the GBP lifted 1.6% the US dollar lost strength. But the UK is not out of the lurch with power outages likely later this year. Plus also consider, so far this US earnings season, only 38 of the S&P500 companies have reported results and earnings growth has so far declined on average by 3%. So it’s too soon to gauge if markets can sustain this rally, particularly with the Fed likely to hike rates by 75 bps later this month and next. Strong earnings from bank boosted market sentiment. Bank of America (BAC:xnys), reporting solid Q3 results with net interest income beat and a 50bp sequential improvement on CET1 capital adequacy ratio, surged 6% and was one of the most actively traded stock on the day. U.S. treasury curve (TLT:xnas, IEF:xnas, SHY:xnas) steepened Initially US treasuries traded firmer with yields declining, after taking clues from the nearly 40bps drop in long-dated U.K. gilts following the new U.K. Chancellor Hunt scrapping much of the "mini budget" tax cuts and the support for household energy bills. Some block selling in the long-end treasury curve however took 30-year yields closing 3bps cheaper and 10-year yields little changed at 4.01%. The 2-year to 5-year space finished the session richer, with yields falling around 5bps and 2-year closed at 4.44%. The market has now priced in a 5% terminal Fed fund rate in 2023 and a 100% probability for a 75bps hike in November and over 60% chance for another 75bps hike in December. Australia’s ASX200 (ASXSP200.1) lifts 1.4%; with a focus on Uranium, stocks exposed to the UK and lithium Firstly Lithium stocks are in the spotlight after Pilbara Minerals (PLS) accepted a new sales contract to ship spodumene concentrate for lithium batteries from Mid-may, at $7,100 dmt. PLS shares are up 3.1% with other lithium stocks rising including Core Lithium (CXO) up 3.7% and Sayona Mining (SYA) up 4.7%. Secondly, shares in Uranium are focus today after Germany plans to extend the life of the countries three nuclear power plants till April, as it contends with the energy crisis. The Global Uranium ETF (URA) rose 5.9% on Monday and ASX uranium stocks are following suit like Paladin (PDN) up 2%. For a deep look at the uranium/nuclear sector, covering the stocks to perhaps watch and why read our Quarterly Outlook on the Nuclear sector here. Thirdly, amid the risk-on short term relief in markets from the UK, companies with UK exposure are rallying amid the short-term sentiment shift , including the UK’s 5th biggest bank, Virgin Money (VUK) which is listed on the ASX and trades up 5.3%. Ramsay Health Care (RHC), which is a private hospital/ health care business with presence in the UK trades up almost 2% today. Ramsay's recent full-year showed UK revenue doubled to $1.2 billion. Hong Kong’s Hang Seng (HSIV2) China’s CSI300 (03188:xhkg) Stocks in Hong Kong and mainland China traded lower initially and spent the rest of the day climbing to recover all the losses, with Hang Seng Index and CSI300 finishing marginally higher. General Secretary Xi’s speech last Sunday hailed China’s “Dynamic Zero-Covid” strategy and gave no hint of shifting policy priorities toward economic growth as some investors had hoped for. Among the leading Hang Seng constituent stocks, HSBC (00005:xhkg) gained 1.5% and the Hong Kong Stock Exchange (00388:xhkg), which is reporting Q3 results on Wednesday, climbed 2.3%. Chinese banks gained, with China Merchant Bank rising 2.3% and ICBC (01389) up 1.7%.  Healthcare names gained, Hansoh Pharmaceutical (03692:xhkg) surged 13.2% and Sino Biopharm (01177:xhkg) rose 3.6%. EV stocks were among the laggards, dropping from 1% to 5%. Li Ning (02331:xhkg) tumbled over 13% at one point and finished the trading day 4.3% lower following accusations on mainland social media about the sportswear company’s latest designs resembling WWII Japanese army uniforms.  Japanese yen paying no heed to jawboning efforts The US dollar moved lower on Monday, but that was no respite for the Japanese yen. All other G10 currencies got a boost, with sterling leading the bounce against the USD with the help of dismantling of the fiscal measures by the newest Chancellor of the Exchequer Jeremy Hunt and the slide in UK yields. The only G10 currency that weakened further on Monday was the JPY, which continued to test the intervention limits of the authorities. USDJPY rose to 149.08, printing fresh 42-year highs. Bank of Japan Governor Kuroda will be appearing before the Japanese parliament from 9.50am Tokyo time, after some stern remarks in the morning saying that they “cannot tolerate excessive FX move driven by speculators”. While intervention expectations rose, the yen still did not budge until last check. NZD rose on higher New Zealand CPI boosting RBNZ tightening bets Another surprisingly strong inflation print from New Zealand, with Q3 CPI easing only a notch to 7.2% y/y from 7.3% y/y against consensus expectations of 6.5% y/y and an estimate of 6.4% from the RBNZ at the August meeting. The q/q rate rose to 2.2% from 1.7% in Q2 and way above expectations of 1.5%. This has prompted expectations of more aggressive tightening from the RBNZ with a close to 75bps hike priced in for the Nov 23 meeting vs. ~60bps earlier, and the peak in overnight cash rate at over 5.3% from ~5% previously. NZDUSD rose to 0.5660 with the AUDNZD down to over 1-month lows of 1.1120 with RBA minutes due today as well for the October meeting when the central bank announced a smaller than expected rate hike of 25bps. Crude oil (CLX2 & LCOZ2) Crude oil prices stabilized in early Asian hours on Tuesday after a slight decline yesterday, despite a weaker dollar and an upbeat risk sentiment. WTI futures rose towards $86/barrel while Brent was above $91. Chinese demand concerns however weighed on the commodities complex coming out of the weekend CCP announcements. On the OPEC front, Algeria's Energy Minister echoed familiar rhetoric from the group that the decision to reduce output is a purely technical response to the world economic circumstances.   What to consider? UK need to know: Policy U-Turn provides shorter term risk-on rally, but long-term headwinds remain, UK holds talks to avoid power shutdowns New British chancellor Jeremy Hunt reversed almost all of PM Liz Truss’ mini-budget. Initially Truss’ plans sent markets into a tailspin - whereby the pound hit record lows and the Bank of England was forced to intervene. However, after Hunt virtually scrapped all of the announced tax cuts, and cut back support for household energy bills, saving $32 billion pounds, then risk sentiment improved and the pound gained strength. But, the issue is, firstly; there are still almost $40 billion pounds worth of savings to be made to close the fiscal gap; meaning more government spending cuts will come and possibly tax hikes. This is probably why new UK finance chief, Hunt, declined to rule out a windfall profit tax. Nevertheless, the U-turn was received well by markets for the short term, bond yields fell, equities rallies and the pound sterling (GPBUSD) rose 1.6% against the USD with the US dollar losing strength. And the second reason the UK is not out of the lurch is that the fundamentals haven’t changed; the UK energy crisis is not resolved – yesterday in the UK government officials met major data centers discussing the need to use diesel as backup if the power grid goes down in the coming months. Amazon.com and Microsoft run data centers in the UK. Earlier this month, National Grid also warned some UK customers they could face 3-hour power cuts on cold days. The Bank of England is expected to downgrade its rate hike expectations.    NY Fed manufacturing headline lower on mixed components The NY Fed manufacturing survey for October fell to -9.1, contracting for a third consecutive month and coming in below the expected -4.0 and the prior -1.5. While survey data remains hard to trust to decipher economic trends, given a small sample size and questioning techniques impacting results, it is worth noting that more factories are turning downbeat about future business conditions which fell 10 points to -1.8 and was the second weakest since 2009. Also, the prices paid measure rose for the first time since June, echoing similar results as seen from the University of Michigan survey. Fed speakers ahead today include Bostic and Kashkari and terminal rate expectations remain on watch after they are touching close to 5%. La Nina is underway in Australia; floods decimate some wheat crops In the Australian state of Victoria at the weekend, floods decimated some wheat crops, which has resulted in the price of Wheat futures contracts for March and May 2023 lifting in anticipation that supply issues will worsen. The Australian Federal Emergency Management Minister said parts of Australia face ‘some serious flooding’ with more rain forecast later this week, with 34,000 homes in Victoria potentially expected to be inundated or isolated. The Bureau of Meteorology forecasts the La Lina event to peak in spring that’s underway in the Southern Hemisphere, before turning to neural conditions early next year. La Nina is not only disastrous to lives, homes and businesses, but the extra rainfall usually brings about lot of regrowth when rain eases. The risk is, if El Nino hits Australia in 2023 for instance, bringing diminished rainfall and dryness, then there is a greater risk of grassfires and bushfires. Investors will be watching insurance companies like Insurance Australia Group, QBE. As well as companies that produce wheat, including GrainCorp and Elders on the ASX and General Mills in the US. RBA Meeting Minutes out – AUDUSD climbs of lows, up 1.7% The Aussie dollar rose 1.7% off its low after the USD lost strength when the UK re winded some tax cuts. The AUDUSD will be in focus with the RBA Meeting Minutes released, highlighted why the RBA rose interest rates by just 0.25% this month, moving from a hawkish to dovish stance. The RBA previously highlighted it sees unemployment rising next year, and sees inflation beginning to normalize next year, which in our view, implies the RBA will likely pause with rate hikes after December, after progressively making hikes of 25bps (0.25%). Still the Australian dollar against the US (AUDUSD) remains pressured over the medium term, given the Fed’s expected heavy-pace of hikes, while China’s commodity buying-power is restricted with President Xi maintaining a covid zero policy. As such, the AUD's rally might be questioned unless something fundamentally changes. China delays the release of Q3 GDP and September activity data Chin’s National Bureau of Statistics delays the release of Q3 GDP, September industrial production, retail sales, and fixed asset investment data that were scheduled to come on Tuesday without providing a reason or a new schedule.   For our look ahead at markets this week - Listen/watch our Saxo Spotlight.   For a global look at markets – tune into our Podcast. Source: https://www.home.saxo/content/articles/equities/market-insights-today-18-oct-18102022
Russia Look Set To Double Its Exports For The First Half Of 2023

The Agreement Allowing Ukraine To Export Grain May Not Be Renewed

Saxo Bank Saxo Bank 18.10.2022 10:52
Summary:  The Crimea bridge blast last weekend destroyed a key supply route for Moscow’s forces in southern Ukraine. Putin was quick to retaliate by raining missiles over Kyiv and other cities after condemning the act as terrorism done by Ukrainian special services. This places the UN brokered grain deal in jeopardy with negotiations taking place now to extend it by a year. Elsewhere, OPEC+ cut output by 2 million barrels per day despite Western nations protests. The Crimea bridge blast last weekend destroyed a key supply route for Moscow’s forces in southern Ukraine. Putin was quick to retaliate by raining missiles over Kyiv and other cities after condemning the act as terrorism done by Ukrainian special services. He did not spare the port of Odesa, which is considered one of the key grain export ports that Russia has agreed to allow normal export operations to continue via the Black Sea. The bombings has continued for over a week now with central Kyiv being hit by kamikaze drones early yesterday while heavy fighting is still happening at the war front in southeastern Ukraine.Escalating tensions between Russia and Ukraine might see potential risk on grain supply. Prices in wheat (ZWZ2) and corn (ZCZ2) have gained as much as 7.5% and 3.3% respectively after the Kyiv bombings even though these moves look small compared to the ones we saw in the earlier part of this year. To provide some numbers, Ukraine is currently one of the world’s leading exporter of grain. We have the breakdown below:Percentage of global exportsSunflower oil – 46%  Corn – 12%   Wheat – 9% Rapeseed – 20%Barley – 17%UN brokered Grain DealEven though there is an existing UN-brokered deal to allow Ukraine to export grain via the Black Sea, this would expire in November and with tensions escalating between the two nations, there is a risk that this will not be extended a further year. The last time grain exports ceased due to the Russian invasion saw grain prices skyrocket as much as 60%. The market consensus is that it currently expects that the deal would be extended after some changes to the terms – primarily allowing a Russian pipeline to reopen to transport its ammonia fertilizer to Ukraine’s Odessa port for shipment.  However, the move to boost Russia’s export revenues to fund the war indirectly might not sit well with US and Europe which has recently approved a Russian oil price cap to limit export revenue in Russia. U.N. aid chief Martin Griffiths and senior U.N. trade official Rebeca Grynspan has travelled to Moscow last week to discuss this issue.OPEC+ CutJust as we thought supply side constraints were subsiding, we are now facing a possibility that commodity inflation might persist due to political uncertainties. Last week, OPEC+ made a key decision to slash oil output by 2 million barrels per day despite Western nations protesting the move as short sighted, perhaps prioritizing their agenda that maintaining oil revenue is more important than the global inflation problem or crippling Putin’s war now. This sent WTI crude oil rallying as much as 9% with rapid short covering as market was positioned with recessionary risk in mind. Oil has since given back some of those gains. The diverging interest of US and Saudi, both key oil producers globally can create instability in energy supplies.The FedThe US inflation breakdown in the month of September has shown lower inflation from energy while key drivers now are mostly from the demand/services side ( rent, medical, services and food). Because of this, the Fed has been relentless in utilizing every opportunity to reinforce their hawkishness with terminal fed funds rate now at 4.9%. If energy and agriculture prices start rising rapidly once again, this will provide the Fed even more ammunition to stay on the course despite some initial data that shows jobs growth is starting to cool off with vacancies falling 1 million in August. If supply constraints do not resolve, the combination of both demand and supply side factors does not bode well for equities and risk assets.    What trades to consider?Watch for the negotiation outcomes between UN and Russia regarding the grain export agreement set to be out by November. Strained relations between Ukraine and Russia might make negotiations tougher and the terms of the deal less favourable. Grains tradable on Saxo include Wheat futures (ZWZ2) and Corn futures (ZCZ2).The output cut by OPEC+ could trigger the start of a possible supply tightening cycle to support oil prices given weak global demand. The US – Saudi relationship souring could also lead to further price instability with volatility set to rise and possible retaliation from US by increasing their supply. Another bright spark is China reopening even though the recent Chinese Communist Party Congress indicated that China is not doing away with its Covid Zero policy in the near term. To trade, we have both Light Sweet Crude Oil (CLZ2) and Brent Crude (LCOZ2) futures.Lastly, if supply side inflation returns, the Fed might have no choice but to accelerate their rate hike cycle. To express this, USDCNH might be a trade to look at given China’s easing cycle is still ongoing to prop up the property market while the risk reward ratio looks more favourable as compared to USDJPY which has moved substantially and BOJ now jawboning the pair’s appreciation.   Wheat December Futures Corn December Futures Oil December Futures USDCNH Source: https://www.home.saxo/content/articles/commodities/st-note-supply-side-inflation-risks--wheat-corn-oil-and-the-fed-18102022
USD/JPY Weekly Review: Strong Dollar and Yen's Resilience in G10 Currencies

Stock Markets In Europe And The US Showed Marked Gains And Investors Have More Time To Recover

InstaForex Analysis InstaForex Analysis 18.10.2022 11:54
Stocks rose on Monday, primarily due to the start of the corporate reporting season. Clearly, investors are no longer focusing only on increasing interest rates, high inflation and deteriorating world economy, but also on the performance of companies. This inspires optimism in the market, which decreases negative sentiment and brings back demand for shares. Thus, the stock markets in Europe and the US showed a noticeable increase, while US treasury yields have stalled and are not going anywhere after their recent growth. For example, the yield of 10-year bonds hit 4% and so far could not consolidate above it. This, in turn, puts pressure on the dollar, prompting a rise in other currencies paired with it. Considering that there is a two-week time lag until the Fed's meeting in November, investors have more time to win back losses. This may start today, during the European session, and may extend amid positive dynamics of US stock indices. Of course, the dollar will be affected negatively, but there is still the need to buy it because there are too many factors that do not allow it to decline fully. Most likely, further aggressive rate hikes by the Fed and the presence of high demand will keep it afloat for a long time. Forecasts for today: AUD/USD The pair failed to overcome 0.6330, which reinforces the existing downward trend. If this continues, the quote will fall to 0.6220. USD/CAD The pair is testing the level of 1.3715. A rise above it could lead to a further increase to 1.3885.   Relevance up to 07:00 2022-10-20 UTC+00 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/324580
Belgian housing market to see weaker demand and price correction

The US Housing Market Is Experiencing Severe Price Drops | The Market Is Now Leaning Towards A RBNZ Rate Hike By 75 bp

Saxo Bank Saxo Bank 18.10.2022 11:38
Summary:  A huge squeeze across equity markets developed yesterday on no readily identifiable catalyst, with yields easing a bit lower and the US dollar dropped falling sharply, as most markets posted a sudden reversal of the Friday melt-down in sentiment. One possible driver for the fresh thaw in sentiment was a report that the Bank of England may delay its quantitative tightening programme, perhaps raising hopes that other central banks will eventually do the same.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) Strong equity session yesterday with S&P 500 futures closing at their highest level since 7 October as the index futures rebounded 2.6%. The momentum is continuing this morning with S&P 500 futures trading around the 3,742 level with the 3,800 as the next major resistance level on the upside. Nasdaq 100 futures are trading around the 11,295 level this morning with 11,494 as the next upside level to watch. The US 10-year yield is still hovering around the 4% level and US financial conditions remain around their average historical level. As we scan across different markets there are no obvious reasons for the major rebound so our best guess is short coverings and technical flows. Our medium-term outlook is still negative on equities. Hong Kong’s Hang Seng (HSIV2) and China’s CSI300 (03188:xhkg) Stocks traded in Hong Kong bounced the second day in a row with the benchmark Hang Sang Index rising nearly 1.5%. Heavy weight HSBC (00005:xhkg) gained 2.6% and China Internet names surged from 3% to 7%. BYD (01211:xhkg) surged 6.4% after the leading EV maker said its Q3 profit may soar up to 365%. CSI300 was bouncing around small gains and losses. China’s National Development and Reform Commission said China’s economic growth “rebounded significantly” in Q3 while the National Bureau of Statistics delayed the release of Q3 GDP, September industrial production, retail sales, and fixed asset investment data that were scheduled to come today without providing a reason or a new schedule. A document from the European Action Service advises EU’s finance ministers that EU must take a tougher line in its dealing with China and see the latter as an all-out competitor. USD drops as risk sentiment jolts back higher...BoE to drop QT for now? Yesterday was the third consecutive session in which risk sentiment posted a sharp U-turn, as equities rallied sharply and the US dollar sold off steeply, led initially by a drop versus a hard rallying sterling yesterday on hopes that newly minted Chancellor Jeremy Hunt’s elimination of most of PM Liz Truss’ initiatives will stabilize the currency and the country’s bond market. An additional report from the FT that the Bank of England would look to delay its original quantitative tightening (QT) plan may be at the root of some of the broad risk-on, as hopes that other central banks will slow the tightening pressure could bring some relief to deteriorating liquidity across markets. Crude oil (CLX2 & LCOZ2) Crude oil prices stabilized in early Asian hours on Tuesday after a slight decline yesterday. WTI futures rose towards $86/barrel while Brent was above $91. Chinese demand concerns however weighed on the commodities complex coming out of the weekend CCP announcements on Zero Covid. On the OPEC front, Algeria's Energy Minister echoed familiar rhetoric from the group that the decision to reduce output is a purely technical response to the world economic circumstances. US treasuries (TLT, IEF) US treasury yields fell slightly, and the curve steepened in a session marked by far less volatility than the gyrations elsewhere, as the US dollar sold off and risk sentiment squeezed sharply higher. At stake for the longer end of the curve is whether yields remain sticky near the key 4.00% level and head higher still. Data this week is generally second tier stuff. If treasuries rally, the downside focus would be on the 3.84% pivot low in yields. What is going on? Hot Q3 CPI in New Zealand data jolts RBNZ rate expectations The Q3 CPI report came in far above expectations, with the headline printing at 2.2% q/q and +7.2% YoY, far above the 1.5/6.5% expected. This took RBNZ rate expectations sharply higher, and the NZD snapped higher as well. The market is now leaning for the RBNZ to hike by 75 basis points (about 70 bps priced in) at the November 23 meeting, which would be the first time the bank has hiked by more than 50 basis points for this cycle. NZDUSD rose to 0.5700 and AUDNZD punched lower to near 2-month lows after breaking below 1.11 with RBA minutes continuing to highlight concerns of rapid tightening for housing market and household budgets. Q3 earnings recap Bank of America beat estimates yesterday with stronger earnings on disciplined cost controls and robust client activity across both the commercial banking and investment banking activities. Q3 EPS was down 5% y/y, which is much better than its peers, and up q/q to $0.81 from $0.79 in Q2. The US bank is seeing a little slowdown in consumer spending, but it is still minimal supporting the view that the US consumer remains strong and with confidence in the future despite the tighter financial conditions this year. S&P 500 Q3 EPS is down 1.9% q/q but given the weakness among US banks q/q it is too early to say whether this will end up being the conclusion when the entire S&P 500 has reported earnings. Japanese yen paying no heed to jawboning efforts The US dollar moved lower on Monday, but that was no respite for the Japanese yen, which was the only G10 currency that weakened further on Monday, continuing to test the intervention limits of the authorities. USDJPY rose to 149.08, printing fresh 32-year highs. Bank of Japan Governor Kuroda was out overnight noting that the BoJ is watching the market and that JPY weakening drives inflation, but that inflation would eventually fall. He was also defiant when a lawmaker suggested he should resign, saying he had no plans to quit. While intervention expectations rose, the yen remains weak, with EURJPY, for example, hitting new cycle highs and the highest level in nearly eight years. Natural gas prices continue to fall in Europe … with the Netherlands 1-month forward contract falling more than 10% yesterday and at its lowest level since late June as EU storage is essentially fully and weather has been mild thus far this fall. Germany announced that it would keep its three remaining nuclear plants in operation until at least mid-April, cancelling their planned mothballing for now, although there are still no strong signs of a strategic rethink from Germany on the future of nuclear power. NY Fed manufacturing headline lower on mixed components The NY Fed manufacturing survey for October fell to -9.1, contracting for a third consecutive month and coming in below the expected -4.0 and the prior -1.5. While survey data remains hard to trust to decipher economic trends, given a small sample size and questioning techniques impacting results, it is worth noting that more factories are turning downbeat about future business conditions which fell 10 points to -1.8 and was the second weakest since 2009. Also, the prices paid measure rose for the first time since June, echoing similar results as seen from the University of Michigan survey. The U.S. housing market bubble is deflating According to the latest data released by the real estate company Redfin, the U.S. housing market is going through a severe drop in prices in several major cities. From May 2022 to October 2022, the drop in sale prices is the most pronounced in Oakland (minus 16 %), San Jose (minus 14 %), Austin (minus 14 %), Ogden in Utah (minus 11 %) and San Francisco (minus 9 %). The decrease is the most important in California and Texas where home prices jumped sharply in the aftermath of the Covid outbreak. So far, the decrease in prices is positive news for inflation and for home buyers, as the affordability index was at historical levels a few months ago. But this could seriously increase the ongoing economic slowdown. Note that we will see important indicators on the US housing market this week – more below. What are we watching next? US Housing Market Data Housing markets are very interest rate sensitive and thus generally a leading indicator on the direction of the economy. Financing for US house purchases is mostly done on a 30-year fixed mortgage basis, meaning that most of the impact from rising rates, a global phenomenon, is on new purchases in the US. (This contrasts with the floating rates that are popular elsewhere – note the Australian RBA’s and Bank of England’s concerns on housing impact from sharp rate rises). Today we get the Oct. NAHB Housing Market survey, one of the more leading US indicators on housing demand and a survey that has been in freefall in recent months – dropping from 83 in January to 46 last month and expected Earnings to watch Today’s earnings focus is Netflix, Johnson & Johnson, and Lockheed Martin. Headwinds have been building for Netflix since the pandemic growth sprint and analysts expect revenue growth to have slowed down to 5% y/y in Q3 and EPS of $2.22 down 23% y/y and down 12% q/q. Johnson & Johnson is expected to see flat revenue growth in Q3 which given other consumer staples companies might be a bit too pessimistic and we believe there is a good chance that Johnson & Johnson can surprise to the upside given what we know about the US consumer. Today: Charles Schwab, Johnson & Johnson, Goldman Sachs, Intuitive Surgical, Lockheed Martin, Truist Financial, Netflix Wednesday: ASML, Elevance Health, Tesla, IBM, Lam Research, P&G, Abbott Laboratories, Atlas Copco Thursday: China Mobile, China Telecom, ABB, Danaher, Investor, Philip Morris, Union Pacific, CSX, AT&T, Blackstone, Marsh & McLennan, Yara International, Nordea, Volvo, Ericsson, Freeport-McMoRan, Dow, Snap Friday: CATL, American Express, Schlumberger, Verizon Communications, HCA Healthcare, Sika Economic calendar highlights for today (times GMT) 0900 – Germany Oct. ZEW Survey 1215 – Canada Sep. Housing Starts 1315 – US Sep. Industrial Production 1400 – US Oct. NAHB Housing Market Index 1600 – ECB's Schnabel to speak 2130 – US Fed’s Kashkari (voter 2023) to speak Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: https://www.home.saxo/content/articles/macro/market-quick-take-oct-18-2022-18102022
Supply Trends Resurface: Analyzing the Impact on Market Dynamics

AUD/NZD - Reserve Bank Of Australia Minutes Trigger Discussion About The Rate Hikes, So Does New Zealand CPI Data

John Hardy John Hardy 18.10.2022 23:35
Summary:  We have seen some wild swings in risk sentiment in recent days, with the USD first jerked one way and then the other, all while the JPY continues to fall broadly and set new lows versus even a shaky US dollar today as it appears Bank of Japan governor is willing to go down with the YCC ship and longer US treasury yields remain pinned near the cycle highs. Elsewhere interesting relative moves in Aussie and kiwi overnight on dovish RBA minutes and a hot NZ CPI print. FX Trading focus: Whiplash for USD traders, JPY continues plunge. Yesterday saw a bizarre melt-up in risk sentiment that took the USD down a few notches. There was no readily identifiable trigger for the sentiment shift yesterday, which could be related to heavy derivatives exposure and stretched sentiment. Even for the relatively near term, it is hard to see a meaningful USD turnaround without anticipation that the Fed is set to ease up on its tightening message, with the chicken-and-egg dilemma that it will likely only do so once employment indicators (badly lagging) are headed clearly south. A considerable portion of the USD weakness yesterday was against sterling, with GBPUSD managing to back all the way up above 1.1400 in late trading. Sterling even made a bid at breaking through pivotal levels in EURGBP, although that move has been corralled for now (low near 0.8575 – trading well above 0.8700 as of this writing). It is interesting to see headlines attributing the latest sterling surge to FT sources indicating that the Bank of England will delay any attempt to do QT for now (The BoE pushed back against that story this morning). Sure, the recent sterling recovery was achieved as the new UK Chancellor reversed most of Truss’ budget-busting initiatives, and on the Bank of England bringing emergency liquidity and indicating it would be will to hike as much as necessary to stabilize markets at the next meeting. When you ease the liquidity crisis in the proverbial burning theater, sterling can stabilize. Stabilization will not necessarily lead to a strong new rally. As for the QT, it would be a sign of ongoing fragility if the BoE was to fail to carry out any QT for now, not a source of sterling strength. We may have seen the top in GBPUSD here unless this strange melt-up in risk sentiment extends. Elsewhere, interesting to note that despite a weak US dollar yesterday and into this morning, the Japanese yen remains resolutely weak, with new highs in JPY crosses and even USDJPY again today (although possible signs of intervention as I am writing today’s report – more in the chart discussion below). Bank of Japan governor Kuroda remains unmoved, arguing for no change in policy once again overnight and saying that inflation would eventually fall back even if currency weakness risked aggravating inflation levels and telling a lawmaker who asked that he resign that he has no plans of quitting. Have to believe the next round of intervention may be coming up soon for JPY crosses, but speculators may be smelling blood after the prior round failed to impress beyond a few hours, as noted below. Chart: USDJPYIn posting a USDJPY chart today, I was originally going to ask whether intervention is on the way, given we were posting new highs in USDJPY this morning and nearing the 150.00 level. Then, what might be intervention or what might be a nervy market over-reacting to large transactions materialized suddenly, with all JPY crosses dipping suddenly and violently, only to recover much of the lost ground within minutes. Official intervention would more likely have driven a larger move. Let’s recall what happened the last time the BoJ intervened a few weeks ago, when USDJPY challenged above the important 145.00 area resistance at the time: an initial low was posted within an hour just below 141.00 and then a few hours later that low was slightly exceeded before the rebound back to more or less unchanged within two days. Working against the intervention efforts was a fresh rise in global bond yields at the time – a factor that will continue to overwhelm any intervention efforts as long as long yields stay here or run higher still. But safe to say that the threat of official intervention makes tactical trading a risky business. Source: Saxo Group An interesting session overnight for AUDNZD as the RBA minutes highlighted concerns that the steep pace of rate tightening in this cycle will heavily impact the Australian consumer, particularly as floating rate mortgages reset in the months ahead. In New Zealand, the release of the much hotter than expected Q3 CPI data jolted RBNZ rate expectations sharply higher, with solid odds now for the first 75 basis point move for the cycle from the RBNZ next month. AUDNZD pounded lower overnight, trading well below 1.1100 at times, but I wonder how much more the market can get out of this correction. I still see the relative current account trajectory as an important factor – will look for support to come in soon as the rate spread likely can’t get much more stretched in the kiwi’s favour and shouldn’t matter that much in the mix anyway. Table: FX Board of G10 and CNH trend evolution and strength.Awaiting the USD status again after this latest sell-off as the secular rally remains intact – would have to see above 0.9900 and even parity in EURUSD and USD weakness elsewhere to suggest a larger scale consolidation afoot. Note the CNH level in USDCNH terms as the action remains pinned in the 7.20+ area there and USDJPY applies further pressure to USD/Asia. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs.Interesting to see if GBP rolls over now to weakness in GBPCHF, EURGBP and GBPUSD terms. GBPUSD just flipped to positive as of yesterday’s close, but hasn’t broken above 1.1500 resistance – the chart is neutral within this range and tilts more negative back below 1.1000 again. Elsewhere, NOKSEK could be set for a challenge lower after an interesting sell-off today – trend is neutral and awaiting new momentum. Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights 1215 – Canada Sep. Housing Starts 1315 – US Sep. Industrial Production 1400 – US Oct. NAHB Housing Market Index 1600 – ECB's Schnabel to speak 2130 – US Fed’s Kashkari (voter 2023) to speak Source: FX Update: Whiplash for USD traders, JPY remains in dumps. | Saxo Group (home.saxo)
GBP: BoE Stands Firm on Bank Rate and Mortgage Interest Relief, EUR/GBP Drifts Lower

Earnings Season Gains Momentum! Commodities Prices Linked To US Dollar

Walid Koudmani Walid Koudmani 18.10.2022 23:58
Indices trading higher as US earnings season ramps up European indices started the day with upbeat moods and are trading higher following the positive performance by US and Asian markets which saw Nasdaq reach the highest level in ten days after breaking through a previous resistance area. Despite this, the situation remains quite volatile and we could see a major shift in moods as investors follow macroeconomic data and major Wall Street earnings reports with Netflix expected to publish their report today. Furthermore, investors continue to monitor the political and economic turbulence surrounding the UK which saw the new chancellor announce a U-turn on the majority of measures previously announced by this newly formed government in an attempt to stabilize currency and stock markets. Despite a lack of major economic data today, investors will certainly have a lot to keep an eye on as the geopolitical and economic situations continue to develop and as uncertainty continues to dominate the market.  Read next: Commotion Around Ethereum. "Most Favorable Crypto Economies" - Germany, Switzerland And Australia| FXMAG.COM Commodities remain stuck in consolidation range as dollar attempts to rebound While the recent weakness seen from the US dollar has led to a recovery in commodity prices and cryptocurrencies, it appears that today might see some unexpected movements across markets while the greenback is attempting to rebound from the lowest levels in around ten days as general market moods showed signs of improvement. Oil prices remain stuck in their recent trading range and while they appear to be slightly pulling back at the beginning of the European session, there is still room for a potential recovery as they test an important support which has managed to hold the price for the last several days and as concerns about supply remain. Meanwhile, gold prices are also struggling to initiate a significant upward move as they continue to hover in the $1650 area after retreating slightly and as they await a catalyst for significant momentum shift. The situation appears to be similar when it comes to cryptocurrencies with Bitcoin still hovering under the key $20,000 level as it trades about 2,70% below that while Ethereum trades around the $1320 mark after testing the highest level since the end of last week. It seems clear that commodity prices continue to be highly related to the US dollar's performance and any major shakeup in sentiment towards the greenback may lead to a cascading effect across asset classes. Read next: JP Morgan Net Income Over $9B | Kanye West Is Buying Parler| FXMAG.COM
The Bank Of Canada Paused Rates Hiking, The ADP Employment Report Had A 242K Increase In Jobs

The US Dollar To Canadian Dollar (USD/CAD) Pair Will Remain On The Bear's Radar

TeleTrade Comments TeleTrade Comments 19.10.2022 08:51
USD/CAD struggles to extend the recovery from two-week low, grinds near intraday top. US readiness to use SPR to battle OPEC+ supply cuts weighs on oil prices. Sluggish markets restrict immediate moves but firmer yields tease DXY buyers. With the BOC’s likely softer rate hike than the Fed’s the pair buyers remain hopeful. USD/CAD steadies near 1.3750 amid sluggish markets during Wednesday’s European morning. In doing so, the Loonie pair seesaws around intraday high while trying to stretch the previous day’s rebound. The quote’s resistance to decline could be linked to the latest retreat in oil prices, due to Canada’s reliance on WTI crude oil export, as the US eyes releasing more oil from its Strategic Petroleum Reserve (SPR) to battle the OPEC+ supply cut. WTI crude oil remains mildly bid at the fortnight low marked the previous day, retreating to around $83.70 at the latest. On the other hand, the US Dollar Index (DXY) picks up bids while tracking the recently firmer US Treasury yields. That said, the US 10-year Treasury yields added two basis points (bps) near 4.02% mark at the latest. The market’s inaction could be linked to the lack of major data/events, as well as mixed catalysts surrounding China and Russia. That said, the recently mixed covid numbers from China join Russia’s strong fight in Ukraine to challenge the sentiment. However, upbeat earnings and hopes of more stimulus from Beijing, Tokyo and the Eurozone keep the riskier assets firmer. On the same line could be the UK’s optimism due to the recent U-turn from the fiscal policies. Elsewhere, Fed bets and the comments suggesting heavy rate hikes from the US central bankers underpin the US Treasury yields and the DXY of late. Earlier in the day, Minneapolis Federal Reserve Bank President Neel Kashkari said, “Until I see some compelling evidence that core inflation has at least peaked, not ready to declare a pause in rate hikes.” With this, the CME’s FedWatch Tool signals that markets are pricing in a nearly 95% chance of the Fed’s 75 rate hike in November. It’s worth noting that the latest second-tier data from the US and Canada have been mixed but the Bank of Canada (BOC) and the Fed have both shown readiness to battle inflation and increase the benchmark rates. Even so, the hawkish pace at the Fed is much stronger than the BOC and hence the USD/CAD pair is likely to witness further upside if today’s Canadian Consumer Price Index (CPI) eases. Forecasts suggest the CPI ease to 6.8% from 7.0% prior while the closely watched BOC CPI could also decline to 5.8% YoY versus 5.6% previous readings. Technical analysis Given the bearish MACD signals and the confirmation of the five-week-old rising wedge formation on Monday, USD/CAD is likely to remain on the bear’s radar unless it successfully crosses the 1.3850 immediate hurdle comprising the wedge’s lower line.
The Commodities Feed: China's 2023 growth target underwhelms markets

Despite The Strengthening Of The Risk-On Mood The Asian Markets Are Showing Mixed Reactions

TeleTrade Comments TeleTrade Comments 19.10.2022 09:01
Asian equities are displaying a mixed performance due to individual factors. Chinese investors are having anxiety ahead of PBOC’s monetary policy. Oil prices have printed a fresh two-week low amid escalating recession fears. Markets in the Asian domain are displaying a mixed response despite the strengthening of the risk-on mood in global markets. S&P500 futures have raised intermittent highs after two-consecutive bullish trading sessions. Rally in US markets is backed by a bumper start of the quarterly result season despite the headwinds of higher interest rates and soaring price pressures. At the press time, Japan’s Nikkei225 gained 0.63% and Nifty50 added 0.48% while ChinaA50 tumbled more than 1% and Hang Seng dived 1.20%. The US dollar index (DXY) has attempted a rebound move after sensing buying interest around the immediate cushion of 112.00. The rebound move seems less confident amid the absence of a risk-aversion theme. Further, investors are awaiting the release of the US Housing Starts data. The real estate catalyst could get impacted by soaring interest rates by the Federal Reserve (Fed). Meanwhile, Chinese investors have shifted their focus toward the People’s Bank of China (PBOC) monetary policy, which will be announced on Thursday. The central bank could adopt a dovish tone as economic prospects are deteriorating. The continuation of the zero Covid-19 policy by the Chinese administration to contain the epidemic and weak property sector needs monetary easing to get back on the growth track. On the oil front, oil prices have rebounded after printing a fresh two-week low at around $81.20. The rebound move could derail amid headwinds of the central bank's monetary policy tightening and escalating recession fears in the US. Rising US Treasury yields have bolstered the case of a recession situation in the coming months.
Traders assume interest rates in Japan and Switzerland could steadily go up next year

The US Dollar To Swiss Franc (USD/CHF) Pair Can Lean Towards The Bulls

TeleTrade Comments TeleTrade Comments 19.10.2022 09:07
USD/CHF edges higher on Wednesday amid a modest pickup in the USD demand. Hawkish Fed expectations, elevated US bond yields act as a tailwind for the buck. The risk-on mood undermines the safe-haven CHF and offers support to the pair. The USD/CHF pair attracts some buying near the 0.9925-0.9930 area on Wednesday and moves away from a one-week low touched the previous day. The pair is currently trading around the mid-0.9900s, though the modest intraday uptick lacks bullish conviction. The prospects for a more aggressive policy tightening by the Fed assist the US dollar to regain some positive traction, which, in turn, is seen offering some support to the USD/CHF pair. The markets seem convinced that the Fed will continue to hike interest rates at a faster pace to tame inflation and have now priced in a nearly 100% chance of another supersized 75 bps increase in November. The bets were reaffirmed by hotter US consumer inflation figures released last week and the recent hawkish remarks by several Fed officials. This remains supportive of elevated US Treasury bond yields and continues to act as a tailwind for the greenback. In fact, the yield on the rate-sensitive 2-year US government bond and the benchmark 10-year Treasury note stand tall near a multi-year peak. Apart from this, the prevalent risk-on environment - as depicted by the follow-through rally in the equity markets - undermines the safe-haven Swiss francs and acts as a tailwind for the USD/CHF pair. Despite the supporting factors, spot prices, so far, have struggled to gain any meaningful traction. This, in turn, warrants some caution before positioning for any further appreciating move. Nevertheless, the fundamental backdrop seems tilted in favour of bullish traders and suggests that the path of least resistance for the USD/CHF pair is to the upside. Traders now look to the US housing market data - Building Permits and Housing Starts - for a fresh impetus. This, along with the US bond yields, will drive the USD demand and produce short-term opportunities around the USD/CHF pair.
All Eyes On Capitol Hill, Jerome Powell Will Appear Before The Senate Banking Committee

A Reversal Of The Situation In The Markets May Take Place When The Fed Stops Raising Rates

InstaForex Analysis InstaForex Analysis 19.10.2022 12:10
The dollar's correction due to the growth of risk appetite is unlikely to last for a long time, as today the mood in the investor environment is dejected, and the US currency index turned up from weekly lows. The index rose above 112.00 on Wednesday amid expectations that the Federal Reserve will continue to implement its aggressive plans to tighten measures to reduce inflation. Minneapolis Fed President Neel Kashkari's latest commentary suggests that interest rates may need to be raised above 4.75% if core inflation continues to pick up. The dollar also continues to prevail as a safe haven currency amid deteriorating global growth prospects. Earlier this week, it came under pressure, including amid solid earnings reports and a sharp turn in UK fiscal policy. The US currency remains stable against the euro and the pound, while a new high has been updated against the yen. The Japanese currency will fall to 32-year lows, despite the possibility of intervention from Japan. However, today the Japanese central bank once again made it clear that it is not worth waiting for monetary support. According to Bank of Japan Governor Haruhiko Kuroda, monetary policy is not directed directly at Forex. "It is advisable to maintain easing to support the economic recovery, as the uncertainty around the Japanese economy is extremely high," the official said. At the same time, he made it clear that intervention against "excessive weakening of the yen was very appropriate." As for other world currencies, the dollar weakened against the New Zealand and Australian counterparts. It is expected that the central banks of their countries will keep pace with the cycle of tightening the Federal Reserve's policy. The Fed's attitude Forecasts regarding the threshold of the US central bank rate hike vary. The increase, according to available estimates, can reach up to 5%, but this is not the limit. Judging by the new information that has appeared on the web, the rate hike may reach up to 9%, it all depends on how the inflation card will fall. Someone sees the peak of inflation. Perhaps there are reasons to believe so, perhaps this is just a reflection of a great desire. Anyway, we'll find out about it soon. Wall Street and the dollar index are now trading in line with expectations of a 1.5% rate hike. If inflationary pressure does not stop and price growth continues to go up, the Fed will have to raise the bar. At the moment, a number of indicators, including Bloomberg Commodity Spot Index, indicate the passage of an inflationary peak. If so, then the dollar has no reason to conquer new heights. Given that the markets live by expectations, there may be a pullback of the US currency index from the current borders altogether, as investors will decide to bet on a more dovish approach of the Fed. Rate hike to 9% The new monthly report of Bank of America reflected the complete pessimism of investors regarding the prospects of the stock market and the growth of the global economy. A record number of respondents (83%) expect economic growth to weaken and corporate profits to fall in the next 12 months. The lion's share of market professionals are set to continue the decline in stocks. It will be possible to talk about reaching the bottom only within the framework of 2023. All short rallies have been and will be held on Wall Street exclusively in the bear market. The reversal of the currency and stock markets will occur only when the Fed refuses to raise rates further or, at least, slows down their increase. The increase in interest rates to 9% was announced by the well-known investor Mark Mobius. This is the highest level in three decades. The US central bank will have to take such a step, because it needs to stop the record rise in consumer prices for 40 years, the investor believes. It is advisable to raise the rate higher than the current inflation. Since it currently stands at 8%, the rate should be 9%, the billionaire explained in an interview with Bloomberg. He also made it clear that he does not expect a decrease in inflation in the coming months.   Relevance up to 08:00 2022-10-20 UTC+00 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/324720
All Eyes On Capitol Hill, Jerome Powell Will Appear Before The Senate Banking Committee

A Reversal Of The Situation In The Markets May Take Place When The Fed Stops Raising Rates - 19.10.2022

InstaForex Analysis InstaForex Analysis 19.10.2022 12:10
The dollar's correction due to the growth of risk appetite is unlikely to last for a long time, as today the mood in the investor environment is dejected, and the US currency index turned up from weekly lows. The index rose above 112.00 on Wednesday amid expectations that the Federal Reserve will continue to implement its aggressive plans to tighten measures to reduce inflation. Minneapolis Fed President Neel Kashkari's latest commentary suggests that interest rates may need to be raised above 4.75% if core inflation continues to pick up. The dollar also continues to prevail as a safe haven currency amid deteriorating global growth prospects. Earlier this week, it came under pressure, including amid solid earnings reports and a sharp turn in UK fiscal policy. The US currency remains stable against the euro and the pound, while a new high has been updated against the yen. The Japanese currency will fall to 32-year lows, despite the possibility of intervention from Japan. However, today the Japanese central bank once again made it clear that it is not worth waiting for monetary support. According to Bank of Japan Governor Haruhiko Kuroda, monetary policy is not directed directly at Forex. "It is advisable to maintain easing to support the economic recovery, as the uncertainty around the Japanese economy is extremely high," the official said. At the same time, he made it clear that intervention against "excessive weakening of the yen was very appropriate." As for other world currencies, the dollar weakened against the New Zealand and Australian counterparts. It is expected that the central banks of their countries will keep pace with the cycle of tightening the Federal Reserve's policy. The Fed's attitude Forecasts regarding the threshold of the US central bank rate hike vary. The increase, according to available estimates, can reach up to 5%, but this is not the limit. Judging by the new information that has appeared on the web, the rate hike may reach up to 9%, it all depends on how the inflation card will fall. Someone sees the peak of inflation. Perhaps there are reasons to believe so, perhaps this is just a reflection of a great desire. Anyway, we'll find out about it soon. Wall Street and the dollar index are now trading in line with expectations of a 1.5% rate hike. If inflationary pressure does not stop and price growth continues to go up, the Fed will have to raise the bar. At the moment, a number of indicators, including Bloomberg Commodity Spot Index, indicate the passage of an inflationary peak. If so, then the dollar has no reason to conquer new heights. Given that the markets live by expectations, there may be a pullback of the US currency index from the current borders altogether, as investors will decide to bet on a more dovish approach of the Fed. Rate hike to 9% The new monthly report of Bank of America reflected the complete pessimism of investors regarding the prospects of the stock market and the growth of the global economy. A record number of respondents (83%) expect economic growth to weaken and corporate profits to fall in the next 12 months. The lion's share of market professionals are set to continue the decline in stocks. It will be possible to talk about reaching the bottom only within the framework of 2023. All short rallies have been and will be held on Wall Street exclusively in the bear market. The reversal of the currency and stock markets will occur only when the Fed refuses to raise rates further or, at least, slows down their increase. The increase in interest rates to 9% was announced by the well-known investor Mark Mobius. This is the highest level in three decades. The US central bank will have to take such a step, because it needs to stop the record rise in consumer prices for 40 years, the investor believes. It is advisable to raise the rate higher than the current inflation. Since it currently stands at 8%, the rate should be 9%, the billionaire explained in an interview with Bloomberg. He also made it clear that he does not expect a decrease in inflation in the coming months.   Relevance up to 08:00 2022-10-20 UTC+00 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/324720
Upcoming Corporate Earnings Reports: Ashtead, GameStop, and DocuSign - September 5-7, 2023

Europe's Fear Of A Social Crisis Is The Main Difference Between Ahe US And The Eurozone Strategy

TeleTrade Comments TeleTrade Comments 20.10.2022 09:30
The fight against inflation is much softer in the eurozone than in the United States because of the risk of a social crisis, analysts at Natixis report. The US government and central bank are not afraid of a social crisis “The US strategy is to rapidly reduce inflation, whatever the cost of this strategy (loss of household purchasing power, increase in unemployment), and this strategy can be implemented due to the lack of risk of a social crisis even if households suffer from this policy of rapid inflation reduction.” “The eurozone’s strategy is to reduce inflation very slowly, with the ECB hiking interest rates slowly and household purchasing power being boosted by fiscal deficits.” “The reason for this difference between the strategy of the US and the eurozone is fear in Europe of a social crisis if household purchasing power declines or if the unemployment rate rises.”
Asia Market: Exports In Indonesia Are Likely To Continue To Grow, Chinese Interest Rate Decision Ahead

Australia Has A Growing Number Of Business Insolvencies | Chinese Concept Of Regulating The Way Wealth Is Accumulated

Saxo Bank Saxo Bank 20.10.2022 10:42
Summary:  The major US indices, the Nasdaq 100 and S&P 500 fell on weaker-than-expected company news, Putin clearing martial law, and more hawkish Fed comments. 10-year US bond yields hit 4.14%, its highest since July 2008 which boosted the US dollar against every G-10 peer. Netflix, the standout performer up 13% following their mostly better-than-expected results. Tesla shares slid after hours on weaker-than-expected 3Q results. AU jobs data disappoints, putting the focus back on the AUD and banking shares. Across the Asia Pacific, all eyes are on energy and oil stocks after the Crude oil price lifted 3% on EIA warnings. What’s happening in markets? The Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) fall on weaker than expected company news, Putin clearing martial law & hawkish Fed comments US stocks fell on the backfoot after a two-day rally, with the 10-year US bond yield hitting 4.136% in the session, which is its highest level since July 2008, while 2-years rose to the highest since 2007. That in turn boosted the dollar, which rallied against every G-10 peer. Gold dropped. It comes as Fed speakers warned US inflation continues to surprise to the upside, saying there’s no reason to think key price measures have peaked. Over in UK and Canada CPI came in stronger than expected in September, up 10.1% year on year (YOY) and 6.9% YOY respectively, ensuring the Bank of England and Bank of Canada keep on hiking rates.  Earnings enthusiasm faded with backup generator manufacturing Generac (GNR) shares sliding 25% on slashing its full year sales outlook. While community bank M&T (MTB) shares crumbled 14% on the company reporting weaker than expected results. On the upside, oil stocks charged with Baker Hughes (BKR), Valero Energy (VLO) and Halliburton (HAL) up over 5% each. While Netflix (NFLX) was the stand out performer up 13% following their mostly better than expected result released the day prior as we mentioned here.  S&P 500 dropped 0.7% and Nasdaq 100 slid 0.4%. 10 of the 11 sectors of S&P 500 declined with the notable exception of Energy, which rose 2.9%. 10-year U.S. treasury yields (TLT:xnas, IEF:xnas, SHY:xnas) jumped to 4.13% Higher-than-expected U.K. inflation prints, hawkish comments from Fed’s Bullard and Kashkari, poor results from the 20-year treasury bond auction, and corporate bond supply contributed to an around 13bp rise in yields across the curve. The 2-year yield rose to 4.56% and the 10-year surged to 4.13%, both reaching new highs. The 20-year auction was awarded at 2.5bps cheaper than the market level at the time of the auction, indicating poor demand. Corporate bond issuance amounted to around USD15 billion and added to the upward pressure on yields. Hong Kong’s Hang Seng (HSIV2) China’s CSI300 (03188:xhkg) Hang Seng Index fell 2.4% by mid-day, as China Internet stocks reversed the bounce in the past two days, falling by 4% to 7%, and local property developer names paring early gains as the relief for extra stamp duties for non-resident home buyers in the maiden Policy Address of the Hong Kong Chief Executive is less extensive than expected. Sun Hung Kai Properties (00016:xhkg) dropped 3.6% and New World Development (00017:xhkg) tumbled 7.8%. Hong Kong Stock Exchange (00388:xhkg), falling 2%, reported a 30% Y/Y decline in EPS in Q3, slightly better-than-feared. EV stocks tumbled, with Xpeng (09868:xhkg) falling 9.5% and other leading names losing by 4% to 7%.  Tanker and dry bulk operator COSCO Shipping Energy Transportation (01138:xhkg) soared more than 10%. In mainland bourses, the CSI300 fell 1.6%, with Consumer Staple and Consumer Discretionary sectors being the worst performers, falling over 3%. While all major sectors in the CSI300 declined, lithium battery makers, shipping, and coal mining companies gained. Australia’s ASX200 (ASXSP200.1), focus is on bank and energy stocks It’s worth keeping an eye on banking stocks particularly regional banks that could see more volatility, like Suncorp (SUN), Bendigo and Adelaide (BEN) and Bank of Queensland (BOQ). Also, today focus will be on oil stocks like Santos (STO), Woodside Energy Group (WDS) and Beach Energy (BPT) after the oil price darted ahead. Japanese yen flirting with 150, GBP facing political hurdles There is a lot of sense of “urgency” in the Japanese officials as USDJPY continues to flirt with the 150 handle. The surge higher in US yields overnight is likely to further pressure the yen, and FinMin Suzuki’s comments this morning on taking appropriate steps to curb speculative moves still suggest they stand ready to intervene if USDJPY rises above 150. Meanwhile, the rebound in the US dollar weighed on G10 currencies, with GBP suffering despite a pick up n BOE rate hike bets after the higher than expected UK CPI print, as political turmoil continued to weigh. Three officials left the office yesterday, including the Home Secretary and Chief Whip, although there were reports later that some of them will remain in post. Meanwhile, the fight for Truss to stay in office continues. GBPUSD testing the downside at 1.1200. USDCNH climbed to as high as 7.2790 The Chinese offshore yuan weakened to as much as 7.2790 this morning and is trading at around 7.2680 as of writing. Higher U.S. bond yields, sell-offs in Chinese stocks, concerns over a harsher line on income redistribution in China, and reports about talks on the joint production of weapons between the U.S. and Taiwan weighed on the yuan.  Gold (XAUUSD) slumps as the dollar momentum returns Gold prices heading lower to test the support at $1620/oz amid risk aversion and higher Fed bets propelling US yields higher and a rebound in the US dollar. Hawkish Fed speak yesterday, together with fresh highs in UK CPI, suggested higher-for-longer inflation and interest rates, while demand for the yellow metal also remains depressed due to ongoing lockdowns in China.  Crude oil (CLX2 & LCOZ2) in focus again following EIA warnings Oil extended gains rising 3.3% to $85.55 after EIA earlier reported US crude stockpiles dropped by 1.73 million barrels last week. Four-week seasonal demand for distillate fuels soared to the highest since 2007 while inventories remained at the lowest point on record for this time of year.  What to consider? Fed speakers further up the hawkish ante James Bullard and Neel Kashkari kept up their hawkish Fed rhetoric, in light of the burgeoning global price pressures. Bullard warned that inflation continues to surprise to the upside and the Fed needs to continue to act, also emphasising higher-for-longer rates even if inflation starts to decline in 2023. Kashkari (2023 voter) added that there is no reason to think that key price measures have peaked, and he sees little evidence of a labor market softening. He also reiterated the Saxo view that “risk of under shooting on rate hikes bigger than overdoing it”. He also said his best guess is the Fed can pause hikes sometime next year but he favours rate hikes until core inflation starts to cool, noting the Fed's rate changes take a year or so to work through the economy. Chicago Fed President Evans was also on the wires this morning, and given that he’s retiring next year, he was accepting of the fact that “beginning rate hikes six months earlier would have made sense.” UK CPI comes out hotter than expected, Euro headline inflation more subtle UK inflation came in at double-digits again, matching the 40-year high in July, at 10.1% y/y. This puts further pressure on the Bank of England to go big with its rate hike at the November meeting. Price pressures were broad-based, but most notable was the increase in food price. Scaling back of aid for electricity and natural gas prices, as suggested by the latest fiscal measures announced by Chancellor Hunt, could fuel further inflationary pressures next year. Eurozone headline inflation, on the other hand, was revised lower to 9.9% for September from flash reading of 10.0% but core measure rose to 5.8% y/y from 5.2% y/y in August, coming in at a record high. The ECB is expected to raise rates by 75bps at the October 27 meeting. Tesla shares slide after hours on reporting weaker-than-expected results Tesla (TSLA) shares fell 2.7% after hours when the EV giant reported third-quarter sales falling short of analyst estimates, noting the US dollar’s growing strength, along with production and delivery bottlenecks impacted results. Tesla’s Revenue rose to $21.5 billion, versus $22.1 billion expected by Wall Street. Profit rose to $1.05 a share, exceeding the $1.01 average Bloomberg estimate. And the closely watched Q3 automotive gross margin, came in at 27.9%, missed the 28.4% expected. Tesla cited higher costs related to a slower-than-expected ramp up in output at new factories, as well as difficulties shipping vehicles. Tesla’s shares are down almost 45% from their high against the backdrop of a slowing economy, higher inflation and rising interest rates, plus Musk’s $44 billion bid to buy Twitter. For more on Tesla click here to read Peter Garnry’s note. Discussion between the U.S. and Taiwan on joint weapon production According to Nikkei Asia, the Biden administration and Taiwan are in talks for American defense companies to provide Taiwan technology to manufacture weapons in Taiwan or to ship Taiwan-made parts to make weapons in the U.S. This, reading together with U.S. Secretary of State Blinken’s warning this Monday that “a fundamental decision that the status quo was no longer acceptable and that Beijing was determined to pursue reunification on a much faster timeline” and President Biden’s remarks of deploying U.S. forces to defend Taiwan in a CBS 60 Minutes interview last month, stirred up some unease among investors. Separately on Wednesday, Taiwan conducted live-fire military drills on Penghu Island, an archipelago in the Taiwan Strait. Investors are feeling unease about the introduction of the concept of regulating the means of accumulated wealth in China in an official document in China Market chatters show some investors are feeling unease about the phrase “we will improve the personal income tax system and keep income distribution and the means of accumulating wealth well-regulated” in the Work Report delivered by General Secretary Xi at the Chinese Communist Party’s National Congress last Sunday. The concept of regulating the means of accumulating wealth (规范财富积累机制) shows up in an official document for the first time. Hong Kong’s Chief Executive John Lee unveils his plans for active industrial policies and integration into national development schemes In his maiden Policy Address, Chief Executive John Lee unveils a Steering Group on Integration into National Development to devise strategic plans to integrate Hong Kong’s economy into the mainland’s Greater Bay Area development scheme and the Belt and Road Initiative. Li also rolls out investment-led measures aiming to boost the Hong Kong economy, including setting up a Hong Kong Investment Corporation which will establish and fund an HKD30 billion public-private co-investment fund to invest in projects that potentially drive industry development in Hong Kong. Hong Kong will also establish the Office for Attracting Strategic Enterprises whose mandate is to attract business enterprises from the mainland and overseas through favorable tax, financing, land provision, and other incentives. Weaker yen to prop up Japan inflation further Japan’s inflation data for September is due for release on Friday, and as signalled by the Tokyo CPI released earlier this month, price pressures are likely to pick up further. Bloomberg consensus expects the core measure (ex-fresh food) to come in at 3.0% y/y from August’s 2.8% y/y while the core-core measure (ex-fresh food and energy) is expected at 1.8% y/y in September from 1.6% y/y previously. The headline is expected to be a notch softer at 2.9% y/y from 3.0% y/y, but still remain way above the 2% target level. Weakness in the yen prompted an intervention from the Bank of Japan in September but the effect faded fast and the currency was significantly weaker in the month, which possible led to import price pressures. Still, the central bank is unlikely to shift its easing stance and will likely continue to wait for the global pressures to ease and USD to top out.       Aussie unemployment rises. Employment falls Traders digested much weaker than expected jobs data for September. Data released today showed just 923 jobs were added to the economy, much weaker than the 25,000 jobs Bloomberg estimated to be added. It also shows employment is falling ahead of RBA’s expectations, with less jobs added to the Australian economy, following last month’s 33,500 jobs being added. Also in important news; the unemployment rate rose by less than 0.1 percentage points, but remained at 3.5% in rounded terms. The reason for this is because rate rises and rising inflation is having a greater impact on the corporate world with the RBA also noting business insolvencies are rising in Australia.   For our look ahead at markets this week - Listen/watch our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: https://www.home.saxo/content/articles/equities/market-insights-today-20-oct-20102022
Bank Of England Will Probably Be Unable To Avoid A Significant Easing Of Policy

Liz Truss (UK Prime Minister) In Deep Trouble | Procter & Gamble And Tesla Did Better Than Expected | Nestle Reported Its Strongest Sales Growth

Swissquote Bank Swissquote Bank 20.10.2022 10:53
The market mood was rather bearish yesterday, as the major US indices gave back a part of the early week gains. The S&P500 slid 0.67%, Nasdaq gave back 0.85%, and the Dow Jones eased 0.33%. Mixed earnings didn’t really help improve sentiment. One of the biggest gainers was Netflix which jumped 13%, but other FANG stocks, or MAMAA stocks did poorly on hawkish Federal Reserve (Fed) expectations. Better than expected Procter & Gamble did better than the earnings and revenue expectations, Nestle reported its strongest 9-month sales growth in 14 years, IBM beat analyst expectations, and boosted its full year profit forecast, and Tesla announced a better-than-expected earnings per share, but slightly missed on revenue expectations. Tesla shares slipped more than 6% in the afterhours trading. Philip Morris and Dow are due to announce earnings today, American Express and Barclay on Friday. Crude Oil In energy, the barrel of American crude rebounded yesterday, after falling toward $82 earlier this week. Politics In politics, Liz Truss is really in a hot seat, as the chaos among the Tories got worse yesterday, after Home Secretary Braverman got fired for sharing confidential information. Forex Market In the FX, Cable continued falling, the EURUSD remains sold below the 50-DMA and the Japanese yen continues diving against the US dollar. The situation of turkey In central banks, Turkey is expected to cut its policy rate by another 100bp to 11%, which would push the Turkish inflation-adjusted rate down to -71.5%. But tell that to Mr. Erdogan! Watch the full episode to find out more! 0:00 Intro 0:33 Market update 2:08 Mixed earnings: Tesla, Nestle, P&G, IBM 3:48 Growing EV competition 5:05 US crude rebounds, Exxon revised to Buy at Jefferies 5:52 ASML reports strong results, jumps 6% 7:06 Liz Truss in deep trouble 8:59 FX update: USDJPY tests 150 resistance, Turkey to cut Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Netflix #Tesla #Nestle #P&G #IBM #ASLM #earnings #hawkish #Fed #expectations #USD #EUR #JPY #GBP #TRY #gilt #sovereign #crisis #Bailey #BoE #Liz #Truss #Jeremy #crude #oil #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH      
Bank of England survey highlights easing price pressures

There Is Nothing Stopping The Bank Of England From Hitting The Rate Sharply

InstaForex Analysis InstaForex Analysis 20.10.2022 11:34
Deputies quarrel, ministers are leaving, Truss' chair is shaking, inflation is rising. The pound has started a black streak again, although the presence of a white one can be questioned. The burden of problems hangs over the British currency and it does not get better, on the contrary, there are new reasons to think about the potential achievement of parity for the GBP/USD pair. The dollar gaining strength, the equally rapidly growing inflation in the UK, which the Bank of England continues to ignore, the specter of a recession. All this is happening during a possible change of power in Britain. The new prime minister has not had time to settle in the chair, as MPs want to send her after Boris Johnson. The government's twists and turns are not at the right time, but apparently there is no other way out. Inflation The pound fell for a moment after the release of inflation data. The new indicator turned out to be disappointing, the price index in the UK continued to accelerate, reflecting, among other things, the passivity of the local central bank. In September, inflation moved to double digits, increasing from 9.9% to 10.1% against the consensus of economists of 10%. More importantly, the core inflation rate rose just as quickly, amounting to 6.5% compared to 6.3% in the previous month. The highest figure in four decades, but succeeding figures are expected to be higher. "The overall inflation rate will rise to almost 11% in October, primarily due to a 27% increase in energy prices. But in the first quarter, the overall figure should decrease to 9%, since the peak of growth in food and motor fuel prices has probably been reached," Pantheon Macroeconomics economists comment. High inflation could be made an argument for strengthening the pound due to the aggressive rhetoric of the BoE, which, in theory, should have followed after another record price increase. Now nothing is keeping the central bank from raising the rate sharply at the November meeting, which was raised to 2.25% in September and is expected to rise to about 4% by the first months of the new year. In practice, things may be different. However, some economists say this may now be less likely after recent scenes in the government. Most of the September budget plan was canceled this week in favor of a return to "austerity." This leaves the economy on the path to a barely mitigated recession, which, according to the August monetary policy report, could last for about a quarter. Everything is too complicated, and the authors of this confusion are British politicians. Downing Street The inflationary picture in the UK has been erased by reports of new layoffs in the ranks of high-ranking political officials. Following the sudden departure of former Chancellor Kwasi Kwarteng, who was forced to resign on October 14, Interior Minister Sewelluella Braverman left her post. The pound tried to grow amid large-scale losses on Wednesday. This movement, apparently, was a reaction to the departure of another high-ranking member of the government, followed by a decline in the yield of UK government bonds, which did not correspond to the internal inflationary picture. Braverman was replaced by Grant Shapps, whom the prime minister had previously pushed to the back of the government. Who's next? What other reshuffles are waiting for Britain and will this save the country from collapse? Anyway, the pound likes what is happening with the change of the main characters. The drop in yields on Wednesday did not correspond to the global background against which US bond yields were pushing other countries higher. Dollar Government reshuffles have a short-term impact on the pound. The reality is that the British currency lags behind not only the strong dollar, but also the weak euro. The pound continued its downward trend, despite extremely high inflation and the rates of the financial markets on the increase in US bond yields after even more hawkish comments from the Federal Reserve representatives. The pound's illogical reaction to the consumer price index data highlights that the currency is "trading in a structural, not cyclical way. In a cyclical world, higher inflation will be accompanied by higher yields and a stronger currency," HSBC noted. When markets are most concerned about structural risks, "higher inflation and higher yields are seen as symptoms of a broader problem," the economists explain. The pound is likely to continue trading structurally until the country's authorities make more efforts to contain the domestic budget deficit or until inflation reaches a peak. In this case, stabilization of the bond market and the pound is possible. In the meantime, the downward trend is the main one. Sterling is waiting for a difficult few months, during which the GBP/USD exchange rate risks falling to 1.0800 and below. The dollar rally, fueled by even more aggressive Fed rhetoric, will put more pressure on the lifeless pound. Traders are revisiting US interest rate hikes closer to 5%. In November, the rate can be raised immediately by 100 bps. The dollar rally in the middle of the week followed statements from Minneapolis Fed chief Neel Kashkari. The official signaled that he had "very little confidence in what inflation will be in six months" and argued that the central bank should keep raising rates until there was "convincing evidence" that the inflationary peak had passed. As for rates, September forecasts suggested an upper limit of 4.5% by the end of the year. Concerns were also raised about a rise to 4.75% early next year. Core inflation rose from 6.3% to 6.6% y/y in September, while the official or headline inflation rate remained stubbornly elevated at 8.2%. After the reversal of the dollar index, expectations about reaching new highs again became more active. The current range is 112.00-114.00. These notes will remain relevant until the next FOMC meeting. If bulls manage to break above 114.00, gains will accelerate to a 2022 peak at 114.80.   Relevance up to 09:00 2022-10-21 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/324821
S&P 500 ended the session 1.4% higher. This evening Japan's inflation goes public

Federal Reserve's Beige Book Delivers Some Positive News About The US Economy, But...

ING Economics ING Economics 20.10.2022 12:22
Higher US rates continue to pile the pressure on, and things are beginning to creak system-wise. Angst is rising. Central banks still pushing the hawkish message could see more typical bear flattening of curves again. Germany's repo announcement highlights shifts in supply-demand balances for Bunds with ECB quantitative tightening also looming  The stress barometers begin to ratchet higher in the US Even though the Federal Reserve's Beige Book noted some moderation in labour markets and a moderation in activity generally, it did not note a large enough ratchet lower in price pressures as would be required to pivot the Fed from its rate hiking path. The 10yr Treasury yield now looks quite comfortable above 4%. It’s been above before in the past week, but this move looks more decisive, a relentless and steady tick-by-tick, one-day-move, from 4% towards 4.15%. Some weeks back we noted that a break above 4% was on the cards, and we followed that up by noting that Bank of England Gilt buying was nothing more than a short-term hurdle ahead of a re-break higher in US market rates. We’ve not seen these levels since 2008, just before US yields really lurched lower as the Great Financial Crisis (GFC) mushroomed. This latest move convincingly back above 4% for the US 10yr is yet more confirmation that the low-rates environment is very much behind us. It seems the only way is up for market rates, until something breaks that is Even the US 10yr real yield is now threatening to breach above 1.7%, and in all probability will hit 2% in this cycle. That’s really getting back to the kind of levels we were used to before the GFC. Remember, the US 10yr real rate was -1% at the beginning of this year. The approach of 2% means a 3% aggregate swing higher, an elevation that is quite dramatic. It is also something that can't be diversified away by corporates (like inflation can, to an extent). Hence it's quite painful right across the credit spectrum. It seems the only way is up for market rates, until something breaks that is. We note that banks are beginning to pay up a little more for 3mth commercial paper, with many European names now paying 50bp over the USD risk-free rate. No material stress for now, but things are winding up some more. Rising US real yields are a drag on risk appetite globally Source: Refinitiv, ING Calming UK turmoil allows refocus The developments in the UK allowed for a further relief rally in long-end Gilts with the Bank of England announcing it will spare the long end in the first phase of its active portfolio reduction and assurances from the BoE’s deputy governor that pension funds were now coping with a 200bp increase in yields. With the market tensions surrounding the liability-driven investment funds now “mostly behind us”, this has allowed other markets to refocus on the issues at hand. The pricing out of a risk component in the wake of the turmoil probably contributed to the rise in rates outside the UK, but it is global central banks’ main mandate to rein in unbudging inflation that remains at the forefront of market concerns. For now, that notion still trumps any signs of economic weakness as a driver of rates. It is global central banks’ main mandate to rein in unbudging inflation Markets are braced for another 75bp hike from the Fed, with small chances for even a larger hike seen. In the eurozone, markets are equally seeing a strong case for another 75bp hike this month. And after the ECB’s Bostjan Vasle suggested a further 75bp hike could be on the cards in December, the market discounting almost 140bp over the next two meetings does not look far-fetched. Most noticeable over the past weeks has been the shift of discussion to the shrinking of the ECB’s balance sheet, with officials signalling that the groundwork for that to happen could be laid as soon as next week. In any case, the October meeting will be a crucial one with the ECB having a lot on its plate besides hikes. German 10Y Bund yields are closing in again on the intraday highs they had staked out alongside UK Gilts when they peaked amid the turmoil. The BoE skipping long-end sales has injected fresh confidence in Gilts Source: Refinitiv, ING Germany announced €54bn in repo lending to finance energy support Germany’s finance agency announced yesterday morning that it would increase its own bond holdings by €54bn for use in the repo market. The debt agency cites the additional flexibility needed to cover extraordinary funding needs amid the government’s measures to address the energy crisis. Yesterday’s decision follows on the heels of an earlier €22.5bn issuance increase that was announced for the fourth quarter, already foreshadowing increased funding needs. At the headline level, this decision should help to alleviate the collateral scarcity At the headline level, the latest decision in particular should help to alleviate the collateral scarcity that is plaguing German government bond markets and has added to their extreme valuations versus swaps. And indeed, the market's first reaction has been to tighten Bund asset swap spreads led by the front end. Note that the debt agency has chosen to increase the holdings of 18 specific bonds that were “particular in demand” of the market. This suggests that the intention could be more to counter extreme cases of “specialness” in the repo market of individual bonds, rather than addressing the collateral scarcity more generally. We also note that the debt agency still reports own holdings of €141bn in conventional bonds, though we do not know to what degree they are currently already lent out. Has the balance finally tipped for Bund asset swap spreads? Overall, Bund yields are still extremely low versus swaps, 96bp in 2y and around 88bp in 10Y. As much as some fundamentals are now tilting towards a tightening of the asset swap spread (ASW), with supply increasing and the ECB about to reduce its footprint in the market as well, other factors remain unchanged. One more technical factor we are keeping an eye on is the still large government deposits held with the ECB that could push into the market for collateral next year when they are no longer remunerated. While collateral supply is rising, other factors pushing asset swap spreads wider remain unchanged More generally, the geopolitical backdrop still backs demand for safe-haven Bunds. Furthermore, the same ECB stepping away from the bond market can also raise systemic concerns, whereas in the eurozone, the concern centres on periphery bond markets. Record-high implied market volatility and rates near term still pointing up as central banks tighten the policy reigns, the directionality of rates is another factor that could well keep Bund ASWs at elevated levels.     3M Germany bills failed to ease in response to the additional collateral release Source: Refinitiv, ING Today's events and market view EUR and US rates have taken a different direction from UK rates yesterday in a sign of markets further moving on from the episode of stress that emanated from long-end Gilts. Near term that may allow for more bear flattening of yield curves more typical of environments where central banks are still engaged in pushing their hawkish message.  That said, it should become quieter on the ECB front as we now enter the blackout period ahead of next week's policy meeting. US markets still have to deal with a busy slate of Fed speakers. Relevant data also comes mainly from the US in the form of the Philly Fed index, initial jobless claims and existing home sales.  In primary markets, France and Spain will be active, both mainly selling shorter-dated bonds.  Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Conflict Over Taiwan Would Trigger A Huge Global economic Shock

Deployment Of US Forces To Defend Taiwan |Because Of Global Price Pressure, The Fed Strategy Will Remain Unchanged And More

Saxo Bank Saxo Bank 20.10.2022 12:43
Summary:  Equity markets rolled over yesterday suffering in the headwinds of a fresh strong rise in US treasury yields, as the entire US yield curve lifted to new highs for the cycle. After the close, the heavily traded Tesla reported disappointing revenue and margins and traded some 6% lower in late trading. Elsewhere, the rise in yields is pushing hard on the JPY to weaken further, but the USDJPY rate of 150.00 it’s clearly a psychological barrier for official intervention-wary traders.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) The S&P 500 index closed the day –0.7% lower and the Nasdaq 100 index was down –0.4% (although far lower from the overnight highs posted after the Netflix earnings late Tuesday) Still, this was not that weak a performance, given the fresh strong lift in treasury yields, with the price action holding up relatively well after the close of trading yesterday despite the disappointing Tesla results that took that heavily traded stock down sharply after the close. The further outlook for treasury yields on incoming data, as well as the heavy earnings calendar of next week, are likely to set the tone for equity markets from here. Hong Kong’s Hang Seng (HSIV2) and China’s CSI300 (03188:xhkg) Hong Kong’s Hang Seng (HSIV2) and China’s CSI300 (03188:xhkg) Hong Kong stocks tumbled with Hang Seng Index down 2.4% hitting 13-year lows. Higher U.S. bond yields and the Chinese Yuan weakening to new lows weighed on the markets. To add to the woes, investors have become increasingly concerned about the potential policy implications of the concept of “regulating the means of accumulating wealth” and US-Taiwan discussions on joint manufacturing of defensive capabilities (more below) China Internet names sold off 5% to 9%. CSI 300 declined 0.7%. Semiconductor stocks are the notable outperformers in both the Hong Kong and mainland bourses.  SMIC (00981:xhkg) gained 0.9% and Hua Hong Semiconductor (01347:xhkg) climbed 3.2%. Maximum support for the US dollar from rising treasury yields, but price action uninspiring The US dollar is getting about as much support as it conceivably can from a fresh rise in US treasury yields, but the impact on the currency has been minimal, as it feels as if a large finger has pressed the paus button – could this be a widespread nervousness as traders look at the USDJPY level perched near 150.00, with pressure from rising global yields for the JPY to weaken further, but with market participants knowing that a large bout of official Japanese intervention will be forthcoming at some point above that level? Relatively stable sentiment despite the fresh surge in treasury yields may also be behind the lackluster price action in USD pairs here, with USDCNH correcting back lower after its burst higher yesterday on a strong CNY fixing overnight another source of resistance for the greenback. Crude oil (CLX2 & LCOZ2) in focus again following EIA warnings November WTI extended gains rising above $86/barrel overnight after the EIA yesterday reported US crude stockpiles dropped by 1.73 million barrels last week. Four-week seasonal demand for distillate fuels soared to the highest since 2007 while inventories remained at the lowest point on record for this time of year. Oil stocks charged higher with Baker Hughes, Valero Energy and Halliburton up over 5% each. Gold (XAUUSD) slumps as the dollar momentum returns Gold prices heading lower to test the support at $1620/oz amid risk aversion and higher Fed bets propelling US yields higher and a rebound in the US dollar. Hawkish Fed speak yesterday, together with fresh highs in UK CPI, suggested higher-for-longer inflation and interest rates, while demand for the yellow metal also remains depressed due to ongoing lockdowns in China. US treasuries (TLT, IEF)   US treasury yields lifted all along the curve, with the 2-year rising above 4.55% for the first time and the 10-year yield lifting aggressively to almost 4.15%, well clear of the 4.00% level that seemed to be providing bond market support in recent weeks. What is going on? Fed speakers further up the hawkish ante James Bullard and Neel Kashkari kept up their hawkish Fed rhetoric, in light of the burgeoning global price pressures. Bullard warned that inflation continues to surprise to the upside and the Fed needs to continue to act, also emphasising higher-for-longer rates even if inflation starts to decline in 2023, though he also suggested that “front-loading” of hikes is likely to end early next year (market pricing this anyway). Kashkari (2023 voter) added that there is no reason to think that key price measures have peaked, and he sees little evidence of a labor market softening. He also reiterated the Saxo view that “risk of under shooting on rate hikes bigger than overdoing it”. He also said his best guess is the Fed can pause hikes sometime next year but he favours rate hikes until core inflation starts to cool, noting the Fed's rate changes take a year or so to work through the economy. Chicago Fed President Evans was also on the wires this morning, and given that he’s retiring next year, he was accepting of the fact that “beginning rate hikes six months earlier would have made sense.” Tesla misses on revenue growth and margins, reaffirms longer term growth guidance Investors are used to Tesla beating estimates but last night the EV-maker surprised investors missing revenue and automotive gross margin estimates as the EV-maker faced battery constraints during the quarter and delivery transportation capacity during peak deliveries at the end of the quarter. While the company disappointed against estimates revenue growth was still impressive 56% y/y and the company is reiterating its 50% average growth target over the coming years, something analysts are not agreeing with seeing revenue growth declining to 14% in 2025. Shares were down 6% in late trading after the report. Discussion between the U.S. and Taiwan on joint weapon production According to Nikkei Asia, the Biden administration and Taiwan are in talks for American defense companies to provide Taiwan technology to manufacture weapons in Taiwan or to ship Taiwan-made parts to make weapons in the U.S. This, reading together with U.S. Secretary of State Blinken’s warning this Monday that “a fundamental decision that the status quo was no longer acceptable and that Beijing was determined to pursue reunification on a much faster timeline” and President Biden’s remarks of deploying U.S. forces to defend Taiwan in a CBS 60 Minutes interview last month, stirred up some unease among investors. Separately on Wednesday, Taiwan conducted live-fire military drills on Penghu Island, an archipelago in the Taiwan Strait. Chinese Investors uneasy about the introduction of policy language on wealth regulation Market chatters indicate that some investors are feeling unease about the potential policy implications of the phrase “we will improve the personal income tax system and keep income distribution and the means of accumulating wealth well-regulated” in the Work Report delivered by General Secretary Xi at the Chinese Communist Party’s National Congress last Sunday. The concept of regulating the means of accumulating wealth shows up in an official document for the first time. Weak Aussie September jobs report for September, supporting less hawkish RBA The data showed just 923 jobs were added to the economy, vs the +25k consensus from Bloomberg. It also shows employment is falling far ahead of RBA’s expectations, following last month’s 33,500 jobs being added. The unemployment rate also rose, by less than 0.1 percentage points but remained at 3.5% in rounded terms. It comes as part-time employment fell by 12,400. Recently the RBA noted business insolvencies were rising, and today’s data shows that the official stats are reflecting this too. That said, of the Australian mining companies reporting quarterly result this week, most reported labour shortages are continuing, which is affecting production. What are we watching next? Weaker yen to prop up Japan inflation further   Japan’s inflation data for September is due for release on Friday (tonight), and as signalled by the Tokyo CPI released earlier this month, price pressures are likely to pick up further. Bloomberg consensus expects the core measure (ex-fresh food) to come in at 3.0% y/y from August’s 2.8% y/y while the core-core measure (ex-fresh food and energy) is expected at 1.8% y/y in September from 1.6% y/y previously. The headline is expected to be a notch softer at 2.9% y/y from 3.0% y/y, but still remain way above the 2% target level. Weakness in the yen prompted an intervention from the Bank of Japan in September but the effect faded fast and the currency was significantly weaker in the month, which possible led to import price pressures. Still, the central bank is unlikely to shift its easing stance and will likely continue to wait for the global pressures to ease and USD to top out.         Earnings to watch Today’s earnings focus is on Swedish power and automation equipment maker ABB, diversified and medical equipment maker Danaher, miner Freeport McMoRan and mobile network equipment maker Ericsson. Today: China Mobile, China Telecom, ABB, Danaher, Investor, Philip Morris, Union Pacific, CSX, AT&T, Blackstone, Marsh & McLennan, Yara International, Nordea, Volvo, Ericsson, Freeport-McMoRan, Dow, Snap Friday: CATL, American Express, Schlumberger, Verizon Communications, HCA Healthcare, Sika Economic calendar highlights for today (times GMT) 1100 – Turkey Rate Announcement 1230 – Canada Sep. Teranet/National Bank Home Price Index 1230 – US Oct. Philadelphia Fed Business Survey 1230 – US Weekly Initial Jobless Claims 1400 – US Sep. Existing Home Sales 1400 – US Sep. Leading Index 1430 – US Weekly Natural Gas Storage Change 2145 – New Zealand Sep. Trade Balance 2301 – UK Oct. GfK Consumer Confidence 2330 – Japan Sep. National CPI Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: https://www.home.saxo/content/articles/macro/market-quick-take-oct-20-2022-20102022
Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

Fed: Very Likely Interest Rate Hike By 75 Basis Points

InstaForex Analysis InstaForex Analysis 20.10.2022 13:30
Summary of statements by Fed members In an exclusive interview yesterday with Kathleen Hays for Bloomberg News, St. Louis Federal Reserve Bank President James Bullard reaffirmed the Federal Reserve's determination to continue aggressively raising rates to curb high inflation. Bullard said the good news is that markets are pricing in expected interest rate hikes, so it's important that officials honor and implement those hikes to keep high inflation in check. An increasingly confident decision He also said that the Federal Reserve is surprised that inflationary pressures continue to rise. Confirming that the goal of the Fed is to bring the federal funds rate closer to 4.5% or 4.75%. And the 75 basis point rate hike at the November FOMC meeting was more or less taken into account by the markets. However, he would prefer to wait for the meeting to decide on the amount of the increase. December is not sure He did not confirm that a 75 basis point rate hike in November would be followed by an additional 75 basis point rate hike in December, saying he did not want to publicize his opinion, which he would back at the December meeting. Bullard Statement Among Federal Reserve officials, Bullard is considered one of the most hawkish. He was the first Federal Reserve President to publicly propose a 75 basis point rate hike. In an interview, he said that the core consumer price index, which rose to 6.6% in September compared to last year, continues to cause concern. His interview follows comments the day before yesterday by Minneapolis Federal Reserve President Neel Kashkari. During the panel discussion, he also confirmed that the Fed will maintain an aggressive monetary stance, saying the Fed cannot pause its monetary tightening campaign while core inflation is still accelerating. Yields  These announcements reinforced market sentiment that government debt yields will continue to rise, as we saw yesterday. 10-year bond futures rose 3.23% to 4.127%, while 30-year Treasury yields rose 2.61% to 4.126%. These higher yields, in turn, strengthened the dollar, leading to a 0.75% increase in the dollar index, which is currently fixed at 112.83. This led to a sharp decline in prices for precious metals.   Relevance up to 11:00 2022-10-25 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/324845
Behind Closed Doors: The Multibillion-Dollar Deals Shaping Global Markets

Wall Street Closed In The Red And The S&P 500 Futures Increase Losses

TeleTrade Comments TeleTrade Comments 21.10.2022 08:44
Global markets remain sluggish amid light calendar, early week optimism defends buyers. S&P 500 Futures drop for the third consecutive day. US 10-year Treasury yields seesaw around 14-year high. Inflation woes keep markets on thin ice, last round of Fedspeak before blackout appears important to watch. Traders cheer the Friday mood as an absence of major data/events joins mixed catalysts to keep them off the table during the last day of the week. Even so, cautious optimism prevails as the US dollar struggles to benefit from the strong yields and risk-off mood. While portraying the mood, the US 10-year Treasury bond yields refreshed a 14-year high the previous day, around 4.22% by the press time. Also, the two-year US Treasury yields rose to the highest levels since 2007 before recently taking rounds to 4.62%. That said, Wall Street closed in the red following an initially upbeat performance while the S&P 500 Futures extend the previous day’s losses with 0.50% intraday downside at the latest. “US stocks closed lower on Thursday as data on the labor market and comments from a U.S. Federal Reserve official reinforced expectations the central bank will be aggressive in hiking interest rates outweighed a flurry of solid corporate earnings,” said Reuters. Looking at the data, US Initial Jobless Claims eased to 214K for the week ended on October 07 versus 230K expected and a revised down 226K prior. Further, Philadelphia Fed Manufacturing Survey Index dropped to -8.7 for October versus the -5 market consensus and -9.9 previous reading. Additionally, US Existing Home Sales rose past 4.7M expected to 4.71M but eased below 4.78M prior. Also, Federal Reserve Governor Lisa Cook mentioned that ongoing rate increases will be required. Amid these plays, the CME’s FedWatch Tool suggests a near 98% chance of the Fed’s 75 bps rate hike. Elsewhere, the political crisis in the UK and Japan’s reluctance to intervene despite the multi-year low of the yen, exert downside pressure on the markets. However, China’s readiness to ease virus-led travel curbs seems to defend the buyers. On the same line could be the hopes that Britain will soon overcome the jittery markets. Moving on, the UK’s Retail Sales and the last dose of the Fed speakers’ comments before the blackout period preceding November’s Federal Open Market Committee (FOMC) meeting will be crucial for clear market directions.
UK PMIs Signal Economic Deceleration, Pound Edges Lower

Restricting China's Access To Advanced Technologies | Advertising Partners From Many Industries Are Reducing Their Marketing Budgets

Saxo Bank Saxo Bank 21.10.2022 09:35
Summary:  With Fed officials keeping up their rate hike rhetoric, swaps are now pricing in a 5% peak rate in the first half of next year. The benchmark 10-year Treasury yield rose 9 basis points to 4.23%, which weighed on equity valuation multiples. Snap earnings also send a warning on tech earnings ahead. UK PM Truss’ resignation would do little to help with the chaos in UK economy and politics. The dollar was mixed, oil was steady, gold retreated as bond-yields rose. What’s happening in markets? The Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) retreat as bond yields climb US stocks fell for the second day, after Treasury yields rose again, continuing to climb into territory not seen in more than a decade, with Fed officials keeping up their rate hike rhetoric. Swaps are now pricing in a 5% peak rate in the first half of next year. The benchmark 10-year Treasury yield rose 9 basis points to 4.23%, at one point hitting 4.239%, its highest level since 2008. The policy-sensitive yield, the 2-year Treasury traded up five basis points to 4.608%. As such this makes high PE tech stocks look expensive, particularly as the Nasdaq only offers a yield of 0.97%, and the S&P500 has an average yield of 1.8%, and the Dow Jones with a yield of 2.2%, all at a time when US corporate earnings are falling for the first time this year. The Nasdaq 100 fell 0.5% and the S&P 500 erased an earlier gain of more than 1%, before it ended 0.8% lower. Utilities down 2.5%, were the worst performing sector in the S&P 500. Communication Services outperformed, led by AT&T (T:xnys) which jumped 7.8% after the telecommunications giant reported earnings beating estimates and raising profit outlooks. 10-year U.S. treasury yields made a new 14-year high at 4.23% (TLT:xnas, IEF:xnas, SHY:xnas) U.S. treasuries sold off for a second day in a row, with the 2-year yield climbing 5bps to 4.615 and the 10-year yield 9bps higher at 4.23%, the highest levels in 14 years. Yields surged after the Philadelphia Fed President Harker said he was expecting the Fed Fund rate to be “well above 4% by the end of the year” and Fed Governor Cook said fighting inflation “will require ongoing rate hikes and then keeping policy restrictive for some time.” Hedging for new issues in the corporate space also contributed to the rise in yields. Hong Kong’s Hang Seng (HSIV2) China’s CSI300 (03188:xhkg) Hong Kong stocks tumbled with Hang Seng Index down 1.4% hitting 13-year lows. The bounce on the news of China shorting quarantine requirement for inbound travellers failed to hold. Higher U.S. bond yields and the Chinese Yuan weakening to new lows weighed on the markets. To add to the woes, investors have become increasingly concerned about the potential policy implications of the concept of “regulating the means of accumulating wealth” introduced in the Work Report delivered at the Chinese Communist Party’s National Congress last Sunday and the newswire report that the U.S. and Taiwan are in discussion of jointly manufacturing weapons. Chinese leading banks kept the 1-year and 5-year Loan Prime Rates unchanged. China Internet names sold off 3% to 8%. The EV space remained weak, with leading names falling by 2% to 6%. JD Health (06618:xhkg) rose 7.1% on share buyback news. Semiconductor stocks surged in Hong Kong and mainland bourses. Reportedly, the Ministry of Industry and Information Technology summoned executives of microchip manufacturers to discuss the latest moves from the U.S. to contain China’s access to U.S. semiconductor technology and pledged support to the domestic semiconductor industry. In addition, mainland securities firms published reports saying that China’s domestic chip-making industry will benefit from the whole-nation systemic initiatives to develop strategic technologies proposed at the CCP’s National Congress. Semiconductor names surged both in Hong Kong and mainland bourses, with Hua Hong Semiconductor (01347:xhkg) rising 5.6%, SMIC (00981:xhkg) climbing 1.6%, and Naura Technology (002371:xsec) limit up 10%. CSI 300 gained 0.6%. Australia’s ASX200 (ASXSP200.1) falls 0.8% on Friday, losing 1.2% on the week. Focus is on Lithium and Coal company earnings, from Allkem to Whitehaven   The following companies reporting quarterly and revenue numbers are a focus today; with Australia’s second biggest lithium company, Allkem reporting (AKE) quarterly production that missed expectations, seeing its shares decline almost 4%. Investors focused on the mining giants guidance for the year ahead with Allkem noting it expects lithium carbonate prices to be higher by 15% this quarter, than the last. Meanwhile, it reported lower grades, flagged issues including logistics delays in South America and on-going labour and equipment shortages in Western Australia. As a result, production at its South American Olaroz Stage 2 project is now delayed and planned for Q2 CY23. In good news though for Australia’s second biggest lithium company, Allkem, its net cash rose to $447 million (as at Sept. 30, up from $28.9 million from June 30). In Coal news Whitehaven Coal (WHC) shares rocked 3.2% higher after 16.6 million in block trades pushed its shares up, with the block of trades equating to 2.1% of its float. Also in Coal news, Coronado Global (CRN) results are set to be released and pulled apart, with the coal price in record high neighborhood, despite falling 13% from its high. It will be interesting to glean into their outlook for the year, particularly as coal demand usually peaks in January. For Coronado, focus will also be on the potential merger with Peabody. Other companies to watch include, wealth and financial planning business, AMP (AMP) with focus to be on how they can return $1.1b capital to investors in FY23. And in industrials, eyes will be on rubbish business, Cleanaway (CWY), who is holding its Annual Meeting. Traders will be looking to see if Cleanaway changes its earnings (Underlying Ebitda) forecast that’s pegged to be between A$630m to A$670m. USDJPY breaks 150, next to watch is 153 USDJPY finally broke above the key 150 level yesterday, the level above which many expected intervention. Officials have been jawboning the pair, including FinMin Suzuki this morning saying that they continue to watch the markets with a sense of urgency. He also seemed cautioned by the rattle in the UK markets, as suggested by his comments that they will pursue fiscal health so that market trust isn’t lost. BOJ meeting next week is key, although a change in policy stance cannot be expected. The break of 150 now exposes 153 levels in USDJPY. Crude oil (CLX2 & LCOZ2) Gains in crude oil on the back of expectations of China easing inbound tourism policy restrictions, but gains were later reversed with focus still on US efforts to curb price increase in energy. While the 15mbbl of release announced by President Biden is a part of the larger 180mbbl release that commenced earlier this year, focus is also on how the US strategic reserves will be refilled. WTI futures were seen back below $85/barrel while Brent was close to $92.   What to consider? What could the new UK PM bring in terms of policy change? After significant economic and political turmoil, Liz Truss resigned as Britain’s prime minister after just 44 days in office. The easy choice remains Rishi Sunak, former chancellor, who stood against Truss for the Tory leadership in the summer and predicted correctly that his rival would set off panic in the markets if she pressed ahead with a massive package of debt-funded tax cuts. The other alternative being ex-PM Boris Johnson or Penny Mordaunt, who also stood for the Tory leadership in the summer. Fiscal policy is unlikely top see a major shift with the new PM, as UK administration now remains extremely sensitive to market events. There is little they can do to prevent the upcoming recession or bring back asset allocation to UK assets. Market Fed rate expectations reach 5% Early 2023 Fed rate expectations have now reached over 5%, with the Fed funds rate now fully pricing in a 75bps rate hike for the November meeting and a strong probability of another 75bps rate hike at the December meeting. While the Fed has reiterated it will continue to hike more next year before it pauses, but the market pricing is now running higher than what the dot plot has hinted earlier. So the room for the Fed to surprise on the hawkish side in diminishing, especially if core inflation continues to surprise on the upside. Fed speakers are starting to turn slightly cautious looking at the market pricing, with Charles Evans last night saying that if the Fed pushes its policy rate much further than planned it could start to weigh on the economy and says he is worried that at some point rate increases could have a non-linear impact with businesses becoming more pessimistic. Harker (2023 voter) and Cook reasserted that the Fed needs to continue to hike but will noted that the Fed can pause sometime next year to assess the impact of its tightening on the economy. Another fall in weekly jobless claims for the Oct 15 week continued to suggest labor market strength despite the disruptions from recent hurricanes. China is considering reducing inbound quarantine Reportedly, the Chinese authorities are considering to reduce the current 7 days in hotel plus 3 days at home quarantine requirement for people travelling into China to 2 days in hotel plus 5 days at home. While the move may be small in magnitude, and still not confirmed by the authorities, it may have signaling power in terms of more flexbility in the day-to-day implementation of the zero Covid policy which is constraining consumption, investment and tourism. . US to expand China tech ban Bloomberg reports, citing “people familiar with the situation”, that the Biden administration is considering, at an early stage, new export bans limiting China’s access to advanced computing technologies that can be used in quantum computing and artificial intelligent software. Cyber security attacks on the rise globally, US Home Secretary warns to expect more in Asia A US official has warned that aggressive cyberattacks will rise from Russia, China, North Korea, Iran, particularly against Asian countries. It comes after a very strong spate of cyberattacks occurred globally this month, from Microsoft’s data being breached, along with the Japanese Securities Dealer Association, Australia’s Taxation Office batting three attempts per month, to the Indianapolis Housing Agency’s systems being breached as well, as well as one of Australasia’s telcos, and an ASX listed insurance group, Medibank. This reflects the need for companies and organizations to ramp up cybersecurity spending now and on an ongoing basis. This brings to mind perhaps the importance of remembering the need for diversification and possibly considering exposure to Cybersecurity stocks and ETFs. For more information, refer to our cybersecurity basket. Japan inflation hits 3%, update to CPI forecasts expected next week Japan’s core inflation touched 3% levels for the first time in over 30 years, matching expectations. Headline inflation came in higher-than-expected at 3.0% y/y while core-core ex fresh food and energy) measure was up at 1.8% y/y from 1.6% y/y previously. The stark yen weakness can prompt further import price pressures in Q4 as well, and demand is likely to push higher as well with Japan reopening its borders from the pandemic restrictions. Bank of Japan meets next week, and while policy change is hard to expect, it is expected that the central bank will raise the CPI forecast for fiscal 2022 (year ending March) from 2.3% to high-2% range. Snap earnings send tech earnings fear soaring Snap (SNAP:xnys) plunged 26.5% in the after-hour trading, following the company reported Q3 revenues growth at 6% Y/Y, largely in line with street estimates, but said its internal forecast for the Q4 revenues growth is decelerating to about flat year on year (vs market expectations of +6% Y/Y). The social media company said that they are finding “advertising partners across many industries are decreasing their marketing budgets, especially in the face of operating environment headwinds, inflation-driven pressures, and rising costs of capital.”   For our look ahead at markets this week - Listen/watch our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: https://www.home.saxo/content/articles/equities/market-insights-today-21-oct-21102022
Liz Truss The Shortest Prime Minister In The History Of The Great Britain | Crude Oil Is Growing

Liz Truss The Shortest Prime Minister In The History Of The Great Britain | Crude Oil Is Growing

Saxo Bank Saxo Bank 21.10.2022 09:46
Summary:  Equity markets feebly attempted another rally yesterday, but the headwinds of seemingly ever-rising yields proved too strong, sending the indices sharply back lower to the lowest close in three days. This is still a relatively firm performance, given the scale of the rise in yields. Elsewhere, the USDJPY 150.00 level only proved a barrier for about a day, as the weight of rising yields saw the price action spilling higher above this level, with no signs yet of fresh official intervention against JPY weakness.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) Yesterday saw a session relatively like the prior one, as an early rally simply failed to find sustenance in the face of the ongoing grind higher in US treasury yields. Still, market sentiment seems remarkably quiet despite the strong headwinds of the 25-basis point jump in longer Treasury yields this week. Next week is an important one for equities as the earnings season hits its peak with most of the megacap companies in the US reporting earnings, with the price action currently buried in the middle of the two-week range ahead of today’s session. Hong Kong’s Hang Seng (HSIV2) and China’s CSI300 (03188:xhkg) Hang Seng Index and CSI300 fluctuated in a narrow range and were down modestly. In Hong Kong, Chinese developers and China Internet stocks bounced. In mainland bourses, solar, wind power, education, nuclear power, and properties outperformed. General market sentiment is weak as U.S. bond yield risen to new highs and investors pondering the policy implications from the Chinese Communist Party’s National Congress. USD finds stride again on higher Treasury yields, USDJPY spilling above 150.00 The US dollar behaved rather oddly in recent sessions in trading sideways even as US treasuries continue to provide strong support for the currency. Hesitation yesterday from USD bulls may have been on concern that official intervention and choppy price action across USD pairs might await if USDJPY attempted to trade above the psychological 150.00 level. But that level fell late yesterday without any real fuss, trading nearly to 150.50. Still, while USDJPY moves are heavily correlated with the fresh rise in US Treasury yields, it’s interesting that another 50 basis point jump in long US treasury yields to new 14-year highs has not seen new cycle lows in EURUSD and many other USD pairs. Crude oil (CLZ2 & LCOZ2) Crude oil is among just a handful of commodities trading higher in a week that has seen another sharp jump in US bond yields drive down growth expectations. Crude and its related fuel products however continue to be supported by the risk of tightness driven by a period of supply uncertainty in the coming months as OPEC+ cuts supply, and the EU implements sanctions on Russian oil. In addition, uncertainty over Chinese demand as the zero Covid tolerance is being maintained and further incremental SPR sales of 15 million barrels will continue to weigh on prices in the short term. All developments, however, that are likely to keep crude oil rangebound for now, with Brent finding support below $90. Focus next week being earnings from six Big Oil companies, led by Exxon, Chevron and Shell. Gold (XAUUSD) Gold trades down 1.5% on the week close to key support at $1617, the September low and 50% retracement of the 2018 to 2022 rally. A second week of weakness being driven by an across the curve surge in US treasury yields with the ten-year yield rising 23 basis points on the week to 4.25%. Hawkish Fed comments and no signs of economic data showing the much-needed slowdown, has seen the market price in a Fed funds rate above 5% by early next year. The exodus from bullion backed ETFs has gathered pace this week as investors instead focus on increasingly attractive bond market yields, not least the two-year yield at 4.6% yield. Gold will likely continue to struggle until we reach peak hawkishness and/or the dollar starts to weaken. US treasuries (TLT, IEF) US treasury yields lifted all along the curve again yesterday, posting new highs for the cycle, with rises at the long end outpacing those at the short end, with the 2-10 inversion up to –37 basis points versus the cycle low below –50 bps in Sep and earlier this month. Traders are perhaps awaiting incoming data before trading shorter yields, now that the market has priced the Fed funds rate to reach above 5.00% by early next year (priced to do so at the March 2023 FOMC meeting). What is going on? UK Prime Minister Liz Truss resigned in a short statement yesterday … becoming the shortest serving Prime Minister in Britain’s history. She will stay in power until a new leader of the Conservative party can be chosen. The leading candidate is former Chancellor Rishi Sunak and other top contenders include Boris Johnson as the Conservative party has fallen to a record low in the polls against Labour. Japan inflation hits 3%, update to CPI forecasts expected next week Japan’s core inflation touched 3% levels for the first time in over 30 years, matching expectations. Headline inflation came in higher-than-expected at 3.0% y/y while core-core ex fresh food and energy) measure was up at 1.8% y/y from 1.6% y/y previously. The stark yen weakness can prompt further import price pressures in Q4 as well, and demand is likely to push higher as well with Japan reopening its borders from the pandemic restrictions. Bank of Japan meets next week, and while policy change is hard to expect, it is expected that the central bank will raise the CPI forecast for fiscal 2022 (year ending March) from 2.3% to high-2% range. UK Retail Sales volumes slide badly again in September Real (volume-based) sales were down for a second consecutive month at –1.4% MoM and –6.9% YoY, with the ex Petrol sales at –1.5% MoM and –6.2% YoY. China is considering reducing inbound quarantine The Chinese authorities are considering reducing the current 7 days in hotel plus 3 days at home quarantine requirement for people travelling into China to 2 days in hotel plus 5 days at home. While the move may be small in magnitude, and still not confirmed by the authorities, it may have signaling power in terms of more flexibility in the day-to-day implementation of the zero Covid policy which is constraining consumption, investment and tourism.Snap earnings send tech earnings fear soaringSnap (SNAP:xnys) plunged 26.5% in the after-hour trading, following the company reported Q3 revenues growth at 6% Y/Y, largely in line with street estimates, but said its internal forecast for the Q4 revenues growth is decelerating to about flat year on year (vs market expectations of +6% Y/Y). The social media company said that they are finding “advertising partners across many industries are decreasing their marketing budgets, especially in the face of operating environment headwinds, inflation-driven pressures, and rising costs of capital.” Gas prices in Europe and US see steep weekly declines US natural gas futures are heading for their longest stretch of weekly declines since 1991 as stockpiles continue to build at a faster than expected pace ahead of winter. The November (NGX2) front month contract trades down by 18% on the week and down 44% since the August peak, driven by mild autumn weather and rising production. In addition, the Freeport LNG export terminal explosion on June 8 has reduced exports, and the terminal will open in November at 85% capacity. In Europe, the TTF price trades down 10% has bounced strongly after almost reaching €100/MWh earlier in the week, a level we do not expect to be challenged until later in the winter when demand becomes more visible. With prices falling and almost full inventories, the political resolve to introduce a price cap has faded, hence the bounce. What are we watching next? US is considering national security reviews of Elon Musk business activities ... according to unnamed sources in a Bloomberg story. These would include the acquisition of Twitter and SpaceX’s Starlink satellite network. Musk has expressed his view on the war in Ukraine and investors in his Twitter takeover include Saudi and Chinese individuals. Tesla also has a strong presence in China, an awkward situation as the US has moved recently to cut off China’s access to advanced semiconductor tech. Market Fed rate expectations reach 5%, can they continue to rise? Early 2023 Fed rate expectations have now reached over 5%, with the Fed funds rate now fully pricing in a 75bps rate hike for the November meeting and a strong probability of another 75bps rate hike at the December meeting. While the Fed has reiterated it will continue to hike more next year before it pauses, market pricing is now running higher than the September FOMC dot plot forecasts. Some Fed speakers are starting to turn slightly cautious looking at the market pricing, with Charles Evans last night saying that if the Fed pushes its policy rate much further than planned it could start to weigh on the economy and says he is worried that at some point rate increases could have a non-linear impact with businesses becoming more pessimistic. Harker (2023 voter) and Cook reasserted that the Fed needs to continue to hike but will noted that the Fed can pause sometime next year to assess the impact of its tightening on the economy. Another fall in weekly jobless claims for the Oct 15 week continued to suggest labor market strength despite the disruptions from recent hurricanes. Earnings to watch Today’s earnings included the report from the world’s largest battery market CATL overnight, with a focus in the US session on consumer demand and consumption patterns in today’s American Express earnings report as well as the largest US oilfield services company Schlumberger. Today: CATL, American Express, Schlumberger, Verizon Communications, HCA Healthcare, Sika Economic calendar highlights for today (times GMT) 1230 – Canada Aug. Retail Sales 1340 – US Fed’s Evans to speak 1400 – Euro Zone Oct. Consumer Confidence Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: https://www.home.saxo/content/articles/macro/market-quick-take-oct-21-2022-21102022
The FTX Bankruptcy Exposed Vulnerabilities In The Crypto System

A Positive Sign For Bitcoin Is The Correlation With Gold

InstaForex Analysis InstaForex Analysis 21.10.2022 11:47
For the past four months, Bitcoin quotes have been moving within a wide fluctuation range of $17.6k–$25k. Over the past month, the cryptocurrency has mastered the $18.2k–$20.4k area. The consistent movement of BTC within certain areas was made possible by a decrease in trading activity. Bitcoin tried to go beyond the ranges, but each such attempt was unsuccessful. At the same time, the drop in trading activity had a positive impact on the stability of the cryptocurrency. Thanks to the minimal attention of investors, the level of Bitcoin volatility has updated a seven-year low. Does Bitcoin correlate with gold? As a result, some stock indices have become more volatile than the main cryptocurrency. According to Bloomberg experts, a significant decrease in volatility has become a catalyst for increased attention to the industry by institutional investors. Arcane Research also stated that the decline in Bitcoin's volatility has affected the asset's "relationship" with gold. The correlation of BTC and the precious metal over the past month has reached an all-time high zone. It is for this reason that the cryptocurrency holds on to the $19k level, and does not follow the stock indices. The correlation of Bitcoin with stock indices remains, despite the passive behavior of the cryptocurrency price. Technically, Bitcoin follows the price movement of the S&P 500 and other indices, but everything happens within a narrow price range, which does not allow BTC volatility to increase. What does the growing correlation between BTC and gold mean? The macroeconomic situation and the seven-year low of volatility return Bitcoin the status of digital gold. Investors look to the asset as a deflationary savings vehicle. Given that the correlation between Bitcoin and stock indices persists, the reorientation is just beginning. In the medium term, this can significantly increase the attractiveness of Bitcoin and allow the asset to go beyond price ranges. However, along with the growing interest in cryptocurrency, the level of volatility will undoubtedly increase. Given this, there are two possible options for Bitcoin in the medium term. While maintaining the boundaries of the wide range of $17.6k–$25k, the correlation with gold may strengthen. However, in case of multiple attempts to go beyond the area, BTC volatility will start to rise. The growing correlation of Bitcoin with gold is situational but beneficial for the cryptocurrency. This suggests that investors are ready to consider a digital asset in various forms, including savings. Given the continuation of the Fed's hawkish policy, the correlation with gold is a positive signal. However, it is important to understand that fundamentally nothing has changed for Bitcoin. Gold is as much an underdog in the current bear market as high-risk assets. Precious metals rise during the DXY correction, and therefore you should not count on significant dividends from the correlation with gold. Conclusions The growing correlation of Bitcoin with gold confirms the willingness of investors to use the situational strengths of the cryptocurrency. In the medium term, interest in BTC can provoke an increase in trading volumes and the achievement of local highs. However, fundamentally the situation around the cryptocurrency does not change. In the current macroeconomic crisis, high-risk assets and precious metals are in the boat of outsiders. Given this, we can say with confidence that Bitcoin has no significant chances for a full-fledged growth before the end of the Fed's aggressive policy.   Relevance up to 09:00 2022-10-22 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/324953
Technical Analysis: Gold/Silver Ratio Still On The Rise

Only On Monday, Gold And Silver Closed In Positive Territory

InstaForex Analysis InstaForex Analysis 21.10.2022 11:53
Gold in the spot and futures markets has lost all of the small gains that it started at the beginning of the week. Silver futures also lost most of their gains: There seems to be a group of traders who see any profit, small or large, in gold and silver as an opportunity to wipe out those profits by actively going short. The only day when gold and silver closed in positive territory was Monday, the high and close gold reached during which is currently the highest it has made this week. The recent bearish sentiment in the gold market was a direct result of market participants' genuine concern about the impending 75 basis point rate hike at the last two FOMC meetings of this year in November and December. Comments made by several Federal Reserve officials underscored their intentions and focused on lowering inflation by raising interest rates. This resulted in higher yields on US debt instruments across the board, including 10-year notes and 30-year Treasury bonds. The yield has steadily risen to a higher value and continues to trade today. The yield on 10-year bonds rose 2.4% yesterday and currently stands at 4.226%. The yield on 30-year bonds increased by 2.18% and currently stands at 4.216%. There is still a reciprocal return between 10-year bonds and 30-year bonds, with 10-year bonds having a higher yield than a longer-term debt instrument. This indicates that investors and traders perceive current levels of return to be higher than they will be in a few years. Recent statements by Fed officials James Bullard and Neel Kashkari have confirmed that they are aiming to bring benchmark interest rates closer to 4% or 5%. As long as the Federal Reserve continues to raise its base rate, it is likely that gold will react negatively to higher interest rates instead of focusing on inflationary pressures that continue to persist.   Relevance up to 09:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/324965
Softer New Jobs Reading Would Likely Weigh On The Canadian Dollar

Fed Members Claim That Rates Need To Rise To Control Inflation

InstaForex Analysis InstaForex Analysis 21.10.2022 12:16
USD/CAD closed higher after Philadelphia Fed President Patrick Harker said the central bank will raise rates above 4%. Most likely, it will remain at this level, or increase further if needed. Fed member Lisa Cook said the same thing, stressing that rates need to continue to rise to control inflation. The current rate is between 3% and 3.25%. This scenario creates opportunities to buy the pair. Since a three-wave pattern (ABC) developed, where wave "A" represents the buying pressure from yesterday, traders can enter the market by taking long positions to the 61.8% and 50% retracement level. Stop loss could be set at 1.36500, then exit the market on the breakdown of 1.38. This trading idea is based on the "Price Action" and "Stop Hunting" methods. Good luck and have a nice day! Don't forget to control the risks.   Relevance up to 09:00 2022-10-22 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/324955
Forex: US dollar against Japanese yen amid volatility and macroeconomics

Eurozone consumer confidence and Fed members speeches are crucial events today

ING Economics ING Economics 21.10.2022 12:38
Pressure continues to build on market rates, as they ratchet higher in a relentless fashion. That can be dangerous, as we can easily face circumstances where something breaks. The UK had a brief taste of this. But even there, the odds are that gilts too re-engage in the 'pain trade' of higher market rates and tighter conditions. The US 10yr is eyeing 4.5% Rates are set to go higher The US 10yr has a pathway to 4.5%, but is held back by capital inflows The separation between UK gilts and US Treasuries has been quite stark. In fact, it’s UK gilts doing their own thing as Treasury yields and Bund yields just continue to shoot on higher. The 10yr US Treasury yield in the area of 4.25% and the 10yr Euribor rate in the 3.25% area are quite some levels, and the trend for yields remains to the upside. UK gilts are now trading back below Treasuries as the outlook for the UK darkens, even as the smog of the political landscape clears. These are remarkable times where the market abruptly stepped in recently to punish policy mistakes in the UK, but has tended not to do the same in the US and the eurozone where arguably some mistakes have also been made (albeit not as stark). But the UK is suffering from a very poor track record, and sterling is no dollar. Even the euro is managing to trend firmer versus sterling (big picture). Capital flows are and will be a driver ahead The fact that global FX reserves have a 7% weighting in sterling is anomalous given the 3% weight of the UK in global GDP (approximate rounded numbers). Times are a-changing for the UK. For the US the mighty dollar remains everyone else’s problem and is reflective of net capital flows; it’s also containing the rise in US Treasury yields. Had it not been for the buffer being offered by the flight into Treasuries and US assets (in a relative sense), Treasury yields would be much higher than they currently are. With the effective fund rate now discounted at 5%, there is a path for the US 10yr to get to 4.5% (with 50bp through at the extreme in the past, when the funds rate peaks). It does not need to go much above this, provided the terminal rate discount does not continue to ratchet higher, and there are no guarantees there. Forget the gilt rally, bond yields are heading up globally Source: Refinitiv, ING UK in the headlines, but no longer in the driving seat The UK remains in the headlines with prime minister Truss announcing her resignation yesterday and the governing Conservative party heading for another leadership contest. With thus some uncertainty still surrounding the fiscal plans, gilts should continue to trade with a risk premium. Any further retightening versus Bunds looks set to be much slower. The 10Y spread between gilts and bunds has already tightened from levels around 215bp last week to 150bp following the latest developments. This is still above levels in late August/early September before the spike in gilt yields. Long end yields should struggle to remain below 4% But as politics start to emerge from their turmoil gilts will increasingly focus on the Bank of England’s reaction. Currently, markets are still seeing the Bank lifting the key rate above 5% before the middle of next year. That being the case will also mean that long-end yields should struggle to remain below 4%. There's still a risk given the political backdrop that the BoE won't have all the information on fiscal plans when it decides on rates in November. Such feared lack of clarity may help explain why money market pricing has not dropped more on the back of dovish comments coming from the bank's Broadbent yesterday, who clearly said he thought market pricing was overdone. Our own economists think that the Bank Rate could top out at 3.5% to 4%.   There is still a 50bp political risk premium in gilts but it won't go away easily Source: Refinitiv, ING inflation versus recession angst enters the next round At the forefront of the inflation-fighting charge next week will be the European Central Bank, which is seen hiking 75bp and perhaps also setting in motion first plans to start shrinking the balance sheet. But they will also follow the Bank of Canada’s decision, which should underscore that the hawkish push is a global phenomenon. A larger 75bp hike looks more likely here after a recent upside surprise in inflation. The Fed meeting is still a week further away, but here US money markets have for the first time started to price a terminal rate of 5% for the Fed Funds effective rate. To be sure, the market is still pricing the Fed turning towards cuts later next year, but Fed officials are pushing against that notion. The Fed’s Harker stated that it could hold hiking in 2023. But this is more to assess whether policies have the desired impact on inflation as he remarked the Fed could then tighten further if needed; one cost being that he sees unemployment peaking at 4.5% next year. Near-term data is unlikely to deter markets from continuing to price a hawkish Fed Near-term data is unlikely to deter markets from continuing to price a hawkish Fed. The 3Q GDP data next week should show positive growth again after the technical recession of the first half of the year. The Fed’s preferred inflation measure due for release next week should reflect the upside surprise already witnessed in the CPI data. As for the eurozone, the PMI data next week as well as the German Ifo index later in the week should provide evidence of the economy having slid further into contraction. The ECB’s new reaction function has made clear though that the fight against inflation may come at the cost of recession. While market participants will always question how far this notion can be pushed, we doubt that they are in the position to focus on the long-term picture just yet. Market volatility remains high and the outlooks for both inflation and growth are still shrouded in great uncertainty. In the upcoming round of inflation versus recession angst, inflation looks set to maintain the upper hand. The odd one out among next week’s central banks is the Bank of Japan which is largely seen to stay put, sticking with asset purchases and its yield curve control programme. But with inflation hitting 3% for the first time in three decades the pressure on the bank to eventually reduce stimulus is increasing. Today's events and market view Near-term upside to rates should dominate. In the upcoming round of central bank meetings, kicking off with the ECB next week, inflation angst should still maintain the upper hand in determining policy action and communication. Eurozone PMI data at the start of the week pointing to deepening economic woes as well as month end – note that the German debt agency’s increase in own holdings will also be reflected in the month-end rebalancing of index trackers – can provide some support to rates markets. But that may prove fleeting as the focus then turns to the Fed and BoE. Eurozone consumer confidence is one of the few data points to watch today. In the US the Fed's Williams and Evans are scheduled to speak. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
EM Index Inclusions and Exclusions: India Thrives, Egypt Faces Challenges

The USD/JPY Pair Above 150! | Who Will Replace Liz Truss? | The Central Bank Of Turkey Cut Interest Rates

Swissquote Bank Swissquote Bank 21.10.2022 13:30
Liz Truss resigned. Normally, a PM resignation means uncertainty and limited visibility; it’s not a preferred scenario for the market. But the little time Liz Truss stayed in power was so hectic that investors welcomed the news that she departs sooner rather than later. All eyes are on who will replace Liz Truss? Forex In the FX, the US dollar continues extending its rally across the board, and there is nothing the other currencies can do. The dollar-yen is now trading above the 150 level, with prospect of another Bank of Japan intervention. The Central Bank of Turkey cut interest rates by another 150bp yesterday. Turkish stocks gained, as Turkish Airlines hit 100 lira level. The results American Airlines revenues grew 13% compared to the same time in 2019, and other airline companies also hinted at strong results. Snap, however, nosedived 27% in the afterhours trading, after reporting the lowest ever quarterly sales growth due to lower advertising spending. On the macro front, the Philly Fed manufacturing index came in softer than expected, but the weekly jobless claims fell – which certainly fueled the hawkish Fed expectations. Watch the full episode to find out more! 0:00 Intro 0:24 Who will be the next UK PM? 4:21 FX update: USDJPY above 150! 5:09 Turkey cuts, stocks rally 7:37 Airlines report strong results, Snap dives 8:37 Why the US jobless claims keep falling?! Ipek Ozkardeskaya  Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Liz #Truss #resignation #Rishi #Sunak #Boris #Johnson #Penny #Mordaunt #GBP #UK #CBT #TRY #TurkishAirlines #AmericanAirlines #Snap #earnings #USD #JPY #BoJ #PhillyFed #jobless #claims #Fed #hawks #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH      
Crude Conundrum: Will Oil Prices Reach $100pb Amid Supply Cuts and Inflation Concerns?

Bond Market May Remain Under Pressure | Yield Increases May Have Followed Statements By Fed Officials

Conotoxia Comments Conotoxia Comments 21.10.2022 13:48
Treasury bonds, while they may be considered a relatively safe investment instrument, it seems that they cannot boast the above status this year. The dynamics of changes in interest rates seem to be unprecedented, which may force big changes in the bond market. Bond yields Yields on U.S. 10-year bonds surpassed the 4.25 percent level this week for the first time in 14 years. Further price declines and yield increases may have followed statements by Federal Reserve officials, who continue to reaffirm a commitment to long-term restrictive monetary policy, which may keep negative pressure on U.S. government bonds, which appear less attractive to investors in a high interest rate environment. They may also wait for further debt issuances already with higher interest rates and, in favor of them, dispose of current paper that had lower interest rates. Statements relevant to interest rates and bonds Federal Reserve Bank of Philadelphia President and CEO Patrick Harker said Thursday that the federal funds rate will be "well above" 4 percent by the end of 2022 due to a "frankly disappointing lack of progress in curbing inflation," BBN reported. The Fed will stop raising interest rates next year, Harker added. The restrictive stance the central bank will take at this point should remain in place "for some time to allow monetary policy to do its job." He went on to estimate that GDP growth will be "flat" this year, and will soon rise by 1.5 percent and around 2 percent in 2023 and 2024, respectively. The unemployment rate will peak at 4.5 percent in 2023 and should fall to 4 percent in 2024, "suggesting that even as we tighten monetary policy, the labor market will remain quite healthy." - Harker stressed in his statement, quoted by BBN. What does the scale of the bond sell-off look like? Source: Conotoxia MT5, AGG, Weekly Looking at the trading chart of the ETF with the symbol AGG, someone could see that the price of a unit of this fund has fallen by more than 20 percent since its peak in August 2020. What is the AGG fund? The iShares Core U.S. Aggregate Bond ETF seeks to track the investment performance of an index composed of the entire U.S. investment grade bond market. According to the issuer, AGG can provide broad exposure to U.S. investment-grade bonds, which also includes Treasury bonds. Nevertheless, for the moment, until a peak in US interest rate hikes is reached, the market may continue to be under pressure. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
Assessing 'Significant Upside Risks to Inflation': Insights from FOMC Minutes

The Aggressive Policy Of The Fed May Harm The Economy

Saxo Bank Saxo Bank 22.10.2022 08:01
Summary:  Winter is coming to the financial markets as central banks are tightening their grip. How will markets be after hibernation? I am sorry to disappoint our younger readers of this Q4 Outlook who think that its title is a play on Games of Thrones. Rather, it’s a reference to the 1970s movie Being There, in which Peter Sellers plays Chauncey Gardiner, a simple gardener who becomes a sensation on Wall Street and as a presidential adviser. Observers misinterpret his basic gardening and seasonal tips as oracular advice—for example, “In the garden, growth has its seasons. First comes spring and summer, but then we have fall and winter.”   This year winter is coming once again for global markets. Winter came already for the crypto market last year and has lingered since the pivot by the Fed in November 2021. And more broadly speaking, the same has been the case for the equity market, save for a brief thaw in the spring of this year and then for a sunny couple of months after the 16th June FOMC meeting. That meeting’s super-size 0.75 percent rate hike had the market hoping that peak Fed would arrive sooner rather than later due to the anticipated damage that the aggressive Fed hiking cycle would do to the economy.  We have argued since early 2020 that inflation would be deep rooted and persistent. This view still holds but we are fast approaching a breaking point for the global economy—one that we’ll arrive at due to the “peak hawkishness” from policymakers over the next quarter or so. Three factors will lead to this breaking point.  First, global central banks realise that it’s better for them to err on the side of excess hawkishness than continuing to peddle the narrative that inflation is transitory and will remain anchored. Second, the US dollar is incredibly strong and reduces global liquidity through the increased import prices of commodities and goods, reducing real growth. Third, the Fed is set to finally achieve the full run-rate of its QT program, which will reduce its bloated balance sheet by up to $95bn per month. This triple whammy of headwinds should mean that in Q4 we should see an increase in volatility at a minimum, and potentially strong headwinds for bond and equity markets.   The question facing investor is really this: If we are set for peak hawkishness in Q4, what then comes next? The answer is possibly that the market begins to price the anticipation of recession rather than merely adjusting valuation multiples due to higher yields. That turning point to pricing an incoming recession, again, could come in December, when the energy prices peak with the above trio.  It's estimated the total share of energy in the global economy has risen from 6.5 percent to more than 13 percent. This means a net loss of 6.5 percent GDP, whether through an increase in prices relative to lower volumes or service output, or however one wants to define it. The loss needs to be paid for by an increase in productivity or lower real rates.   And lower real rates will need to be maintained to avoid the seizing up of our debt-saturated economies. This means that there are really two ways this can play out: higher inflation persists well above the policy rate, or yields fall even faster than inflation. Which one will it be? That will be the critical question.  The odds right now favour another 50-70 bps higher for US and global interest rates, while inflation remains either stuck at high levels or only comes off gradually, meaning risk-off is the most likely outcome during this window of time. But beyond our anticipated peak hawkishness scenario, the market will be champing at the bit to go long risk assets on any sign that policymakers have surrendered in their fight against inflation as the costs of tighter policy become unacceptable relative to supporting the economy and labour markets, and the costs of servicing sovereign debt. The battle is on, but to paraphrase Chauncey Gardiner, before we can have spring we must have fall and winter.   Safe travels, Steen Jakobsen  Chief Investment Officer, Saxo Bank Group  Explore products at Saxo   Source: https://www.home.saxo/content/articles/quarterly-outlook/winter-is-coming-04102022
Indonesia's Inflation Slips, Central Bank Maintains Rates Amidst Stability

Europe Has Moved From The World's Largest Trade Surplus Bloc To A Deficit Bloc

Saxo Bank Saxo Bank 22.10.2022 08:13
Summary:  Barring a sudden resumption of Russian natural gas flows to Europe in the coming quarter, an economic winter is coming for Europe and the euro, as well as satellite currencies sterling and the Swedish krona. Despite the ECB and other central banks - with the extremely notable exception of the Bank of Japan - playing some catchup with the Fed in delivering policy tightening in Q3, the Fed remains the central bank that "rules them all". We will need to see the Fed easing again before we can be sure that the US dollar is finally set to roll over. USD: after the Fed tried to get cute on a policy deceleration, it found religion again.  The US dollar found a temporary peak in the wake of the June 16 FOMC press conference as the market figured that the first 0.75 percent hike since 1994 would prove a peak in Fed hawkishness for the cycle. For its part, the equity market bear market low of the cycle at the time of writing was posted on the day after that FOMC meeting. Risk sentiment found further fuel and the USD dipped slightly heading into the late July FOMC meeting as Powell offered insufficient pushback against the market, which was beginning to price that the Fed policy rate would peak by as early as December 2022 and begin rolling over in the first half of 2023. However, beginning in early August Fed members quickly moved to push back explicitly against the notion of forecasting any Fed easing with consistently hawkish rhetoric almost across the board. The USD rallied anew, even as a number of other central banks moved even more aggressively with their own rate tightening moves and guidance. The ECB even hiked 75 basis points at its September 8 meeting, the largest hike in the central bank’s history, with another 75 basis points priced for the October meeting. After the remarkable thaw in financial conditions since the June FOMC meeting, despite that meeting delivering the first “super-size” rate hike of 75 basis points, the Fed clearly decided that it had more to gain by maintaining a hawkish tone than in trying to guide for the possibility of any imminent policy pivot due to some abstract notion like the neutral rate. The Fed probably can see now that that it is easier to back down from accidents created by excessively tight policy than to risk aggravating inflation risks with easing financial conditions in the middle of a tightening cycle by trying to play cute with guidance. One factor that has added to the potential for a bounce-back in the US economy fairly deep into Q4 is the steep decline in petrol prices after their remarkable peak at record prices north of $5/gallon in early June. The decline to well below $4.00 already in August could have a significant real and psychological impact on the legendary US consumer and keep the economy and wage pressures humming a bit longer than expected for this cycle, requiring that the Fed maintain course and continue its attempt to achieve the full pace of quantitative tightening, promised to reach $95 billion in balance sheet reductions per month in September. Hence our Steen Jakobsen’s anticipation of “peak tightness” in the coming quarter. Tail risk alert for USD in Q4: the mid-term elections. The mid-terms are an important tail-risk event in Q4 for the longer-term outlook for likely US policy responses in the next recession or soft patch. The pundits and oddsmakers assure us that, while the Democrats are very likely to solidify their majority in the Senate, they are nearly certain to lose control of the House. That may well be, but the last two election cycles have taught us to treat election polls with more than a grain of salt, and two developments have dramatically raised the potential for surprises in our view: the Trump-packed US Supreme Court overturning of the Roe v. Wade case from the 1970s that guaranteed access to abortion services at a federal level, and a couple of special elections in Trump country in recent months falling to Democrats—particularly the election for Alaska’s US House representative in which the pro-Trump Sarah Palin lost to a Democrat. This was a state that voted for Trump in 2020 by a margin of 10 points and for the Republican House member by nine points over an independent challenger in the same election. With a deeply divided partisan political environment, the US is only able to make policy at the margin on the fiscal side when one party does not control both houses of Congress and the Presidency. There are important exceptions, including bipartisan issues like reducing supply chain vulnerabilities with China and limiting Chinese access to military and advanced technology. In any case, if the Democrats surprise and maintain control of the House, together with a stronger control of the Senate, it could completely flip the script on fiscal policy potential ahead of the 2024 US presidential election, generally increasing the risks of far higher inflationary outcomes. Had Biden enjoyed a mere seat or two more in the Senate over the last two years, his party might have passed a package some $2 trillion larger than what actually made it through in the so-called Inflation Reduction Act. Graphic: The jaws are widening perilously! The story since mid-2021 has been of a widening performance divergence between the soaring US dollar and weakening euro and even weaker JPY. Note that the indices are CPI-adjusted, and Japan’s retail CPI measures have likely been suppressed, meaning that the picture would look even worse than it does here. Something could give in Q4 on the Bank of Japan’s commitment to containing yields. Note that the euro weakness looks pedestrian in comparison, even after trading below parity at times in Q3. EUR, GBP and a winter of discontent. The euro fell to below parity against the US dollar on the intense and excessive pressure on inflation in the EU from soaring energy and power prices, which also presented risks to output volumes and had a seismic impact on external balances. Europe went from being the world’s largest surplus bloc on trade to a deficit bloc in a world heading into a slowdown and likely recession in Q4 and early next year.  Much has been made of the EU’s heroic efforts to build natural gas storage ahead of the heating season beginning in the autumn, but this will not cover the additional supply needed unless Russian gas flows resume over the winter—unless EU demand drops further. If Russian leader Putin, or anyone of his ilk, remains in power in Russia, the longer-term energy supply picture for Europe will remain difficult as the EU will have to continue bidding up for shipments of LNG in a tight global market. New sources of gas could be in the wings, possibly in the long run from Algeria and already in coming months from the newly-arrived-on-the-scene LNG from Mozambique. But the EU energy outlook will likely never again prove as bad as it does for the coming winter of discontent, so some major low in the euro may emerge in the coming quarter or early next year. The EU plans to cap prices may help nominal EU inflation readings to begin rolling over in coming months, but this won’t kill demand. Physical limits to natural gas supply, possibly aggravated by risks that French nuclear power is not fully back on line until late in the winter, might force power rationing and real GDP output drops. Europe will be hoping that a mild winter lies ahead, and daily and weekly weather forecasts will receive more attention than perhaps at any time in the continent’s history. Ditto for the UK with the cherry on top that the UK lacks strategic gas storage facilities even if it is scrambling on that front. Again: winter is coming and will continue to come every year, but the EU will move with existential haste to address its vulnerabilities.  The UK bears extra close watching as a country capable of a more nimble and forceful policy response than any other major country, given the combination of tremendous pressures on the UK economy from its external deficits and cost of living crisis on the one hand, and a new Prime Minister Liz Truss and her nothing-to-lose mentality on the other. Her instinct will be to move fast and move big to keep the lights on and to keep her country warm this winter for starters, but also to ensure that policy moves the UK away from its current predicament and vulnerabilities. The UK simply must find a new path toward balancing its external deficits and decreasing energy vulnerabilities if she is to enjoy more than a brief stint as PM. Her approach of populist price controls on the one hand together with tax cuts on the other are a risky gambit for sterling on the implications for the national deficit. Sterling may see an aggravated further drop this winter as long as energy prices remain divergently high for Europe (natural gas is the critical factor in particular). Further out, policy will have to show traction in attracting investment, bringing rising UK domestic energy output (UK shale gas potential unleashed?) and improving productivity to see sterling rising from the ashes. And for perspective, sterling isn’t even fully in the ashes yet anyway, as we note that in CPI-adjusted real-effective-exchange-rate terms, it is actually only mid-range since the 2016 Brexit referendum collapse. Continued tension among the Asian giants CNH and JPY: Q4 to deliver a big bang? We have highlighted the still very stretched CNYJPY exchange rate in both of the last two outlooks. The CNH has loosely tracked the USD higher, while the JPY has remained the weakling of G10 currencies on the Bank of Japan’s stick-in-the-mud refusal to shift to a tightening stance and away from its yield-curve-control policy. In Q3, the CNYJPY exchange rate reached new multi-decade highs well north of 20.00. Could Q4 finally be when something “breaks” here? On the CNY side of the equation (and closely linked, the tradeable offshore CNH), China might decide that it is simply no longer in its interest to maintain a strong currency, especially if commodity prices begin to fret at the economic outlook souring. But more likely, the capitulation could come from the Bank of Japan via a stronger JPY as discussed in our Q3 outlook. Significant further downside pressure on the yen may simply force the Bank of Japan to surrender after it held out so long in the hope of seeing wage gains rising sufficiently to suggest a sustainably positive inflation outlook. But there may also be a chicken-and-egg problem in the Bank of Japan’s measures of inflation and inflationary risks from here: the policy by Japan’s supermarket chains to keep food prices capped even as wholesale and import prices have soared, the latter aggravated by the tanking JPY. October 1st is meant to see a reset of retail prices for retail shoppers overnight, which could lead to soaring official inflation readings and a growing sense of popular outrage as the cost-of-living rises. Fiscal attempts to shield lower income households will do nothing for the JPY or alleviate the concern for medium-wage and higher income earners. Will Q4 finally be the quarter that sees the Kuroda BoJ surrender and shift its guidance, and at least shift the goal posts on yield-curve control? There is tremendous two-way volatility potential for JPY crosses, particularly if the USDJPY rips to new aggressive multi-decade highs before the BoJ finally then capitulates. The rest of G-10 FX. In this case, the “rest of G-10” would be the Swiss franc (CHF) and the “G-10 smalls” that include the AUD, CAD, NZD, SEK and NOK. Regarding CHF, with cost-of-living pressures at a maximum over the coming winter, the Swiss National Bank will be happy to continue its tightening policy and encouraging a stronger franc, which has helped materially in dampening inflation pressures for Switzerland. For the G-10 smalls, the “peak tightness” we anticipate in Q4 will likely not be kind to these less liquid currencies. For the Antipodeans AUD and NZD, we’re curious whether AUDNZD can break above the multi-year range capped by 1.1300 that stretches back over seven years, as we consider Australia’s formidable commodities portfolio and its newfound status as a current account surplus country while New Zealand is reliant on energy imports. New Zealand was also quick to tighten rates and is therefore likely at the leading edge of countries set to roll over into a slow-down and an eventual pause of its rate-tightening regime. In Europe, Norway will have to play ball to some degree with Europe’s move to cap energy prices after the country has reaped enormous windfall profits from soaring natural gas prices in particular. The Swedish krona looks cheap, but may need to see a major market bottom before its prospects can brighten sustainably, given its history as one of the more sensitive currencies to the economic outlook and risk sentiment.     Source: https://www.home.saxo/content/articles/quarterly-outlook/a-fed-thaw-needed-to-deliver-a-sustained-usd-turn-lower-04102022
BRICS Summit's Expansion Discussion: Impact on De-dollarisation Speed

Tightening Of Fed Monetary Policy Next Year Will Remain If Necessary

InstaForex Analysis InstaForex Analysis 23.10.2022 09:42
The US dollar was gradually regaining its positions after Thursday's unsuccessful attempt by buyers of risky assets to continue growing. Yes, investors took advantage of the resignation of Prime Minister Liz Truss, but this did not last long. Good statistics on the US labor market and the speech of the President of the Federal Reserve Bank of Philadelphia Patrick Harker - all this strengthened the confidence that the Fed will continue to act quite aggressively, actively fighting inflation. Harker statement  Harker said on Thursday that the committee is likely to raise interest rates well above the planned 4% this year and will keep them at this level for quite some time to combat inflation. At the same time, the official did not rule out taking additional measures, if necessary. "We're going to keep raising rates for a while. Given our outright disappointment at the lack of progress in reducing inflation, I expect that by the end of the year we will exceed the 4% ceiling," Harker said during a speech at the Greater Vineland Chamber of Commerce in Vineland, New Jersey.   Expectations Policymakers are expected to commit to a fourth consecutive 75 basis point rate hike when they meet in early November this year. Many economists also expect that the Fed will go for a similar increase in December of this year, after which rates will reach their peak of about 5% in early 2023. Harker, who does not vote on monetary policy decisions this year, said the Fed will base its decisions on economic data and will remain flexible on policy, tightening next year if necessary. "If we need to, we can continue tightening policy based on new data," Harker said. "But these are extreme measures, because we have to let the system work itself, which will take time." Harker said he expected the unemployment rate to rise to 4.5% next year and then fall to 4% in 2024. According to the Ministry of Labor, it was 3.5% in September. As for inflation, Harker believes that the price index of personal consumption expenditures, the Fed's preferred indicator, will be about 6% this year, 4% next year and will drop to 2.5% only in 2024. "We really need to see a steady decline in a number of inflation indicators before we stop tightening monetary policy," he said. Lisa Cook The head of the Fed, Lisa Cook, in a separate speech, also said that high inflation would probably require a constant increase in rates, and then maintaining a restrictive policy for some time. EUR/USD As for the technical picture of EURUSD, the bears actively piled on the euro and managed to return everything to the framework of the horizontal channel observed recently. To resume growth, it is necessary to return the pair above 0.9800, which will take the trading instrument to the area of 0.9840 and 0.9870. However, the upward prospects will depend entirely on the new US data and the decisions taken by the Fed. A breakthrough of 0.9760 will return pressure on the trading instrument and push the euro to a low of 0.9720, which will only worsen the situation of buyers of risky assets in the market. Having missed 0.9720, it will be possible to wait for the lows to update around 0.9680 and 0.9640. GBP/USD As for the technical picture of GBPUSD, the growth and reaction to Truss' retirement quickly ended, which by the end of Thursday led the pound to the area of the opening level. Now bulls will focus on protecting the support of 1.1170 and the breakdown of the resistance of 1.1240, limiting the pair's growth potential. Only a breakthrough of 1.1240 will return the prospects for recovery to the 1.1290 area, after which it will be possible to talk about a sharper jerk of the pound up to the 1.1330 area – Thursday's high. We can talk about the trading instrument being under pressure again after the bears take control of 1.1170. This will deal a blow to the bulls' positions and completely negate the prospects of the bull market observed since September 28. A breakthrough of 1.1170 will push GBPUSD back to 1.1120 and 1.1070.   Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/324949
US Dollar Index May Confirm A Potential Bullish Trend Reversal

Without US Support, Currency Interventions Are Doomed To Failure

InstaForex Analysis InstaForex Analysis 23.10.2022 09:44
What doesn't kill makes us stronger. No matter what the Federal Reserve's rival central banks try to rein in the US dollar, it still blooms. It would seem that high inflation-induced rate hikes in other countries outside the US should have cooled the ardor of the bulls on the USD index. It wasn't there! One piece of information about the acceleration of consumer prices in New Zealand, Britain and Canada was enough for the greenback to launch a new attack. The same can be said about foreign exchange interventions. In conditions of low external demand and the highest inflation in decades, the interest in reverse currency wars, thereby strengthening rather than weakening the national currency, is understandable. As well as the dissatisfaction of governments with the fall of its exchange rate. Alas, intervention in the life of Forex does not help. Large-scale long positions on the yen managed to stop the USDJPY pair at 146 for just a few days, after which it rose to 151. At the same time, the experience of foreign exchange interventions with USDJPY in 1998 and 2011, with EURUSD in 2000, with GBPUSD in 1992 was also negative. A coordinated intervention is required, like the Plaza Accord in 1985. Dollar pairs react to coordinated intervention The problem is that the conditions then and now are significantly different. In those years, the Fed defeated high inflation and could afford the weakening of the US dollar. Today, the central bank still has a lot to do before consumer prices begin to move confidently towards the target. In addition, Finance Minister Janet Yellen notes that market-determined exchange rates are the best regime for the US dollar. Its strengthening is the result of differences in economic policies and the shocks that countries face. Without US support, currency interventions are doomed to failure. You don't need to go far for an example. Japan threw money to the wind, trying to support the yen diving into the abyss. Its interference in the life of Forex only made the situation worse. Gold and foreign exchange reserves were used to sell USDJPY. It was necessary to get rid of US Treasury bonds, which led to an increase in their yields and further strengthened the dollar. Dynamics of US Treasury Bond yields Rates on 10-year securities have reached the highest level since 2007. The situation resembles the events of those years, and investors are beginning to argue that only an increase in profitability to 5-5.25% will allow the indicator to reach a plateau. Until this happens, the US dollar will continue to sweep away everything in its path. No matter how hard its opponents try, raising rates or using currency interventions. Only the European Central Bank is able to suspend the fall of EURUSD. Its meeting is rightly regarded as a key event of the economic calendar in the last full week of October. Technically, the EURUSD peak continues on the daily chart. We hold the short positions formed from the 0.9845 and 0.9815 levels and increase them on the breakout of support at 0.97. The initial target is the 0.95 mark.     Relevance up to 15:00 2022-10-26 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/324997
US Stocks Extend Rally Amid Optimism Over Fed's Monetary Policy

Recent Reports Have Not Helped The Euro To US Dollar Pair (EUR/USD)

InstaForex Analysis InstaForex Analysis 23.10.2022 10:04
  The US dollar index showed contradictory dynamics this week. Initially, at the start of the five-day trading period, it dropped sharply, returning to the area of the 111th figure. The market unexpectedly increased interest in risk, amid quarterly reports of the largest US banks (in particular, Bank of America and Bank of New York Mellon), which exceeded the expectations of most analysts. After that, the main Wall Street indexes went up, while the safe greenback came under pressure. In addition, on Monday it became known that British Prime Minister Liz Truss canceled the key points of her odious anti-crisis plan, which included large-scale tax cuts. And although this step subsequently did not help her stay in the chair of the head of government, directly "in the moment" it increased interest in risky assets. Against this background, the EUR/USD pair reached 0.9875 (one and a half week price high). However, bulls on the pair were unable to develop an upward trend. On Tuesday, the US dollar index turned around and headed upward again. Throughout the week, including on Friday, the pair had been trading within a wide price range, actually circling in the area of 97-98 figures. Traders reacted reflexively and are reacting to contradictory macroeconomic statistics, mainly from the United States. For example, the greenback reacted positively to the published report in the real estate sector: the volume of construction permits issued in America increased by 1.4% in September after a serious decline in August (-8.5%). At the same time, the volume of housing sales in the secondary market (the release was published the next day) unexpectedly decreased, and immediately by 1.5% (with a forecast decline of 0.8%). The Federal Reserve-Philadelphia Manufacturing Index also turned out to be disappointing, which came out at -8.7 in October. While the growth rate of initial applications for unemployment benefits was at the level of 214,000 (a three-week low). The above-mentioned macroeconomic reports (generally of a secondary nature) could not help – neither the EUR/USD bears nor the bulls. Of course, traders reacted to these reports accordingly, but only formally – literally after a few hours, the downward/upward momentum faded away. Obviously, traders need a more powerful informational occasion that will allow them to either approach the parity level or break through the defense at the base of the 96th figure. For the development of the upward corrective movement, EUR/USD bulls need to settle above the 1.0000 mark, and for the continuation of the downward trend, bears need to go below the 0.9600 target. Current macroeconomic statistics are not able to cope with such tasks. In my opinion, EUR/USD traders can only pin their hopes on larger-scale information campaigns. The vector of price movement will be determined primarily by the level of anti-risk sentiment. By the way, Friday's dynamics of the dollar index eloquently illustrated the current situation. So, during the day, the greenback steadily strengthened its positions throughout the market, but at the start of the US session it weakened sharply: it became known that Russian Defense Minister Sergei Shoigu held telephone talks with US Defense Minister Lloyd Austin. According to Russian media, the parties discussed "topical issues of international security, including the Ukrainian issue." These are the second talks between the heads of defense departments this year (the first were in May). Amid general geopolitical tensions, this news was received by the market "with a bang". However, the growth of the EUR/USD pair was limited. Almost immediately, the press secretary of the president of Russia Dmitry Peskov said that following the conversation of the ministers, "there are no plans for a telephone conversation between Vladimir Putin and Joe Biden." However, this moment highlighted the main idea: traders react sharply to news of a geopolitical nature. A decline in anti-risk sentiment can put significant pressure on a safe greenback - and vice versa, an increase in panic will allow dollar bulls to open a second wind. Also, the tone of trading can be set by representatives of the Fed. But, to the disappointment of the EUR/USD bears, the members of the Fed have not yet decided to voice "ultra-hawkish" comments. In particular, many representatives of the central bank spoke this week – Philip Jefferson, Lisa Cook, Michelle Bowman, Patrick Harker, James Bullard, Charles Evans. In one form or another, they made it clear that the Fed is ready to continue taking steps to curb inflation in the United States. In one form or another, they hinted that they are ready to support a 75-point rate hike in November. But the thing is that even before their speeches, the probability of a 75-point rate hike at the November meeting was estimated at 95%! That is, the market has already largely played this fundamental factor. While the members of the Fed are not yet ready to "increase the degree of heat", allowing, for example, a 100-point increase. They are also not ready to talk about more distant prospects (regarding the November meeting) – according to them, further decisions will be made taking into account incoming data, primarily in the field of inflation and the labor market. Thus, traders of the EUR/USD pair in the medium term will continue to trade in the 100-point price range of 0.9750-0.9850. In my opinion, the downward dynamics will resume over time, but at the moment it is impossible to talk about prioritizing short or long positions. Given the current uncertainty, it is advisable to take a wait-and-see attitude for the EUR/USD pair.     search   g_translate       Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/325008
Prices Of Gold Rose For The Third Straight Session

The Decision Of The ECB May Threaten The Gold Rate (XAU/USD)

TeleTrade Comments TeleTrade Comments 24.10.2022 08:46
Gold price prints mild losses while reversing from one-week high. DXY pares the first weekly loss in three amid geopolitical, market meddling concerns. Fed speakers’ absence, likely hawkish outcome from ECB could test XAU/USD bears. Preliminary readings of US PMI for October, Q3 GDP are also important for near-term directions. Gold price (XAU/USD) remains pressured around the intraday low of $1,652, keeping the week-start pullback from a fortnight top, during early Monday morning in Europe. In doing so, the yellow metal justifies the firmer US dollar, as well as the market’s cautious mood. US Dollar Index (DXY) rises 0.30% intraday to 112.25 by the press time amid chatters surrounding Japan’s meddling in the market to defend the yen, as well as challenges to the risk appetite. That said, the news that both North and South Korea have exchanged warning shots near their disputed western sea boundary, published on Monday, also seemed to have favored the US dollar buyers of late. On the same line could be the fears that China President Xi Jinping won’t hesitate to escalate geopolitical matters with the US when it comes to Taiwan. The reason could be linked to Jinping’s dominating performance at the annual Communist Party Congress after winning the third term in a row. Additionally, ABC News quoted Ukrainian General Oleksandr Syrskiy citing fears of Nuclear war, which in turn might have recalled the US dollar buyers. Recently, news that China announced covid lockdown in the factory hub Guangzhou weigh on the market sentiment and the XAU/USD prices. The latest jump in the market’s bets over the Fed’s 75 bps move in November, from 88% to 95%, also seemed to have drowned the gold prices. Amid these plays, S&P 500 Futures print 0.50% intraday gains while the US 10-year Treasury yields remain offered around 4.17%, extending Friday’s losses from the 14-year high. That said, the US equities posted the largest weekly gains in four months in the latest amid previously receding fears of the Fed’s aggressive rate hike. On Friday, the gold price rose heavily while portraying the first weekly gain in three as the hawkish Fed bets retreat after a mixed Fedspeak. That said, St. Louis Fed President James Bullard said, “I want rates that put significant downward pressure on inflation.” On the same line, Chicago Fed President Charles Evans stated that they will need to raise rates further and hold them for a while. However, Nick Timiraos, Chief Economics Correspondent at The Wall Street Journal (WSJ) wrote that the Federal Reserve officials are barreling toward another interest-rate rise of 75 bps at their meeting in November and are likely to debate then whether and how to signal plans to approve a smaller increase in December. Looking ahead, gold traders should expect further weakness amid dicey markets and challenges to sentiment. However, the absence of the Fed speakers and a likely hawkish outcome from the European Central Bank (ECB) could challenge the XAU/USD downside. Technical analysis Gold price retreats from the 21-DMA hurdle amid bearish MACD signals and sluggish RSI, which in turn suggests the metal’s further declines towards the resistance-turned-support line from October 06, around $1,630 by the press time. However, monthly horizontal support near $1,620, quickly followed by the yearly bottom of $1,614, could challenge the gold bears afterward. In a case where the metal prices drop below $1,614, the $1,600 threshold and the 61.8% Fibonacci Expansion (FE) of June-October moves, near $1,565, lure the XAU/USD bears. Alternatively, the 21-DMA and the 50-DMA, around $1,665 and $1,694 in that order, guard the short-term recovery of gold price. Following that, the $1,700 round figure and the monthly high near $1,730 might be interesting to watch for further upside. Gold: Daily chart Trend: Limited downside expected
The ECB President Christine Lagarde's Speech Could Bring Back Risk Appetite

US Dollar affected by Bank's of Japan intervention and rumours about possible rate hiking slowdown. ING Economics don't see incoming ECB decision as a big one for EUR/USD

ING Economics ING Economics 24.10.2022 10:29
The dollar is a little weaker after seemingly large-scale FX intervention from the Bank of Japan (BoJ) and a WSJ article hinting that the Fed is ready to slow the pace of tightening. But decent US 3Q GDP growth and higher inflation readings this week should keep the dollar bid on dips. This week also sees central bank meetings in the eurozone, Japan and Canada Sterling is trading on a mildly firmer footing as it increasingly looks as though Rishi Sunak will become the UK's next prime minister USD: Japan sells a lot of dollars The dollar opens a new week slightly softer and we would say two main factors are at work here. The first is the large-scale FX intervention campaign underway from Japanese authorities, with reports that Tokyo might have sold as much as US$30bn late on Friday in a carefully-crafted move to upend speculators chasing what appeared to be a decisive break in USD/JPY above 150. This has resulted in some phenomenal trading ranges, e.g. nearly a 146-152 range on Friday and not far from 145-150 today with another round of intervention in early Asia. Tokyo has yet to confirm that it has intervened, but we might receive FX intervention statistics next week. Though FX markets are deep, $30bn+ in dollar sales will be having some effect on the dollar across the board. Friday also saw US rates markets react to a Wall Street Journal article implying that the Fed was wrestling with how to communicate a slow-down in tightening after a likely 75bp hike in November. The article was well-timed in that expectations of the terminal rate for the Fed cycle had just hit 5.00% – and have since dropped back to 4.82%.  However, neither of the above factors may keep the dollar in check for long. On the former, the BoJ meets to set monetary policy this Friday and unless we see a shift in its ultra-dovish outlook (a negative policy rate and ongoing quantitative easing) it seems hard to expect a top in USD/JPY anytime soon. Equally on the Fed side, this week's US data calendar should maintain a hawkish Fed. Third-quarter GDP should come in around 2% quarter-on-quarter annualised and the September readings (both headline and core) for the PCE price deflator should both rise and move further away from the Fed's year-end expectations.  For today, the focus will be on the PMIs released in the US and Europe. These readings should continue to portray greater challenges for Europe. Expect continued high FX volatility and DXY probably bouncing around in a 111.50-112.50 range. Chris Turner EUR: Bear market consolidation EUR/USD has struggled to make the most of the softer dollar environment. We highlighted last week that the sharp drop in European natural gas prices gave cause for the euro to bounce and aggressive BoJ dollar sales could also have created room for EUR/USD to push ahead. Instead, the EUR/USD recovery has been pretty lacklustre and can be best described as a bear market consolidation. For reference, 0.9950 is now probably significant intra-day resistance, marking the top of this year's bear channel. Look out today for another soft set of PMI releases across Europe and the eurozone. And we doubt that Thursday's 75bp hike from the ECB will be a game-changer for EUR/USD.  Chris Turner GBP: Some welcome stability Sterling is trading on a mildly firmer footing as it increasingly looks as though Rishi Sunak will become the UK's next prime minister. It seems that former PM Boris Johnson has pulled out of the race and unless he endorses the third candidate, Penny Mordaunt, we may well hear news later today that the race is over. Were Mordaunt to receive the support of 100 MPs, however, the race could extend into Friday. Sterling price action seems to assume the advent of a Sunak/Hunt ticket as PM/Chancellor and a focus on trying to restore some of the UK's lost fiscal credibility. After the failed experiment with Trussonomics, the challenge facing the new team will be harder than the one that existed earlier this summer and probably a reason why international investors will not want to chase GBP/USD above the 1.15 level. FX volatility does remain exceptionally elevated, however, and large swings cannot be ruled out. Chris Turner CEE: The region remains supported on all fronts The Central and Eastern Europe (CEE) region offers a rather lighter calendar this week. Today, we start with consumer confidence in the Czech Republic, which dropped to its lowest-ever reading in September, and labour market data in Hungary, boosted by a one-off pay rise by employers amid a cost-of-living crisis. Tuesday will see the highlight of this week, the Hungarian central bank meeting. The National Bank of Hungary raised rates at an emergency meeting in mid-October, and we expect the central bank to maintain that approach and leave rates unchanged at this meeting. Otherwise, the region will be driven more by global events this week, which offer more this time.   On the FX side, the CEE region continues to benefit from falling gas prices, rising interest rate differentials and friendly EUR/USD levels. The Hungarian forint should remain supported and enjoy this moment of peace created by recent central bank actions and global conditions. The rest of the region should also remain supported. We see room for the Hungarian forint to move closer to 405 EUR/HUF, the Polish zloty to 4.760 EUR/PLN, and the Czech koruna to 24.450 EUR/CZK. However, the ECB meeting will come into play in the second half of the week, resulting in a lower EUR/USD and potentially weaker CEE FX.  Frantisek Taborsky  Read this article on THINK TagsFX Dollar Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Long-Term Yields Soar Amidst Hawkish Fed: Will They Reach 5%?

It Will Be Busy Week, Central Bank's Decisions Ahead (BoC, ECB, BoJ), Softer US yields Could Play In Favour Of Gold And More

Swissquote Bank Swissquote Bank 24.10.2022 14:13
Last week ended on a strong positive footage, on hints that some Federal Reserve (Fed) officials have started talking about pausing the interest rate rises to avoid going too far. BoC, ECB & BoJ to decide Softer Fed expectations pulled US yields lower and sent equities higher.On the earnings front, 70% of the S&P500 companies that reported earnings so far did better than earnings expectations, and big US tech companies and oil giants will be reporting earnings this week. In politics, Boris Johnson announced yesterday evening that he will not be running for the PM role this week. That makes the British ex-Chancellor of Exchequer Rishi Sunak the front runner in the contest. Sterling kicked off the week on a positive note, but bumped into 50-DMA resistance. In central banks, the Bank of Canada (BoC) is expected to raise interest rates by another 50bp when it meets this week, the European Central Bank (ECB) will certainly raise its rates by 75bp, while the Bank of Japan (BoJ) is expected to stay pat. The BoJ intervened again in the currency markets on Friday to pull the USDJPY lower, after the pair flirted with the 152 level last week. The pair eased to 145.50 following the intervention and is back to almost 149 at the time of video. Commodities In commodities, US crude trades around $85per barrel level, and gold is better bid. Softer US yields could play in favour of gold if we really start seeing material easing in Fed expectations. But the latter is data dependent. Due this week, investors will closely watch the US latest GDP update, and the PCE index. Watch the full episode to find out more! 0:00 Intro 1:02 Are Fed officials softening tone? 3:23 China GDP better-than-expected, but well below target 4:44 US Big Tech & Oil Giants due to announce earnings 7:54 UK to choose its new PM 8:57 BoC, ECB & BoJ to decide 11:05 Update on crude oil & gold Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Apple #Amazon #Microsoft #Meta #ExxonMobil #Chevron #earnings #UK #PM #Rishi #Sunak #GBP #USD #JPY #BoJ #ECB #BoC #China #US #GDP #XiJinPing #crudeoil #XAU #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___  Let's stay connected: LinkedIn: https://swq.ch/cH
The Bank Of Canada Paused Rates Hiking, The ADP Employment Report Had A 242K Increase In Jobs

Bank of Canada is expected to rise the rate by 75bp. Inflation is still there

Kenny Fisher Kenny Fisher 24.10.2022 20:10
The Canadian dollar has started the week with losses. In the North American session, USD/CAD is trading at 1.3721, up 0.57%. The week ended on a high note, as Canadian retail sales for August were stronger than expected. Retail sales posted a modest 0.7% gain, rebounding from -2.2% in July and beating the consensus of 0.2%. Core retail sales also rose 0.7% after a -2.2% reading in August and above the forecast of 0.4%. The turnaround boosted the Canadian dollar by close to 1%. Consumer spending has stabilized, which has bolstered the case for the Bank of Canada raising rates by 75 basis points. As well, the BoC would like to keep pace with the Fed, which is expected to raise rates by 75 bp,  so as to prevent the Canadian dollar from falling further against the US dollar. The markets have priced in a 75bp move by the BoC at around 80%, which would bring the cash rate to an even 4.0%. Markets expect 0.75% hike from BoC The Bank of Canada has been aggressive in its rate-tightening cycle, with the reduction in inflation its number one priority. Still, there are no clear signs that inflation has peaked. Headline inflation ticked lower to 6.9% in September, down from 7.0% in August. Still, the reading was higher than the consensus of 6.8%. Core inflation remains even more stubborn and rose unexpectedly to 6.0%, up from 5.8% and above the forecast of 5.6%. The Fed has given no signals that it plans to ease up on rate hikes anytime soon, and this hawkish stance was reaffirmed by Philadelphia Federal Reserve President Patrick Harker on Thursday. Harker said that higher interest rates had failed to curb inflation, and the Fed would have to continue raising rates, which he said will be “well above” 4% by the end of the year. There is a 95% that the Fed will raise rates by 75bp according to the CME’s FedWatch, which would bring the benchmark rate to 4.0%. USD/CAD Technical 1.3854 and 1.4005 are the next resistance lines There is support at 1.3731 and 1.3580 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Canadian dollar starts week with losses - MarketPulseMarketPulse
Rates and Cycles: Central Banks' Strategies in Focus Amid Steepening Impulses

The Upward Movement Of US Treasuries Was Halted | Allegations Of Systematic Maltreatment Of Patients Against Orpea

Saxo Bank Saxo Bank 25.10.2022 08:46
Summary:  Equity markets managed a comeback from an intraday sell-off yesterday as treasury yields eased back lower after briefly threatening to challenge the cycle highs. Today is the first day of the blitz of earnings releases this week and will include Microsoft and Google-parent Alphabet reporting after the close of trading today. In Asia, even while the US dollar treads water, the Chinese yuan slipped to a new cycle low versus the greenback after a weak official fixing.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities are continuing to climb ahead of key earnings tonight with S&P 500 futures trading around the 3,811 level this morning and potentially could reach for the 50-day moving average around the 3,876 level if we get better than expected Q3 earnings over the coming days. Euro STOXX 50 (EU50.I) Momentum is extending this morning with STOXX 50 futures trading around the 3,542 level with yesterday’s high at the 3,551 level being the key resistance level on the upside. The key drivers are lower energy prices caused by recently very mild weather in Europe. If flows into EUR continues, European Q3 earnings surprises, and energy prices remain in easing stance then the 3,600 level could be the next big level to be tested. FX: USD treads water, CNH continues broad plunge The continued local softness in US yields and resilient risk sentiment here have kept the US dollar trading sideways and kept USDJPY out of the headlines. But USDCNH extended sharply higher after a surprising weak fix for the onshore CNY last night, and USDCNH spiked all the way to 7.368 before the move was cut about in half by later in the session. China is clearly happy to allow the CNH to weaken broadly, with EURCNH, for example, rallying hard since earlier this month and trading near the range high of the last year close to 7.30. Crude oil (CLZ2 & LCOZ2) Crude oil has settled into a relatively tight range, in Brent between $90 and $95 per barrel, while the market assesses the overall impact on demand from the global economic slowdown against a tight supply situation, especially in the distillate market, which is likely to worsen once OPEC producers in the Middle East reduce production of high yielding middle distillate crude oil from next month. In addition, EU sanctions against Russia starting in December is already having an impact on supplies reaching the region. Overall, the oil market judging from the bullish curve structure remains tight and may tighten even further during the coming months. Focus this week on earnings from Exxon, Shell and their Big Oil peers. US treasuries (TLT, IEF) US treasury yields threatened back higher toward the cycle highs yesterday, but the move was tamed as treasuries found support. The 10-year yield has been almost unchanged on a daily close basis for the last three days running (near 4.22%). The circulation of an article from “Fed whisperer” Nick Timiraos suggesting that the Fed will consider slowing the pace of hikes after the November 2 FOMC meeting saw no follow-on drop in short yields. The treasury will auction 2-year t-notes today, 5-year notes tomorrow and 7-year notes on Thursday. What is going on? EU gas (TTFMX2) traded below €100/MWh on Monday for the first time since June with the “Next hour” contract briefly trading negative following a warm start to the heating season, a development that looks set to continue in the next couple of weeks, thereby leaving storage sites near full. While a great deal of weather-related volatility, and potentially even lower prices, can be expected at the front of the curve, it is important to watch TTFMG3, the peak winter demand contract for February, which remains anchored above €140/MWh. However, the longer the warm spell continues, and LNG arrivals remain strong the worry about next winter will fade, thereby providing a much-needed boost to industries trying to navigate through the current crisis. EU energy ministers meet today to discuss the emergency actions proposed by the Commision last week. Ugly flash Eurozone PMI for October There is nothing new here. As expected, activity weakened more quickly in October. The eurozone October business activity is down at 47.1 versus prior 48.1 and expected at 47.6. It looks increasingly clear that the Eurozone economy is set to contract in the fourth quarter. The factors driving the contraction in activity are well-known: fears of a recession, widespread and higher inflation (especially in the services sector), worries about high inventories, weaker than expected sales etc. We all know the next step: companies will start to cut costs, reduce their employment expectations for 2023 and ultimately cut their labor force. All of this even before we enter winter. This is a high-risk period for the Eurozone due to the energy crisis and potential energy disruptions in some countries. DSV lifts outlook Europe’s largest logistics company is raising its EBIT outlook this morning as Q3 results are better than estimated with revenue at DKK 60.6bn vs est. DKK 56.3bn and adjusted net income of DKK 4.8bn vs est. DKK 4.7bn. The company also says that it expects a gradual decline in profitability as logistics prices are coming down from their high prices reached during pandemic bottlenecks in the global supply chain. SAP beats on revenue in Q3 Europe’s largest software company reports Q3 revenue of €7.8bn vs €7.6bn driven by strong performance in its cloud business. HSBC Q3 results beat estimates The bank reports this morning Q3 adjusted revenue of $14.3bn vs est. $13.5bn and adjusted pre-tax profits of $6.5bn vs est. $6.1bn. The bank is also lifting its outlook and announcing the replacement of its CFO. What are we watching next? Orpea could get a bailout by the French government The French retirement home group Orpea is facing a rough time since allegations of systematic mistreatment and patient abuse were discovered earlier this year. Yesterday, the stock was suspended by the French regulator AMF on rumors that the French government could step in to save the company. The stock is down 80 % year-to-date. Orpea is facing a mountain of debt (around €9.5bn). The group operates nearly 1,200 homes worldwide, with around 350 of them in France. It used to be one of the best performing stocks in the French stock market. Rishi Sunak set to become next UK Prime Minister, October 31 budget statement on tap Sunak is said to be keeping Jeremy Hunt on as Chancellor and is expected to proceed with prudence in keeping the UK’s fiscal deficits on a more sustainable path, with the austerity likely to mean a harder landing for the UK economy and the Bank of England possibly unwilling to hike interest rates as much as the market expects (or forced to do so because inflation remains stubborn and the currency weak). EURGBP jumped back higher toward 0.8750 yesterday after selling off on the news that Boris Johnson would not run for the leadership. Earnings to watch Today’s US earnings focus is on Microsoft, Alphabet, Visa, UPS, General Electric, Halliburton, and Enphase Energy. Microsoft’s business model is robust due to its large market share and dependency for its software, but the company is facing rising input costs on wages and energy cost for running its datacenters. Alphabet could post Q3 weakness as Snap’s Q3 results last week showed advertising weakness. UPS earnings are important for insights into the global economic slowdown. Today: First Quantum Minerals, Canadian National Railway, DSV, UPM-Kymmene, SAP, HSBC, ASM International, Norsk Hydro, Novartis, UBS, Kuhne + Nagel, Microsoft, Alphabet, Visa, Coca-Cola, Texas Instruments, UPS, Raytheon Technologies, General Electric, 3M, General Motors, Valero Energy, Biogen, Enphase Energy, Halliburton, Spotify Technology Wednesday: Dassault Systemes, Mercedes-Benz, BASF, Deutsche Bank, PingAn Insurance, CGN Power, UniCredit, Canon, Barclays, Standard Chartered, Heineken, Aker BP, Iberdrola, Banco Santander, SEB, Meta Platforms, Thermo Fisher Scientific, Bristol-Myers Squibb, ADP, Boeing, ServiceNow, Ford Motor, Twitter Thursday: ANZ, Anheuser-Busch InBev, Argenx, Shopify, Teck Resources, Neste, Kone, TotalEnergies, EDF, STMicroelectronics, PetroChina, China Life Insurance, CNOOC, Oriental Land, Shin-Etsu Chemical, Takeda Pharmaceuticals, Hoya, FANUC, Shell, Lloyds Banking Group, Universal Music Group, Repsol, Ferrovial, Hexagon, Evolution, Credit Suisse, Apple, Amazon, Mastercard, Merck & Co, McDonald’s, Linde, Intel, Honeywell, Caterpillar, Gilead Sciences, Pioneer Natural Resources Friday: Macquarie Group, OMV, ICBC, China Merchants Bank, LONGi Green Energy Technology, Midea Group, Imperial Oil, Danske Bank, Sanofi, Airbus, Volkswagen, China Construction Bank, Agricultural Bank of China, Bank of China, BYD, China Shenhua Energy, Eni, Keyence, Hitachi, Denso, Equinor, CaixaBank, Wilmar International, Swiss Re, Exxon Mobil, Chevron, AbbVie, NextEra Energy, Colgate-Palmolive, Royal Caribbean Cruises Economic calendar highlights for today (times GMT) 0800 – Germany Oct. IFO Business Climate survey 0855 – UK Bank of England Chief Economist Huw Pill to speak 1200 – Hungary Central Bank Decision 1300 – US Aug. S&P CoreLogic Home Price Index 1400 – US Oct. Consumer Confidence 1400 – US Oct. Richmond Fed Manufacturing Index 1700 – US Treasury to auction 2-year notes 1755 – US Fed’s Waller (Voter) to speak 2030 – API Weekly Oil and Fuel Stocks Report 0000 – New Zealand Oct. ANZ Business Confidence 0030 – Australia Q3 and Sep. CPI Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher     Source: https://www.home.saxo/content/articles/macro/market-quick-take-oct-25-2022-25102022
Share of Russian metal grows in LME warehouses

In China Copper Imports Have Jumped But Copper Price Fall

TeleTrade Comments TeleTrade Comments 25.10.2022 09:24
Copper price has sensed selling pressure amid mounting recession fears. The Fed is behaving extremely aggressively ever to downsize the inflation rate. Copper imports in China have climbed significantly as the proposed infrastructure spending kick-off. Copper prices drop below Monday’s lowest price as recession fears have escalated in the US economy. The base metal has delivered a south-side break of the consolidation formed in a narrow range of $3.41-3.44 and is aiming for more weakness as accelerating interest rates are challenging growth rate projections. A poll from Reuters claims that a fourth consecutive 75 basis point (bps) rate hike by the Federal Reserve (Fed) in the first week of November is a done deal. It is worth noting that the Fed is behaving extremely aggressively ever to downsize the inflation rate. Therefore, policy-tightening measures have been continuously trending. This has triggered the risk of recession ahead as the growth rate has been slashed sharply and unemployment levels are expected to ditch downside levels. Fears of a recession have bolstered further post commentary from US Treasury Chief Janet Yellen that “Cannot rule out risk” of a recession, reported MSNBC news. Meanwhile, in China, copper imports have jumped by 25.6%, from a year ago. Infrastructure spending has accelerated amid the announcements of stimulus packages by the Chinese administration to dodge the consequences of the no-tolerance Covid approach and a real estate meltdown. Winters in Asia are known for a rebound in construction and real estate businesses after monsoons. A note from ANZ Research claims that "Copper imports were up strongly as the outlook for demand from the power sector improves” Going forward, policy announcements from China’s XI Jinping will remain the key after the continuation of his leadership for the third time.
"Private investors will be required to increase their gilt exposure by at least £268bn in FY2023-24"

Political Events In UK Have Positive Effect On The British Pound (GBP)

InstaForex Analysis InstaForex Analysis 25.10.2022 12:09
The pound has been evaluating political news in a positive light since the morning. How will the mood of traders of the British currency develop in the near future and is it worth counting on the growth of the exchange rate in the future? Political twists  Today, investors are assessing the news about the appearance of a new British prime minister. Rishi Sunak was elected head of the ruling Conservative Party of Great Britain, and will also take the post of prime minister of the country. England has surpassed itself in political twists and turns. Sunak will be Britain's third prime minister this year. In July, Boris Johnson announced his intention to resign. Liz Truss, who was elected in his place, was able to stay in the prime minister's chair for 44 days and also resigned due to an avalanche of criticism against her. Many see the new prime minister as a source of stability. Perhaps there really is some truth in this, when compared with the chaotic rule of the Truss, during which serious volatility was observed in the markets. Time will tell what kind of ruler Rishi Sunak will be, but for now market players are breathing a sigh of relief and are in a cautiously positive frame of mind. GBP/USD Today, the GBP/USD pair rose to 1.1293 from the previous closing level of 1.1275. As expected, the pound may continue to rise in the short term, but it risks failing during the week. Economic data is ahead, and they are likely to show an even greater divergence from the US economy for the worse.  Britain's economic prospects While the market has welcomed the recent developments surrounding the election of a new prime minister, they alone can do little to improve Britain's economic prospects. The GBP/USD pair may continue to rise, but estimates regarding the extent of the rate hike are already declining. If the 1.1500-1.1700 range becomes a reality in the very near future, this does not mean that the quote will fly further and higher. Such a scenario is more like a decent short entry point. The target range for the end of the year is still 1.0800-1.1200. Britain released a disappointing PMI on Monday. Indices of activity in the manufacturing sector and the service sector collapsed, falling below market expectations. The composite index in October was 47.2, which is two points lower than in September. Its value has become the lowest in the last two years. In addition, the business activity indicator has been below 50 points for three consecutive months. The reason for the sharp decline in the index in October is called political instability in the country, which caused turmoil in the financial markets. The current situation  Anyway, the current situation points to the recession that has formed in the country. A reduction in economic growth may occur as early as the third quarter, and in the fourth negative trends will only intensify. The Fed's hawkish attitude The prospects of the pound, among other things, depend on the positioning of the US dollar and its further strength. Will the decline in the dollar index last until the end of the week? Much will depend on how traders react to the upcoming economic reports in connection with the forecast of the Federal Reserve's policy. The focus is on the GDP report for the third quarter and the employment cost index for the same period. Data on wages and inflation will strengthen the hawkish attitude of the Fed. One of the most significant risks for the pound this week will be the US GDP report. It can show that America is emerging from a technical recession, while the UK is entering an active phase of recession. Divergence in economic prospects will undermine the pound's recovery. A serious obstacle is the core PCE price index's release this Friday, the Fed's preferred inflation indicator. The inflation rate is expected to increase from 4.9% year-on-year to 5.2%. If so, it will be more than enough to guarantee the Fed's hawkish attitude, which has helped the dollar reach new heights against many currencies in the weeks since the bank set course to raise the benchmark interest rate to 4.5% by the end of the year and 4.75% at the beginning of the next. In general, the dollar index is forecast to rise to 114.00 this week.     Relevance up to 10:00 2022-10-26 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/325237
The RBA Will Continue At A 25bp Pace At Coming Meetings

The Australian Government Will Not Be Able To Deliver On Its Election Promise

Saxo Bank Saxo Bank 26.10.2022 08:34
Summary:  The US major indices, the Nasdaq 100 & S&P 500 lift for the 3rd day supported by bonds yields falling, with traders digesting weaker US economic news which could persuade the Fed to slow its pace of hikes, all while parsing through stronger than expected earnings. WTI and gold both gained, while Bitcoin broke above $20,000 for the first time in nearly three weeks. Asian equity futures are in the green. Downunder investors parse through the Australian Federal budget winners; green energy, infrastructure, healthcare and parents. While mulling over Government warnings that power bills will rise 50%. What’s happening in markets?   The US major indices, the Nasdaq 100 (USNAS100.I) & S&P 500 (US500.I) lift for the 3rd day The major indices rallied 2.3% and 1.6% respectively, supported by bonds yields falling, with traders digesting weaker US economic news which could persuade the Fed to slow its pace of hikes, all while parsing through stronger than expected earnings. The 10-year Treasury yield plunged 15 bps to 4.10%, which helped the dollar fall against every G-10 peer, while the pound added 1.7%. It's worth noting so far this US earning seasons 146/S&P500 companies reported results, and 3% delivered earnings surprises to the upside, which has supported equites, with energy earnings growth up the most, averaging 164%.  While total aggregate earnings have declined. Crude oil (CLX2 & LCOZ2) rises over $85 on near supply tightness and some thinking the Fed will slow its pace of hikes  Three US economic data sets released over the last two days are pointing to the US economy souring, which could indicate the US Federal Reserve’s rate rises have been working and may perhaps persuade the Fed to slow its pace of hikes. This could be seen as a positive signal for fuel demand. Consumer Confidence fell, while the S&P Core Logic Case-Shiller 20-City House Price Index also released Tuesday showed home prices fell 1.3% in the 20 core cities studied month-on-month, but were still 13.1% higher than a year ago. The day prior we had S&P Global’s flash US Composite PMI Output Index, that tracks the manufacturing and services sectors, falling to 47.3 this month from a final reading of 49.5 in September  Australia’s ASX200 (ASXSP200.1) rises 0.3%, erasing earlier gains on hotter than expected CPI Australian CPI rose more than expected to a 32 year high, with CPI up 7.3%, hotter than the consensus expectation that consumer prices would rise 7.1% YoY. The biggest moves were in Housing prices, up 10.5% YoY, followed by Transport costs up 9.2% (fueled by fuel prices ripping up), while Food price growth remained strong, up 9% YoY. Core inflation (or trimmed mean inflation) which the RBA looks at, which excludes large rises and falls rose to 6.1% YoY, which is the highest reading since the data was first published. Today's proof shows the RBA’s pace of hikes has done very little to slow price growth and serves as a wakeup call that perhaps the RBA will continue to hike rates to slow inflation, despite employment falling and some businesses being in financial hardship. Coincidently, the last time CPI was this high, was in 1990, when the RBA hiked so aggressively it tipped the economy into recession, so that’s something to consider. It's also worth looking at asset classes that typically do well in recessionary cycles (such as bonds, and in equities healthcare, utilities and consumer staples). The Australian share market is up 0.3% on Wednesday, up for the third day. The real estate sector is leading today, up 2.3% after the sector won in the Australian Federal budget handed down last night. As for stocks, Costa Group (CGC) is up the most, 11% with investors speculating the business might be taken over.   What to consider? Australian Govt budget winners are green energy, infrastructure, healthcare and parents  The Australian Federal Budget handed down last night forecasts slower GPD growth, higher energy bills, as well as higher spending. See below for more.  A sector to watch is green transformation. With the AUD$20b to be put toward Australia’s transformation to net zero. The government outlined a large fund to mitigate climate change risk and support the transformation to net zero, with the funding going toward recently commenced projects on windfarms in VIC and the TAS Marinus Link project, while also delivering cheaper infrastructure loans for investment into renewable energy, in order to lower energy costs and achieve net zero over the coming years. Focus will be on lithium, rare earths, hydrogen, with companies like Pilbara Minerals, Allkem, Lynas and Iluka on watch.      Another sector to watch is building, construction, infrastructure and mining. With the introduction of the national Housing Accord between government and other industry bodies, there is a target of building one million new homes over 5yrs, starting mid-2024. The government will establish a AU$10bn housing Australia future fund, with an aim of providing 20k new social housing dwellings. AU$350m will be spent over 5yrs in delivering 10k affordable dwellings, with state governments to provide another 10k homes. The government also committed to its pre-election promise of a shared equity scheme, allowing eligible people to buy a house with a smaller deposit. Focus will be on stocks like Transurban, Abbri and eyes will also be on banks that could benefit from housing polices, so CBA, ANZ Bank, NAB, as well as Westpac as well as Suncorp and Bank of Queensland   Another sector to watch is health and aged care. The Government will spend AU$787.1m over four years on making a greater co-payment for prescription drugs, starting next year. Moreover, the government pledged to open 50 Medicare urgent care clinics, expand access in suburbs and regions. Overall, along with a rise in spending on hospitals, and extending various COVID-19 support measures, the government has pledged AU$6.1b. Elsewhere, the government is committing AU$2.5b to improving aged care to improving aged care facilities and staffing issues. Focus will be on health care businesses like Ramsay Health, Sonic Health Care, ResMed as well as Healius and Australian Clinical Labs.   And another big highlight was increasing child care subsidies and paid parental leave to drive female labour force participation. From July 2023, childcare subsidy rates will increase for all eligible families with annual incomes less than AU$530k, which would cover around 96% of families. The increase in paid-parental leave will cost AU$531.6mn over four years, starting in FY23. Each year from July 2024 to July 2026, the paid parental leave will increase by 2 weeks, with a total increase of 6 weeks to 26 weeks by FY27. Australian Federal Budget 2022 warns power bills will rise 50%  The Australian Federal Budget handed down last night, estimated power prices will rise 50% over the next two years. It follows on from the Australian Energy Regulator warning electricity prices will rise by up to 50% just in 2023. Either way, it seems the Australian Government won’t be able to fulfill its election promise to cut power bills. Several bodies warned Australia will run out of energy next year including the Australian Consumer and Competition Commission, who says there is a significant risk the nation will be short supply in 2023 by 56PJ, which could further cause prices to rise, and result in some manufacturers closing their businesses, with market exists already occurring.  This might be a catalyst for some to perhaps consider looking at large cap oil companies, and ETFs.       For a global look at markets – tune into our Podcast.   Source: https://www.home.saxo/content/articles/equities/market-insights-today-26-oct-26102022
Australia Is Expected To Produce A Bumper Year Of Crops

Ukrainian Exports Of Agricultural Products May Increase In October | Rising Energy Costs Will Hurt Microsoft's Operating Margin

Saxo Bank Saxo Bank 26.10.2022 08:45
Summary:  A whiplash-inducing session for equity traders yesterday as the strong market session was spoiled after hours yesterday by weak results from Microsoft and Google-parent Alphabet. A drop in US treasury yields, meanwhile, has driven a sharp correction lower in the US dollar, with EURUSD eyeing parity suddenly ahead of next week’s FOMC meeting and AUDUSD trying to break higher after a hot core Q3 CPI reading overnight.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) Strong rally in US equities yesterday touching the 50-day moving average before settling a bit lower on the close. Price action has subsequently turned negative overnight after the cash session as disappointing earnings from Alphabet and worsening outlook from Microsoft are weighing on the indices. On the positive side, the US 10-year yield is coming down from its recent peak and the Chicago Fed National Activity Index showed yesterday that the US economy operated meaningfully above trend growth in both September and August suggesting inflationary forces are still intact despite tighter financial conditions. Euro STOXX 50 (EU50.I) Touched almost the 3,600 level as we indicated yesterday was the upside level the market was looking for, but the weaker US earnings overnight might impact equity sentiment today, but on the other hand European earnings releases this morning have broadly beaten estimates. FX: USD punched lower as yields drop Yesterday saw the potent, USD-negative combination of treasury yields pushing sharply lower and strong risk sentiment, but interesting to note that the USD weakness continued in late trading yesterday, even after important megacap companies in the US reported weak earnings and risk sentiment reversed sharply, suggesting that treasury yields are the primary driver of the moment. EURUSD came within spitting distance of parity again, and could head to 1.0200 on a break above if the US 10-year yield breaks below 4.00%, although traders may rein in their market exposure ahead of next Wednesday’s FOMC meeting. USDJPY is also under pressure, trading near 148.00, and may have a path to 145.00 or lower if yields continue to ease. Elsewhere, a hot CPI print from Australia overnight (more below) has AUDUSD making a bid above the important 0.6400 area. Gold (XAUUSD) and silver (XAGUSD) Gold and silver trade higher after receiving a boost from a weaker dollar and continued decline in US bond yields amid signs the US economy is showing signs of rolling over, just days before the next FOMC interest rate decision on November 2. US yields slumped across the curve after data showed home prices tumbling the most since 2009 and US consumer confidence was down by more than expected. While another bumper 75 basis points hike is expected next week, the FOMC may decide to ease the foot of the brakes in coming meetings while assessing the impact of their rate and quantitative tightening actions. As a minimum gold needs to break above $1730 before an end to the month-long downtrend can be called. Until then watch the dollar and yields for inspiration, while silver, in order to avoid creating a potential bearish head-and-shoulder formation, needs a break above $20. Crude oil (CLZ2 & LCOZ2) Crude oil remains rangebound, with Brent currently stuck in a $90 to $95 range, after a weaker dollar led pop on Tuesday was reversed after the American Petroleum Institute reported a 4.5-million-barrel expansion in US crude stocks. In today’s weekly update from the EIA, the market will be watching distillate stocks as concerns about tight supplies continue to grow ahead of the EU embargo on Russian fuel starting next February. Diesel inventories in the US are at lowest seasonal level ever heading into winter while the situation in Europe looks similar. Developments that have driven distillate crack spreads and diesel prices at the pumps higher in recent weeks relative to gasoline. Also focus this week on earnings from Big Oil. US treasuries (TLT, IEF) US treasury yields dropped further yesterday, with the 2-year benchmark yield easing below 4.50%, and the 10-year yield pushing all the way down below 4.10% and therefore nearing the important 4.00% area. A drop in the latest Consumer Confidence survey (more below) offered a tailwind, as have talks since Monday of a possible treasury “buyback” from US Treasury Secretary Yellen, said to be prompted by the need to improve liquidity in the treasury market and attractive from the Treasury’s point of view as lower yielding long treasuries issued at far lower yields can be bought back at significant discounts. What is going on? Australia September and Q3 CPI comes in hot Yet another hot inflation report out overnight, particularly in the core inflation data, this time from Down Under, as Australia’s September CPI came in at +7.3% YoY vs. +7.1% expected, and the Q3 CPI was also higher than expected at +1.8% QoQ and +7.3% YoY vs. +1.6%/7.0% expected, with the “trimmed mean” core CPI out at +1.8%/6.1%, far above the 1.5%/5.0% expected, and 4.5% YoY in Q2. Housing prices were the biggest contributors up 10.5%, followed by Transport costs up 9.2% and Food price growth up 9%. US October Consumer Confidence weaker than expected The survey was out at 102.5 versus 105.9 expected and 107.8 in September, with a bad miss in the Present Situation component, which fell to 138.9 from 150.2 in September, a large drop and the lowest reading since early 2021. Wheat futures (ZWZ2) slipped to a five-week low on Tuesday ... with Black Sea grain exports pressuring prices while rain in recently dry growing areas in the US and Argentine adding further downward pressure to prices, especially in the US where recently planted winter wheat fields in the US Midwest look set to receive a decent dose of moisture and potentially further speed of the planting currently 79% completed. Ukraine’s export of agricultural products could rise by more than 8% in October from last month, the Ukrainian Agrarian Council said on Tuesday while ADM’s chief grain trader on an earnings call said that he sees “nothing significant that could derail” an extension of the Black Sea grain export corridor next month. Google shares down 7% on big Q3 miss It turned out that Snap’s worse than expected results last week were a good leading indicator on Google’s performance in Q3. Revenue came in at $69.1bn vs $70.8bn and operating income was $17.1bn vs est. $19.7bn as the operating margin is coming under significant pressure q/q and y/y. Revenue growth in Q3 at 6% y/y is the slowest pace since Q2 2020. Microsoft shares down 7% on worsening outlook FY23 Q1 (ending 30 September) revenue was $↨50.1bn vs est. $49.6bn and EPS of $2.35 vs est. $2.29, but it was the forecast for the current quarter that negatively surprised the market. Microsoft expects the slowdown in PC sales and rising energy costs to hurt operating margin, and the company has more or less introduced a hiring freeze to keep costs under control. What are we watching next? Bank of Canada set to hike 75 basis points We have an interesting combination of hot CPI readings in a number of places, including Canada and Australia, seeing the market adjusting expectations higher for the Bank of Canada and Reserve Bank of Australia, all while US yields have eased off on the anticipation that the FOMC will deliver a message. After the recent hot September Canada CPI reading, the market boosted expectations for today’s Bank of Canada hike to 75 basis points for today's, which will take the policy rate to 4.00% UK PM Sunak may delay budget statement scheduled for early next week Prime Minister Rishi Sunak may delay the report to give the new government a chance to find its feet first, with less urgency as sterling has not only stabilized, but rallied and UK Gilt yields have plunged, with the 10-year yield some 100 basis points lower, closing at 3.64% yesterday. Sunak reappointed Jeremy Hunt as Chancellor and announced a number of other appointments. Earnings to watch Today’s US earnings focus is Meta and given the weak results from both Snap and Alphabet due to worsening pricing on online ads we expect downward pressure on Meta’s business. Key for investors will be Meta admitting that its Metaverse bet is too expensive and will be reined in in the short-term as the company is facing tough headwinds on cash flow generation. Today: Dassault Systemes, Mercedes-Benz, BASF, Deutsche Bank, PingAn Insurance, CGN Power, UniCredit, Canon, Barclays, Standard Chartered, Heineken, Aker BP, Iberdrola, Banco Santander, SEB, Meta Platforms, Thermo Fisher Scientific, Bristol-Myers Squibb, ADP, Boeing, ServiceNow, Ford Motor, Twitter Thursday: ANZ, Anheuser-Busch InBev, Argenx, Shopify, Teck Resources, Neste, Kone, TotalEnergies, EDF, STMicroelectronics, PetroChina, China Life Insurance, CNOOC, Oriental Land, Shin-Etsu Chemical, Takeda Pharmaceuticals, Hoya, FANUC, Shell, Lloyds Banking Group, Universal Music Group, Repsol, Ferrovial, Hexagon, Evolution, Credit Suisse, Apple, Amazon, Mastercard, Merck & Co, McDonald’s, Linde, Intel, Honeywell, Caterpillar, Gilead Sciences, Pioneer Natural Resources Friday: Macquarie Group, OMV, ICBC, China Merchants Bank, LONGi Green Energy Technology, Midea Group, Imperial Oil, Danske Bank, Sanofi, Airbus, Volkswagen, China Construction Bank, Agricultural Bank of China, Bank of China, BYD, China Shenhua Energy, Eni, Keyence, Hitachi, Denso, Equinor, CaixaBank, Wilmar International, Swiss Re, Exxon Mobil, Chevron, AbbVie, NextEra Energy, Colgate-Palmolive, Royal Caribbean Cruises Economic calendar highlights for today (times GMT) 1230 – US Sep. Advance Goods Trade Balance 1400 – Bank of Canada Rate Decision 1400 – US Sep. New Home Sales 1430 – US DoE Weekly Crude Oil and Product Inventories 1500 – Canada Bank of Canada Governor Macklem to speak 1700 – US Treasury auctions 5-year T-notes 2045 – New Zealand RBNZ Governor Orr to speak 2130 – Brazil Selic Rate Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: https://www.home.saxo/content/articles/macro/market-quick-take-oct-26-2022-26102022
Reserve Bank of New Zealand: Kenny Fisher says he expects a 25bp rate hike on May 24th

The New Zealand Dollar To US Dollar Pair (NZD/USD) Is Advancing Towards The Round-Level

TeleTrade Comments TeleTrade Comments 26.10.2022 09:27
NZD/USD is oscillating in a 12-pip range as investors await US GDP data. US households are bound to postpone their new home demand due to higher interest obligations. ANZ Business Confidence dropped to -42.7 VS. projections of 42.0 and the prior release of -36.7. The NZD/USD pair has delivered a north-side break of the consolidation formed in a narrow range of 0.5740-0.5752 in the early European session. The asset is advancing towards the round-level resistance of 0.5800 as the risk-on impulse is aiming to regain the glory. S&P500 futures witnessed a vertical fall in early Asia led by weaker guidance from tech-giant Microsoft (MSFT), however, the three-day buying spree in the 500-stock basket indicates sheer optimism in the overall market structure. The US dollar index (DXY) is struggling to sustain above 111.00 and a subdued performance could accelerate volatility in the counter. Meanwhile, returns on US government bonds are declining sharply amid positive market sentiment. The 10-year US Treasury yields have dropped to 4.07% and have still not displayed any sign of exhaustion. For further guidance, investors are awaiting the release of the US Gross Domestic Product (GDP) data. As per the projections, the US economy has grown at 2.4% rate vs. a decline of 0.6% reported earlier in the third quarter of CY2022. It would be worth watching the placement of the GDP figures in comparison with the projections as Monday’s PMI numbers reported by S&P were lower than expectations. But before that, the US New Home Sales data will display the condition of the US real estate market. The economic catalyst is seen lower at 0.585M vs. the prior release of 0.685M on a monthly basis. In addressing mounting inflationary pressures, the Federal Reserve (Fed) is continuously accelerating interest rates. This has resulted in higher interest obligations for households, which has forced them to postpone their demand for new homes. In early Tokyo, ANZ Business Confidence dropped further to -42.7 against the projections of 42.0 and the prior release of -36.7. The kiwi dollar didn’t react much to the qualitative data, therefore, the entire focus will remain on the DXY’s movement and risk profile.
Key Economic Events and Earnings Reports to Watch in US, Eurozone, and UK Next Week

Saxo Bank Members Talks In Podcast About Reports Of The Next Key Companies, The Biden Administration And More

Saxo Bank Saxo Bank 26.10.2022 10:54
Summary:  Today we look at a whiplash-inducing session for equities traders as a strong session yesterday on falling treasury yields and a weaker US dollar was marred in the aftermarket session by very weak earnings from Microsoft and Google-parent Alphabet. We break down those earnings reports, the next key companies to report, the status of the US dollar, crude oil and gold, and importantly: the narrative around the Biden administration, with a cooperative Fed, trying to engineer strong support for the equity market into the mid-term elections the week after next. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting an on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: https://www.home.saxo/content/articles/podcast/podcast-oct-26-2022-26102022
The Current War Between China And The United States Over Semiconductor Chips Is Gaining Momentum

Google and Microsoft Fell, Expectations For Meta Are Low | The Bank Of Canada Will Deliver A Jumbo Rate Hike

Swissquote Bank Swissquote Bank 26.10.2022 11:11
US indices rallied yesterday on the back of soft economic data from the US, but the sentiment reversed after the Q3 results from Google and Microsoft didn't please. Both stocks fell in the afterhours trading. Rest of the earnings were mixed. Meta is the next US giant to announce earnings, and expectations are rather… low. US Yields The US 2-year yield has been easing after hitting a fresh 15-year high last week, as the US 10-year yield fell to 4.05%. The dollar index tanked around 1%, both the EURUSD and Cable advanced past their 50-DMA, which were acting as strong resistance since the start of the year, especially since the start of the war in Ukraine. Bank of Canada The USDCAD fell to a 3-week low, as the Bank of Canada (BoC) prepares to deliver another jumbo rate hike today. The BoC could deliver a 75bp hike, which would further fuel the odds of recession in Canada by next year. FX Market It’s important to note that the common denominator of the latest FX moves is the softer US dollar. And the downside moves in dollar and the US yields depend on Fed expectations – whatever the other central banks do seem accessory to the main dollar story. Fed The Fed expectations have been shaped by softish data, and some softish comments from the Fed officials recently. But there is nothing official pointing at a potential softening tone from the Fed just yet. Hence, the recent fall in the US dollar, and rebound in equities may not last. Gains remain vulnerable. And very much so, as the latest results from the US tech giants failed to make the investors smile yesterday. Watch the full episode to find out more! 0:00 Intro 0:35 Soft US data fueled optimism… 3:15 … but Big Tech earnings hurt. GOOG & MSFT fell 6.5% post-market 5:01 Other companies announced mixed results 6:30…as UPS surprised 7:00 Some come back to stocks, but stock/ bond correlation remains high 7:52 Meta earnings preview: expect nothing crazy… Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Meta #Google #Microsoft #UPS #Spotify #GM #Visa #UBS #CocaCola #earnings #USD #EUR #GBP #CAD #BoC #rate #decision #US #home #prices #Fed #expectations #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH  
Analysis Of The CAD/JPY Commodity Currency Pair - 06.02.2023

The USD/CAD And The USD/JPY Exchange Rates Depend On The Actions Of Central Banks (BoC, BoJ)

InstaForex Analysis InstaForex Analysis 26.10.2022 11:27
A week of silence before the Fed meeting on November 2 helped reduce volatility in markets. Then, weaker macroeconomic data from the US strengthened confidence that the Fed will slow the pace of growth of interest rates. This is also why stocks continued to rally despite weak data and some deterioration in corporate earnings. Pound also rose after Rishi Sunak became the new prime minister of the UK. However, quotes are likely to move sideways starting today. USD/CAD Inflation in Canada turned out to be higher than expected in September even though it fell from 7% to 6.9% (6.8% was expected). Meanwhile, the core index rose to 6%, instead of falling from 5.8% to 5.6% as predicted. Clearly, price pressure continues to spread, capturing wider sectors of the economy. Although gas prices fell by 7.4%, rising prices in the service sector more than offset the decline. A week ago, markets expected the Fed rate to increase by 50 basis points. But now they are counting on a 75 basis point hike, and some even anticipate as much as 100 points, which, of course, is unlikely, but clearly indicates a slight panic in the markets. If the Fed press conference today is hawkish, and the November meeting hint at a potential 50bp rate hike in December, the situation will shift in favor of the loonie, which will eventually lead to a reversal of USD/CAD. Although it is too early to talk about this, the Bank of Canada will most likely act more cautiously. So far, according to the latest CFTC report, the net short position in CAD decreased by 363 million to -1.5 billion. But positioning remains bearish despite the slight adjustment. The estimated price is above the long-term average and is directed upwards, which gives reason to expect USD/CAD to continue growing. If the BoC shows firmness today, the pair is likely to fall towards the support level of 1.3510/20. But more realistic is the resumption of purchases, followed by a transition to a sideways range in anticipation of the Fed meeting on November 2. USD/JPY Yen broke the psychological level of 150 and flew to a new multi-year record, which led to an emergency intervention by the Bank of Japan. This caused USD/JPY to drop to a low of 146.23, the same magnitude as during the last intervention on September (£145.90 to £140.26). The exact amount of the intervention will be known after the Ministry of Finance publishes its report on October 31, but it is clear that it was no less than that of the previous intervention. There was another intervention on Monday, but it did not lead to the expected result. It seems that Japan is losing capital, and its foreign investment income is not enough to cover the deficit. Most likely, this will continue as long as the Bank of Japan carries on its ultra-soft policy. According to the latest CFTC report, the net short position in JPY rose by 1.267 billion to -7.9 billion. The positioning is steadily bearish, and there are no signs of a reversal. USD/JPY will continue to rise until the Bank of Japan changes its monetary policy. Perhaps, the meeting on Friday will give some news, but interventions will not be able to block growth.   Relevance up to 07:00 2022-10-31 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/325331
RBA Governor Announces Major Changes at RBA Board as US Inflation Expected to Decline

Finalizing Twitter Purchases By Elon Musk | The US Stock Market Scores Gains

InstaForex Analysis InstaForex Analysis 26.10.2022 11:49
S&P 500 Outlook for October 26th The US stock market scores gains The main US stock indices have been bullish for the third straight day: the Dow added 1.1% and the S&P500 grew by 1.6%. The S&P 500 index is seen trading at 3,859 in the range between 3,800 and 3,900. S&P 500 futures showed a fall of up to 1% at the morning open. The US stock market The US stock market has been bullish for three straight days. It also formed a deep bottom. As the chart shows, the index has encountered strong resistance in the 3,860-3,930 range with the 50-day and 100-day moving averages. In order to extend growth, the index should leave the range and close above it. On Tuesday, the market grew, following the release of disappointing consumer sentiment data, which fell to 102. It fuelled speculation that the US Federal Reserve might reduce the pace of rate hikes after raising the rate by 0.75% in November. The US Q3 GDP report is due on Thursday (forecast: +2.1%). The ECB is expected to lift interest rates by 0.75% at a meeting on Thursday. Yesterday, the yield on 10-year Treasury bonds fell to 4.11%. Reports Strong reports came: Coca-Cola (KO 58.95, +1.38, +2.4%), General Motors (GM 37.01, +1.29, +3.6%), and Sherwin-Williams (SHW 220.20, +7.67, +3.6%). Ten of the 11 S&P 500 sectors rose. Real estate led the way with a 3.9% gain. Automatic Data (ADP), Boeing (BA), Bristol-Myers (BMY), General Dynamics (GD), Harley-Davidson (HOG), Hilton (HLT), Kraft Heinz (KHC), Norfolk Southern ( NSC), Roper (ROP), Seagate Tech (STX), and Waste Mgmt (WM) will deliver earnings report on Wednesday. VISA's profit surged by 21% to $15 billion. Microsoft's shares were down by 7%. The firm's profit dropped by 14%. Alphabet's shares lost 6%, following the earnings report that logged a 26% decline in profit. Elon Musk is planning to close the Twitter acquisition deal on Friday. The deal is now at the stage of signing documents. New home sales are due today in the United States. The reading is estimated to plunge to 575,000 from 685,000 year-over-year. Energy: Crude is firm at previous levels. Brent is trading at $92.7 per barrel. Macro data The United States is to sell another 15 million barrels of oil from its strategic reserves in an attempt to prevent a rise in prices. Biden says the US is ready to sell even more. Saudi Arabia slammed the US for using its strategic reserves to manipulate crude prices. However, OPEC's decision to artificially limit supply in the oil market can also hardly be called a market action. The US House of Representatives election will be held in early November. Recent polls show that both Democrats and Republicans have a 50% chance of a House majority. Inflation in Australia accelerated to a record 7.3%. The Bank of Canada will announce its interest rate decision today. The US dollar index dropped to 110.70. Final thoughts: the US stock market needs to pull back deeper. Buy trades could be considered after a pullback.     Relevance up to 08:00 2022-10-29 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/325341
Central Bank Policies: Hawkish Fed vs. Dovish Others"

The Latest Data Increases The Chances Of A Recession In the US

InstaForex Analysis InstaForex Analysis 26.10.2022 12:31
Gold in 2022 lost to the dollar in the fight for the status of the main safe-haven asset without options. Therefore, neither the high degree of geopolitical risks, nor the proximity of inflation in the US to 40-year highs helped XAUUSD. The precious metal quotes have collapsed by about 20% from the levels of their March peaks, money managers are holding clean shorts for gold for the first time in many years, and the outflow of capital from ETFs does not stop for a minute. It would seem that the precious metal is doomed to fall to $1,500, but suddenly the rules of the game have changed. Dynamics of speculative positions in gold Along with rising Treasury bond yields, the strong US dollar regularly drove the nails into the coffin of gold. Its position seemed unbreakable: the US economy looked better than the rest, the Fed was aggressively raising rates, and high risks of a global recession supported the demand for the greenback as a safe haven asset. However, as soon as the US economy began to falter, at least two of the dollar's three trump cards began to look less strong than before. Weak statistics on real estate prices and consumer confidence increased the risks of a recession in the United States, while falling gas prices in Europe, on the contrary, reduced them. American exceptionalism was called into question. This circumstance, coupled with expectations of a slowdown in the rate of monetary restriction by the Fed, weakened the dollar against major world currencies, which extended a helping hand to the "bulls" on XAUUSD. Investors immediately remembered geopolitical risks—the degree of which is still high. The armed conflict in Ukraine, the testing of nuclear missiles by North Korea, and the escalated aggression of China after the prolongation of the terms of Xi Jinping in power are far from a complete list of events that served the precious metal faithfully and faithfully in the past. Dynamics of Central Bank Rates The pressure on the US dollar is exerted by an improvement in global risk appetite against the backdrop of a slowdown in the Fed's monetary restriction, which is expected by investors. Peak federal funds rates and other central bank rates are within easy reach. If so, a global recession could be avoided, reducing the demand for safe-haven assets. Thus, the conditions for the correction of stock indices and opponents of the US dollar in the foreign exchange market are ripe. How long will this Wednesday last? Previous episodes in August–October showed that either macro statistics or the Fed became the catalysts for the recovery of the upward trend in the USD index. In this regard, the November meeting of the FOMC can restore investor interest in the US dollar and plunge the precious metal into another wave of sales. Technically, the formation of the Double Bottom pattern on the gold daily chart at the lower end of the fair value range of $1,620–1,1690 per ounce is a powerful reversal signal. Nevertheless, it is too early to speak about the change of the "bearish" trend to the "bullish" one before the return to $1,725. We sell the asset on the rebound from resistance at $1,680 and $1,695.   Relevance up to 08:00 2022-10-31 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/325363
The Yellow Metal Continues Its Struggle For Breaking Above The Crucial Resistance

The Collapse In US Bond Yields Has Caused The Recent Rise In Gold Prices

Saxo Bank Saxo Bank 26.10.2022 12:43
Summary:  Gold trades higher supported by a change in sentiment across bonds and the dollar on speculation that we may approach peak hawkishness from the US Federal Reserve. The idea being supported by the FOMC’s potential willingness to offer time to assess the economic impact of the rapid pace of rate hikes and quantitative tightening already seen. After once again being rejected at the key $1615 support area, gold as a minimum needs to break above $1735 before an end to the month-long downtrend can be called Gold trades higher supported by a recent change in sentiment across bonds and the dollar on speculation that we may approach peak hawkishness from the US Federal Reserve. The latest recovery that followed another failed attempt to break below key support at $1615, now a double bottom, started on Friday when the now famous “Fed whisperer” Nick Timiraos of the Wall Street Journal penned an article suggesting that the Fed is preparing to downshift in pace of rate hikes by early next year. The idea being the FOMC’s willingness to offer time to assess the economic impact of the rapid pace of rate hikes and quantitative tightening already seen. The latest boost to gold came in response to a fresh slump in US bond yields and the dollar after economic data on Tuesday showed US home prices tumbling the most since 2009 while US consumer confidence was down by more than expected. Responding to these numbers the euro has returned to parity after breaking a trendline that was rejected several times since being established in February. In addition bond yields have softened across the curve, resulting in the 2-10 year spread still trading inverted at around 40 basis points, thereby signalling an elevated, but still unlikely risk of a recession in the US next year.  At Saxo, we maintainour bullish outlook for gold and in our latest update we wrote about how the eventual recovery would need drivers to align, with the first trigger being peak hawkishness from the FOMC sending yields and the dollar lower. Being cautious we doubt that this is it, but there is clearly a growing belief the FOMC may pause soon to assess the economic impact of the current rate hike cycle which is currently pricing in a peak Fed funds rate just below 5% from the current 3.25%. In addition we maintain the view that long term inflation will end up somewhere in the 4 to 5% area, well above the current market expectations for a sub 3% rate. If proven correct, it would trigger a major adjustment in breakeven and inflation swap prices, developments that may support gold through lower real yields.  Speculators and investors, however, are likely to remain mostly side-lined until we get a clearer view on the thinking within the Federal Reserve, hence the importance of next week's FOMC meeting. According to the weekly Commitment of Traders reports, speculators in the futures market have been whipped around for the past few weeks, thereby reducing the willingness to aggressively enter the market until a clearer picture appears. The same goes for investors in bullion-backed ETFs who have been net sellers on an almost continued basis since June. Overall total holdings have slumped to 2968 tons to a 30-month low, down 11% from the April peak.  After once again being rejected at the key $1615 support area, gold as a minimum needs to break above $1735, thereby reversing a succession of lower highs, before an end to the month-long downtrend can be called. The path to that level, however, remains littered with several smaller resistance levels, especially $1687 and $1700. For now and until such time momentum can be reestablished, watch the dollar, yields and geopolitical developments for directional inspiration.     Source: https://www.home.saxo/content/articles/commodities/fomc-rollover-speculation-boosts-gold-26102022
Belgian housing market to see weaker demand and price correction

House Prices In The United States Will Continue To Fall

Conotoxia Comments Conotoxia Comments 26.10.2022 14:16
Incoming data from the U.S. economy seems to indicate that the Fed's earlier interest rate hikes may already be hinting at a slowdown. It’s about a slowdown in industry, as well as in the real estate market, where negative surprises seem that have emerged. These could lead to a slowdown in the pace of hikes by the Fed, which is what the market seems to be hoping for at the moment. Worse situation in US manufacturing S&P Global US Manufacturing PMI data released this week showed a reading of 49.9 points in October 2022, compared to 52 in September, and was below market forecasts of 51 points. A reading below 50 points, according to the survey's methodology, signifies a contraction in the manufacturing sector, the first time this has happened since June 2020. New orders fell, signaling a possible drop in demand, with manufacturers stressing that high inflation and inventory build-up from earlier in the year may be contributing to this. The rise in the value of the dollar also caused export demand to fall at the fastest pace since May 2020. Meanwhile, employment grew at a slower pace. In addition, production costs accelerated after a four-month period of mild inflation, mainly due to material shortages and higher wages. Looking ahead, price pressures and expectations of higher interest rates caused sentiment in the industrial sector to deteriorate, the Markit Economic survey showed. Weakening real estate market in the United States The 20-city house price index measured by the S&P CoreLogic Case-Shiller in the US rose 13.1% y/y in August 2022. Thus, the house price growth rate was the lowest since February 2021 and below forecasts at 14.4%. This also marks the fourth consecutive month of slowing house price growth in the United States. All 20 cities posted lower price increases in August, with Miami (28.6%), Tampa (28%) and Charlotte (21.3%) posting the highest year-over-year increases, while San Francisco (5.6%), Washington (7.4%) and Minneapolis (7.6%) posted the lowest. Meanwhile, the National Composite Index rose 13% in August, down from 15.6% in July, the biggest slowdown on record. Given the continued outlook for a challenging macroeconomic environment, home prices may continue to slow," said Craig J. Lazzara, Managing Director at S&P DJI as quoted by tradingeconomics. Source: Conotoxia MT5, USDIndex, Daily The dollar exchange rate seems falling Since the beginning of the week, in fact l since Friday and the possible intervention of the Japanese authorities, the dollar exchange rate seems to be falling. On Wednesday morning, the USD index slipped below the 111-point level. After falling 1% during the previous session. The USD's weakness may be due to the market's growing conviction that the US Federal Reserve would be less aggressive in the coming months. After a widely expected 75-basis-point rate hike in November, Fed officials are probably considering a smaller hike in December amid concerns about excessive monetary tightening, WSJ reported. The aforementioned weaker U.S. data this week, signaling that previous rate hikes may have already had an impact on the economy, seem to support such a view. It also appears that countries such as Japan and China are fed up with a strengthening US dollar. The former has already been expected to intervene twice in the forex market, while the latter was expected to intervene yesterday. As Reuters reported, China's major state-owned banks have been selling U.S. dollars on both the domestic and foreign markets to support the weakening yuan. Daniel Kostecki, director of the Polish branch of Conotoxia Ltd. (Cinkciarz.pl investment service) Read more reviews and open a demo account at invest.conotoxia.com Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75,21% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
GBP: BoE Stands Firm on Bank Rate and Mortgage Interest Relief, EUR/GBP Drifts Lower

ECB is expected to hike by 75bp. USD is not that powerful at the moment, and it seems that a less hawkish move may be on the cards

ING Economics ING Economics 27.10.2022 11:25
The dollar is having one of its deepest corrections of the year. Yesterday's smaller-than-expected hike by the Bank of Canada has given rise to speculation that the Fed may also want to slow the pace of tightening. Softer-than-expected 3Q US GDP numbers later could see the dollar correct a little further. But the highlight today should be a 75bp ECB hike USD: Focus on US GDP numbers Volatility remains the name of the game and the dollar is now seeing one of its deepest corrections of the year. If we were to say what drove dollar weakness yesterday, we would highlight: i) quite a sharp turn lower in USD/CNY where there had been reports of Chinese state banks selling (quasi intervention?) and ii) the smaller than expected Bank of Canada (BoC) rate hike by 50bp. On the latter, it does seem that the BoC is a little hesitant to power ahead with 75bp rate hikes, noting the slowing economy. This has raised speculation that the Fed may not be as immune to economic weakness as it claims. Somewhat surprisingly, the pricing of the Fed terminal rate is only 15bp off its recent highs at 5.00%. This suggests the FX market has reacted more than the rates market. That brings us to today where we will receive third-quarter US GDP data. My colleague, James Knightley, believes there are downside risks to the consensus figure of 2.4% QoQ annualised given softer residential investment and consumption. Such an outcome could feed the corrective forces currently at work for the dollar. That could possibly see the DXY correction extend all the way to the 100-day moving average at 108.42. However, some high US inflation data tomorrow and what should be a hawkish Fed next week should contain the depth and length of this dollar correction. And for those corporates with dollar needs over the next 3-6 months, this correction should be a good opportunity to secure dollars. As an aside, we noted reports of record US crude and refined product exports last week. That will help keep the US current account deficit in check. Chris Turner EUR: A hawkish ECB has not helped the euro so far this year The European Central Bank is expected to hike rates by 75bp today, which will bring the deposit rate to 1.50%. Money markets price the deposit rate being taken to 2.75% in a year's time. Our team thinks the top in the cycle will be more like 2.25%, but with Eurozone CPI running at 10% it is too early to expect the ECB to push back against such pricing. As my colleagues discuss in their ECB preview, beyond any discussion on the terminal rate, the focus will be on i) excess liquidity and ii) Quantitative tightening (QT). On the former, source stories suggest the ECB may adjust the terms of the existing TLTROs (making borrowing rates less advantageous) as opposed to some kind of reverse tiering which could depress available deposit rates. This makes sense in that the ECB will not want to depress money market rates as it fights inflation. On the QT side, our team feels it is too early to provide too many details on QT, where a wind-down of the ECB balance sheet could hit peripheral debt markets. What does this all mean for the euro? As my colleague Carsten Brzeski noted in that ECB preview, the ECB has surprised hawkishly all year - but EUR/USD has generally ended ECB policy days weaker. It feels like investors use the liquidity provided around ECB event risk to offload euros. As noted above, we have a slightly softer environment today and EUR/USSD has firmly broken out of this year's bear channel. That could point to EUR/USD risk on the day to 1.0200. If EUR/USD does find something bearish in the release, ideally it would now need to break back below the 0.9920/0.9950 area to return us to the bear trend. Chris Turner GBP: Recovery moves into the hard yards Sterling continues to enjoy a renaissance, but we would argue that further gains will be harder to come by. The fiscal credibility premium has reduced substantially, and increasingly the markets will be left to focus on the UK fiscal/monetary policy mix. Here the delay in the release of the government's fiscal plan to November 17th serves as a reminder that there is a lot to play for. Does the delay signify greater cost-cutting at work or will the use of lower gilt yields and lower gas prices in the Office for Budget Responsibility (OBR) estimates mean that the Sunak government has to do less cost-cutting overall?  Where the ground looks slightly firmer is on the Bank of England (BoE) side. Here a recent speech by the BoE's Ben Broadbent makes the case that the BoE does not need to respond as aggressively as the markets have priced to government spending plans. In effect, this is a push-back against the aggressive pricing of the BoE cycle. And if there is a risk to the consensus of the BoE hiking 75bp next week, it's that it merely rises by 50bp.  The softer dollar environment means that the GBP/USD correction could extend to the 1.1750 area - but we doubt these gains last. EUR/GBP may well find support in the 0.8600/8650 area, with risks tilted towards 0.8800 into next week. Chris Turner CEE: ECB may spoil the party in the region The Central and Eastern Europe (CEE) region continues to seek new local currency gains thanks to a combination of new highs in EUR/USD, gas prices staying below EUR 100/MWh, elevated rates and risk-on sentiment in the markets. This saw the Polish zloty reach its strongest levels since late September and the Hungarian forint test the recent highs. The Romanian leu also looked stronger, breaking significantly away from central bank intervention levels for the first time since the summer. We see similar buying interest in the ROMGB market, but we think it is too early to consider this the same scenario as we saw in the summer. The Czech koruna is the only currency in the region to remain flat after fresh comments from the CNB, which once again cooled market hopes for an additional rate hike at the November meeting. However, the koruna is well away from the CNB's intervention levels, and our estimates suggest that the central bank has not had to intervene since the September meeting. Today, the regional calendar is empty again and all eyes will be on the ECB, which could threaten the favourable EUR/USD levels for the CEE region and end the positive story of the last two weeks. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Price Of USD/JPY Pair Has To Fight With The Resistance Level

The Divergence Between The Fed And BoJ Policies Is Not Favorable For The USD/JPY Pair

TeleTrade Comments TeleTrade Comments 27.10.2022 13:59
Thursday's economic docket highlights the release of the Advance third-quarter US GDP report, scheduled at 12:30 GMT. The world's largest economy is expected to have expanded by a 2.4% annualized pace during the third quarter. This would mark a sharp reversal from the 0.6% fall in the previous quarter and the 1.6% decline registered in the first three months of the year. Economists at Société Générale offer a brief preview of the key macro data and write: “We calculate a 3% gain for real GDP, the key economic release of the week. We think that it could be even higher. What does that do for recession calls? Temporary reconsideration is our answer. Companies are becoming more conservative as compensation pressures build.” How Could it Affect USD/JPY? Ahead of the release, the emergence of some US dollar buying assists the USD/JPY to rebound swiftly from the vicinity of the 145.00 mark, or a nearly three-week low touched earlier this Thursday. A stronger GDP print will pour cold water on expectations that the Fed will soften its hawkish stance amid signs of a slowdown in the US economy. This, in turn, will lift bets for more aggressive Fed rate hikes in future and provide a fresh lift to the greenback, setting the stage for some meaningful upside for the major. Conversely, a weaker reading would add to growing market worries about a deeper economic downturn and prompt fresh selling around the buck. That said, a big divergence in the monetary policy stance adopted by the Fed and the Bank of Japan might continue to act as a tailwind for the USD/JPY pair. Investors might also refrain from placing aggressive bets ahead of the BoJ meeting on Thursday, suggesting that the immediate market reaction is more likely to be limited. Key Notes   •  US Q3 GDP Preview: Dollar bears to retain control on weak GDP print   •  US GDP Preview: Forecasts from eight major banks, strong rebound to break two quarters of negative growth   •  USD/JPY bounces off multi-week low, finds decent support ahead of 145.00 mark About US GDP The Gross Domestic Product Annualized released by the US Bureau of Economic Analysis shows the monetary value of all the goods, services and structures produced within a country in a given period of time. GDP Annualized is a gross measure of market activity because it indicates the pace at which a country's economy is growing or decreasing. Generally speaking, a high reading or a better-than-expected number is seen as positive for the USD, while a low reading is negative.      
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The US GDP grows 2.6% in Q3. 75bp rate hike next may not be the final one

ING Economics ING Economics 27.10.2022 20:23
After two consecutive quarters of negative GDP growth the economy has expanded by 2.6% in the third quarter. However, the outlook is deteriorating rapidly as the cumulative effects of 300bp of rate hikes weigh on activity and the Fed signals it will tolerate a sustained period of sub-trend growth to ensure inflation hits target Third quarter GDP rose by 2.6% 2.6% Third quarter GDP growth (QoQ% annualised) Higher than expected Net trade drives third quarter GDP higher The US economy met the technical definition of a recession when GDP fell in both the first and second quarters of the year, but it didn’t feel like a real downturn. Consumer spending and business capital expenditure rose, while the economy created more than 3.5mn jobs. Instead, it was volatility in trade and inventories, a legacy of the long-running supply chain problems around the globe, that led to the contraction. But the picture has begun to look quite different through the third quarter. Overall GDP grew by 2.6% on an annualised basis, with net trade doing a lot of the leg work. But this decent headline reading masks some less encouraging trends beneath the surface. Consumer spending growth has slowed, albeit perhaps not as much as expected. Personal consumption grew by 1.4% in the third quarter, compared to 2% in the second. Meanwhile, residential investment is now exerting a massive drag, given the rapid slowdown in housing transactions. This component shaved 1.4% off the overall GDP figure in the third quarter, a symptom of a housing market that is moving from a period of significant excess demand to one with modest excess supply.  Contributions to US quarterly annualised GDP growth Source: Macrobond, ING Recession will feel much more real in 2023 With the Fed signaling that it is prepared to accept weaker activity, and even tolerate recession, to get inflation under control, next week’s widely expected 75bp interest rate hike won’t be the last move from the Federal Reserve. Rising borrowing costs throughout the economy and the strong dollar are creating a massive headwind. At the same time, the weak external environment is adding to the downside risks to growth, led by Europe's forthcoming energy-driven recession, and China still being constrained by Covid containment measures. So while the US may have just exited a technical recession, the cold winds are set to get a whole lot chillier this winter and make recession feel much more real in early 2023. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
ECB's Hawkish Hike: Boosting EUR/USD and Shaping Global Monetary Policy

The Main US Indices Fell | Asia-Pacific Stocks Are Mostly In The Red | Fortescue (FMG) Plans To Increase Iron Ore Production

Saxo Bank Saxo Bank 28.10.2022 08:38
Summary:  The ECB rose its key rate to 1.5% from 0.75% and signaled it is making progress in the fight against inflation. The US economy grew 2.6% on an annualized basis last quarter after two declines in a row, beating consensus as personal consumption rose more than forecast. The Nasdaq 100 & S&P 500 ended 1.6% and 0.6% lower, with Amazon falling 13% after hours, while the Dow Jones lifts, boosted by McDonald’s and Boeing. Crude oil climbs above $89, while iron ore falls to its lowest level since 2020. Asian equity futures mostly trade lower. Australia’s ASX200 opens 0.6% lower today, but tracks 2% higher this week, supported by commodity stocks and Macquarie beating forecasts. What’s happening in markets?     Need to know  The ECB rose its key rate to 1.5% from 0.75% and signaled it is making progress in the fight against inflation. Officials dropped a reference to hikes continuing for "several meetings," while saying they expect further action. Christine Lagarde emphasized that more increases were on the way: "We still have ground to cover." Money markets pared tightening wagers by as much as 20 bps, and European stocks erased losses. The US economy grew 2.6% on an annualized basis last quarter after two declines in a row, beating consensus as personal consumption rose more than forecast. The GDP report showed foreboding signs, as growth was almost entirely driven by trade, and residential housing investment plunged. As such, treasuries yields extended their fall, with 10-year yield pushing below 4%. The dollar was mostly higher, though the yen was barely up ahead of the BOJ meeting. Oil advanced and gold retreated. Asia-Pacific's equity futures are mostly in the red. The Nasdaq 100 (USNAS100.I) & S&P 500 (US500.I) ended 1.6% and 0.6% lower, while the Dow Jones lifts, boosted by McDonald’s The US major indices fell on Thursday from continued weaker than expected earnings carnage with Facebook (META) falling 25%. In mega caps, Amazon (AMZN) was leading the losses, falling 4.1% on projecting slower growth and cutting its spending in the face of economic uncertainty, falling 13% after hours. Apple (AAPL) shares fell 3% on reporting weaker than expected iPhone and services sales in its latest quarter, however it gave an otherwise somewhat upbeat report, noting record sales spurred its active base of devices to hit an all-time high. Post market, Apple shares trade 0.4% higher. Meanwhile, the Dow Jones 30 blue-chip index ended 0.6% up on Thursday, supported by recession-stalwart McDonald’s (MCD) shares rising 3.3% on reporting sales that well surpassed analysts’ estimates, despite inflationary pressures. McDonald’s results were boosted by McRib sales, with the CEO saying they are “the GOAT of sandwiches on our menu,” using the acronym for greatest of all time. The fast-food chain will offer McRib nationwide in the US from the end of this month. Oct. 31. Boeing (BA) shares moved up 4.5% with the company releasing a bullish 20-year forecast for China’s commercial jet market, saying China will need to double its fleet in two decades and that China will be a major driver of Boeing sales. Boeing expects China to need 8,485 new passenger and freighter planes valued at $1.5 trillion through 2041.   Crude oil (CLX2 & LCOZ2) climbs above $89, while iron ore (SOCA) falls to its lowest level since 2020 Oil is trading higher for the third day, on tightness and heavy worry about the price of fuel products over the coming months as the northern hemisphere heads to winter. WTI climbed above $89 with US data showing an economic rebound last quarter. US natural gas futures steadied after the EIA reported stockpiles rose last week. European gas prices advanced. It’s also really important to note, tight diesel markets are taking the main stage at the moment, which you can read more on from our head of commodity strategy, just click here. As for other commodities, copper fell 0.7%, while iron ore (SCOA, SCOX2) fell 0.2% to $81.55, which is its lowest level since May 2020 on concerns that the iron ore market could be oversupplied. Yesterday Fortescue Metals (FMG) affirmed extra production will come to the market before March, (instead of June), with investors worried there is not enough demand from China. Most other commodities were lower, including Wheat and Corn while Cocoa rose 1.6%  Australia’s ASX200 (ASXSP200.1) falls 0.6% on Friday, but tracks 2% higher this week, supported by commodity stocks. Macquarie beats forecasts  After the Aussie share market rose for four straight sessions putting on 2.5% Monday to Thursday supported by commodity stocks, including lithium, gold stocks and agricultural stocks, today’s focus is on tech stock carnage, following the Wall Street sell off. Brainchip (BRN) is down 15%. While iron ore shares are lower, with Fortescue (FMG) trading 7% lower after noting that its increasing its spending, while its margins are tightening. Plus Fortescue is ramping up production, at a time when iron ore demand is limited. On the upside, Macquarie Group (MGQ) shares trade up 3.5% after reporting profit that beat forecasts with market volatility buoying its commodities and global markets business. Macquarie’s net income for the six months to Sept. 30 rose to A$2.31 billion ($1.49 billion), up from A$2.04 billion in the prior year. That exceeded the A$2.15 billion average estimate of four analysts surveyed by Bloomberg. Elsewhere, oil stocks are higher with the WTI price cleared $89, with Viva Energy (VEA) up the most in energy, up 1.6%. What to consider Markets, businesses, commodities with high exposure to China see heavy selling this week. Will it continue?   Assets with exposure to China are being heavily penalized as it seems investors are realigning their portfolios somewhat with the priorities of President Xi his policy on stronger state control over the economy and markets, which look set to continue unchallenged for years. The confirmation was made on Sunday and across the week, Hong Kong’s Heng Seng fell 7.5%, and the iron ore (SCOA, SCOX2) price fell to 15% $79.60 its lowest level since 2020 on concerns that the biggest iron ore consumer, China will further slow demand, all while iron ore seems oversupplied. The biggest pure play iron ore company in the southern hemisphere, Fortescue (FMG) shares fell almost 12% this week, as a result. Plus Fortescue company affirmed it is increasing its spending, while its margins are tightening. Fortescue plans to ramp up iron ore production at its expanded facility in March, instead of June, which will likely further push the iron ore market into greater oversupply. Australian exports trade prices stumble, imports prices rise   Australian exports prices fell last quarter, but less than expected, falling 3.6% vs the 7% fall consensus forecast. That said, export prices are still up 25.9% YoY. The quarterly drop in prices was driven by the fall in iron ore demand from China, and the drop in coal prices, as global steel demand weakens. That said, Australian gas and crude export prices rose amid surging global demand particularly from Europe. And lithium prices rose markedly, boosted by global electric vehicle sales. Inversely, Australian import prices rose more than expected, up 3%, vs the 0.9% consensus forecast. What contributed to this was price of imports of sodium hydroxide (used in bauxite refining) rose, while the price of importing plastics rose, coinciding with higher energy prices. All in all, import prices to Australia are up 19.3% YoY.    For a global look at markets – tune into our Podcast.     Source: https://www.home.saxo/content/articles/equities/market-insights-today-28-oct-28102022
Oil Prices Soar on Prospect of Soft Landing, Eyes Set on $80 Breakout

Headline Tokyo CPI increased by 0.7%, Nasdaq lost 1.63%

ING Economics ING Economics 28.10.2022 09:02
CNY rises again as USD finds renewed support ahead of next week's FOMC meeting Source: shutterstock Macro outlook Global markets: Expectations for Fed tightening continue to be pared back ahead of next week’s FOMC meeting. The May 23 Fed funds contract implied rate is now 4.74%. It was more than 5% earlier this month. This has also pulled back yields on Treasuries. 2Y Yields fell 13bp yesterday. 10y yields are now 3.919% after dropping 8.4bp overnight. There don’t seem to be any obvious catalysts for this. It is the blackout period so there are no Fed speakers. Falling reverse repo usage may be an indicator that the Fed could at least slow the pace of QT, but other than that, it looks mostly like speculation ahead of the FOMC meeting for some “pivot” hints. Despite the softer yield environment, the USD has caught a small bid and has pushed back below parity with the EUR, maybe benefiting from a softer equity backdrop too as the NASDAQ had another bad day ( -1.63%), following some softer sales guidance from Amazon. Equity futures are also still looking soft, so the current sentiment looks likely to persist through today. The USD was slightly stronger against most of the G-10 currencies,  though the JPY has held onto the ground it made yesterday. Asian FX is split, with the CNY bouncing higher after its plunge yesterday, weakening back to 7.229. The KRW and TWD, both of which topped the Asian FX pack yesterday will likely soften into today’s trading. G-7 Macro: As widely predicted, the ECB hiked the refi-rate by 75bp yesterday, taking it to 2%. This note From our Head Of Macro Research, Carsten Brzeski, summarises the decision and press conference. But in short, the ECB is not done with hiking yet as it moves closer to a restrictive rate setting. We also had 3Q22 US GDP data yesterday, which delivered a bigger-than-expected bounce back of 2.6% (saar). Though as our Chief US Economist, James Knightley states, “the outlook is deteriorating rapidly”. Today, we get preliminary October inflation data from Germany, which may continue to creep higher according to the consensus view.  3Q22 GDP for Germany is also released and should register a decline from the previous quarter, taking Germany one step closer to an official recession.  US September personal income and spending data don’t add much to the stock of macro knowledge and can probably be glossed over, though the University of Michigan consumer confidence data and inflation outlook will be worth a look. And finally, the BoJ meets today. As usual, nothing is likely to happen here, especially now the JPY is off its recent highs (see below).   Japan: Headline Tokyo CPI inflation rose quite sharply to 3.5% YoY in October (vs 2.8% in September, market consensus 3.3%). The core inflation rate excluding fresh food also hit 3.4%, the highest level since 1989. We don't think this morning’s much faster rate of inflation will change the BoJ's policy decision today. The BoJ takes a different view than the ECB. If inflation is not driven by demand-side factors, they will not change the easy policy stance and it seems like they believe this will maintain their credibility. Meanwhile, PM Kishida announced a 29.1 trillion yen extra budget. Including local government spending, the number adds up to 71.6 trillion yen.  South Korea: The authorities continue to calm down money markets by providing easier measures on policies. The BoK also eased some of its micro-policy measures. The BoK will temporarily (for three months starting Nov 1st) accept bonds issued by banks and nine state-owned companies such as KEPCO and KOGAS, as eligible collateral for banks borrowing money from the central bank. The plan to raise the Liquidity Coverage Ratio (LCR) from 70% to 80% will be postponed by three months to May 2023. The BoK will also carry out a temporary RP (until the end of January 2023) with an estimated amount of 6 trillion KRW.  The government also announced plans to ease mortgage terms from early next year. We think this will help ease market nervousness, but the housing market will continue to cool for the time being given that mortgage rates are now reaching 7%. What to look out for: US sentiment and core PCE Tokyo CPI inflation (28 October) Bank of Japan policy meeting (28 October) Australia PPI inflation (28 October) Taiwan GDP (28 October) US personal spending, core PCE and Univ of Michigan sentiment (28 October) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
FX Daily: Upbeat China PMIs lift the mood

The Bears On The Asian Stock Market Attack The Lowest Levels

TeleTrade Comments TeleTrade Comments 28.10.2022 09:15
Asia-Pacific shares remain pressured amid firmer inflation data, downbeat growth forecasts and central bank inaction. Japan, Australia print strong inflation numbers, IMF cuts Asia growth outlook. BOJ defends status quo despite upwardly revising inflation forecasts. Asian shares hold lower ground while tracking global cues as fears surrounding inflation and growth prevail during early Friday. While portraying the mood, the MSCI’s index of Asia-Pacific shares outside Japan drops nearly 1.0% as bears attack the lowest levels since March 2020 whereas Japan’s Nikkei 225 loses 0.73% intraday heading into the European session. It’s worth noting, however, that the downbeat yields have earlier favored the equity buyers but the hawkish ECB and strong US Gross Domestic Product (GDP) drowned the stocks afterward. A 33-year high Tokyo inflation data joined strong Australia Producer Price Index (PPI) to keep bears hopeful as the International Monetary Fund (IMF) cut Asia's economic forecasts. “The IMF cut Asia's economic forecasts on Friday as global monetary tightening, rising inflation blamed on the war in Ukraine, and China's sharp slowdown dampened the region's recovery prospects,” said Reuters. The news also adds that the IMF cut Asia's growth forecast to 4.0% this year and 4.3% next year, down 0.9% point and 0.8 points from April, respectively. The slowdown follows a 6.5% expansion in 2021. Further details suggest that the Washington-based institute expects China's growth to slow to 3.2% this year, a 1.2-point downgrade from its April projection, after an 8.1% rise in 2021. The world's second-largest economy is seen growing 4.4% next year and 4.5% in 2024, the IMF said as per Reuters. On a broader front, Thursday’s US data weighed on the Fed wagers even as the headline US Gross Domestic Product (GDP) rose 2.6% on an annualized basis, more than expected, in the third quarter (Q3). The reason could be linked to a fifth consecutive fall in private consumption that challenged the Fed hawks as it showed the policymakers are gradually nearing the target of slowing down private domestic demand, which in turn might favor the easy rate hike talks for December in the next week’s Federal Open Market Committee (FOMC) meeting. That said, the sluggish US Treasury yields and the risk-off mood could also be held responsible for the Asia-Pacific market’s sour conditions. That said, the US Dollar Index (DXY) retreats to 110.50, following Thursday’s recovery from the five-week-low, whereas commodities are slightly red amid the market’s indecision. Moving on, the US Core PCE Price Index for September, expected to rise to 5.2% versus 4.9% prior, will be crucial for traders to watch for clear directions. A firmer print of the Fed’s preferred inflation gauge could add strength to the yields and hawkish Fed bets, which in turn will be favorable for the risk-safe assets ahead of the next week’s FOMC.
Bank of England Faces Rate Decision: Uncertainty Surrounds Magnitude of Hike

Today in the USA, 3Q22 Employment Cost Index is released, which is important for Fed and as a consequence for US dollar

ING Economics ING Economics 28.10.2022 09:55
Away from G10 markets, the Egyptian pound finally sold off 17% yesterday as local policymakers had to implement a flexible exchange regime to secure IMF funding. Attention will turn to countries in similar predicaments. For today, the highlight will probably be US price data, including the 3Q employment cost index release. Dollar to remain bid on dips The decline in the Egyptian pound is not unexpected as the country has suffered from higher global interest rates USD: 3Q22 employment cost data will be important In a busy day for FX yesterday, one could be forgiven for missing that Egypt had devalued its pound – or more correctly, had allowed it to float. Stepping back from managing its exchange rate had been a pre-condition the International Monetary Fund (IMF) had outlined to Egyptian authorities in return for a 46-month, $3bn loan. The decline in the pound was not unexpected as Egypt suffered from both this year's food inflation shock and higher global interest rates. As my colleague James Wilson highlighted in his emerging market (EM) overview: 'Back to the 80s: What soaring inflation, US rate hikes, and a stronger dollar mean for EM debt', Egypt screened poorly for government interest expenses as a percent of GDP – not far behind Sri Lanka which had already defaulted on its debt earlier this year. The question then turns to which country might be in a similar predicament to Egypt. Egypt's sovereign credit default swap (CDS) had been trading above 1000bp ahead of yesterday's move. There are ten other EM sovereigns with CDS above 1000bp. Many are in Africa and in Central America. Perhaps the most in focus now could be Nigeria's naira (NGN). Here Nigeria also has a relatively high government interest cost relative to GDP (30%) and its CDS trades at 1070bp – very close to Egypt. Local authorities in Nigeria have managed $/NGN closely over recent years, but have recently allowed the naira to depreciate 5% since the summer. 3m implied yields through the FX forward are still 37% higher, with pressure building for a $/NGN move to 500 into next spring. Back to today in G10, the hot story will be US price data. We get to see the 3Q22 Employment Cost Index (ECI). This is an influential number for the Fed and its spike to 1.4% quarter-on-quarter in the first quarter certainly contributed to this year's hawkish Fed. Consensus expects the 3Q ECI to soften to the 1.2% QoQ area in today's release. Any upside surprise could push the pricing of the Fed terminal rate (now 4.75% and off a recent high at 5.00%) higher. This would be dollar positive. Maybe 110 does prove support for DXY after all. A final few points for the strong dollar story: i) the Bank of Japan kept policy unchanged and has CPI forecasts for FY23 and FY24 down at 1.6%, justifying dovish policy and a weak Japanese yen ii) Brazil has contentious presidential elections on Sunday, $/BRL could be a lot higher Monday morning and iii) the latest BIS triennial FX survey shows the dollar retaining its dominant status in global FX transactions. Chris Turner EUR: A dovish 75bp hike? The ECB hiked rates by 75bp yesterday, but in some ways, it could have been described as a dovish hike. Certainly, interest rate markets took note of the reference to 'substantial progress being made in withdrawing monetary accommodation' and took 30bp off the pricing of the terminal ECB rate, which is now priced at 2.50%. We still think that it is too high. The repricing of the ECB cycle saw euro two-year swap rates fall and the spread to two-year dollar rates (normally a key driver of EUR/USD) widen back out to 200bp in favour of the dollar. That is the widest since mid-August. We had said going into the meeting that interest rate differentials had not been playing a big role in EUR/USD pricing, although that could reverse into December as speculation of an ECB pivot grows. For today, EUR/USD might bounce around a little as ECB hawks brief the media that the central bank's statement was not quite as dovish as the market has interpreted. But we think the dollar should stay supported into next week's FOMC meeting and would favour EUR/USD edging down today to the 0.9910/20 area – marking the top of a bear trend channel which was recently broken. Chris Turner GBP: Taking stock ahead of next week's BoE meeting Sterling will be settling into ranges ahead of next week's event risks in the form of both the Fed and Bank of England (BoE) rate meetings. Intriguingly, the pricing for next week's BoE rate meeting is starting to drift below a 75bp hike to 3.00%. Remember that at the height of the fiscal fiasco, the market had briefly priced the bank rate being taken to 3.90% at next week's meeting. We think the chances of a 50bp hike from the BoE are greater than the market currently prices – and that is a sterling negative. Let's see whether GBP/USD can break back under 1.1500 today, while the softer euro probably defines the EUR/GBP range somewhere in the 0.8600-0.8700 region. Chris Turner CEE: ECB provides a mixed outcome for the region The regional calendar is almost empty again and today we will see only PPI data from Hungary. The Central and Eastern Europe region continues to follow global events and the ECB yesterday injected new impetus into this. On the one hand, the fall in the EUR curve means higher interest rate differentials across the region. In Poland and the Czech Republic, this led to new highs in differentials, supporting local FX on its way to stronger levels. On the other hand, EUR/USD back below parity is clearly negative news for the CEE region and we are likely to see a negative reaction to it today. Moreover, gas prices have moved back above EUR 100/MWh, probably in response to the EU's indecision on how to proceed with price cap measures. Thus, overall we are likely to see a halt to the CEE FX rally of the last two weeks and adopt a wait-and-see mode before a heavy calendar next week. Frantisek Taborsky Read this article on THINK TagsFX ECB Dollar Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Gold Rally Is Continuing To Stall, This Could Be A Good Year For Crude Oil

The Risk Is Aggravated By The Weakness Of The Japanese Yen (JPY) |Gold And Oil Are Doing Well

Saxo Bank Saxo Bank 28.10.2022 10:02
Summary:  A rocky session for equity markets once again yesterday, which tried to find cheer on falling bond yields, only for a thorough thrashing after the close yesterday on Amazon issuing its weakest ever holiday sales outlook, which saw its shares knocked some 13% in the aftermarket. Elsewhere, Apple shares managed to stabilize after its earnings report in, as revenue and earnings topped estimates. What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) The recent string of US earnings have not done much to keep the recent momentum in US equities alive. Neutral earnings from Apple last night was topped with awful outlook from Amazon, the second largest stock in the US equity market, that saw its shares decline 13% in extended trading. S&P 500 futures are retreating this morning trading around the 3,790 level despite a sizeable readjustment lower in the US 10-year yield to 3.93%. Euro STOXX 50 (EU50.I) European equities saw more diverging price action yesterday but closed above the 3,600 level again, but this morning STOXX 50 futures are coming down 1% trading around the 3,570 level with 100-day moving average at 3,528 being the next support level to watch. There are no economic releases in Europe of importance today so it will be interest rate direction and sentiment on earnings that will drive price action into the weekend. FX: USD pulled in two different directions as falling yields negative, weak sentiment positive The further drop in US treasury yields fail to extend the US dollar sell-off yesterday, as a far less hawkish than expected ECB took EURUSD back below parity and the Bank of Japan sent no new signals on its terminally stuck policy mix of ongoing QE and yield-curve-control.  Weak risk sentiment seems to provide offsetting support from the greenback, but the dollar will find stronger support if US data remains resilient and the Fed is faced to stay on message with further tightening, especially now that the market has significantly downshifted expectations for peak Fed Funds rate beyond the 75 basis point move expected at next Wednesday’s FOMC meeting, with less than 100 basis points of further tightening now priced and a peak rate near 4.78% by next March. Gold (XAUUSD) Gold remains on track for a second week of gains although some caution has emerged ahead of next week's FOMC meeting. Yesterday, the positive sentiment received a knock as the dollar regained some ground, especially against the euro after the ECB stayed far less hawkish than expected. Countering this potential gold negative development, US bond yields continued lower with the US 10-year treasury yield benchmark falling below the important 4% level to record a +25-basis point drop on the week. While the FOMC is expected to deliver another bumper 75 basis points hike they may tilt towards slowing the pace at future meetings while assessing the impact of their rate and quantitative tightening actions. As a minimum gold needs to break above $1730 before an end to the month-long downtrend can be called. Crude oil (CLZ2 & LCOZ2) Crude oil remains on track for a second week of gains but for now without challenging resistance indicating a market still struggling for direction with no overriding theme being strong enough to set the agenda. Strength this week has been driven by a developing tightness in the fuel product market, US exports of crude and fuels setting a weekly record and the weaker dollar, as well as strong buying from China as refineries there plan to boost fuel exports through the end of the year. Diesel markets in Europe and the US continues to signal tightness ahead of winter with elevated refinery margins and prompt spreads signalling tight market conditions. Focus next week on the Nov 2 FOMC meeting and major OPEC producers beginning to cut their production. Additional technical upside in WTI above $89.25 while Brent’s next level of resistance is the October high at $98.75. US treasuries (TLT, IEF) The US 10-year treasury yield benchmark fell through the important 4.00% level yesterday, with the yield trading as low as 3.90% before treasuries found resistance. The 3.85% area is arguably a pivotal level if treasuries continue to rally. The entire yield curve dropped yesterday, in part on a less hawkish ECB continuing the trend recently of central banks delivering less than expected on guidance, as German 10-year Bunds dropped below 2.00% for the first time in weeks on the ECB meeting yesterday (more below). It looks like we’ll be heading into next week’s FOMC meeting with a fairly hard market lean for a significant downshift in the Fed’s hawkish message. What is going on? ECB the latest central bank to surprise dovish The ECB hiked its key rate 75 basis points to 1.5% from 0.75%. Officials dropped a reference to hikes continuing for "several meetings," in the statement, while saying they expect further action. Christine Lagarde said in the press conference that more rate hikes were on the way: "We still have ground to cover." The bank will continue to reinvest all maturing assets in its asset purchase program (QE) and QT won’t be discussed until the December meeting. The market read the meeting as a strong dovish surprise, as another 20 basis points of tightening were removed from forward expectations for 2023 (down some 50 basis points now from peak expectations just over a week ago.) Apple is a fortress FY22 Q4 revenue came out at $90.2bn vs est. 88.6bn up 8% y/y keeping up with inflation and EPS at $1.29 vs est. $1.26 driven by a new all-time high of active devices. The number of paid subscriptions, which Apple has recently announced will see price hikes, have doubled in three years to 900mn. Shares were unchanged in extended trading. Amazon shares plunged 13% on Q3 results Revenue in Q3 hit $127.1bn vs est. $127.6bn up 15% y/y but operating income hit $2.5bn vs est. $3.1bn. The weaker than estimated operating income was driven by a negative revenue surprise in their cloud business AWS with revenue of $20.5bn vs est. $21bn. The free cash flow in Q3 was still negative at $5bn with the combined negative free cash flow over the past year at $26bn. The change in cash generation for Amazon indicates that the pandemic turned out to be bad for the business as it spent too much on expanding capacity that could not be maintained. The outlook for Q4 was what terrified investors with the retailer guidance operating income in the range $0-4bn vs est. $4.7bn and revenue of $140-148bn vs est. $155.5bn. Japan announces massive fiscal stimulus Japan’s Prime Minister Fumio Kushida announced a ¥71.6 trillion (nearly $500 billion) stimulus package overnight, in a purported bid to “ease inflation” and shore up his government’s popularity. The new spending in the package is set at ¥39 trillion and will focus on incentivizing companies to raise wages, national security/defense and subsidies to reduce the impact of energy costs, especially electricity bills. With the Bank of Japan not allowing government bond yields to adjust, this risks adding to the yen’s weakness as long as other major central banks are not in easing mode. Caterpillar, McDonalds, and Boeing positive stories in the negative backdrop A few positive stories to highlight amidst the massive drop in marquee megacap names include Caterpillar, which soared a massive 7.7% on impressive results. Elsewhere McDonald’s (MCD) shares rose 3.3% on reporting sales that handily beat analysts’ estimates, despite inflationary pressures. McDonald’s results were boosted by McRib sales, and the fast-food chain will offer McRib nationwide in the US from the end of this month. Meanwhile, Boeing (BA) shares jumped a day after an ugly drop on its earnings report. Yesterday, shares rose 4.5% with the company releasing a bullish 20-year forecast for China’s commercial jet market, saying China will need to double its fleet in two decades and that China will be a major driver of Boeing sales. Boeing expects China to need 8,485 new passenger and freighter planes valued at $1.5 trillion through 2041. A tough week for coffee, cotton and sugar The Bloomberg Commodity Softs index trades down 5% on the week led by a 6% drop in Arabica coffee (KCH3) $1.79/lb, a 14-month low as money managers continue to exit long-held bullish bets, now turning increasingly sour amid concerns a global recession will hurt demand at a time where the outlook for the 2023/24 crop in Brazil is showing signs of improving. However, a combination of exchange monitored stocks lingering at a 23-year low and oversold condition may soon drive a technical bounce ahead of support at $1.73/lb. Sugar (SBH3) meanwhile has been hurt by a weaker Brazilian Real boosting incentives to export. Cotton (CTZ2), down 52% from its May peak has plunged to near a two-year low on weak demand for supplies as consumers around the world cut back on spending. Weekly export sales from top shipper, the US, plunged from a year earlier with overall sales for the current season being well behind last year and the long-term average. What are we watching next? Market leaning very hard now for a dovish downshift at next Wednesday’s FOMC After the Bank of Canada surprised with a smaller than expected hike this week and the ECB surprised with more dovish forward guidance, the market is now. But will the US data cooperate and is the maximum conceivable downshift from the Fed next week already in the price – given that the Fed itself has said that it will continue to hike even as the economy – including the labor market - weakens? After all, the market has removed nearly 25 basis points of tightening through the March FOMC of next year from the peak of just above 5.0% a bit more than a week ago to just under 4.8% now, and is more aggressively pricing the Fed to begin cutting rates by late next year (December ‘23 FOMC yield down almost 50 bps from peak).  Earnings to watch Today’s US earnings focus is on the two oil and gas majors Exxon Mobil and Chevron expected to report strong earnings in Q3. Exxon Mobil is expected to grow revenue 44% y/y with the operating margin expanding further. NextEra Energy is also worth watching given the recently passed US bill on renewable energy because it may lift the outlook for the industry. Today: Macquarie Group, OMV, ICBC, China Merchants Bank, LONGi Green Energy Technology, Midea Group, Imperial Oil, Danske Bank, Sanofi, Airbus, Volkswagen, China Construction Bank, Agricultural Bank of China, Bank of China, BYD, China Shenhua Energy, Eni, Keyence, Hitachi, Denso, Equinor, CaixaBank, Wilmar International, Swiss Re, Exxon Mobil, Chevron, AbbVie, NextEra Energy, Colgate-Palmolive, Royal Caribbean Cruises Earnings releases next week: Monday: Daiichi Sankyo, Stryker Tuesday: Toyota Motor, Sony Group, Mondelez, AMD, Airbnb, Eli Lilly, Pfizer, BP Wednesday: KDDI, Novo Nordisk, GSK, Booking, Qualcomm, CVS Health, Estee Lauder, Humana Thursday: Cigna, Amgen, PayPal, Starbucks, EOG Resources, ConocoPhillips, Regeneron Pharmaceuticals, Zoetis, Canadian Natural Resources, DBS Group Friday: Duke Energy, Enbridge Economic calendar highlights for today (times GMT) 0800 – Germany Q3 GDP0900 – Eurozone Oct. Confidence Surveys1200 – Germany Oct. Flash CPI1230 – Canada Aug. GDP1230 – US Sep. Personal Income/Spending1230 – US Sep. PCE Inflation1400 – US Oct. Final University of Michigan Sentiment   Source: https://www.home.saxo/content/articles/macro/market-quick-take-oct-28-2022-28102022
Oanda Podcast: US Jobs Report, SVB Financial Fallout And More

In USA Higher Interest Rates Exacerbate The Problem Of Public Debt

InstaForex Analysis InstaForex Analysis 28.10.2022 14:02
Today the BLS (Bureau of Labor Statistics) will publish the latest inflation report in relation to the PCE index for September 2022. This will be the most recent inflation data the Federal Reserve will receive and will therefore be a key component in deciding the size of the next rate hike at the Federal Open Market Committee meeting next week. According to the CME FedWatch tool, there is an 88% chance that the Fed will raise rates by 75 basis points, down from yesterday's forecast of 92.5%. This will raise the Fed's base rate between 375 and 400 basis points at the FOMC meeting next week. According to Bloomberg News, economists polled predict that, compared with last year, the PCE index will rise by 6.3% in September. "Excluding food and energy, the figure is expected to rise by 0.5% compared to August and by 5.2% from September 2021. The higher forecasts follow government data released earlier this month, which show that a key indicator of core consumer prices accelerated to a 40-year high in September. In an article written by Jessica Menton of Bloomberg News, the biggest question facing investors and traders is: "Is multi-year inflation nearing a peak, or will prices continue to rise... Traders are keeping a close eye on the Federal Reserve's preferred inflation rate. The PPI will help determine if there will be another 75 basis point interest rate hike by the central bank at its meeting next week." Although her article focused on Wall Street and stock investors, her statements give a clear picture of other asset classes, including gold and silver. Thomas Martin, senior portfolio manager at Globalt Investments, said: "The Fed is laying the groundwork to end excessive rate hikes if inflation data supports it. But if this does not happen, they will be ready to continue their big campaigns after November. Unlike previous trading days, yesterday's dollar strength was negatively correlated with gold prices. The dollar rose 0.79%, with the dollar index currently at 110.87. This means that the partial decline in the price of gold would have been much larger had the dollar not added about 8/10 percent of its value. Market participants are also considering how the Fed will take into account yesterday's government report, which showed third-quarter GDP rose 2.6% from an estimate of 2.3%, expanding faster than expected. It is also clear from the report that this year the US economy experienced a period of positive growth for the first time. This led to a decline in gold prices after the release of yesterday's GDP report. The third-quarter GDP report included the most recent data on annual federal interest payments, indicating they had increased to $736.5 billion. This set a new record for annual interest payments on US government debt. According to US Debt Clock.org, the US national debt is currently over $31 trillion and is unsustainable. The higher interest rates set by the Fed only exacerbate this problem. However, the current level of government debt and the high cost of servicing only interest rates are creating extremely optimistic market sentiment for gold.   Relevance up to 10:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/325634
ECB's Tenth Consecutive Rate Hike: The Final Move in the Current Cycle

Central Banks (Fed, BoE) Will Decide To Continue To Tightening The Monetary Policy

ING Economics ING Economics 29.10.2022 08:00
A busy week ahead filled with central bank meetings. The Federal Reserve's FOMC meeting is set to result in a 75bp rate hike given that annual rates of core inflation are heading higher. On the other hand, we believe that for the Bank of England, a 50bp rate hike is narrowly more likely than the 75bp most are expecting, due to policy U-turns in recent weeks In this article US: fourth consecutive 75bp hike incoming UK: Bank of England could surprise markets with a smaller rate hike Norway: Norges Bank to deliver one final 50bp rate hike Source: Shutterstock US: fourth consecutive 75bp hike incoming Markets will have a broad range of US data and events to digest over the next couple of weeks. Wednesday’s Federal Reserve FOMC meeting is set to result in the fourth consecutive 75bp rate hike given that annual rates of core inflation are heading higher rather than lower, the economy has returned to growth with a decent third-quarter GDP report, and the labour market remains robust with job vacancies exceeding the number of unemployed Americans by four million. The tone of the press conference and the outcome of next Friday’s jobs report will then help markets firm up expectations for what the Fed may do in December. There have been hints that officials could open the door to a slower pace of rate hikes, and after 375bp of interest rate increases (after next Wednesday) there is a strong argument for taking stock of the situation. Unfortunately, the data hasn’t been moving in the right direction and we would probably need to see a noticeable slowdown in the month-on-month rates of core CPI increases from 0.5/0.6%MoM towards 0.2/0.3% to give the Fed the confidence to moderate the pace meaningfully. At this stage, we just aren’t confident that this will happen in time for the December FOMC meeting so there remains the strong possibility that we get a fifth consecutive 75bp hike versus our current 50bp view. Attention will then switch to the midterm elections that will be held on 8 November. In our preview, we set out different scenarios and potential impacts. The polls seem to be shifting in the direction of a Republican-controlled Congress, which will greatly limit what President Joe Biden can achieve in the second half of his presidential term. This means less government influence on the economy and will put more pressure on the Fed to cut rates in the second half of 2023 to support the economy, as nothing will come from the fiscal side. UK: Bank of England could surprise markets with a smaller rate hike It was unthinkable only a few weeks ago, but we now think a 50bp rate hike is narrowly more likely than the 75bp Bank of England rate hike markets and most economists appear to be expecting. It’s undeniably a close call, and whatever happens, the committee is likely to be heavily divided. But in recent speeches, policymakers have been signalling that markets are overestimating the amount of tightening left to come. Meanwhile, following the various policy U-turns of recent weeks, the expected boost from fiscal policy now looks similar to what was expected before September’s meeting, when it opted against a 75bp move. With the latest data not providing a clear justification for a faster hike, and sterling now stronger than it was before September’s meeting, we think there is a good chance now that the Bank will underdeliver on market/economist expectations. Read our full preview here. Norway: Norges Bank to deliver one final 50bp rate hike Having opted for multiple 50bp rate hikes through the summer, Norway’s central bank hinted it could slow the pace back to 25bp for its final few moves. The question for next week is whether it instead decides to continue to front-load tightening, and we think it will. Higher overseas rate expectations and another massive upside surprise on inflation suggest we should expect another 50bp hike on Thursday. However that would take the central bank close to the end of its hiking cycle, and we are pencilling in one (or perhaps two) more 25bp moves before it pauses. Key events in developed markets next week Source:Refinitiv, ING This article is part of Our view on next week’s key events   View 3 articles TagsUS Norway Bank of England   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
ECB's Tenth Consecutive Rate Hike: The Final Move in the Current Cycle

What Can Bring The Fed's Next Decision And What It Means For Economy?

Kamila Szypuła Kamila Szypuła 29.10.2022 10:55
Another Fed decision is ahead. During the Covid-19 pandemic, the interest rate was kept close to zero, but rose sharply in response to rising inflation. Last time I mentioned that the level of interest rates will be at a historical level. It looks like we can expect even higher levels. Read more: This Will Be The Highest Rate Level In Five Years| FXMAG.COM What to expect? In an effort to bring down inflation, which was near the highest levels since the early 1980s, the central bank raised the federal funds rate to a range of 3% -3.25%, the highest since the beginning of 2008. The economy is growing too fast and inflation is heating up, the Fed is likely to raise interest rates to curb spending and loans. Fed rate movements depend on inflation and employment data. According to experts, job creation has not slowed down significantly.The Fed still believes that inflation risk is weighted upwards and that the ongoing rate hikes are appropriate. Many experts believe the Fed will remain hawkish and will raise rates by 75bp again. Subsequent increases are also connected with the hope that headline inflation will fall this year. Along with the rate hikes, the Fed reduced the amount of bonds accumulated over the years. September was the start of a rapid "quantitative tightening" as is known in the markets. Looking even further ahead, the Fed is preparing to raise rates to 4.5-4.75% next year. What it means for consumer? Inflation remains high and interest rates are rising, putting Americans in a difficult financial position. This can slow down demand and spending for both consumers and businesses. US consumer confidence fell to its lowest level since July in October as high borrowing costs and soaring inflation hit household budgets. The level of consumer optimism has weakened not only for the current economic period, but also for what may happen in the next few months. As a result, households are less likely to spend money and businesses do not have as much access to capital to expand or expand their businesses. Worse, companies tend to pass on these extra costs, making them a "double-edged sword" for consumers. When the Fed raises interest rates, it becomes more expensive to borrow money. This means higher rates for credit cards, car loans, and any industry that relies on financing. This is painful for consumers, especially those who rely more on credit cards or loans. Benefit of a rate hike Savings and CD interest rates are rising due to Fed rate hikes, which means more earnings from your savings balance and a few extra dollars back into your pockets. Having an emergency fund can help deal with unexpected expenses and periods of financial instability. Experts generally recommend saving anywhere for three to six months, but even saving just a few dollars a week can shift significantly over time. Recession is ahead? Markets fear that beating inflation means starting a recession. While the Fed is aiming for a "soft landing" for the economy - by bringing inflation down to 2% without triggering a recession - many fear a recession is coming. Many indicators suggest that this state of farmyard is inevitable. If the Fed raises rates too high and too quickly, it could cool demand so much that the economy will slide into recession. Source: investing.com
All Eyes On Capitol Hill, Jerome Powell Will Appear Before The Senate Banking Committee

The Fed Would Follow Other Central Banks And Rein In Their Aggressiveness

ING Economics ING Economics 30.10.2022 11:02
The Fed's favoured measure of inflation is heading higher, rather than lower while employment costs continue to rise at double the rate experienced over the past 15 years. The market is probably right to expect the Fed to slow the pace of rate hikes from December, but this is by no means guaranteed In this article Underlying inflation still heading higher Labour costs still running hot Better spending momentum, but GDP growth is still likely to slow in the fourth quarter 5.1% Annual rate of core inflation   Underlying inflation still heading higher US market interest rate hike expectations have been scaled back in recent days as caution on the economic and market outlook have heightened expectations that the Fed would follow other central banks and rein in their aggressiveness. Yet, while we may well get a “step down” in the pace of tightening from December onwards it is clear that inflation is far from defeated and the risks are that rate hikes could continue for longer. That view has been backed up by today’s data which show the Fed’s favoured measure of inflation rose 0.5% month-on-month in September, the same as in August (although it was revised downwards from 0.6%). This leaves the year-on-year up at 5.1% versus 4.9% previously. Remember that to get the annual rate of inflation trending back down to the 2% target we need to see MoM figures closer to 0.2%, so there is little sign of us heading in that direction yet. Nonetheless we are hopeful that it will slow next year. The chart below shows the relationship between the National Federation for Independent Business’ data series on price plans – the proportion of companies looking to raise their prices in the next three month and the core PCE deflator. It hints that weakening demand, the deteriorating economic outlook and rising inventory levels are making businesses more cautious and suggests pricing power is waning. If so this indicates inflation could slow rapidly through the first half of the year. Core PCE deflatior and the NFIB survey of corporate price plans   Source: Macrobond, ING Labour costs still running hot That said, the Fed appears focused on the here and now with another of their favourite indicators highlighting the strength in near-term inflation pressures. The Employment Cost Index showed that labour market inflation pressures remain strong, rising 1.2% quarter-on-quarter in the third quarter after a 1.3% increase in the second quarter. This is double the 0.6% QoQ average over the past 15 years, indicating that this is still going to be an issue for the Fed given its increase prominence in how the central bank is assessing the risks. Wages rose 1.3% while benefits increased 1% with government labour cost increases outstripping private sector costs for the first time in several years – government wages rose 2.1% QoQ versus 1.2% in private industry. Better spending momentum, but GDP growth is still likely to slow in the fourth quarter Meanwhile, the personal spending numbers have seen some quite big revisions so that after a contraction in real consumer spending in July we got some pretty firm figures for August and September with 0.3% MoM growth. As such this positive momentum heading into the fourth quarter makes us a little more optimistic on fourth quarter GDP than we had been. But even so the intensifying headwinds from the downturn in the housing market, high borrowing costs and the strong dollar mean that we think it will slow to something around the 1.5% mark. TagsUS Inflation Federal Reserve Board Federal Reserve   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Nasdaq 100 Faces Bearish Breakdown Below Ascending Wedge and RSI Momentum Indicator

The US Dollar (USD) May Meet Strong Demand Into Any Weakness

ING Economics ING Economics 30.10.2022 11:07
Market expectations are firmly behind a fourth consecutive 75bp interest rate hike from the Federal Reserve next week. The key story is whether the Fed opens the door to a slower pace thereafter or if the hawks’ focus on core inflation momentum signals a fifth 75bp move in December In this article Markets on board for another 75bp hike Fed could hint at a slower path ahead Inflation needs to soften to prevent a fifth 75bp hike The 10yr effect, market liquidity and Fed cost management FX markets: Hyper-sensitive to the pivot A fourth consecutive 75bp rate hike from the Federal Reserve looks like a done deal for next week’s Federal Open Market Committee (FOMC) meeting. After all, core inflation readings are heading higher rather than lower, the economy has returned to growth after two consecutive quarters of falling GDP, while job creation continues apace with job vacancies exceeding the number of unemployed Americans by four million. The Fed continues to believe inflation risks are “weighted to the upside”, that ongoing rate hikes are “appropriate” and that a “sustained period of below trend growth” is required to get inflation under control. Unsurprisingly, 75bp is fully priced by financial markets. Possible scenarios and market implications Source: Macrobond, ING   A 50bp hike is predicted by a tiny minority of analysts, a view that got some traction following recent comments from a couple of doves on the committee about the perceived risks of over-tightening policy and creating an unnecessarily deep recession. However, the general view is that this is more of a story regarding the size of rate hikes at subsequent meetings. Still, it certainly dampened any talk of a 100bp rate rise. No analyst is forecasting such an outcome based on consensus survey responses, unlike at recent meetings. The current rate hike cycle vs. previous cycles – the orange circle marks where we currently are Source: Macrobond, ING Fed could hint at a slower path ahead The market had been favouring a fifth consecutive 75bp hike at the December FOMC meeting up until late last week. However, a Wall Street Journal article last Friday by Nick Timiraos, who has gained a reputation as the Fed's go-to guy when "senior management" want to guide the market more directly, helped alter the balance of thinking. His article hinted that some officials are concerned that things were moving too fast too quickly and they need to rein the market back a bit, which has re-opened the possibility of “just” a 50bp hike in December. This was followed by comments from San Francisco Fed president Mary Daly, echoing sentiments from Fed governor Chris Waller that the Fed is "thinking about a step down [in the pace of hikes], but we’re not there yet". Smaller rate hikes from Canada and Australia have added to a sense that bankers are looking to tone down the aggressiveness. As Fed chair Jerome Powell has repeatedly admitted, monetary policy works with “long and varied lags” and after having hiked rates 375bp, it might soon be time to stop battering the economy so aggressively. The speed with which Treasury yields, mortgage rates and other borrowing costs have been rising in the economy is causing some economic stress, most notably in the housing market, but there is also concern that financial stresses could potentially be brewing in the system. Consequently, we do indeed expect the Fed to open the door to a slower pace through formal forward guidance, but it may not necessarily go through it. Inflation needs to soften to prevent a fifth 75bp hike With inflation failing to behave as the Fed would like, the central bank is going to be reluctant to slow the pace of hikes until there is evidence that price pressures are moderating. The core CPI and PCE deflator continue to show prices rising 0.5% or 0.6% month-on-month, but to get inflation to trend toward the 2% year-on-year target we need to see month-on-month price changes of closer to 0.2%. So, while the recent commentary has offered some support to our current house view of a 50bp rate hike in December, the data doesn’t yet. As such we have to keep the option open for a 75bp hike in December, even if the Fed language is a little softer next week. Indeed, the stickiness of inflation also suggests the risk is that our call for December to mark the peak (at 4.25-4.5%) is perhaps too early and it could be that we get a final 50bp in February that would then mark the top. This would leave a terminal rate of 4.75-5%. The 10yr effect, market liquidity and Fed cost management The market discount for the terminal fed funds rate is very important for the trajectory of the 10yr Treasury yield. In the past week, that market discount has moved from 5% down to 4.8%. And if the Fed hikes by 75bp on 2 November, the effective funds rate will move up to 3.83%. That’s still some 100bp below where the market expects the effective fund rate to get to. The issue for the 10yr is whether that 100bp gets delivered. And if not, whether it over or undershoots the 100bp discounted. That’s where the direction for the 10yr yield will come from. The other issue that will be interesting for the Federal Reserve is whether it decides to talk about market technicals. There is a running US$2.2tr going back to the Fed on the overnight reverse repo facility, reflective of an ongoing excess of liquidity in the system. Such is the size of that excess that the SOFR rate, effectively the general collateral rate, has been dragged down to the 3% area at times. It has even been below 3%, which is not a great look as the fed funds floor is 3%. The rate the Fed pays on the reverse repo window is 3.05%.  So far the Fed has viewed this through the prism of a facility that continues to do its job. That’s fair to a point. But during deeper moments of reflection, there must be a nagging feeling at the Fed that this is not an ideal set of circumstances, and a means to correcting this is through faster balance sheet run-off. Alternatively, the balance sheet run-off will ultimately cumulate to a point where it begins to materially impact the liquidity excess. But that will take some time; likely another few quarters. A final point that the Fed may or may not opine on is its profit and loss account. Two issues here. First the performance of its bond portfolio. Clearly, it has seen a large capital loss so far this year, just as practically all bond portfolios have. Further rises in yields add to this negative performance. Second, it will be interesting to see whether the Fed addresses the rising price to be paid on excess reserves, which are compensated at the rate of 3.15% currently, and that likely goes up by 75bp in line with other rates. There has been minimal commentary on this from the Fed to date, but it’s certainly something that could be commented on, in line with the tiering discussions elsewhere. FX markets: Hyper-sensitive to the pivot The dollar goes into the October FOMC 3-4% off its highs of the year. The move has coincided with momentum towards the idea that the Fed might want to slow the pace of hikes – akin to what we have seen in Australia and more recently in Canada. The big question for the market is whether Powell wants to use the press conference to discuss slowing the tightening cycle. Frankly, that is very uncertain and why we use the scenario approach above. Making the case for the dollar staying relatively supported is: i) the market already prices the pivot to a 50bp hike in December and ii) the Fed knows how sensitive rate markets are to communication, where the European Central Bank saying it had made "substantial progress in withdrawing monetary accommodation" saw 30bp wiped off the pricing of the ECB cycle. Does the Fed really want to send that message?  As long as further hikes are coming – which seem likely unless core month-on-month inflation starts to fall sharply – we would expect the dollar to meet strong demand into any weakness. After all, the Fed is still battling with core inflation moving away from its year-end targets. And as real US interest rates push higher again into year-end, we would back the dollar making a return to the highs. In terms of levels, we doubt EUR/USD sustains any gains over the 1.01/1.02 area and would favour 0.95 – perhaps lower for later this year. Huge FX intervention from the Bank of Japan should not stand in the way of USD/JPY returning to 150. And USD/CNY should push towards the 7.40 area despite sporadic attempts from policymakers to slow the move.  TagsUSD US Treasuries Interest rates Federal Reserve   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Oanda Podcast: US Jobs Report, SVB Financial Fallout And More

Whether President Biden Stands Again And Whether Former President Trump Will Seek The Nomination To Run

ING Economics ING Economics 30.10.2022 11:48
President Joe Biden is not on the ballot at the 8 November mid-term elections, but the outcome will determine how much he can achieve in the second half of his presidential term and how the government can respond to growing recession risks. It will also be an important barometer for the Republican Party and whether Donald Trump will run against Biden in 2024   In this article What Is happening? What are the key issues? The state of play What history tells us The scenarios and what might happen in the next two years The market impact The market impact The market impact What Is happening? All 435 members in the House of Representatives are up for election (currently 220 Democrat, 212 Republican, three vacant). This is a two-year term. The Senate is comprised of 100 members. Each Senator has a six-year term with approximately a third up for election every two years; 34 Class 3 Senate seats + one seat due to vacancy is up for election on 8 November. Of these 35 Senate seats 21 are currently held by Republicans and 14 are Democrat. The Senate membership is currently 50 Republicans, 48 Democrats, and two independents who vote with the Democrats. Vice President Kamala Harris (Democrat) gets the deciding vote in a tied ballot. Republicans need to win one seat (net) from the Democrats to control the Senate. Should the Democrats lose control of either the House or the Senate (or both) then President Biden’s ability to pass legislation will be severely curtailed. He would likely be limited to using executive powers – a heavily restricted form of lawmaking without tax-changing powers. It will therefore be important in defining what support can be offered to the economy in a likely recession – will the onus be on fiscal policy or monetary policy? The presidency is not up for election until 2024, but the outcome of the mid-terms could determine whether President Biden stands again and whether former President Trump will seek the Republican nomination to run. The mid-term elections will also have implications for Biden’s climate agenda. Partial or full Republican control of Congress will add difficulties to the execution of clean energy tax incentives and funding under the Inflation Reduction Act, as well as other climate measures the administration intends to establish before the next presidential election. In all the scenarios of the election outcome, we can expect more measures coming from federal government agencies to regulate emissions. 36 states and three territories also hold gubernatorial elections – a vote to elect a governor to a four-year term, except for New Hampshire and Vermont where the governor serves a two-year term. Of the 36 states up for election, 20 currently have a Republican governor and 16 have a Democrat. Guam (Dem), US Virgin Islands (Dem) and the Northern Mariana Islands (Rep) are the territories holding elections. Numerous state elections for Attorney General, Secretary of State, Treasurer and state legislative elections are also occurring. This could have major implications in a contested election in 2024. There are also various local referendums, including abortion legislation referendums in six states.   What are the key issues? President Biden’s approval rating, while low by historical standards, has increased following recent legislative “wins” surrounding green policies, infrastructure and technology. The Democrat Party’s stance following the Supreme Court’s vote to eliminate the constitutional right to obtain an abortion has also helped lift approval ratings.  Nonetheless, the most important issue according to pollsters is the state of the economy with the rising cost of living, higher interest rates and falling asset prices all causing concern for the electorate. Percentage of Americans mentioning economic issues as the nation's most important problem Source: Gallup   The perception of poor performance in government is the second most cited negative factor. In the immediate aftermath of the Supreme Court’s vote on abortion, this issue did become the top issue for 8% of respondents, having been at 1% the previous month. It has since slipped back to 4%. Other issues respondents cite as the top concern for the election Source: Gallup The state of play Mid-term elections are typically seen as a referendum on the effectiveness of a president and their party during the first two years of their term. The omens are not good so far, with President Biden’s approval at this stage in his presidency very low by historical standards, matching Bill Clinton and Ronald Reagan and just ahead of Donald Trump. All three took heavy losses in their first mid-term election. High levels of partisanship, the high (and rising) cost of living, a weakening economy and falling asset prices are all hurting President Biden and the Democrats. Presidential approval ratings six weeks before mid-term elections Source: Gallup   The election of House members tends to reflect generic Republican-Democrat polling. FiveThirtyEight collates opinion polls which suggest that Democrats and Republicans are tied on 45% each, with 10% of the population undecided. Turnout is therefore key for the Democrats if they are to retain a winning margin in the House. People who want political change tend to vote in greater numbers than those who are content with the status quo. Mid-term election turnout tends to be far lower than for presidential election years. Typically, presidential election years see a turnout of 50-60% with 2020 seeing 67% turnout. Mid-term elections typically see a turnout of around 40% although 2018 saw a 53% turnout. Hence, the consensus amongst political forecasters is that the Republicans will win a narrow victory thanks to their more motivated base. The Senate and Gubernatorial elections are different to the House elections in that senators and governors tend to be better known and individual personalities play a greater role in the decision-making process for the electorate. One way of looking at it is that California only has one governor and two senators, but 52 house seats. Consequently, the Senate races are less driven by national issues that impact generic Democrat-Republican voting patterns in the House. Most polls show the majority of Senate seats up for election are solid Democrat or solid Republican. There are perhaps only four Senate seats out of the 35 up for contention where there is genuine uncertainty on the outcome. The Cook Political Report lists one Democrat seat in Georgia and one in Nevada as a “toss-up” while one Republican Senate seat in Pennsylvania and one in Wisconsin are listed similarly. Hence the Senate is a closer call than the House. What history tells us Only three out of the last 22 mid-term elections (going back to Franklin D Roosevelt’s presidency in 1934) have seen the incumbent president’s party make gains in the House of Representatives (nine seats for Roosevelt in 1934, five seats for Clinton in 1998 and eight seats for George W Bush in 2002). The six-seat gain that the Republicans need to win control of the House has been achieved on 17 occasions since 1934 and in each of the last four mid-terms. The median loss of House seats for an incumbent’s party since 1934 has been 28. In the Senate, the incumbent president’s party has gained seats on six occasions and lost seats 15 times with one no-change outcome since 1934. The median change in the past 21 occasions has been a loss of five seats. The Republicans need to pick up just one seat to control the Senate. House and Senate gains/losses for incumbent presidents at mid-term elections     Source: Wikipedia, ING   While the backdrop supports the view that the Republicans have a chance to win control of the Senate, individual Republican candidates have run into difficulties. For example, Herschel Walker in Georgia has lost ground following an abortion scandal, while there are independent voter concerns regarding inexperience and extremism in other candidates. Most political forecasts have the Democrats maintaining control of the Senate, but it is a close call. Betting markets narrowly show a majority expecting the Republicans to win control of both the House and the Senate. Implied probabilities of outcomes based on PredictIt betting odds – spreads mean numbers do not sum to 1     Source: Macrobond The scenarios and what might happen in the next two years Republicans win the House and Democrats retain the Senate: Biden constrained. 50% probability President Biden struggled to pass legislation when he had a Democrat majority in both the House and the Senate. Without a majority in Congress, it is nigh on impossible. Intense partisanship with just two years to go until the next presidential elections means major legislation is unlikely to pass unless there is a national emergency. President Biden’s legislative actions are therefore likely limited to the use of executive orders and actions to circumvent Congress, where allowed. This is a much more limited form of government. Executive orders can only be implemented in areas where the president has constitutional powers, such as trade negotiations. The president cannot use an executive order to change taxes because that power is held by Congress. Executive orders can be an effective way of implementing policy since legislation is often written in broad, general language. Legislation is often set out to achieve certain targets or aims without explicitly saying how this should be done. An executive order can allow the president to specify in more detail the route to achieve those aims. These orders only apply to Federal agencies. Consequently, Biden’s focus may shift towards international relations and trade policy where the president is less constrained by Congress. Given that the fear of recession is rising, the president is going to have less scope to offer fiscal support given the requirement of having Republican legislators on board. This suggests that once inflation is under control the onus is going to be on the Federal Reserve to offer stimulus to the economy. This is our base case for aggressive interest rate cuts from the second half of 2023 onwards. A Senate controlled by the Democrats would still be able to approve the president’s choices for key positions, such as judges. With control of the House, Republicans gain congressional investigative powers, with some on the right already proposing looking into the president’s son, Hunter Biden’s, business dealings. They can also stall or disband other inquiries, including the committee investigation into the 6 January insurrection. Trump’s enlarged power base in the House could also lead to investigations into the FBI search at Mar-a-Lago. From a sustainability perspective, the landmark Inflation Reduction Act is unlikely to be repealed if the Republicans control either the House or the Senate because President Biden has the authority to veto the repeal, or any other passed legislation intended to replace the original law. However, under a divided Congress, it could be tough to execute the planned clean energy spending under the Inflation Reduction Act. Republicans could make it harder for the tax credits and funding to be distributed through stricter procedure inspection. Under this scenario, Biden will also likely embark on more climate initiatives from the executive branch, such as issuing executive orders or directing agencies to roll out more aggressive carbon regulations, although the latter faces challenges from the Supreme Court. A split Congress and President Biden left to focus on international issues such as trade could end up proving mildly positive for the dollar and bad for EMFX. The Biden Administration’s stance on Chinese trade has not been as accommodative as many had expected back in 2020 and the recent tightening of restrictions in the semiconductor sector could lay the groundwork for a more hawkish trade path into 2024.  The market impact FX: A split Congress and President Biden left to focus on international issues such as trade could end up proving mildly positive for the dollar. The Biden Administration’s stance on Chinese trade has not been as accommodative as many had expected back in 2020 and the recent tightening of restrictions in the semiconductor sector could lay the groundwork for a more hawkish trade path into 2024. Rates: Equity markets tend to prefer political malaise, as there tends to be less political meddling to fret about. Any material outperformance in the equity space can act to amplify the upside move in market rates in the month or so after the mid-term outcomes, while at the same time dampening the downside to market rates in the longer term, say looking through to the end of 2023. Market rates will still fall in 2023 (once the peak for the Funds rate is in), but not by as much if the Democrats were to hold both houses.   2. Republicans win the House and Senate: A springboard for Trump in 2024? 40% probability A bad performance for the Democrats will prompt questions as to whether Joe Biden is the best person to lead the Party into the next election. Senior Democrats could start jockeying for position with potential party infighting, further undermining the president’s ability to deliver policy. However, the lack of a credible alternative still favours Biden standing again and defeating any Democrat challenger. The president’s ability to pass any legislation is curtailed and limited to executive orders as outlined above. A Republican Senate would be able to block Biden’s picks for key positions in the judiciary and elsewhere. The fact that candidates backed by Donald Trump, and importantly that backed him, have won seats in both the House and Senate strengthens his position as the likely Republican nominee to challenge President Biden in 2024. The Republicans, buoyed by a convincing victory, are likely to open investigations into Hunter Biden and there could even be impeachment charges. Republicans making sweeping gains in the House and the Senate would likely be mirrored by major gains for Republicans in state positions that have influence over election processes and the certification of results. This could make the 2024 election even more contentious. As in the previous scenario, there will be little prospect of any meaningful fiscal support to counter the recession, putting the onus on the Federal Reserve to loosen monetary policy aggressively in the second half of 2023 onwards. On sustainability, like the scenario of a split Congress, while the Inflation Reduction Act is here to stay, the implementation process would be a lot harder. Moreover, a fully Republican-controlled Congress would encourage the party to propose energy legislation that could advance their policy platform. For instance, there will likely be proposals to increase oil and gas activities to cement US energy dominance and seize profits from exports. There might also be attempts to streamline the federal energy project permitting process, which can substantially shorten the permitting time for not only renewable projects but also oil and gas projects. Some clean energy areas that will likely see Republican support include carbon capture and storage (CCS, as it can be applied to hard-to-abate sectors such as oil and gas), clean manufacturing, and key domestic energy supply chain strengthening. Congress would also likely support blue hydrogen produced from natural gas using CCS technologies over the short to medium term, as opposed to a more radical transition toward green hydrogen produced from renewables. Biden will likely be more aggressive (than scenario 1) in using his executive power to counter resistance from Congress on the climate issue. Republican control of both branches of Congress could initially weigh on the dollar via a hamstrung Administration unable to deliver fiscal support in a downturn. Closer to 2024, however, the dollar could be making a comeback were Republicans holding gains on the polls – given the experience with Donald Trump’s Tax Cuts and Jobs Act of 2017. The market impact FX: Republican control of both branches of Congress could initially weigh on the dollar via a hamstrung administration unable to deliver fiscal support in a downturn. Closer to 2024, however, the dollar could be making a comeback were Republicans to hold gains in the polls – given the experience with Donald Trump’s Tax Cuts and Jobs Act of 2017. Rates: For markets, this extreme version of political separation between the executive and congressional powers is one that will likely see politics lurch to petty squabbling, removing the risk for big macro-impactful outcomes. As a pre-emptive swing in the direction of a potential Trump administration, a pro-growth tint should result in higher bond yields than would otherwise be the case. Expect an amplification of the risk in yields to the upside, and then a more dramatic fall in market rates to the downside as we progress through 2023.   3. Democrats retain House and Senate: Biden gets a second chance. 10% probability This would be a major surprise given the current state of polling, but it would reinvigorate the Democratic party and Biden’s presidency. Legislation in support of abortion, same-sex marriage and voting rights would be high on the agenda. With recessionary fears intensifying, this outcome would be the one most likely to generate a fiscal response, presumably on spending support for impacted households, e.g. the reintroduction of a federal unemployment benefit. Looser fiscal policy may mean there is less pressure on the Fed to cut interest rates, especially if inflation proves to be stickier than we project. The Republican party’s failure to pick up enough seats would likely weaken the chances of Donald Trump being selected as the Republican candidate to challenge President Biden in 2024. The party may look to put momentum behind alternatives such as Ron DeSantis, former vice-president Mike Pence and former UN Ambassador Nikki Haley. Climate and clean energy legislation could be expanded, building on the Inflation Reduction Act (if they gain a Senate seat and remove the need to get backing from Kyrsten Sinema or Joe Manchin). For instance, Congress might propose bills to change excessive emissions from the power sector—a provision that was originally part of the Democrats’ legislative efforts but was removed by Manchin. Congress could even go a step further to pass a new law and give authorisation to the Environmental Protection Agency (EPA) to put caps on power plant emissions. The EPA’s authority to do so was previously rescinded by a recent Supreme Court decision. Finally, the Biden administration could be expected to set up more regulation measures to curb emissions. These include tougher rules to reduce methane emissions, as well as new vehicle emissions and efficiency standards. Surprise retention by the Democrats of both the House and the Senate could be seen as a dollar positive for 2023. The administration would have more power to meet a recession with a fiscal response. This would potentially make more difficult the Fed’s objective of bringing inflation back to 2%. The market impact FX: A surprise retention by the Democrats of both the House and the Senate could be seen as a dollar positive for 2023. The administration would have more power to meet a recession with a fiscal response. This would potentially make more difficult the Fed’s objective of bringing inflation back to 2%. Rates: Markets would perceive this as being the lower growth and heightened political meddling outcome, which would tend to present a downside risk for equity markets relative to the baseline. For bonds, one question is how inflation might be impacted, with risks that the elevation of climate-focused measures could result in higher inflation, at least in the short term. This could dominate the perception of a lower growth outlook, resulting in higher bond yields than otherwise would be the case (although they would still fall in 2023 once the cycle has turned). That said, there is also a route for bigger spending from a Democratic controlled administration, bolstering growth, and supply of bonds. That could in turn ultimately skew the risk towards higher market rates on a more medium term outlook. Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The EUR/USD Pair Is Showing A Potential For Bearish Drop

Next week's Fed decision is naturally crucial for EUR/USD. What do we learn from predictions? How big may be the December move?

InstaForex Analysis InstaForex Analysis 30.10.2022 18:59
The euro-dollar pair ended the last trading week at 0.9965 – so to speak, in "neutral territory". Bulls on EUR/USD were unable to settle above the parity level, while bears were unable to develop a downward momentum to return to the 98-97 figure area. As a result, the parties stopped around the 1.0000 mark and dispersed to the corners of the ring. At the same time, there is no doubt that traders will come together again next week. The Federal Reserve will act as the arbiter of this confrontation. The US central bank will determine the winner: either the dollar will collapse throughout the market (and the EUR/USD pair will not be an exception here), or dollar bulls will organize another rally.     The Fed will announce the results of its next meeting on November 2. On the one hand, the results of this meeting are predictable. The probability of a 75-point rate hike is now estimated by the market at 82%, according to the CME FedWatch Tool. The main intrigue of the November meeting lies in the further pace of tightening of the Fed's monetary policy. Again, if we focus on the CME data, the probability of a 75-point rate hike in December is only 43.4%. Whereas the probability of implementing a 50-point scenario is estimated at 48.2%. A 25-point hike is also not excluded, although this scenario is unlikely (8.4%). Rumors that the Fed will slow down the pace of monetary policy tightening (after the November meeting) especially intensified last week, when the so-called "silence mode" was already in effect (for 10 days before the meeting, Fed members cannot voice comments in the public plane). An interesting situation has developed: amid the "forced silence" of the representatives of the Fed, weak macroeconomic reports were published in America, indicating a slowdown in economic growth. At the same time, it became known that the volume of US GDP in the third quarter increased by 2.6%, after a two-quarter decline in the first half of 2022. Now the Fed members will have to resolve this. Actually, there are only two scenarios: either the Fed expresses its concern about the "side effects" of aggressive tightening of monetary policy (hinting at a decrease in the rate of rate hikes in December and beyond), or the central bank again focuses on inflation, thereby confirming its intention to raise the interest rate at an aggressive pace. Many factors speak in favor of the second, hawkish scenario. Among them is the corresponding position of Fed Chairman Jerome Powell and the growth of inflation indicators (core CPI, base PCE). On the side of the conditionally dovish scenario, there are gloomy prospects for the American economy. According to many experts, US GDP growth will slow down in the coming months, as consumers and businesses continue to cut spending in the face of rising interest rates and uncertainty. On Wednesday we will find out which way the scales will tilt. In my opinion, the Fed will maintain its hawkish attitude, after which the dollar will strengthen its position throughout the market. Powell has repeatedly stated that the fight against high inflation is the number one task for the Fed. Similar statements were made by many of his colleagues, including those who have the right to vote in the Committee. In general, the economic calendar of the upcoming week is full of events. For example, key data on inflation growth in the eurozone will be published on Monday. According to most analysts, the overall consumer price index in October will jump to 10.2%, the core CPI – to 5.1%. However, given the results of the October ECB meeting (which were announced last Thursday), this release will have a limited impact on the EUR/USD pair. On Tuesday, traders will focus on the ISM manufacturing index, which should fall to the 50.0 mark. If it falls below the 50-point value, the dollar will be under significant pressure. On Wednesday, as mentioned above, the Fed will announce the results of its November meeting. Also on this day, the ADP agency will publish a report on the state of the labor market in the United States. This release serves as a kind of "petrel" ahead of the release of Nonfarm, which will be published a day later, on November 4. On Thursday, we should pay attention to the dynamics of the index of business activity in the US services sector from the ISM Institute. Negative dynamics is also expected here (a decrease from 56 points to 54). And finally, on Friday, Nonfarm will be the central release of the day. According to preliminary forecasts, the unemployment rate will increase slightly in October (from 3.5% to 3.6%), and the number of people employed in the non-agricultural sector will grow by 200,000. The average hourly wage should slow down to 4.7% (in annual terms). However, all of the above releases, despite their significance, will play a secondary role for the EUR/USD pair (perhaps, except for Non-Farms). The tone of trading will be set by the Fed. If the US central bank refutes (explicitly or covertly) rumors about a slowdown in the pace of monetary policy tightening, EUR/USD bears will be able to mark at least 0.9830. At this price point, the average line of the Bollinger Bands indicator coincides with the Kijun-sen line and the lower boundary of the Kumo cloud on the daily chart. With a high degree of probability, bears will push through this level of support and will be designated in the area of the 97th figure. But if the dovish rumors are really confirmed, bulls will again try to gain a foothold above the parity level. The key resistance level here will be the 1.0060 mark – this is the upper line of the Bollinger Bands on the same timeframe. Relevance up to 12:00 2022-10-31 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/325712
GBP: BoE Stands Firm on Bank Rate and Mortgage Interest Relief, EUR/GBP Drifts Lower

Awaited Fed's interest rate decision is made on Wednesday - InstaForex talks important events of the next week

InstaForex Analysis InstaForex Analysis 30.10.2022 19:44
Wednesday 02 November Germany. Index (PMI) of business activity in the manufacturing sector (final release) This S&P Global report is an analysis of a survey of 800 purchasing managers that asks respondents to rate the relative level of business conditions, including employment, production, new orders, prices, supplier shipments and inventory. Since purchasing managers have perhaps the most up-to-date information on the situation in the company, this indicator is an important indicator of the state of the German economy as a whole. This sector of the economy forms a significant part of Germany's GDP. A result above 50 is considered positive and strengthens the EUR, below 50 is considered negative for the euro. Data worse than the forecast and/or the previous value will have a negative impact on the euro. Previous values: 47.8, 49.1, 49.3, 52.0, 54.8, 54.6, 56.9, 58.4, 59.8, 57.4, 57.4, 57.8 , 58.4, 62.6. The preliminary value was 45.7. The level of influence on the markets (final release) is average. Eurozone. Index (PMI) of business activity in the manufacturing sector (final release) The Eurozone Manufacturing PMI (from S&P Global) is an important indicator of the state of the entire European economy. A result above 50 is considered positive and strengthens the EUR, below 50 is considered negative for the euro. Data worse than the forecast and/or the previous value will have a negative impact on the euro. Previous values: 48.4, 48.9, 49.8, 52.1, 54.6, 56.5, 58.2. The preliminary value was 46.6. The level of influence on the markets (final release) is average. USA. ADP Private Sector Employment Report ADP will present the monthly report on employment in the private sector of the US economy in October. This report usually has a strong impact on the market and dollar quotes, although, as a rule, there is no direct correlation with Non-Farm Payrolls. Strong data has a positive effect on the dollar; a decrease in the indicator can negatively affect it. In any case, during the release of this report, there may be an increase in volatility in the market and, above all, in dollar quotes. Previous values: 208,000 in September, 185,000 in August, 270,000 in July, 358,000 in May, 457,000 in April, 425,000 in March, 375,000 in February, 372,000 in January 2022. The level of influence on the markets is medium to high. USA. The Fed's interest rate decision. Fed Commentary on Monetary Policy The level of interest rates is the most important factor in assessing the value of a currency. Most other economic indicators are only looked at by investors to predict how rates will move in the future. The Fed is widely expected to raise interest rates again by 75 bps (up to 4.00%) and, possibly, will announce plans for its further increase, and Fed Chairman Jerome Powell will explain the decision. Market participants expect the US central bank to accelerate the tightening cycle of monetary policy. However, what will happen after the November meeting is not entirely clear. During the announcement of the Fed's decision, volatility in the market usually increases sharply, primarily in the US stock market and in dollar quotes. Powell's comments could affect both short-term and long-term USD trading. A more hawkish stance on the Fed's monetary policy is seen as positive and strengthens the US dollar, while a more cautious stance is seen as negative for the USD. Investors want to hear Powell's opinion on the Fed's plans for this year. The level of influence on the markets is high. USA. FOMC (Open Market Committee) press conference The press conference of the Federal Open Market Committee is used by the Fed to communicate with investors regarding monetary policy. It examines the factors that influenced recent interest rate decisions and comments on the economic environment in which the decision was made. The FOMC press conference lasts about an hour and consists of two parts. The first part reads the ruling, followed by a series of questions from invited members of the press and answers from the leadership of the Fed. Almost always, the course of the Fed's press conference (after the meeting on monetary policy) is accompanied by an increase in volatility in the markets, primarily in dollar quotes and US stock market instruments. The level of influence on the markets is high. Relevance up to 10:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/325632
Forex: US dollar against Japanese yen amid volatility and macroeconomics

Friday, November 4th - Reserve Bank of Australia comments on monetary policy, USA releases its NFP

InstaForex Analysis InstaForex Analysis 30.10.2022 20:08
Friday 04 November Australia. RBA Commentary on Monetary Policy This document, which is a report of a recent meeting of the RBA's management reviewing economic and financial conditions, provides valuable information on the bank's position on the outlook for the economy, the labor market and inflation - key factors that will determine the future of monetary policy. If the RBA is positive about the state of the labor market in the country, GDP growth rates, and also shows a "hawkish" attitude towards the inflationary forecast in the economy, the markets regard this as a higher probability of a rate hike at the next meeting, which is a positive factor for the AUD. The soft rhetoric of statements and comments of the bank's leaders regarding, first of all, inflation will put pressure on the AUD. Germany. Composite index (PMI) of business activity (final release) This S&P Global report is an analysis of a survey of 800 purchasing managers that asks respondents to rate the relative level of business conditions, including employment, production, new orders, prices, supplier shipments and inventory. Since purchasing managers have perhaps the most up-to-date information on the situation in the company, this indicator is an important indicator of the state of the German economy as a whole. A result above 50 is considered positive and strengthens the EUR, below 50 is considered negative for the euro. Data worse than the forecast and/or the previous value will have a negative impact on the euro. Previous values: 45.7, 46.9, 48.1, 51.3, 53.7, 54.3, 55.1, 55.6, 53.8 (in January 2022). The preliminary score was 44.1. The level of influence on the markets (final release) is from low to medium. Eurozone. Composite index (PMI) of business activity in the manufacturing sector (final release) The Eurozone Manufacturing PMI (from S&P Global) is an important indicator of the state of the entire European economy. A result above 50 is considered positive and strengthens the EUR, below 50 is considered negative for the euro. Data worse than the forecast and/or the previous value will have a negative impact on the euro. Previous values: 48.1, 48.9, 49.8, 52.1, 54.6, 56.5, 58.2. The preliminary score was 47.1. The level of influence on the markets (final release) is from low to medium. USA. NFP (number of new jobs created outside the agricultural sector) and unemployment rate The central event of Friday will be the monthly report of the US Department of Labor with data on the main indicators of the country's labor market for October. Market participants are closely following this report, and market volatility during the period of its release usually rises sharply, especially in dollar quotes. The growth of this report's figures (average hourly wages and the number of new jobs created outside the agricultural sector) and the decrease in the unemployment rate are positive for the dollar. Previous values (average hourly wages/new jobs created outside the agricultural sector / unemployment rate): +0.3% in September and August, +0.5% in July, +0.3% in June, May and April, +0.4% in March, 0% in February, +0.7% in January 2022 / 0.263 million in September, 0.315 million in August, +0.528 million in July, +0.372 million in June, +0.390 million in May, +0.428 million in April, +0.431 million, +0.678 million in February, +0.467 million in January 2022 / 3.5% in September, 3.7% in August, 3.5% in July, 3 .6% in June, May, April and March, 3.8% in February, 4.0% in January 2022. Forecast for October: +0.3% / +0.200 million / 3.6%, respectively. The indicators can be called, if not strong, then very positive. At the same time, unemployment remains at minimal levels. In any case, the market reaction to the US Department of Labor report may be unpredictable, because. indicators of previous monthly reports can often be revised, and not always for the better. With volatility traditionally expected to spike around the time this report is released, it may be best for conservative traders to stay out of the market during this time frame. The level of influence on the markets is high. Canada. Labor market data As for the Fed, data on GDP, inflation and the labor market are decisive for the Bank of Canada when planning the parameters of monetary policy. Despite the fact that unemployment rose in Canada during the coronavirus pandemic (from the usual 5.6% - 5.7% to 7.8% in March and already up to 13.7% in May 2020), in recent months there have also been some progress. The decline in the unemployment rate is a positive factor for the CAD. If unemployment rises, the Canadian dollar will fall. Previous unemployment rates: 5.2%, 5.4%, 4.9%, 4.9%, 5.1%, 5.2%, 5.3%, 5.5%, 6.5% ( in January 2022), which indicates an improvement in the situation in the Canadian labor market. The level of influence on the markets is medium to high. Relevance up to 10:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/325632
Canada's Inflation Expected to Ease in May, Impacting BoC's Rate Decision

What a week it was! Macro data, ECB interest rate decision and earnings of Apple, Amazon and Google

Conotoxia Comments Conotoxia Comments 30.10.2022 22:52
U.S. earnings season is underway, and through it, we could learn how the current economic situation is affecting various sectors. Unlike last week, in which it was possible to get an impression of a better-than-expected situation in the banking sector, we now seem to be experiencing a negative surprise among many technology giants. Macroeconomic data At the start of the week, we learned the PMI industrial health index for Germany and the UK, with results of 45.7 points (47 points were expected), and 45.8 points (48 points were expected), respectively. We could see similar readings in July 2022. In addition, these values may indicate a deepening recession in the sector (a reading below 50 points is taken as a decline in activity). On Wednesday, we learned data from the US real estate market. September home sales came in at 604,000 (585,000 was expected), down 74,000 from the previous reading. It seems that the decline may have been caused by rising interest rates and an increase in mortgage rates, which fewer and fewer Americans can afford. On Thursday, we could learn about the Eurozone interest rate decision, which was raised in line with analysts' expectations by 0.75 percentage points, and now the main refinancing rate is at 2% and the deposit rate at 1.5%. The U.S. labor market appears to remain strong, with the number of new claims for unemployment benefits at 217,000 (220,000 was expected). These are the lowest figures since March 2020. Equity market It seems that a positive week cannot be credited to the FAANG tech giants (Facebook, Amazon, Apple, Netflix and Google). Only Netflix surprised with a positive result last week. On the other hand, the CEO of Meta Platforms (Facebook) hinted after the company's conference that he was wary of costs in his metaverse project. This information may have influenced the close of Thursday's session and a share price drop of more than 24 percent. Source: Mt5, Facebook, Weekly Also, surprising was a tweet shared by Elon Musk, in which he showed that he had come with the kitchen sink to Twitter headquarters. We learned that the deal to buy the company was coming to an end at the original price of $54.2 per share. For this reason, the board of directors of the New York Stock Exchange decided to suspend trading of the stock during Friday's session. Meanwhile, the U.S. real estate industry may have surprised positively, as results came in better than expected despite seemingly declining demand and an environment of rising interest rates. Falling commodity prices and widespread inflation may have allowed business costs to be passed on to customers. As a result, almost half of the real estate companies (AlexRe, Equity, Essex, among others) reported net income from operations more than 50 percent higher than expectations. Currency market After Thursday's Eurozone interest rate decision, the EUR/USD exchange rate hovered around parity at 1.000 for a while, eventually falling to a range of 0.995-1.000. It seems that the European currency is starting to strengthen, this time in anticipation of the upcoming FOMC meeting on November 2. Interest rates remained unchanged following Friday's central Bank of Japan (BoJ) meeting. As Reuters reports: “The Bank of Japan kept ultra-low interest rates on Friday and maintained its dovish guidance, cementing its status as an outlier among global central banks tightening monetary policy, as recession fears dampen prospects for a solid recovery. The central bank also announced plans to increase the frequency of its bond buying next month, doubling down on efforts to defend its ultra-loose monetary policy.”. As a result, the price of the USD/JPY pair has risen above JPY 147 since the decision. Source: MT5, USDJPY, Daily Earnings Results season continues next week On Monday, we will learn CPI inflation readings for the Eurozone. On Wednesday, the FOMC's decision on interest rate changes appears to be key. Analysts' consensus is for a 0.75 percentage point hike, in addition, US crude oil inventories may prove important. On Friday, on the other hand, we will learn data on the change in employment in non-farm sectors (NFP), which the FED seems to pay particular attention to. The continuation of the earnings season on Wall Street will show us on Monday the results of the fund of famed investor Warren Buffett, Berkshire Hathaway (BerkshireHa). On Tuesday, we'll learn the Q3 results of healthcare giant Pfizer (Pfizer) and one of the semiconductor and processor industry leaders AMD (AMD). On Thursday, Paypal (PayPal), Starbucks (Starbucks) and Airbnb (AirBNB) will report. The results of the last company may seem particularly interesting, bringing us closer to the situation in the travel industry. Author: Grzegorz Dróżdż, a Market Analyst of Conotoxia Ltd. (Conotoxia investment service) Read more reviews and open a demo account at invest.conotoxia.com Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75,21% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Read the article on Conotoxia.com
Saxo Bank Podcast: A Massive Collapse In Yields, Fed's Tightening Cycle And More

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

InstaForex Analysis InstaForex Analysis 31.10.2022 08:20
The first of the three meetings of central banks has been left behind, and now the market will closely monitor the Fed's meeting, which will be held on Wednesday. All three banks continue to follow the path of tightening monetary policy, but the moment is approaching when rates will rise too much, and their further growth will no longer be necessary. Or the economy will slow down too much, which is why the regulator may refuse new increases. However, this is unlikely to happen in the next month or two, as inflation in the European Union, the UK, or the US remains well above the 2% target. Thus, I doubt that the Fed and the Bank of England will raise rates this week. Fed decision ahead In the case of the Fed, the situation is twofold. The US regulator has already raised the rate to 3.25%, and this Wednesday, it will likely rise to 4%. With one or two more increases, the rate will reach a level at which inflation will accelerate its slowdown. It has been declining for three months, but not yet at a high enough pace, so the regulator will not stop there in November. From my point of view, the demand for the US currency may begin to grow again in November-December 2022 since the factor of tightening the Fed's policy is still one of the most significant. The wave marking of the instruments can be transformed again, and the downward section of the trend can resume its construction. Lower probability of a recession in the United States Demand for the dollar may also begin to grow due to the decreasing likelihood of a recession in the United States. The quarterly US GDP report showed that the economy grew by 2.6%, although the previous two quarters were negative. Thus, the slowdown of the US economy is indisputable, but it cannot constantly grow and constantly accelerate its growth. In my opinion, everything is going well for the US economy. The fall wasn't strong enough to sound the alarm. It almost painlessly survived the increase in rates to 3.25%. Inflation has already started to decline, and there are not so many rate hikes left ahead to expect a major reduction.  Janet Yellen US Treasury Secretary Janet Yellen also believes the US economy is strong and the financial system remains stable. She noted that the situation in the global economy is "too dangerous" at the moment and poses risks to America's financial stability. However, according to her, the administration of President Biden is closely monitoring the situation in the economy and is ready, if necessary, to take certain measures to reduce risks. For the Fed, a strong economy allows it to continue raising rates almost painlessly and fight inflation. The Fed is not currently facing the problem of a falling economy, which may not allow it to raise the rate to the desired level.  The Bank of England The same cannot be said about the Bank of England, which recently had to launch an emergency asset purchase program to stabilize financial markets. Although it will continue to raise the rate, for now, there are big doubts that it will be able to bring the matter to an end without significant damage to the economy. Based on the analysis, I conclude that the construction of an upward trend section has begun, but it may not last very long. At this time, the instrument can build a new impulse wave, so I advise buying with targets near the estimated mark of 1.0361, which equates to 261.8% by Fibonacci, by MACD reversals "up." However, by the end of this trend section, you must be ready now.     Relevance up to 06:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/325728
Australia Is Expected To Produce A Bumper Year Of Crops

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

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

Victory In The Elections Of Luiz Inácio Lula Da Silva | Smoother Crude Oil Trade

Saxo Bank Saxo Bank 31.10.2022 09:13
Summary:  Equity markets closed strongly on Friday, even as the narrative that has purportedly driven strength at times in the equity market of late, the hope that central banks and especially the Fed are set for a dovish shift, failed to offer any fresh support on Friday. After a fresh article from “Fed whisperer” Nick Timiraos from the Wall Street Journal suggested that the Fed fears that it may have to keep the policy rate higher for longer, the event risk of the week will be the FOMC meeting this Wednesday, though other important central bank meetings are in the mix, including a Bank of England meeting on Thursday.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) Strong Friday close in the S&P 500 futures reaching the highest closing price for the up cycle that began earlier this month. S&P 500 futures are now up 8.7% from their lowest close on 12 October. This morning the index futures are trading lower hovering around the 3,898 level which is just below the 100-day moving average. This week is all about the FOMC decision and the ongoing US earnings. Euro STOXX 50 (EU50.I) European equities had a less spectacular performance on Friday and the impressive performance in US equities has not positively impacted STOXX 50 futures this morning trading lower around the 3,620 level. European equities have done better than US equities over the past month as the US technology sector has had weak Q3 earnings. FX: USD mixed as Wednesday’s FOMC meeting eyed Mixed developments for the US dollar on Friday, with the wild rally in equity markets a headwind, while the sharp, partial unwind of the anticipated dovish shift from the Fed at this Wednesday’s FOMC meeting offered some offsetting support as yields perked up slightly after testing key levels last week (see more below in What are we watching next?). After the brief foray above parity and nearly to 1.0100, EURUSD has been tamed back well below that level, while GBPUSD remains relatively bid and well clear of the pivotal level of 1.1500 ahead of the key event risk of the week for sterling, the BoE meeting Thursday (preview below). Elsewhere, USDJPY is coiling within the 145.00-150.00 range, while USDCNH has rebounded sharply and nearly back to the cycle highs. Broad CNH volatility is worth watching for contagion across asset markets. Wheat futures gap higher on Ukraine supply worries Wheat futures (ZWZ2) in Chicago surged as much as 7.7% to $8.93 on the opening after Russia over the weekend pulled out of the UN brokered black sea grain deal (see below). Since the UN and Turkey supported grain corridor opened three months ago Ukraine has shipped more than 9 million tons of foodstuff and it has helped ease tight world supplies and control global food costs. Money managers have been wrongfooted by the latest developments after raising bearish bets on Chicago wheat futures by 63% to a 28-month high in the week to October 25. Food exports from Ukraine also includes corn and sunflower oil and reduced supply of those has lifted corn futures (ZCZ2) in Chicago by 2.3% to trade near resistance at $7/bu and soybean oil futures by 2%. Gold (XAUUSD) Gold trades nervously within a narrowing range ahead of Wednesday’s FOMC meeting where another bumper rate hike is expected. What may follow, however, has caused a great deal of volatility across markets with traders looking for guidance regarding the pace and strength of future rate hikes. Gold is heading for its seventh straight month of declines, the longest losing streak since at least the late 1960’s (Bloomberg) while bullion-backed ETF holdings have dropped to a 30-month low and money managers hold a net short near the highest in four years. All developments supporting an eventual recovery, but not until we reach peak hawkishness from where we could see yields and the dollar soften. As a minimum gold needs to break above $1730 before an end to the month-long downtrend can be called. Crude oil (CLZ2 & LCOZ2) Crude oil trades softer therefore trimming a monthly gain driven by already tight markets and OPEC+’s planned supply cuts from next month. The latest weakness once again being driven by weak economic data from China and a stronger dollar ahead of Wednesday’s FOMC meeting after the famous FOMC whisperer at WSJ in an article speculated the Fed will need to keep rates higher for longer (see below). In addition to OPEC+ production cuts, the market will also have to gauge the impact of EU planned sanctions on Russian oil flows in December, a development that could be a “big hit” to already tight fuel supply, especially in Europe according to Eni’s CEO. US treasuries (TLT, IEF) The low water mark for the US 10-year treasury yield benchmark was near 3.90%, a key pivot level this week as we await the FOMC meeting and how the Fed’s guides for its future policy moves now that it is reaching an important inflection point in which the market expects it is likely the Fed will begin to hike in smaller increments as soon as December. It’s a delicate communication task to guide for a downshift without appearing too dovish. The important US economic data this week includes Thursday’s October ISM Services and especially the Friday October payrolls and earnings data for October. The October CPI is up next week. What is going on? Russia exits Ukraine grain deal Russia suspended its participation in the Ukraine grain export deal after a swarm of drones targeted at least one Russian warship from the Black Sea navy. This will block the passage of millions of tonnes of grain via southern Ukraine and may lead to a fresh jump in prices. The report is especially catastrophic as it comes together with massive wheat crop damage with the US crop belt seeing La Nina for its third consecutive year. Ukraine’s infrastructure ministry said 218 ships had been immediately affected. This included 95 that had already left its ports and were waiting at the inspection site before unloading, 101 waiting for inspection before collecting Ukrainian grain, and a further 22 that were loaded up and ready to set sail. “Putin needs leverage as things go south for him on the battlefields in Ukraine, so the threat of global food crisis needs to be put back in the Russian toolbox of coercion and blackmail,” wrote Alexander Gabuev, senior fellow at the Carnegie Endowment for International Peace via the FT. Lula’s comeback in Brazilian presidential elections Luiz Inácio Lula da Silva claimed a victory in Brazil’s presidential election on Sunday, defeating incumbent rightwing leader Jair Bolsonaro by less than two percentage points and setting the stage for a return to leftwing governance in Latin America’s largest nation. Brazilian ETFs including such as EWZ:arcx, IBZL:xams, RIO:xpar, BRZU:arcx, or BRQ:arcx may be the ones to watch, as will be the BRL later in the day. BRL has been the best performer in the EM basket (excluding Russian rouble) against the USD so far this year. Lack of economic plans from Lula may make a case for market outperformance somewhat weaker, however. What are we watching next? Is Fed concerned that market is expecting too much of a dovish shift at FOMC meeting this Wednesday? Nick Timiraos, who is seen as a kind of “Fed whisperer” and possible conduit of Fed communication with the market, had sent shivers across markets last week with a report suggesting that the November FOMC meeting may be used to signal a downshift to smaller rate hikes. This saw equity markets extending gains while the USD was on the backfoot last week, but now he has come out with another article: Cash-rich Consumers Could Mean Higher Interest Rates for Longer, saying that higher consumers savings buffers and a low level of interest expenses could require that the Federal Reserve raise rates higher and keep them there for longer due to less sensitivity to interest rates than was seen likely previously. The December 2023 EuroDollar contract had rallied as much as 50 basis points off the lows recently, correcting some 15 basis points Friday and slipping a bit lower to start this week as the market is unsure of how aggressively it should lean for dovish guidance. Big week ahead for central bank meetings The general theme is “downshifting” of guidance (As noted in the FOMC comments above). The FOMC meets Wednesday and is expected to hike 75 basis points with guidance indicating that the pace of hikes may start to slow as soon as at the December meeting (if likely with no commitment in either direction). First up, however, is tonight’s RBA meeting, where Governor Philip Lowe and company are expected to only hike 25 basis points tonight after a string of 50 basis point moves as the RBS is concerned about the impact of further tightening on consumption and mortgage payments, though a small minority still expect another 50 basis points moves. On Thursday, we have a pivotal Bank of England meeting, the first after the violent market swings during the uproar over former PM Truss’ fiscally risky policy moves. With calming markets and the new Sunak government rolling out far tighter budget plans, BoE expectations have fallen like a stone, but with the market still expecting the first ever 75 basis point move for this cycle. The BoE has s history of bad communication with the market – and an austere budget brings forward and increases the severity of the coming recession. Finally, Norges Bank also meets Thursday and is expected to hike 25 basis points, seemingly in no hurry despite a very weak currency and high inflation readings, and even having guided that it soon sees an end to the tightening cycle. Earnings to watch Today’s US earnings focus is Stryker which is expected to see its earnings growth increase to 7% y/y with operating margin still under pressure. Otherwise, as we look ahead, earnings tomorrow from Toyota, Sony, BP, AMD, and Airbnb will have the market’s focus. Monday: Daiichi Sankyo, Stryker Tuesday: Toyota Motor, Sony Group, Mondelez, AMD, Airbnb, Eli Lilly, Pfizer, BP Wednesday: KDDI, Novo Nordisk, GSK, Booking, Qualcomm, CVS Health, Estee Lauder, Humana Thursday: Cigna, Amgen, PayPal, Starbucks, EOG Resources, ConocoPhillips, Regeneron Pharmaceuticals, Zoetis, Canadian Natural Resources, DBS Group Friday: Duke Energy, Enbridge Economic calendar highlights for today (times GMT) 0900 – Switzerland SNB Weekly Sight Deposits 0930 – UK Se. Mortgage Approvals 1000 – Eurozone Oct. Flash CPI estimate 1000 – Eurozone Q3 GDP estimate 1345 – US Oct. Chicago PMI 1430 – US Oct. Dallas Fed Manufacturing Activity 1500 – ECB Chief Economist Lane to speak 0145 – China Oct. Caixin Manufacturing PMI 0330 – Australia RBA Cash Target Announcement Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: https://www.home.saxo/content/articles/macro/market-quick-take-oct-31-2022-31102022
The Commodities Feed: Stronger Oil Prices Boost US Oil Production and Supply

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

Swissquote Bank Swissquote Bank 31.10.2022 10:09
Despite the broadly disappointing Big Tech earnings, and the heavy selloff we saw in most Big Tech stocks, US equities ended last week on a positive note, thanks to record profits from US Big Oil companies, and a much better than expected reaction to Apple results. American crude consolidates above the 50-DMA, but failed to clear the $90 offers last week, as recession fears prevent a further rally from developing. Fed, RBA & Bank of England This week, attention shifts to Federal Reserve (Fed), expected to raise rates by another 75bp. The Reserve Bank of Australia (RBA) and the Bank of England (BoE) are also expected to hike by 25bp, and 75bp respectively.Elsewhere, news is not great. Russia decided to pull out of a deal to allow Ukrainian crop shipments; wheat futures jumped more than 5% this morning. China China’s manufacturing and services PMI slipped below 50, to the contraction zone in October due to Covid restrictions in major cities, and many cities are still dealing with lockdown measures, and Xi Jinping made sure to emphasize that he will continue to fight… the virus. Brazil In Brazil, Lula won the election bearing Bolsonaro by less than 2 percentage points. The latter said he refuses the defeat, which means that we will see some more political uncertainty in Brazil in the coming weeks. Watch the full episode to find out more! 0:00 Intro 0:24 Big Oil earns Big 4:07 Big Tech disappoints 5:41 Don’t look at Powell to make you feel better 7:19 Russia scraps wheat deal, China slows, Brazil elections 8:32 Watch Fed, BoE, RBA decisions, US jobs & EZ inflation 9:30 …and some more earnings… Ipek Ozkardeskaya  Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #ExxonMobil #Chevron #Shell #BP #earnings #crudeoil #natural #gas #Fed #RBA #BoE #monetary #policy #decision #USD #GBP #AUD #EUR #ECB #inflation #wheat #futures #Ukraine #Russia #war #Brazil #elections #Lula #Bolsonaro #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH
Hang Seng Index Plummets -2% Amid Weak China Data, Short-Term Trend Intact

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

InstaForex Analysis InstaForex Analysis 31.10.2022 11:02
According to a preliminary estimate released by the Bureau of Economic Analysis, U.S. real GDP increased at an annualized rate of 2.6 percent in the third quarter of 2022, well above expectations. The main contribution to GDP growth was from data on foreign trade, other indicators turned out to be noticeably less positive. Take note that the US stock indexes were impressed by the strong reporting of companies, the S&P 500 index rose 2.5%, exceeding the cumulative fall of 1.35% over the previous two days, ending the week up 3.95%, which was the second consecutive weekly gain. In general, the US economy looks quite confident, which gives reason to expect that the Federal Reserve will not give clear signals about the slowdown in tightening, and the dollar may well win back the positive data, continuing to strengthen. In any case, the probability of a rate hike by the same 0.7% in December remains high. European stock indices showed mixed dynamics, high inflation and the threat of an energy crisis are still the main negative factors for the euro, which will prevent it from resuming growth. EURUSD As expected, the European Central bank raised interest rates by 0.75%, but did not give any signal that the pace of rate hikes will continue to be high. Most likely, the ECB is inclined to slow down the pace of rate hikes, as it noted "substantial progress" in the revision of monetary policy, plans for quantitative tightening will be determined at the December meeting, which came as a surprise to markets that were waiting for specifics. The insufficiently hawkish stance of the ECB provoked a decline in global bond yields, European ones suffered the most, and amid accelerating inflation. Germany's overall consumer price index reached an annualized rate of 11.6% in October, well above the 10.9% expected by economists, while Italy (11.9% vs. 9.5% experience) and France (7.1 % vs 6.5% experience) also exceeded expectations. The net long position on the euro increased during the reporting week by 3.4 billion to 9.3 billion, this is a very strong growth, indicating an increase in the positive relative to the euro. However, despite such a strong change, the settlement price turned down, the reason being that even the apparently hawkish decision of the ECB did not lead to an increase in European bond yields, and the yield differential between European and US bonds did not decrease, but even slightly increased. This discrepancy between the long-term positioning in the futures and options market, which is reflected in the CFTC report, and current yields does not yet allow us to break the trend towards the weakening of the euro. EURUSD, as we suggested a week earlier, made a successful attempt to corrective growth, it passed the resistance of 0.9920/40, however, short positions resumed in the area above parity. We assume that the euro will be under slight pressure ahead of the Federal Reserve meeting, growth above the local high of 1.0092 is unlikely, trading will go in a sideways range with a downward trend. The main target is the support zone of 0.9820/40. This scenario can be canceled if the Fed shows more pronounced weakness on Wednesday than the markets have been laying down so far. GBPUSD The Bank of England will hold a regular meeting on Thursday, and the rate is expected to rise by 0.75%. The government change has calmed the markets, yields have pulled back, and now the focus will be on inflation forecasts, as they directly affect the position of the BoE. The net short position on the pound slightly decreased during the reporting week by 0.2 billion to -3.4 billion, positioning, unlike the euro, remains confidently bearish. The yield differential widened sharply in favor of the dollar, resulting in a rapid decline in the settlement price. The pound on the wave of rumors about the easing of the Fed's position still went higher than we expected, and reached the upper limit of the long-term bearish channel. We assume that a high will be formed here, an attempt to test the strength of the local high of 1.1735 is not ruled out, but a downward reversal from current levels is much more likely. Technical support at 1.1336 and 1.1147 can also act as immediate targets. High volatility is unlikely before the announcement of the results of the Fed meeting.   Relevance up to 09:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/325776
US Inflation Forecasted at 3.3%, UK GDP Projections at 0%, Fed Member Harker's Views on Rates

Inflation In Eurozone Higher Than Forecast | Retail Sales Reports

Kamila Szypuła Kamila Szypuła 31.10.2022 11:15
We start the beginning of the new week with data on inflation in the European Union. Apart from important data from Strego Kontunet, the market does not expect important data from America. Japan Industrial Production In Japan, despite the positive results in August, Industrial Production fell below zero to -1.6%. The decline was expected but not that low. The result was forecast at -1.0%. Such a situation means weakening demand in this sector. For investors, this means a significant slowdown and is not beneficial for the image of the Japanese currency or its entire economy. Japan Retail Sales Another important report for the Japanese economy is the report on retail sales. The result turned out to be positive. The 4.1% level was expected to hold this time as well, but the reading was higher. The current level of retail sales in Japan is 4.5%. Since the fall in July, sales in Japan started a new pattern trend, which, as we can observe, continues. Retail sales are seen as a stand-in for consumer spending and its growth can be considered positive for the development of the Japanese economy. Source: investing.com Austrailan Retail Sales Australia also shared the results on retail sales. The result was neither positive nor negative. The positive fact is that it has met expectations and has not fallen. This is the third reading in a row when the retail sales level is 0.6%. According to this indicator, the Australian economy is stagnating. China Manufacturing PMI The China Manufacturing Purchasing Managers Index fell below 50 again. The current reading shows that the index reached the level of 49.2 against the previous one (50.1), it is a negative reading. Also, this reading did not meet the forecast level (50.0) The China Non-Manufacturing Purchasing Managers Index (PMI) also fell. The spatula trend continues. The gauge has dropped from level 50.6 to level 48.7. The current value and movements of the PMI and its components can provide useful information for business decision makers, market analysts and investors .We can expect that poor performance in both sectors will have negative effects on market decisions. Important economic data from Europe The core CPI reached the level of 5.0% against the forecasted 4.8%. On the other hand, the overall CPI reached the level of 10.7% and was higher by 0.5% than forecasted. As we can see, the situation in the euro zone has not changed despite the actions of the ECB. Read more: Forecasts Of The Situation In The Eurozone Are Not Very Good| FXMAG.COM ECB’s member is set to speak After today's important economic data from the Eurozone, a speech by Philip R. Lane, member of the Executive Board of the European Central Bank will take place at 16:00 CET. The speech that will take place after important reports will be helpful for investors in taking further decisions and thus contain indications on the future possible direction of monetary policy. Summary Despite the fact that only the European Union released data important for the markets, during the week there will be more reports that will have a significant impact on the market situation. This week we should focus on next decisions of central banks regarding interest rates (Fed, RBA, Bank Of England). 0:50 CET Japan Industrial Production (MoM) (Sep) 0:50 CET Japan Retail Sales (YoY) (Sep) 1:30 CET Austrailan Retail Sales (MoM) (Sep) 2:30 CET China Manufacturing PMI (Oct) 11:00 CET EU CPI 11:00 CET EU GDP 11:00 CET EU Core CPI 12:25 CET BCB Focus Market Readout 16:00 CET ECB's Lane Speaks Source: https://www.investing.com/economic-calendar/
Russia Look Set To Double Its Exports For The First Half Of 2023

The Saxo Bank's Economists Talk About The Upcoming Fed Decision, The Weak Chinese Currency (CNH) And Wheat Jumping

Saxo Bank Saxo Bank 31.10.2022 11:34
Summary:  Today, we scratch our heads a bit at Friday's wildly strong equity session, as the narrative supporting recent equity market strength - the anticipation of a dovish downshift in Fed policy guidance - was rapidly unwinding on the same day. An article at the weekend from "Fed whisperer" Nick Timiraos of the Wall Street Journal suggests that the Fed is concerned the market is expecting too much of a policy climb-down this Wednesday. We also discuss wheat jumping on Russia moving against the Ukrainian grain deal, industrial metals struggling on weak China data and a weak Chinese currency, the busy earnings and macro calendar for the week ahead and more. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting an on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: https://www.home.saxo/content/articles/podcast/podcast-oct-31-2022-31102022
The USD/JPY Pair Tends To Keep The Trend In A Sideways Direction

The Japanese Yen Is Still Weakened, The Fed's Decision Will Give Direction The USD/JPY Pair

TeleTrade Comments TeleTrade Comments 31.10.2022 11:47
USD/JPY gains traction for the second successive day amid sustained USD buying. The Fed-BoJ policy divergence continues to undermine the JPY and offers support. The uptick lacks bullish conviction as the focus remains on the key FOMC meeting. The USD/JPY pair edges higher for the second straight day on Monday and looks to build on its recovery from the 145.00 psychological mark, or a nearly three-week low touched last Thursday. The pair stick to its modest gains through the first half of the European session and is currently placed near a multi-day high, just below mid-148.00s. The Japanese yen continues to be undermined by the fact that the Bank of Japan held interest rates at record lows on Friday and reiterated that it will continue to guide the 10-year bond yield at 0%. The central bank reaffirmed the need for accommodative policy amid economic headwinds stemming from the resurgence of COVID-19 cases in China and global recession fears. This, along with some follow-through US dollar buying interest continues to lend support to the USD/JPY pair. In fact, the USD Index, which measures the greenback's performance against a basket of currencies, extends last week's bounce from over a one-month low amid rising US Treasury bond yields. The prospects for another supersized 75 bps Fed rate hike move in November turn out to be a key factor pushing the US bond yields higher and lending some support to the greenback. The USD bulls, however, seem reluctant to place aggressive bets ahead of this week's key central bank event risk. The Fed is scheduled to announce its monetary policy decision on Wednesday and investors will look for fresh clues about the future rate-hike path. Hence, the focus will remain on the accompanying policy statement and the post-meeting press conference. This will influence the USD price dynamics and help determine the next leg of a directional move for the USD/JPY pair. In the meantime, elevated US bond yields should act as a tailwind for the USD amid absent relevant economic data.
Indonesia's Inflation Slips, Central Bank Maintains Rates Amidst Stability

The Currency Markets This Week Will Be Dominated By Fed Decisions

ING Economics ING Economics 31.10.2022 11:58
It is a busy week for FX markets, with key policy rate meetings on both sides of the Atlantic and some tier-one data releases. The question to be answered this week: is the Federal Reserve ready to pivot? We would argue that the Fed has less cause than many to pivot. And weak growth overseas should mean that it is too early to unwind long dollar positions In this article USD: Wednesday's FOMC will dominate EUR: Markets still price a 75bp ECB hike in December GBP: Thursday's BoE could do some damage CEE: Tough times are back USD: Wednesday's FOMC will dominate FX markets this week will be dominated by Wednesday's FOMC meeting and whether the Fed provides any oxygen to the idea of a pivot - or a shift to a slower pace of tightening. As we discuss in our FOMC preview, the Fed faces several challenges here, but we suspect the bar is quite high for a pivot and we feel it is too early to call time on the dollar's rally. After all, the market in effect already prices the pivot (pricing a 75bp hike this week and a 50bp hike in December) and we suspect the chances of another 75bp hike in December are under-priced. In addition, this week sees a whole raft of US data culminating in Friday's nonfarm employment data. We forecast 220k in job gains and an unemployment rate of 3.6% - still below the 3.8% the Fed forecast for year-end. Recall that even with the unemployment rate rising to 3.8%, the Fed's dot plots had assumed that a policy rate in the 4.25-4.50% area would be appropriate for the end of this year. As always there are two sides to the dollar story - what's going on at home and what's going on abroad. High beta currencies like the Norwegian krone, New Zealand dollar and British pound have been some of the best performers against the dollar over the last month. That has largely been due to the turnaround in sterling. But as my colleague James Smith discusses in his Bank of England (BoE) preview, the BoE may well disappoint with just a 50bp hike.  A weaker tone in sterling could undermine the recent renaissance in European currencies and push more wind back into the dollar's sails. At the same time, Chinese data continues to disappoint, with the October composite PMI dropping back into contraction territory for the first time since May. In short, it looks as though the dollar's month-long, 4.5% correction could have ended last Thursday and events this week could prove a catalyst to send the dollar back towards the highs. Our base case does see the dollar retesting the highs later this year. A break of 111.00/10 in DXY today could open up a move to the 111.80 area. Chris Turner EUR: Markets still price a 75bp ECB hike in December The eurozone continues to battle with inflation and today should see the release of a new cycle high in CPI at 10.3% year-on-year - and potentially even higher given the German CPI release. Today we will also get a first look at 3Q22 eurozone GDP, expected at 0.1% quarter-on-quarter. The news may temporarily push eurozone rates higher, even though a 75bp hike is virtually priced for the 15 December ECB meeting. Ultimately, however, our macro team believes the ECB will only hike 50bp in December and that the terminal rate for this cycle proves to be in the 2.25% area rather than the 2.80% currently priced by the markets. And bluntly, the ECB has far more cause than the Fed to pivot. With global growth under pressure from tighter rates and a misfiring Chinese economy, we think the eurozone and the euro will continue to struggle. That is why last Thursday's high of 1.0089 in EUR/USD could have been significant. A close back under the 0.9900/9910 area this week would support our preferred view of EUR/USD retesting the lows near 0.95. Chris Turner GBP: Thursday's BoE could do some damage GBP/USD is consolidating above the important 1.1500 level, holding onto recent gains. The highlight this week will be Thursday's Bank of England meeting. The market firmly prices 75bp, but we think the risk of a softer 50bp is under-priced as the BoE prepares for the coming recession. As we have argued previously - now that a lot of the fiscal risk premium has come out of sterling - the forthcoming tighter fiscal and more dovish than expected monetary policy could prove a bearish combination for sterling. We are dollar bulls and would thus favour GBP/USD breaking back under 1.1500 based on this week's confluence of events. This would also point to current EUR/GBP losses under 0.8600 proving short-lived. Chris Turner CEE: Tough times are back This week we have a busy calendar not only at the global level but also in Central and Eastern Europe. Today we start with Polish inflation, which will be crucial for next week's National Bank of Poland meeting. We expect a jump from 17.2% to 18.1% year-on-year, slightly above market expectations, mainly due to higher fuel, energy and food prices. Tomorrow in the Czech Republic, 3Q GDP data, October PMI and the state budget result will be released. The first GDP result in the region should show a contraction in the economy and confirm the start of a shallow recession. On Wednesday, we will see October PMIs in Poland and Hungary, which will confirm the downward trend in industrial sentiment. On Thursday, the highlight of this week is the Czech National Bank meeting. In line with the market, we expect interest rates to remain unchanged. A new forecast will be presented which will show lower inflation but higher wage growth, which together with the cost of FX intervention is the main risk for us in terms of a possible additional interest rate hike at the coming meetings. However, we consider the CNB hiking cycle to be finished. The FX market in the region will be dominated by global events in the coming days. Already last week, the positive trend in CEE was halted by the ECB meeting. This week will see a series of central bank meetings led by the Fed. Therefore, we see both support from high-interest rate differentials in the region and EUR/USD as being at risk. In addition, gas prices have been rising again in the last two days and many of the reasons for the strengthening trend in the CEE region over the past two weeks are now dissipating. Of course, at the local level, we will be watching the inflation numbers in Poland and the CNB meeting in particular but this week speaks strongly against CEE FX.  We see the Czech koruna as the most vulnerable at the moment, which will again be the focus of short positioning ahead of the central bank meeting. We will likely see a move towards the 24.60-24.70 EUR/CZK levels. The Hungarian forint is likely to look above 415 EUR/HUF again. On the other hand, the Polish zloty should be best positioned this week, supported by a high inflation number and an increase in NBP rate hike bets. Frantisek Taborsky Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Things May Soon Get Better In The Chinese Markets

On Friday we learned that we can't expect any move of Bank of Japan "anytime soon" - as Governor Kuroda said

Kenny Fisher Kenny Fisher 31.10.2022 12:32
USD/JPY ended last week with strong gains and the uptrend has continued today. In the European session, the yen is trading at 148.23, up 0.51%. Yen slips as BOJ stays the course All eyes were on the Bank of Japan rate meeting, which wrapped up on Friday. It was business as usual for the BoJ, which maintained its dovish stance. Governor Kuroda said that the BoJ had no plans to raise rates or shift policy “anytime soon”. The BoJ has maintained an ultra-loose policy for years, but there has been speculation that the Bank might make some changes, as the yen has tumbled and inflation is higher than it has been in years. Kuroda’s remarks poured cold water on any such thoughts, as the BoJ remains focused on supporting the weak Japanese economy by means of an ultra-accommodative policy. Clearly, the BoJ has no interest in raising rates to support the yen, although Kuroda paid the usual lip service to the yen’s descent, saying that its rapid fall was “negative and undesirable”. Investors were not impressed and the yen fell close to 1% on Friday. In the US, the Fed is widely expected to raise rates by 0.75% on Wednesday. Inflation has been falling slightly, but core inflation has been rising, which has put to rest hopes that solid data might induce the Fed to ease up on tightening. The Core PCE index, the Fed’s preferred inflation gauge, rose 5.1% in September, up from 4.9% in August and just shy of the consensus of 5.2%. The Fed continues to view inflation risks as weighted to the upside and is unlikely to ease rates unless it is satisfied that inflation has peaked.   This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Japanese yen falls to 148 - MarketPulseMarketPulse
BRICS Summit's Expansion Discussion: Impact on De-dollarisation Speed

The DXY US Dollar Index Maintains A Positive Trend

InstaForex Analysis InstaForex Analysis 31.10.2022 13:27
The dollar finished last week on a negative note. The DXY index ended last Friday in the red zone for the second consecutive week, although there were no strong drivers to weaken the dollar. Moreover, very positive macro data were published last week, which could not weaken the dollar in any way. Thus, preliminary data published on Thursday showed that US GDP grew in the 3rd quarter by 2.6% (on an annualized basis). At the same time, real exports of goods and services grew by 14.4% in the 3rd quarter, while real imports fell by 6.9%. This shift improves the performance of the US foreign trade balance. Even though the price index, released also on Thursday, fell from 9.1% to 4.1% in the third quarter, consumer prices are still too high for the Federal Reserve, economists say. The core PCE price index, which is the Fed's preferred measure of inflation, rose to 5.1% (year-on-year) in September from 4.9% in August. In the 3rd quarter, the underlying PCE rose by 4.9% (in annual terms). The rate of inflation (apart from the state of the labor market and GDP) is important to the Fed in setting the parameters of its monetary policy. Rising prices put pressure on the central bank to tighten its policies and raise interest rates. Published on Friday, the final release of the survey by the University of Michigan pointed to continued high consumer confidence in the US. At the same time, the US labor market continues to be strong, while the unemployment rate is at its lowest pre-pandemic levels, amounting to 3.5% (in September). By the way, the latest data from the US labor market for October will be published this Friday. Everything indicates that at the meeting, which starts tomorrow, the FOMC will continue to tighten monetary policy. Most economists expect another 75 bps rate hike. And yet, the dollar fell in the past and preceding weeks, despite the expected increase in the interest rate in November and the same in December (according to a survey conducted by Bloomberg on October 20, 2022, the market currently estimates the probability of a Fed rate hike by 75 bps in December at 88%). Economists say that the combination of high inflation, which reduces the purchasing power of the population, and an aggressive pace of monetary tightening will lead to an economic recession starting in the second quarter of 2023. To raise the interest rate further in a recession is suicidal for the economy. And, probably, strategic investors who make trading plans with long cycles are already beginning to prepare for at least a slowdown in the Fed's tightening cycle, and at most for the reverse process, i.e. to the easing of monetary policy in the United States. In the meantime, this is a matter of more or less distant prospects, the DXY dollar index maintains a positive trend. At the time of release of this article, the DXY dollar index (in the MT4 trading terminal the dollar index is reflected as CFD #USDX) is near 111.00, in the lower part of the range formed between the local support and resistance levels of 114.74 and 109.37. At the same time, the general upward dynamics of the dollar remains, pushing the DXY index towards more than 20-year highs near 120.00, 121.00. The breakdown of the local "round" resistance levels of 114.00, 115.00 will be a signal that the DXY index will return to growth. Support levels: 111.00, 110.65, 109.60, 106.90, 105.20 Resistance levels: 111.31, 112.00, 113.00, 114.00, 114.74, 115.00 Trading Recommendations Dollar Index CFD #USDX: Sell Stop 110.40. Stop Loss 111.40. Take Profit 110.00, 109.60, 106.90, 105.20 Buy Stop 111.40. Stop Loss 110.40. Take-Profit 112.00, 113.00, 114.00, 114.74, 115.00     Relevance up to 10:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/325798
Canada's Inflation Expected to Ease in May, Impacting BoC's Rate Decision

US personal savings rate nears the historical bottom

Alex Kuptsikevich Alex Kuptsikevich 31.10.2022 12:17
Americans' Personal spending rose 0.6% in September, the same as a month earlier, while income growth was up 0.4% in each of the two months. Total earnings grew 5.2% YoY, as did earnings, whereas due to a cutback in tax credits, disposable income rose only 3.1% YoY. Spending, meanwhile, closely mirrors inflation, adding 8.2% in September compared to the same month a year earlier. Spending growth is usually a positive signal for the markets because it pulls the entire economy along. However, this growth driver is near exhaustion as savings have fallen to 3.1% of income and are near the lows since 2007. Historically, the lowest Americans saved was in 2005, when the rate fell to 2.1%, and the yearly average was 2.9%. Approaching the savings rate to the 3% threshold has cooled the housing market, as we see in our case. The low savings rate can be explained by maintaining the same living standard (spending). However, the steepest rise in credit interest rates in 40 years and a falling stock market have prompted Americans to save a historically low proportion of their income. In this environment, there is likely to be a further drop in interest in long-term purchases such as homes and cars. However, before you shout ‘’crisis!’’, you should remember that enormous sums have gone into savings during the pandemic. In the two years since March 2020, almost twice as much has been saved as in the two years before (61.4 trillion vs 32.4 trillion). In other words, Americans still have something to spend, and their debt burden is not as high as it was in 2005-2008. The fall in the savings rate close to historic lows is a red flag, and it is now worth paying increased attention to the consumption behaviour of Americans. Given the savings accumulated during the pandemic, economic growth (excluding the suffering housing sector) has a high chance of further development for the foreseeable future. If we are right, there is no reason for the Fed to change its intentions to aggressively raise rates and keep them high for an extended period.
The US Dollar Index Is Expected A Pullback Rally At Least In The Near Term

The US Dollar Started The Week Stronger | Expectations For The RBA's Decisions

Saxo Bank Saxo Bank 01.11.2022 08:44
Summary:  A return to hawkish expectations for the FOMC and risk-off from weak China data as well as possible issues in Russia-Ukraine grain deal saw markets tumble on Monday and US 10-year yields reversed back to 4.10%. Dollar strength returned as well, with gains most pronounced against the sterling and yuan. However, demand concerns returned, while oil also retreated with President Biden’s hopes of a windfall tax on profits of US energy companies weighing as well. Gold extended its downtrend with the surge in yields. Reserve Bank of Australia on watch in the day ahead, with some key Japanese names like Toyota and Sony also reporting earnings. What is happening in markets? The Nasdaq 100 (USNAS100.I) & S&P 500 (US500.I) fall on Monday ahead of Fed, but hold onto monthly gains US stocks fell into the red on their last trading day of the month with end of month rebalancing coming into play, while stocks were also on the back foot as bond yield climbed ahead of Wednesday's Fed decision. Still the S&P500 held onto a monthly gain of 8%, but on Monday the index dropped 0.75%. The Nasdaq fell 1%, but held a 4% October gain. Most Treasury yields rose, with 10-year notes up to around 4.05%, while the dollar climbed against every G-10 partner, save the kiwi. Oil and gold both retreated. Energy shares whipsawed on news that President Joe Biden will call on Congress to consider tax penalties for oil producers accruing record profits. JPMorgan Chase Marko Kolanovic is joining strategists who believe the aggressive Fed hiking is nearing an end. He thinks the Fed will raise rates by 50 basis points in December and pause after one more 25-basis-point hike in the first quarter. Apple (AAPL) shares fell 1.5% with iPhone’s Foxconn plant in central China grappling with virus outbreak.  Fertilizer giant, Archer Daniels (ADM) rose 2.2% with traders expecting higher agricultural prices amid supply concerns from added geopolitical tension. Australia’s ASX200 (ASXSP200.1) futures suggest a 0.15% rise on Tuesday, ahead of the RBA rising rates today The Reserve Bank of Australia is expected to deliver its 2nd straight month of 0.25% hikes at today’s meeting, according to Bloomberg consensus, which will take the cash rate from 2.6% to 2.85%. However it will be a tough decision, with stronger-than-expected third-quarter inflation data from last week, and hot retail and credit data yesterday giving room for a potential 50-bp (0.5%) hike. This could trigger a knee jerk jump in the Aussie dollar vs the US (AUDUSD), however we maintain our bearish view of the AUDUSD given the Fed has more ammo to aggressively rise. Also note, Governor Philip Lowe has regularly wrong-footed forecasts. Still, swaps imply only a 20% chance of an outsized move, and Australian 10-year yields are a full 25 bps below similar-dated Treasuries, meaning there are expectations that RBA will take a softer line than the Fed. The RBA will last month previously noting loan arrears and insolvencies have picked up in Australia, while housing loan commitments declined -  ‘demonstrating the effect of high interest rates on housing’. This demonstrates, the RBA has a tough task of rising rates to slow inflation, without compromising the health of the economy. FX: Dollar returns to gains ahead of FOMC Dollar started the week on a firmer note as WSJ Timiraos comments turned more hawkish over the weekend after dovish Fed expectations possibly went a bit far. The worst performer was GBP, and we had raised concerns yesterday that it was pricing in all the good news so there was scope for disappointment. GBPUSD broke below 1.1500 with EURGBP also reversing back higher to 0.8620 despite EURUSD weakness to sub-0.99. USDJPY rose back above 148.50, with US 10-year Treasury yields touching 4.1% at one point. Japan’s Finance Ministry data showed a record USD 42.8bln was spent on multiple interventions in the FX market last month to attempt to cushion the Yen’s fall. The Chinese yuan continued to slide, USDCNH rose to 7.34 and the onshore spot USDCNY seen close to 15-year highs of 7.30+ at Monday’s close. Crude oil (CLX2 & LCOZ2) worried about oil demand Crude oil prices were lower on Monday as concerns of weaker demand weighed on sentiment with the Fed commentary from whisperer Nick Timiraos shifting towards a hawkish stance again. Meanwhile, China’s PMIs fell below the 50 mark which separates expansion and contraction. On the other hand, OPEC’s World Oil Outlook estimates demand will climb 13% to reach 109.5mb/d in 2035, then hold around that level for another decade and secretary-general Haitham al Ghais said that the oil supply surplus was the main reason for the decision to cut output. There were also some reports suggesting that President Biden is considering a potential windfall tax on US energy companies. WTI futures slid towards $86/barrel. Gold (XAUUSD) in a downtrend Gold (XAUUSD) fell for a third consecutive day approaching the recent support area $1,625 as US dollar broadly strengthened with 10 year treasury yield touching 4.10% at one point on Monday. With the Fed poised for another 75bps rate hike this week, pressure on gold could increase, but we continue to see fundamental strength in gold especially given the higher-for-longer inflation expectation. But as a minimum gold needs to break above $1730 before an end to the month-long downtrend can be called.   What to consider? What next for the RBA after peak hawkishness? The Reserve Bank of Australia meets today and is expected to continue with a smaller pace of rate hikes with 25bps priced in despite a hotter than expected Q3 CPI. Q3 CPI rose by 7.3% YoY from previous print of 6.1%, coming in higher than expectations. RBA’s preferred Trimmed Mean CPI was seen at 6.1% vs. expected 5.6% (prev. 4.9%), while PPI also accelerated in Q3 to 6.4% from 5.6% previously. There are, therefore, some calls for an outsized 50bps rate hike as well as inflation continues to inch above the central bank’s 2-3% target range. An update on the latest growth and inflation projections will also be seen along with today’s rate decision. AUDUSD will need a clearly larger than expected rate hike of 50bps, or a very hawkish commentary with a 25bps rate hike to make any substantial gains. If RBA tows the line, focus shifts to USD and the Fed meeting on Wednesday. AUDNZD is also key to watch, with the 1.1000 handle on test. Eurozone GDP and inflation prints continue to make the ECB’s job tougher Eurozone inflation data for October YoY printed another record as it soared to 10.7% (prev. 9.9%), and well above the median Bloomberg expectation of 10.3%. Meanwhile, Q3 GDP growth slowed to 0.2% QoQ or 2.1% YoY (prev. 0.8% QoQ, 4.1% YoY). While mild whether and full storage hasn’t unleashed the full effects of energy shortages this year, the threat continues to loom and this could mean the macro story could deteriorate further. China PMIs and Hong Kong GDP growth send red flags China’s manufacturing and non-manufacturing PMI both plunged into contractionary territory in October with Covid curbs likely continuing to weigh on demand and manufacturing ahead of the CCP meeting. China's official manufacturing PMI declined to 49.2 in October after a brief rebound to 50.1 in September following a two-month decline. Meanwhile, services activity fell to 48.7 in October from 50.6 last month. Also, Hong Kong recorded its worst quarter in over two years, with Q3 GDP growth coming in at -4.5% YoY vs. expectations of -0.8%. The QoQ growth was also in negative territory at -2.6%, signalling recession concerns if such a performance continues despite the economy’s reopening. Key Japanese earnings on watch Big Japanese names Toyota (7203) and Sony (6758) report earnings today. While high inflation and interest rates remain a key consideration to watch for consumer spending trends, the effect of a weak yen will also be key to consider. Sony will be key to watch after the US tech tumble last week, and consensus is looking for a 10% drop in its operating profit from a year ago. Toyoto will likely continue to highlight the supply chain pressures, but possible buyback announcements could support.   For a global look at markets – tune into our Podcast.   Source: https://www.home.saxo/content/articles/equities/market-insights-today-1-nov-01112022
China's Position On The Russo-Ukrainian War Confirmed At The G20 Meeting

Positive Signals In Global Markets Helped The Asian Stock Market

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

The Global Gold Demand In The Third Quarter Rose

TeleTrade Comments TeleTrade Comments 01.11.2022 09:16
Gold price bounces off five-week-old support line amid pullback in DXY, yields. Mixed concerns over Fed, sluggish session allow XAU/USD traders to brace for FOMC. Upbeat performance of Chinese equities adds strength to the recovery moves. US data, risk catalysts could entertain traders but bears stay hopeful. Gold price (XAU/USD) grinds higher around $1,640 while snapping a two-day downtrend heading into Tuesday’s European session. In doing so, the yellow metal cheers the US dollar pullback, as well as sluggish Treasury yields, as traders brace for today’s US PMIs for October and Wednesday’s all-important Federal Open Market Committee (FOMC) meeting. That said, the US Dollar Index (DXY) slides to 111.25 during the first loss-making day in four while the benchmark 10-year Treasury yields fade two-day uptrend by making rounds to 4.05% of late. Recently softer US data and growing fears of recession recently raised concerns over how the Fed might announce the downshift to smaller hikes. “The safe-haven greenback got some support from overnight losses on Wall Street, but a rise in US stock futures and firmness in Asian stocks, led by China, scuppered that demand on Tuesday. Lower long-term US Treasury yields also removed a crutch for dollar strength,” stated Reuters. Elsewhere, reports suggesting an increase in gold demand also underpin the XAU/USD run-up. “A report by the World Gold Council (WGC) showed the global gold demand in the third quarter rose 28% from the same period in 2021, bolstered by record buying by central banks, although there was a notable contraction in investment demand,” stated Reuters. Given the market’s month-start consolidation, the gold price may witness further recovery. However, the moves should take clues from the October month’s ISM Manufacturing PMI and S&P Global Manufacturing PMI for the US ahead of the Fed’s meeting. Technical analysis A five-week-old symmetrical triangle restricts short-term XAU/USD moves between $1,632 and $1662. Given the quote’s latest rebound from the stated triangle’s support, backed by a steady RSI (14), the gold price may witness further advances toward the 10-DMA hurdle near $1,647. It should be noted that the 21-DMA level surrounding $1,665 acts as an additional upside filter. Meanwhile, a downside break of $1,632 could direct gold bears toward the yearly low near $1,614 before the 61.8% Fibonacci Expansion (FE) of the metal’s August-October moves, near $1,609, as well as the $1,600 round figure, could challenge the XAU/USD bears. Gold: Daily chart Trend: Limited upside expected
From UFOs to Financial Fires: A Week of Bizarre Events Shakes the World

A Rate Hike By Fed By 75 bp Seems To Be Well Expected

Saxo Bank Saxo Bank 01.11.2022 09:35
Summary:  While a 75bps rate hike is baked in for the November meeting, it’s the pivot expectations that need to get a make-or-break acknowledgement from the Fed. This means focus will be on whether the Fed keeps the door open for another 75bps rate hike at the December meeting (hawkish), pushing out of Rate cut expectations from next year (hawkish) or concerns from global financial stability (dovish). The US dollar has reversed 3-4% lower from its cycle highs, suggesting room for gains if we see a hawkish surprise. The bar isn’t too high. Market participants are looking beyond the November rate decision for this week’s FOMC policy meeting. A fourth consecutive 75bps rate hike seems to be well expected, but the hopes of a pivot have seen markets rally in October and is really the key debated issue this week. There have been hopes that the Fed will signal smaller hikes from December and prepare the ground for rates to peak and pause at 4.5-5.0% in 1Q23. Reasons behind this include some softening of stance from other global central banks such as the Reserve Bank of Australia (RBA), Bank of Canada (BOC) and the European Central Bank (ECB). Liquidity stress emerging in the Treasury market has also been touted as one of the reasons for the expectations. The US Treasury Department plans to issue USD550bn in debt in 4Q22, more than the USD400bn estimated in August. We think the following key points will be key at the November policy meeting from a markets perspective: December rate hike talk Dovish expectations that have been set in currently include Powell clearly guiding for a 50bps rate hike in December rather than a 75bps. We believe this will be premature, and at best what we can get is Fed to become data-dependent. Anything that even keeps the possibility of another 75bps rate hike open at the December meeting will be a hawkish surprise. Terminal rate projections Terminal rate forecasts are currently the largest driver of US yields. As expectations of terminal rates surged above 5% at one point in October, 10Y US yields tested cycle highs. That probably was a trigger for the Fed to use the whisperer and convey peak hawkishness in an October 24 WSJ article which first mentioned the idea of the Fed downshifting to a path of smaller rate hikes. But easing of financial conditions since then has possibly again made the central bank uneasy. This gives us a sense that the Fed is uncomfortable with an over 5% terminal rate being priced in, and we are still close to that level at 4.96% currently. But we still have more than two full rate cuts priced in by the markets for 2023, and that is where the Fed can still push back. If the Fed makes a clear case of rates staying at the peak until late 2023, that will be considered hawkish in our view, and result in risk off again. Concerns around financial stability With the economy still holding up well, there is little concern yet that Fed’s rate hikes will break anything in the domestic US economy. Instead, any risk of breaking things is still in the global financial markets. Too much focus on financial stability also risks shifting expectations to a Fed pause, and may be considered dovish. Inflation and unemployment There would be no update to the dot plot at the November meeting. It is right to consider that the Fed will have to slow the pace of rate hikes at some point. But is a softer inflation a necessary condition to reach that stage? Or we need to just wait for inflation to stop getting worse, even if it takes time to actually go lower. The core CPI and PCE data reported recently continues to show that inflation remains uncomfortably high, and any indication of commitment to still bring that down to much below 3% might potentially require a much higher unemployment rate and possibly much more pain in the financial markets. Market impact The US dollar is 3-4% off its highs amid these Fed pivot expectations. With dovish expectations having set in, there is potentially room for the USD to surprise on the upside. That would mean EURUSD back below 0.98 and USDJPY taking another go at 150. USDCNY also would be poised for a move to 7.40 unless these rumours of China considering an exit from its Zero Covid policy by March 2023 prove to be true. However, if these dovish expectations were to materialize, we could see EURUSD heading to 1.02 and USDJPY down at sub-145 levels. While the Japanese yen may sustain these gains as yield differential pressures start to ease, EUR may have a tougher time holding on to the recovery as room for ECB rate hikes is also decreasing and the energy crisis can only get worse from where we are in this winter. The most ideal reaction for the equity markets will be to stay in a sideways trend. With markets eager for any bullish trends, the risk of a technical rally remains if the Fed clearly closes doors for any more 75bps rate hikes from here. However, if the markets rally too hard on any Fed communication, we will likely see a host of Fed speakers in the coming weeks trying to clarify and assert that the Fed maintains a hawkish stance, as easing of financial conditions isn’t what the Fed wants right now. The market moves need to remain orderly for the Fed to achieve its inflation goal, else any hopes of a Fed pivot will continue to be smashed.     Source: https://www.home.saxo/content/articles/macro/fomc-november-meeting-preview-markets-holding-their-breath-for-a-fed-pivot-01112022
Rates and Cycles: Central Banks' Strategies in Focus Amid Steepening Impulses

US 10-Y Treasury Yields Have Eased Back | Airbnb Expects Revenues To Increase

Saxo Bank Saxo Bank 01.11.2022 09:42
Summary:  Risk sentiment remains near the local highs heading into tomorrow’s FOMC meeting, where the market is hoping for guidance that suggests a downshift in the pace of tightening. Another micro-hike of 25 basis points from the RBA increases the sense that more central banks are set to slow their fight on inflation via rate hikes. Elsewhere, unconfirmed stories swirling overnight in China that that Covid restrictions are set to be lifted saw a potent rally in Chinese equities.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) Momentum is trying to come back into US equities after yesterday’s retreat with S&P 500 futures trading around the 3,902 level. A higher close today could set in motion an extended rally into tomorrow’s FOMC rate decision lifting expectations for the Fed to signal a slowdown in rate increases. Given the latest macro figures we have gotten this might still be too early for the market to expect this, but if the Fed confirms the ‘peak hawkishness’ narrative then the 4,000 level in the S&P 500 futures is not outrageous. Euro STOXX 50 (EU50.I) Strong earnings from BP lifting sentiment in early trading in addition to positive spillover effects from the Chinese equity session seeing Hang Seng futures 6.1% higher on unconfirmed news that Chinese policymakers are considering phasing out its strict Covid policy. STOXX 50 futures are pushing higher this morning trading around the 3,649 level, which is the highest level since 13 September. The market is increasingly adjusting to the ‘peak hawkishness’ theme and if momentum extends here the 200-day moving average at the 3,675 level is the big area to watch out for. FX: USD on its back foot as market hopes for dovish downshift at FOMC meeting The market’s hope for a dovish downshift in the Fed’s guidance is a bit nuanced, as the expectations for the coming handful of meetings are back near the cycle highs, with the Fed funds priced to reach nearly 5.00% at the March or May FOMC meeting next year, while expectations farther out into next year and in 2024 are 25 or more basis points from the cycle highs. But with the USD on its back-foot and risk sentiment clearly unafraid of the Fed at the moment, the surprise side this Wednesday would be a stern message from the Fed that checks sentiment. Watching parity in EURUSD as an important psychological barometer, 1.1500 in GBPUSD, which was briefly broken yesterday, and eventually 145.00 in USDJPY and 7.25 area in USDCNH if the sudden USD drop overnight on hopes that China Covid policy is set for relaxation sticks and follows through. HG Copper (HGZ2) recovered all of Monday’s losses during Asian trading ...partly driven by a report that a “Reopening Committee” has been formed led by a Politburo Standing Member. The committee is reviewing data to assess various opening scenarios, targeting a March 2023 reopening. In addition to a weakening dollar and demand towards renewable energy, the copper market is being supported by persistent supply challenges highlighted by top supplier Codelco lowering its annual guidance for the second time in three months. The futures price remains stuck within a narrowing trading around $3.45 and looks poised for a breakout soon. Given the latest developments the risk of an upside break has risen. Gold (XAUUSD) trades higher … after falling for a third consecutive day on Monday, thereby extending its monthly losing streak to seven, the longest since the late 1960’s. The market bounced with support from lower bond yields and a softer dollar but as a minimum the yellow metal needs to break above $1730 before an end to the month-long downtrend can be called. The WGC reported that central banks bought a record 400 tons during the third quarter, more than quadruple the amount of a year earlier, thereby more than offsetting the 227 tons reduction in holdings across bullion-backed ETFs Crude oil (CLZ2 & LCOZ2) Crude oil trades higher within the established range after advancing with the broader market overnight as OPEC+ begins to cut production by around 1.2 million barrels per day, a decision that has been driven by excess supply according to its secretary-general. OPEC also released its World Oil Outlook in which they estimate demand will climb 13% to reach 109.5mb/d in 2035, then hold around that level for another decade. A weaker global economic growth hurting demand, OPEC+ production cuts and EU sanctions on Russian crude from December have all clouded the outlook, thereby supporting the current rangebound price action. Focus on Wednesday’s FOMC meeting and its potential impact on the dollar. Brent has since the September low several times been bouncing off trendline support, currently at $92 with resistance at $97.25 and $98.75. US treasuries (TLT, IEF) US 10-year treasury yields have eased back toward 4.00% after briefly touching above 4.1% yesterday. The focus on continued strength in bond markets will be the 3.90% pivot low yield posted last week, which could open up for a run to the 3.50% area, but would such a move represent a flight to safety (weak risk sentiment) or be celebrated as a sign of easing pressure on asset valuations. The key two event risks are the FOMC meeting Wednesday and how the yield curve reacts as well as the US jobs report on Friday, with the ISM Services Thursday also an interesting data point. What is going on? RBA hikes 25 bps, ups inflation forecasts, downgrades GDP and remains dovish Will the RBA stop hikes early? The RBA hiked the cash rate by 25bps (0.25%) as most expected to 2.85%, maintaining its dovish stance and bordering on restrictive, as it again acknowledged tighter financial conditions are yet to be felt in mortgage payments, but higher rates and inflation have put pressure on household budgets, causing a small amount of loan arrears and insolvencies. This rate hike cycle since May, has been the second fastest in history. We note the RBA was the first major central bank to under-deliver on rate hike expectations last month. The RBA raised its year-end 2022 CPI forecast from 7.8% to around 8%. The RBA revised its GDP forecast down, with growth of around 3% expected this year and 1.5% in 2023 and 2024. AUD knee-jerked lower on the decision, but recovered most of the lost ground against a stumbling US dollar in Asia, while sticking near local lows against the NZD. BP had exceptional Q3 in gas marketing and trading The European oil and gas major is lifting sentiment in Europe with strong net income beating expectations while cash flow generation is coming in below estimates. The energy company is increasing its buyback programme further by $2.5bn. Toyota down 2% on big operating income miss Japan’s largest carmaker is lowering its fiscal year production target as Volkswagen also recently did while posting a Q2 operating income of JPY 563bn vs JPY 765bn due to soaring materials costs and one-off items. The lower production target comes as the industry is still facing a chips shortage. UK Treasury says all Britons will have to pay more tax Chancellor Hunt said that “those with the broadest shoulders should be asked to bear the greatest burden” as the clear message from the new Sunak government, after the previous Truss-Kwarteng team triggered chaos in UK Gilts and sterling, is that financial stability is priority number one. The particulars of the new budget and policy will be laid out in a statement on November 17. US President Biden rails against oil companies not reinvesting profits, promising to raise taxes on profits that are “windfall of war”... ... saying that “The oil industry has not met its commitment to invest in America.” Such a move would require a bill to pass through Congress, however, which would likely prove difficult after the mid-term elections next week, if projections of a strong GOP showing flip the House and possibly the Senate into their hands, making for a largely lame-duck presidency for the next two years. Eurozone GDP and inflation prints continue to make the ECB’s job tougher Eurozone inflation data for October YoY printed another record as it soared to 10.7% (prev. 9.9%), and well above the median Bloomberg expectation of 10.3%. Meanwhile, Q3 GDP growth slowed to 0.2% QoQ or 2.1% YoY (prev. 0.8% QoQ, 4.1% YoY). While mild weather and full storage has not unleashed the full effects of energy shortages this year, the threat continues to loom, and this could mean the macro story could deteriorate further. Japan spent a record $42 billion to defend JPY in October The Finance Ministry is said to have another 10 trillion yen, or about $68 billion in ready cash left to throw after defending the JPY if pressure mounts again, although Japan’s central bank reserves are many, many multiples of these amounts, currently at $1.24 trillion. What are we watching next? Another small hike from a central bank (the RBA) encourages speculation of dovish shift at the FOMC meeting on Wednesday A number of recent central bank meetings of late, including the latest RBA meeting overnight, which saw Australia’s central bank only hiking rates 25 basis points for the second consecutive time, encourage the notion that the Fed is set for a dovish shift at this Wednesday’s FOMC meeting. Working against that narrative have been a number of possible “leaks” by journalists at key publications thought to have strong Fed sources, including the WSJ’s Nick Timiraos and a NY Times reporter, whose latest musings suggest that the Fed is not set to indicate any backing down from its hawkish message. An overtly defensive and hawkish FOMC meeting tomorrow could badly shock the market, which coming into this morning, at least, seems hopeful that the Fed is set to downshift its tightening guidance this week. Or at least, given that Fed expectations for the next six months or so are within a few basis points of the cycle highs, isn’t obviously afraid of the message the Fed is set to deliver: equities are up near the local highs after a ripping rally off October lows. Earnings to watch Today’s US earnings focus is AMD, Airbnb, and Uber with analysts expecting revenue growth of 31% y/y for AMD but EPS down 5% y/y as input pressures are eating up growth coming from strong product introductions. Airbnb is still riding the reopening tailwind with revenue expected to increase 26% y/y in Q3 and EBITDA expanding significantly to $1.39bn up from $888mn a year ago. Uber has a goal of becoming self-funded by 2024 and could achieve this based on the current trajectory. The company is expected to deliver revenue growth of 67% y/y and EPS of $-0.06 up from $-0.42 a year ago. Today: Toyota Motor, Sony, BP, Eli Lilly, Pfizer, AMD, Mondelez, Airbnb, Uber Wednesday: Suncor Energy, Nutrien, Novo Nordisk, Maersk, Vestas Wind Systems, GSK, Electronic Arts, Qualcomm, CVS Health, Estee Lauder, Booking, Fortinet, Ferrari, Albemarle Thursday: Verbund, Barrick Gold, Orsted, Novozymes, BNP Paribas, BMW, Enel, ING Groep, DBS Group, ConocoPhillips, Amgen, PayPal, Starbucks, Regeneron Pharmaceuticals, EOG Resources, Moderna, MercadoLibre, Block, Cloudflare, Coinbase Friday: Enbridge, Societe Generale, Intesa Sanpaolo, SoftBank, Amadeus IT Group, Duke Energy, Economic calendar highlights for today (times GMT) 0820 – Australia RBA Governor Lowe to speak 1400 – US Sep. JOLTS Job Openings 1400 – US Oct. ISM Manufacturing 2000 – New Zealand RBNZ publishes Financial Stability Report 2030 – API Weekly Report on US Oil Inventories 2145 – New Zealand Q3 Average Hourly Earnings 2145 – New Zealand Q3 Employment Change/Unemployment Rate 2230 – Canada Bank of Canada Governor Macklem to speak 0030 – Australia Sep. Building Approvals Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: https://www.home.saxo/content/articles/macro/market-quick-take-nov-1-2022-01112022
The Melbourne Institute Inflation Gauge For Australia Rose More Than Expected

The Reserve Bank of Australia (RBA) Hikes By 25bp | Bitcoin Could Rebound

Swissquote Bank Swissquote Bank 01.11.2022 10:06
Equities fell and bond yields rose, as the hawkish Federal Reserve (Fed) fears resurfaced before Wednesday’s FOMC decision. Fed The Fed starts its two-day meeting, and could call the end of the aggressive rate tightening and signal slower rate hikes to enter the final phase of policy tightening, before pausing. But the Fed will not want to throw the foundation of a market rally, which could play against its fight against inflation. Eurozone In the Eurozone, inflation hit a record high of 10.7% in October, versus 10.2% expected by analysts, and the European Central Bank (ECB) Chief Christine Lagarde said that inflation came from nowhere, ignoring a decade-and-a-half of aggressive bond buying that threw the foundations of the present spike in inflation, boosted by the pandemic, the war and a global energy crisis The Eurozone yields spiked on expectation that higher inflation would mean higher ECB rate hikes in the future. But the euro didn’t gain, as currency traders priced in the rising recession fears that come along with the higher interest rates. Rate Hike In Australia, the Reserve Bank of Australia (RBA) raised the interest rates by 25bp as expected and said there will be more rate hikes. The Losses In Switzerland, the Swiss National Bank announced a 142 billion franc loss in the first nine months of the year; melting currency valuations, especially the melting euro, was to blame. Gold In precious metals, gold remains under pressure. The $1615 is the next important support. If the US dollar strengthens as a result of a sufficiently hawkish Fed statement this week, gold bears could pull out the $1615 support and tip a toe into the $1500s for the first time since April 2020. Watch the full episode to find out more! 0:00 Intro 0:28 EZ inflation hits record, EZ yields rise, but euro falls 2:24 Two-day FOMC meeting starts today. What to expect? 5:28 Quick update: Apple, Exxon 6:56 How could oil respond to Fed decision? 7:55 RBA hikes by 25bp 8:18 SNB loses 142 billion francs 8:46 Gold to test important support 9:08 Bitcoin could rebound if risk appetite improves Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Fed #FOMC #RBA #rate #decision #Eurozone #inflation #crudeoil #ExxonMobil #Apple #Foxconn #China #covidzero #USD #AUD #EUR #CHF #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH
The German Purchasing Managers' Index, ZEW Economic Sentiment And More Ahead

The Euro Bloc Economy Lost Its Growth Momentum

InstaForex Analysis InstaForex Analysis 01.11.2022 11:20
The US currency has once again bypassed the European one, which is seriously puzzled by a new batch of news about inflation. At the same time, the dollar draws confidence in the Federal Reserve's actions, which allows the completion of the current cycle of rate hikes. The greenback significantly strengthened at the beginning of this week, restoring some of the positions lost over the past month. This was largely facilitated by the expectation of another interest rate hike from the Fed, whose two-day meeting is scheduled for November 1-2. According to preliminary calculations, on Wednesday, November 2, the central bank will raise the key rate by 75 bps, to 3.75-4.00%. This will be the fourth step on the Fed's part in raising rates. However, many analysts and market participants doubt the continuation of the Fed's harsh rhetoric. According to experts, after the fourth rate hike by 75 bps, the central bank will take a less aggressive position on this issue. Michael Wilson, currency strategist at Morgan Stanley, is sure of this. He believes that the Fed's rate hike cycle is nearing completion. In support of his words, Wilson cites the inversion of the yield curve of ten-year and three-month US Treasury bonds. Recall that this is one of the key indicators indicating the need for a reversal of the central bank's tight monetary policy to a softer one. However, some experts do not share the optimism of the Morgan Stanley representative. Currency strategists at UBS Global Wealth Management are confident that a reversal in the Fed's policy is unlikely, since the inflation rate in the US remains high. Against this background, the central bank will have to raise the rate until inflation recedes, the bank emphasizes. The current situation puts pressure on the dollar, which, despite the current tension, is gradually strengthening. Against this background, the EUR/USD pair has been declining for the third consecutive day, continuing to struggle with the pull of the downward trend. On the morning of Tuesday, November 1, the EUR/USD pair was cruising near 0.9911. This is a difficult situation for the euro since it has to resist negative macro data. Recall that reports on inflation in the eurozone were published on the evening of Monday, October 31, which again demonstrated its sharp rise. As a result, the inflation rate in the region soared to a new historical high, and the euro bloc economy lost its growth momentum. According to analysts, consumer prices in the EU rose by 10.7% in October 2022 compared to October 2021, exceeding forecasts. In the third quarter of this year, the volume of production in the eurozone decreased to 0.2% compared to the same period last year. According to experts, the current situation is aggravated by a sharp increase in the European Central Bank's interest rates. At the same time, many analysts believe that the central bank should continue to actively fight inflation, which includes raising rates. It is possible that after the recent rate hike, the ECB will raise it again by 75 bps at the next meeting, which is scheduled for December 15. However, such a scenario is still in question, as well as a possible pause in the process of raising rates by the Fed. Some analysts do not expect dovish decisions from the US central bank, although the current situation requires revision. According to experts, the aggressive tightening of the monetary policy contributes to the early onset of a recession in the United States, as well as a large-scale drop in treasury state bonds and stocks over the past few years. Take note that as rates rose and the economic downturn that followed the tightening of the monetary policy, the markets were gripped by a crisis. It was followed by an increase in the number of defaults, which seriously hit investors. In the current situation, the leading central banks will have to solve the issues that provoked such problems. The current situation significantly affected the dynamics of the EUR/USD pair, provoking a correction at the end of September. However, the pair is gradually returning to a relatively stable course. According to experts, a new round of risk appetite in the markets will save the EUR/USD pair from further decline. At the same time, experts expect a New Year rally on the US stock market and the growth of risky assets in the near future.   Relevance up to 07:00 2022-11-03 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/325874
Ed Moya Reviews The Latest Market News With Jonny Hart (OANDA Podcast)

Saxo Bank's Podcast: Comments On Financial Conditions, The RBA Slow Pace Of Tightening And More

Saxo Bank Saxo Bank 01.11.2022 11:36
Summary:  Today we look at another jump in sentiment overnight as the RBA maintains its slow pace of tightening, increasing the drumbeat of expectations that central banks are set to ease off the policy tightening gas. But with risk sentiment having roared off the lows and financial conditions rapidly easing in the US, will the Fed have any choice but to stay on message and push back against this market rally? Elsewhere, we look at oil and natural gas, uninspired gold, stocks to watch as earnings this quarter are underperforming expectations, the increasingly busy macro calendar ahead and more. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting an on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: https://www.home.saxo/content/articles/podcast/podcast-nov-1-2022-01112022
The USD/JPY Price Seems To Be Optimistic

The Yen (JPY) Is Extremely Sensitive To The Difference In The Yield Of US And Japanese Bonds

InstaForex Analysis InstaForex Analysis 01.11.2022 11:45
The level of uncertainty in the market is off the scale ahead of tomorrow's Federal Reserve meeting, which affects the current dynamics of the dollar-yen pair. What helps USD? The US currency regained its wings at the beginning of the week. Yesterday, the DXY index soared by almost 0.8% and hovered around a weekly high at 112. The fuel for the greenback was the strengthening of hawkish market expectations ahead of the Fed's monetary policy meeting. The event at which American officials are to announce their decision on interest rates will be held on Wednesday � November 2. Now most traders expect that the Fed will raise the indicator by 75 bps for the fourth time in a row. The probability of such a scenario is estimated at 89.2%. The market's confidence in the hawkish determination of the Fed has a positive effect on the yield of 10-year US government bonds. Yesterday, the indicator rose to 4.06%, which put strong downward pressure on the JPY rate. The yen, which is extremely sensitive to the difference in the yield of US bonds and their Japanese counterparts, fell by more than 0.8% against the dollar on Monday and approached a 30-year low at 149. The sharp drop in the JPY was also facilitated by the dovish decision of the Bank of Japan, which was adopted at the end of last week. Despite the acceleration of inflation in the country, the BOJ has maintained an ultra-soft monetary rate, which implies negative interest rates. The fact that Japan left the indicator unchanged, while America is preparing for the next round of rate hikes, further intensified the divergence in monetary policy of these two countries. Most experts believe that until the monetary divergence begins to shrink, the yen will remain in a downtrend. However, judging by the forecasts regarding the Fed's future course, this will not last that long. What prevents the dollar? Now the main obstacle to the strengthening of the US currency is the growth of speculation about a possible slowdown in the pace of interest rate hikes. We are not talking about the November Fed meeting, but about more distant prospects. Weak US economic statistics, which were published last week, significantly increased market concerns about the impending recession in America. Most analysts believe that signs of weakening economic growth may force the Fed to reduce the degree of aggressiveness towards interest rates. Goldman Sachs analysts predict that in December the US central bank will raise the indicator not by 75 bps, but by 50 bps. More slowdown is expected in February and March next year. According to experts, rates will be raised by only 25 bps during this period. A less hawkish long-term scenario severely limits the dollar's growth, even though the USD may receive another boost from the Fed tomorrow. This morning, the greenback sharply moved to decline in all directions, also against the yen. At the time of preparation of the material, the USD/JPY major plunged by more than 0.5% and fell below the 148 mark. Pessimistic expectations of key US economic data contributed to the rapid decline of the asset. Today traders will focus on the ISM index of business activity in the manufacturing sector for October. According to preliminary estimates, the indicator will decrease to 50.0 against the previous value of 50.9. Investors fear that, if this forecast is implemented, the Fed may indeed change its anti-inflationary plans to less hawkish ones. In this case, the differential in US and Japanese interest rates will begin to shrink, which will help the yen strengthen against the dollar.   Relevance up to 08:00 2022-11-06 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/325894
Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

Increase In German Trade Balance | Waiting For Fed’s Decision

Kamila Szypuła Kamila Szypuła 02.11.2022 10:51
Today, the most important reports for the markets will be from Germany and the USA. In the first half of the day, attention is focused on reports from Germany, but the markets are still awaiting the most important decision of the day - the Fed's decision. German Trade Balance (Sep) The trade result report for the biggest waterfall in the euro zone is positive. The current reading shows an increase from 1.2B to 3.7B. This is quite an optimistic result and could be the start of a trend reversal. Moreover, a trade surplus can create employment and economic growth, but may also lead to higher prices and interest rates within an economy. The reading was very high in April and then dropped drastically. The very low level was maintained for the next two months. After the increase in August, there was another downward trend. This trend was expected to continue this time, the expected level was 0.2B. Source: investing.com German Manufacturing PMI Expectations for Germany Manufacturing were lower than the previous reading, ie the expected level was at 45.7 against the latest reading of 47.8. The current reading of the gauge is 45.5. Another decline was clearly expected, but was 0.2% lower than the forecast level. As you can see, the approaches to this indicator and this sector are projected on a downward trend. German Unemployment Change The change in the number of unemployed fell in Germany from 15K to 8K. This is a positive reading in view of the sustained unemployment rate of 5.5%. As we can read from the data, this number has been decreasing month by month since the sudden increase in the unemployed in June. This is a positive signal for the labor market. Source: investing.com ADP Nonfarm Employment Change The first report that will be published in America will concern the labor market, namely the monthly change in non-farm, private employment. This number is expected to drop from 208K to 195K. These forecasts suggest that the recent rise was just a step back from the prevailing downtrend. Source: investing.com Crude Oil Inventories The next report will be the weekly report on the U.S. Crude Oil Inventories. The last reading was at 2.588M and this was a sharp increase. It is currently predicted to reach the level of 0.367M. What if? If the decline in crude is less than expected, it implies greater demand and is bullish for crude prices. The same can be said if a increase in inventories is more than expected. Fed Interest Rate Decision The most important event of the day, or even of the week, is the Fed's decision on interest rates. The Fed is not expected to follow other central bank decisions and will not soften its decisions. The Fed rarely deviates from expectations in its decisions, therefore the market is ready for another interest rate hike by 75bp. We have to wait for this decision until 19:00 CET Read more: What Can Bring The Fed's Next Decision And What It Means For Economy?| FXMAG.COM FOMC Press Conference U.S. Federal Open Market Committee (FOMC) Press Conference will take place a half an hour after decision. Valuable comments may appear at the press conference regarding the current decision, the situation of the farm and future activities. Summary 8:00 CET German Trade Balance (Sep) 9:55 CET German Manufacturing PMI (Oct) 9:55 CET German Unemployment Change (Oct) 13:15 CET ADP Nonfarm Employment Change (Oct) 15:30 CET Crude Oil Inventories 19:00 CET Fed Interest Rate Decision 19:30 CET FOMC Press Conference Source: Economic Calendar - Investing.com
The German Purchasing Managers' Index, ZEW Economic Sentiment And More Ahead

Conditions In Central And Eastern Europe Are Deteriorating And FX Market Is Heading Into The Fed Meeting

ING Economics ING Economics 02.11.2022 11:16
The Fed should hike by 75bp today, but markets appear divided on the degree of openness to slower tightening by Chair Powell. We suspect that lingering data-dependency may put off pivot speculation to the next inflation report, leaving risk assets vulnerable and the dollar bid. In this scenario, we expect the high-beta pound to suffer more than the euro In this article USD: Is the Fed really a make-or-break event for the dollar? EUR: Eyeing 0.9800 GBP: More at risk than the euro CEE: Fed as party crasher Source: Shutterstock USD: Is the Fed really a make-or-break event for the dollar? It’s FOMC day, and the extreme sensitivity of global assets and the dollar to the theme of a dovish pivot has boosted the notion this will be a make-or-break event for market sentiment. With so much at stake, our approach has been to look at different scenarios for markets and the dollar in our FOMC preview. There, we also highlight our baseline scenario, which sees a 75bp hike (consensus view) being accompanied by some tentative openness to a slower pace of tightening. It does appear that there is a considerable heterogeneity of expectations on the Fed today, which indeed makes it harder than usual to draw a precise market reaction function. Still, it appears that investors have been swinging increasingly in favour of a dovish pivot, which in our view increases the chances of a hawkish surprise. In particular, any reference to a potential slowing of the pace of hikes may come with some strings attached, retaining a de-facto data dependency and making the next inflation report the real pivotal event for markets. Given the tendency of inflation to surprise on the upside, investors may be reluctant to fully price out a 75bp hike in December (currently, 60bp is embedded in the OIS curve). So, what does this mean for the dollar? We are inclined to think that Chair Jay Powell will need to drop a substantial chunk of his data-dependent approach, and emphasise the risks of recession over the risks of inflation, in order to drive a substantial dollar downtrend. However, it does seem too early for this, and a risky move given the lack of evidence that inflation is coming under control. With markets still left in limbo, we suspect the balance of risks for the dollar is skewed to the upside today. After all, recent price action has pointed to interest in rebuilding long-dollar positions after the late-October correction, a dynamic that remains supported by a heavily inverted yield curve, instability in the equity market and lack of alternatives to the dollar in FX given macroeconomic uncertainty (especially in Europe and China). While surely a close call, we see DXY closing the week above the 112.00 handle, and moving back to the 113.00+ highs in the coming weeks. There are also US ADP jobs figures to keep an eye on today, but the proximity to the FOMC announcement and the limited predictive power on actual payrolls (which are released on Friday) should limit market sensitivity to the release. Francesco Pesole EUR: Eyeing 0.9800 It’s all about the FOMC announcement today for EUR/USD, and we see downside risks for the pair into the weekend. The 0.9800 level may prove quite pivotal, as this was an important anchor before last week’s upside correction. A break below 0.9800 before the end of the week would likely imply markets defaulting to the pre-correction levels, and signal a return to a more structural bearish tone on the pair, which could unlock further downside room. The main development to follow in the eurozone at the moment is the rhetoric of European Central Bank speakers after the upside surprise in eurozone inflation numbers. Yesterday, Germany’s Joachim Nagel and Spain’s Pablo Hernández De Cos firmly reiterated that there is still a long way to go in tightening, and we’ll hear from Ireland’s Gabriel Makhlouf and France’s François Villeroy today. As discussed on multiple occasions, the euro remains unable to draw substantial benefits from the ECB’s hawkish tone. Francesco Pesole GBP: More at risk than the euro The pound bounced back yesterday, as it continued to display the kind of high beta to risk sentiment that would normally be associated with commodity currencies in the G10. This feature inevitably puts the pound at risk of a larger drop than other peers – like the euro – if the Fed fails to offer support to risk assets today. We continue to highlight the risk of a dovish surprise (50bp hike) by the Bank of England tomorrow: more details in our scenario analysis. The combination of a USD-positive FOMC and a GBP-negative Bank of England means cable could test 1.1300 by the of the week. EUR/GBP may climb back into the 0.8650-0.8700 area in the coming days. Francesco Pesole CEE: Fed as party crasher For today, we have PMIs in Poland and Hungary on the calendar. As already foreshadowed by the result in the Czech Republic, a negative surprise can be expected here as well. Special attention will be given to Poland, which is currently leading the decline in leading indicators in the region. Poland and Hungary are returning to the market after the holidays today. Meanwhile, conditions in Central and Eastern Europe are deteriorating and FX is heading into the Fed meeting without much support. The US dollar continues its rally, local rates are lower against core rates across the region and yesterday's jump in gas prices back above EUR100/MWh is not helping the situation either. Thus, we expect to see selling pressure in CEE markets return. Moreover, in the Czech Republic, we will see the Czech National Bank meeting on Thursday, which traditionally attracts short positioning with the prospect of an end or change to the central bank's FX intervention regime, which should take the koruna back to CNB intervention levels in the 24.60-24.70 EUR/CZK range. Despite strengthening over the past two days, we continue to think that the Polish zloty and Hungarian forint should trade higher as well. Just based on the current interest rate differential and FX relationship, we see the zloty closer to 4.75 EUR/PLN and the forint closer to 415 EUR/HUF. Moreover, with the Fed meeting today, we expect pressure on the CEE to increase during the day, which may lead to a painful end to the current rally in the region. Frantisek Taborsky   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Bank of England survey highlights easing price pressures

The Bank Of England (BoE) Starts Selling Bonds | Airbnb Down, Sony Up

Swissquote Bank Swissquote Bank 02.11.2022 11:50
Jay Powell will probably hammer the dovish hopes, and the latest risk rally when he speaks following the FOMC decision today. Fed In preparation for an unpleasantly hawkish Fed statement today, the US 3-month yield spiked above the 4.20% mark, the level it was normally supposed to be in 18 months, the 2-year yield returned above the 4.50% mark, the US dollar index advanced and the US equities sold off, as yields jumped. The ADP report is due a couple of hours before the Fed decision, and is expected to have eased below 200’000 in October. Any positive surprise will likely further boost the Fed hawks, and dampen the mood in risk assets. China In China, stocks extend gains on an unverified social media post that China will end its Covid measures. The Chinese foreign ministry spokesman said he was unaware of the plan. Disneyland in Shanghai was shut with people in it, after a Covid case was found in the park… I wouldn’t cry victory just yet! UK In Britain, the first day of bond selling from the Bank of England was a success. The BoE sold 1$750 million worth of bonds, demand exceeded offer, gilt yields pulled lower and sterling was steady. Airbnb Airbnb fell 5% post-market on disappointing Q4 outlook, Sony jumped near 10% in NY as softer yen helped boosting sales, BP announced the second biggest quarterly results, while Abiomed jumped 50% after Johnson & Johnson announced to buy the company. Watch the full episode to find out more! 0:00 Intro 0:18 Will Powell save the risk rally? 2:22 Market update 4:17 Oil stocks extend rally, BP announce strong profits 5:45 Airbnb down, Sony & Abiomed up 7:11 BoE starts selling bonds successfully 8:42 EUR, XAU faith in Powell’s hands… Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Fed #FOMC #rate #decision #USD #ADP #US #jobs #report #crudeoil #ExxonMobil #Chevron #BP #China #covidzero #UK #QT #GBP #BoE #Sunak #EUR #XAU #Sony #Abiomed #JohnsonJohnson #Airnbn #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___  Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH      
The Gold Rally Is Continuing To Stall, This Could Be A Good Year For Crude Oil

Can We See An Improvement In Supplies In The Black Sea Region? | Crude Oil Is Growing

Saxo Bank Saxo Bank 02.11.2022 11:57
Summary:  A surprisingly strong survey of US job openings yesterday suggests that the US labor market remains extremely tight, potentially continuing to feed inflationary pressures. Today sees the latest FOMC meeting, at which the Fed will have to grapple with guidance and whether to flag the much-anticipated possible downshift from 75 basis point hikes at the December meeting. Given the recent easing of financial conditions and strong risk sentiment, the Fed may try to lean against the market and hawkishly keep all options on the table. Industrial metals run higher on speculation China is preparing to ease Covid rules.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) The fear of recession has eased quite a bit in October and as a result equities have rallied from their lows in October. S&P 500 futures are trading around the 3,868 level this morning as the US 10-year yield has moved higher above 4% again. The big event is tonight’s FOMC rate decision which will prove to be a delicate balancing act for the Fed keeping financial conditions tight enough but smooth the transition to this higher level of interest rates without breaking the market. If the market interprets a dovish tilt tonight the 4,000 level is quickly the main focus point in the S&P 500 futures. Euro STOXX 50 (EU50.I) STOXX 50 futures touched the 200-day moving average yesterday before retreating, but this morning the index futures are continuing higher trading around the 3,661 level, which is just below the 200-day moving average. The 3,800 level in STOXX 50 futures could be the next big level to watch if momentum continues. European equities are enjoying tailwinds from easing energy and electricity markets and better than expected GDP reports in Q3 showing that the European economy can absorb the input cost shocks for now. FX: USD rallies on very strong JOLTS survey, eyes FOMC The greenback rebounded yesterday on the very strong September JOLTS jobs openings survey, which jumped sharply from the large August dip (see more below), helping US treasury yields back higher. See the FOMC meeting preview under What are we watching next? below. Today and in the wake of the important US jobs data tomorrow, the pivotal areas for EURUSD are perhaps 0.9850 and parity on the daily/weekly close, for GBPUSD, the 1.1400-1.1500 area is the zone of contention, and in AUDUSD, 0.6350-0.6530. USDJPY will be sensitive to any sharp move in US treasury yields, leaning toward 150.00 if yields jump in the wake of tomorrow’s US jobs report or challenging 145.00 if the Fed fails to surprise hawkish today and the jobs data is weak. Gold (XAUUSD) Gold reached $1657 before running into sellers as bond yields rose following stronger US economic data. The dollar and yields developments continue to haunt the metal, especially ahead of today’s critical Fed meeting. Silver, initially enjoying a trifecta of support from rising gold and copper as well as the weaker dollar, traded up to once again challenge resistance at $20/oz before running out of steam. Crude oil (CLZ2 & LCOZ2) Crude oil trades higher for a second day with WTI challenging a recent high at $90 and Brent moving closer to $97.25 resistance. Oil prices initially received a boost from China reopening speculation, the weaker dollar and OPEC+ production cuts before extending gains after the API reported a bumper 6.5-million-barrel drop in crude inventories. Apart from today’s official inventory report from the EIA, crude oil traders will turn their attention to today’s FOMC meeting given the potential impact the rate decision and comments may have on the dollar and the general level of risk sentiment. US treasuries (TLT, IEF) The key US 10-year treasury yields pulled back above the important 4.00% level after the strong September jobs openings survey out of the US yesterday, but far more important are today’s FOMC meeting and further incoming data, discussed below. The recent price action makes it clear that the 3.90% area is important resistance for bond yields and at the shorter end of the curve, the 5.00% level will be an important focus, given that the market has been unwilling to take Fed expectations more than a couple of basis points beyond that level as it continues to see the Fed cutting rates by the end of next year. What is going on? Metals run higher on China speculation Copper and nickel led a surge in base metals on speculation - which was later denied - that Beijing is preparing to ease Covid rules. However, metals held gains after China’s outgoing premier Li Keqiang said China will strive for a "better" economic outcome and promote stable, healthy and sustainable development, saying China’s economy is showing signs of stabilizing, as well as “rebounding momentum" thanks to stimulus. Developments showing the potential support for industrial metals when restrictions are being lifted, and it brought the focus back on supply issues in Copper, with inventories running low on exchanges and major producers struggling to meet their production targets. The BCOM Metal index jumped 3.4% with steel and iron ore prices also receiving a bid. HG copper’s further advance will be challenged by multiple resistance levels between $3.55 and $3.78. European earnings This morning we have got strong results from Novo Nordisk, Maersk, and GSK, while the wind turbine maker Vestas misses big on revenue and EBIT. Vestas is also adjusting its FY EBIT to –5% from previously –5% to 0%. Novo Nordisk reports Q3 revenue of DKK 45.6bn vs est. DKK 44.4bn and EBIT of DKK 20.2bn vs est. DKK 19.2bn in addition to increase its sales forecast due to strong demand for its obesity drug Wegony. Maersk is still enjoying strong earnings beating estimates on EBIT in Q3, but the container shipping company is lowering its forecast for container volume and in general the market is expecting a slowdown in 2023. US job openings and ISM manufacturing complicate Fed’s message US job openings saw an unexpected rebound in September amid low unemployment, suggesting more wage gains could be in store. JOLTS job openings came in higher at 10.7 million in September from a revised 10.3 million in August. This likely thrashes expectations of any material downshift from the Fed after today’s widely expected 75bps increase. Meanwhile, October's ISM manufacturing index also remained in expansion at 50.2, albeit falling from last month’s 50.9. However, disinflationary trends were emphasised as the index of prices paid fell to an over 2-year low. Still, sticky shelter and services inflation remains materially high suggest still-higher interest rates remain on the horizon. Terminal rate pricing for Fed funds futures has picked up again to 5% levels, and it would be hard for the Fed to push it any higher at this point, but what it can clearly hint at today is pushing out of the rate cut expectations for next year. Read our full FOMC preview here for further insights. Lack of insurance halted UN Black Sea shipments, but progress being made The UN halted grain shipments from Ukraine's Black Sea ports on Wednesday, after Russia warned ships weren't safe using the route and demanded guarantees from Ukraine. However, reports suggested early on Wednesday that an agreement had been reached and ships will start to sail again from Thursday, as pressure on Russia continues to build. We continue to watch crop and fertilizer prices, as a meaningful reversal could come through if we see improving shipments across the Black Sea region. AMD earnings supported by servers despite weak PC sales Advanced Micro Devices rose in the after-hour trading as it reported better than estimated Q3 earnings, although issuing guidance that missed analysts’ expectations. EPS came in $0.67 vs estimated $0.65, revenue $5.57B vs estimated $5.62B. Guidance suggested AMD is expecting strong growth in its server chip business in the coming quarters. Q3 results were in-line with a warning issued by AMD on October 6 which helped to reset expectations, as weak PC sales continued to underpin. Airbnb drops on disappointing guidance Airbnb reported its highest revenue and most profitable quarter but a muted Q4 outlook as consumer preferences are shifting back to cities which tend to have lower rates based on smaller sized spaces. Q3 revenue rose 29% to $2.88B, estimated $2.84B. Net profit rose 45.6% to $1.21B. But the company said it expected bookings to moderate after a bumper third quarter. Sony surges on profit beat Weak yen propped up revenues for Sony and also nudged up the fiscal year profit outlook, pushing shares higher in early trading. Q2 sales came in at 2.75tr yen, est. 2.67 tr yen while operating income was 344bn yen vs. 280.66bn yen expected. Operating profit beat was broad-based, except in games. Australian home-lending falls more than expected in September House lending in Australia fell 8.2% YoY in September (far more than the market expected) while building construction lending fell 36.6% YoY, with the weaker data sets coming out just a day after the RBA remained dovish - raising Australia’s official cash rate by 25bps (0.25%) to 2.85%. Yesterday the RBA acknowledged tighter financial conditions and the ‘full effect’ of increased interest rates are yet to be felt in ‘mortgage payments’, but the rate hikes since May, combined with higher inflation have already put pressure on household budgets. What are we watching next? FOMC meeting – Fed may want to keep a low profile, but can’t afford to be seen dovish The September JOLTS jobs openings data point yesterday was the latest to suggest that the Fed will have a hard time pre-committing to any slowdown in the pace of its policy tightening after the 75-basis-point hike that is priced in for today’s meeting. The December 14 FOMC meeting odds have not shifted much over the last couple of weeks, as investors still favour a downshift to a 50-basis-point move then and another 50 basis points of tightening early next year over the space of a couple of meetings. To surprise hawkish today, the Fed may have to make it very clear that it is willing to continue tightening beyond current expectations and beyond its September forecasts to boost the greenback via rate guidance, but is probably also reluctant to pre-commit to anything. Pointing to high reactivity to further incoming data may be one way to achieve this. That will then mean extreme volatility on the next bits of Incoming data ahead of the December meeting, starting with the ISM Services tomorrow and then the October jobs report this Friday and two more CPI releases before December 14. Earnings to watch Today’s US earnings focus is Estee Lauder, Booking, Fortinet, and Albemarle. Analysts expect revenue to decline by 11% y/y at Estee Lauder but improving operating margin. The cosmetic business is facing headwinds from labour costs and transportation. Booking is expected to deliver strong earnings growth given the better-than-expected result from Airbnb yesterday. Analysts expect 26% y/y revenue growth and EPS growth of 35% y/y. Fortinet is one of the market leaders in the fast-growing cyber security industry and with the ongoing war in Ukraine we expect demand for cyber security solutions to be high; analysts expect Fortinet to grow revenue by 30% y/y in Q3. Albemarle is riding the demand for lithium as electric vehicle sales is seeing explosive growth. Albemarle is expected to deliver 168% y/y growth in revenue and EPS growth of 545% y/y. Today: Suncor Energy, Nutrien, Novo Nordisk, Maersk, Vestas Wind Systems, GSK, Qualcomm, CVS Health, Estee Lauder, Booking, Fortinet, Ferrari, Albemarle Thursday: Verbund, Barrick Gold, Orsted, Novozymes, BNP Paribas, BMW, Enel, ING Groep, DBS Group, ConocoPhillips, Amgen, PayPal, Starbucks, Regeneron Pharmaceuticals, EOG Resources, Moderna, MercadoLibre, Block, Cloudflare, Coinbase Friday: Enbridge, Societe Generale, Intesa Sanpaolo, SoftBank, Amadeus IT Group, Duke Energy, Economic calendar highlights for today (times GMT) 0815-0900 – Eurozone Final Oct. Manufacturing PMI 0855 – Germany Oct. Unemployment Change/Rate 1215 – US Oct. ADP Employment Change 1430 – EIA's Weekly Crude and Fuel Stock Report 1800 – US FOMC Meeting 1830 – US Fed Chair Powell Press Conference 2000 – New Zealand RBNZ Governor Orr before Parliamentary Committee 0145 – China Oct. Caixin Services PMI  Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: https://www.home.saxo/content/articles/macro/market-quick-take-nov-2-2022-02112022
Indonesia's Inflation Slips, Central Bank Maintains Rates Amidst Stability

Ole Hansen Comments On Commodities And John J. Hardy Talks About Forex Market

Saxo Bank Saxo Bank 02.11.2022 12:07
Summary:  Today we discuss the shockingly strong September US JOLTS job openings survey out yesterday that took down risk sentiment as US yields and the US dollar jumped. It's the latest data point to suggest that the Fed needs to hawkishly keep all options on the table to buy at least a bit of time and two monthly data cycles until the December 14 FOMC meeting, where it can better make a decision on whether to downshift the size of further hikes and provide its next set of projections and policy forecasts. A focus on incoming data is likely, but how will the market react? Elsewhere, we look at key stocks to watch as earnings season rolls on, industrial and precious metals and crude oil, key FX stories and more. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting an on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: https://www.home.saxo/content/articles/podcast/podcast-nov-2-2022-02112022
Bank of England Faces Rate Decision: Uncertainty Surrounds Magnitude of Hike

The Fed Is Unwilling To Take On Big Losses As An Explanation For The Reversal Of Their Monetary Policy

InstaForex Analysis InstaForex Analysis 02.11.2022 12:29
As the November FOMC meeting concludes today, many analysts and news sources are reporting the possibility that the Federal Reserve will announce or at least hint that they may begin to wind down their aggressive stance on interest rate hikes. If the Fed announces a slowdown in the scope and pace of further rate hikes, this will happen against the backdrop of continued growth in the PCE core inflation index. The most recent inflation report showed that the core PCE index jumped 5.1% in September compared to the same period last year, the fourth-highest value in this cycle after January, February, and March. The Federal Reserve is still very far from reaching its 2% inflation target. Simply put, inflation shows no signs of slowing down, as measured by their preferred index. Over the past five FOMC meetings, the Fed has made five consecutive rate hikes, starting with a a% rate hike in March and a a% rate hike in May, followed by three consecutive % rate hikes in June, July, and September. It is assumed that the Fed will raise rates by % for the fourth time in a row after today's FOMC meeting. The net result of all these hikes is an increase in the base rate from 0 to a% in March to 3–3a% in September. One possibility as to why the Federal Reserve may reverse the pace of rate hikes is the fact that, based on the current base interest rate of 3% to 3a%, the Fed is losing billions of dollars. On October 25, Bloomberg News published an article titled "Fed Is Losing Billions, Wiping Out Profits That Funded Spending." In this article, written by Enda Curran, Jana Randow, and Jonnelle Marte, they discuss in detail the implications of the Federal Reserve's hawkish monetary policy, stating: "The bond market is enduring its worst selloff in a generation, triggered by high inflation and the aggressive interest-rate hikes that central banks are implementing. Falling bond prices, in turn, mean paper losses on the massive holdings that the Fed and others accumulated during their rescue efforts in recent years." The article also says that the recent rate hike is due to central banks paying more interest on the reserves that commercial banks place with them. The result, according to this article, is that higher rates "tipped the Fed into operating losses, creating a hole that may ultimately require the Treasury Department to fill via debt sales. The UK Treasury is already preparing to make up a loss at the Bank of England." The result of their actions has resulted in huge operating or balance sheet losses that are now materializing. "Fed remittances owed to the US Treasury reached a negative $5.3 billion as of Oct. 19—a sharp contrast with the positive figures seen as recently as the end of August. A negative number amounts to an IOU that would be repaid via any future income." It seems quite plausible that the Fed is unwilling to take on big losses, which would be an excellent explanation for the reversal of their monetary policy at a time when they are not even close to their 2% inflation target.   Relevance up to 21:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/326030
All Eyes On Capitol Hill, Jerome Powell Will Appear Before The Senate Banking Committee

There Is A Little Chance Of A Dovish Surprise From The Fed

Conotoxia Comments Conotoxia Comments 02.11.2022 13:51
As early as today, i.e. November 2, 2022, the U.S. Federal Reserve may decide to raise interest rates by 75 bps for the fourth consecutive year. The current range for the federal funds rate is 3.00-3.25, while the market's expectation is 3.75-4.00 percent. Will this be the last such significant hike in this cycle? Federal Reserve system The Federal Open Market Committee (FOMC) may decide to continue its unprecedented pace of interest rate hikes in early November to combat the highest US inflation in decades. In addition, core inflation seems to have risen faster recently (6.6 percent in September, the highest since 1982), hence a fourth consecutive hike may already be discounted by the market. Moreover, despite previous hikes, the U.S. economy has returned to economic growth, as shown by the latest GDP data (2.6 percent for the third quarter). In addition, job creation in the U.S. economy appears to be maintaining its post-pandemic pace, which may also convince the Fed to continue tightening monetary policy. The Fed may still believe that inflationary risks are directed more upward, and that continued rate hikes are appropriate and that a sustained period of below-trend growth is required to bring inflation under control. What could be the surprise for the USD exchange rate? It seems to be a little chance of a dovish surprise at this point. A few analysts are predicting a 50bp hike, a view that has gained some traction after recent comments by several FOMC members about the risk of over-tightening policy and triggering an unnecessarily deep recession, reports ING in its note. However, it is generally considered a theme regarding the size of rate hikes at future meetings. Nevertheless, it has certainly dampened any talk of a 100bp rate hike. No analyst is forecasting such an outcome based on survey consensus, unlike at recent meetings, according to an ING release. Source: Conotoxia MT5, EURUSD, Daily However, if it turned out that the Fed would follow in the footsteps of the Bank of Canada and raise interest rates by 50 bps, the reaction in the dollar market could be significant. Nonetheless, the US central bank could then focus more on reducing its balance sheet, which in turn could be difficult to do, due to possible liquidity problems. However, it seems that as long as more hikes are expected, which the market is still pricing in, unless month-on-month core inflation starts to fall sharply, the dollar could meet demand again in the event of any weakness. After all, the Fed  seems  still struggling with core inflation, which is moving away from year-end targets, and the central bank's goal may be to achieve positive real interest rates in 2023 (the Fed rate may outpace inflation).Source: Conotoxia MT5, USDIndex, Daily When will the Fed publish its decision? Due to the time change in Europe, but still no time change in the US, the Fed's decision will be published at 19:00 (GMT+1). The post-meeting press conference is scheduled to begin at 7:30 p.m. This is when Jerome Powell will be able to give an overview of the situation in the U.S. economy, and perhaps we will learn what further steps the Fed intends to take. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Read more reviews and open a demo account at invest.conotoxia.com Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75,21% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Powell's Statements On The Future Policy Of The Fed Will Help Bitcoin

Powell's Statements On The Future Policy Of The Fed Will Help Bitcoin

InstaForex Analysis InstaForex Analysis 02.11.2022 14:15
The events of the previous trading week indicate that buyers have begun to return to the cryptocurrency market. Bitcoin and major cryptocurrencies have gone beyond the consolidation channels and are moving towards local highs. There is a recovery of on-chain metrics of daily trading volumes and activity of unique addresses in the BTC network after a decline over the weekend. This is an important signal of growing buying activity and the desire to continue moving upward. Fed meeting On November 2, an important meeting of the Fed is expected, where the markets can hear key theses about the future policy of the regulator. Over the past few months, the uncompromising position of the Fed has led the markets to expect a recession in the US economy in the next six months. At today's meeting, investors want to hear signals from the regulator about a change in current policy. In anticipation of the meeting, Morgan Stanley experts noted that the money supply in the markets has declined significantly. This means that in the coming months, inflation will begin to decline rapidly. If the Fed comes to a similar conclusion, it will fuel another upward spurt for cryptocurrencies and stock indices. At the same time, it is expected that the key rate will again be raised by 75 bps, but this decision is already included in the price. The state of the markets before the Fed meeting The main stock index S&P 500 has reached a resistance zone near the $3,900 level. Over the past five days, a clear dominance of the bears is visible, and the technical metrics on the daily timeframe are gradually turning sideways. This means that the SPX has lost its local bullish momentum. The US dollar index locally recovered to the level of 111, but subsequently, the buying activity decreased. The stochastic oscillator has formed a bearish crossover, which indicates the dominance of sellers. Overall, the DXY is dominated by selling with sluggish attempts by the bulls to even out the situation. The correction of the US dollar index continues, which is a positive signal for BTC. Local bottom not formed? Glassnode analysts said in a weekly report that there are no signs of a local market bottom forming. It is likely that in the near future, Bitcoin will need an additional "redistribution" phase, during which large amounts of BTC will pass into the hands of long-term owners. For the market, this means an increase in volatility and impulsive price movements in order to knock out investors' positions. There is already growing volatility in BTC, which will break the asset's correlation with gold and make the cryptocurrency more unpredictable. In addition, daily BTC trading volumes on exchanges reached $543 billion. This value is the lowest since December 2020. Increased volatility and low trading volumes are ideal conditions for an additional stage of "redistribution," so active trading in the market will become more dangerous in the near term. BTC/USD Analysis Given the data from Glassnode, one can conclude that massive amounts of liquidity below the $17.6k level will be collected. As of November 2, Bitcoin is trying to gain a foothold above the downward trend line at $20.4k. After the Fed meeting, there will be a surge in volatility that can send the price in any direction. In the next few days, it will become clear whether BTC is ready for further upward movement or to retest the local bottom. An increase in the key rate and Powell's statements on the future policy of the Fed will help Bitcoin either gain a foothold above $20.4k. This will allow the cryptocurrency to continue its bullish move to the $22k level. If it finally consolidates below $20k, the price will head towards the $19.5k support zone and continue its downward movement towards the current market bottom.     Relevance up to 10:00 2022-11-03 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/326032
EUR/USD Pair: The Bulls Might Remain Inclined To Be Back In Control

The Indecision Of Both Bears And Bulls On The EUR/USD Pair

InstaForex Analysis InstaForex Analysis 02.11.2022 14:26
It is difficult to overestimate the significance of the Fed's November meeting. Traders of dollar pairs are waiting for the verdict, not daring to make unipolar decisions – either in favor of the greenback or against it. A vivid illustration of this is the EUR/USD pair, which cannot determine the vector of its movement. On Monday, the price dropped sharply to the area of the 98th figure, but yesterday the downward momentum faded, which buyers took advantage of. However, their successes also leave much to be desired: the pair is circling around the 0.9900 mark, reflecting the indecision of both bears and bulls on EUR/USD. In general, a paradoxical situation has developed around the November meeting of the Fed. On the one hand, market participants have no doubt that the regulator will increase the interest rate by 75 basis points today. On the other hand, the general plot contains intrigue, primarily regarding the further pace of monetary policy tightening. So, the probability of a 75-point rate hike in November is currently 90.2%. The probability of implementing a 75-point scenario at the December meeting is 50.3%. These figures, published by the CME FedWatch Tool service, indicate the precariousness of the current situation. The scales can tilt both in the direction of the dollar and against it. If the members of the regulator in the accompanying statement (or/and Jerome Powell at a press conference) hint, or at least do not rule out, a slowdown in the tightening of monetary policy at the end of this year / early next year, the greenback will be under the strongest pressure. In this case, the EUR/USD pair will not only overcome the parity level but also gain a foothold above the 1.0050 resistance level (the upper line of the Bollinger Bands indicator on the daily chart). Moreover, the dollar may react negatively even to veiled hints from the Federal Reserve – for example, if the text of the final communique (or Powell's rhetoric) emphasizes accordingly. For example, if the regulator expresses concern about the slowdown in a number of macroeconomic indicators in the United States, takes care of the decline in the global economy, and pays attention to difficult international conditions. In other words, even if the Fed voices hypothetical reasons for slowing down the pace of rate hikes without directly indicating such intentions, the dollar will be under the strongest pressure. The fact is that over the past two weeks, the situation has been escalating in a certain way, the information background has been "dovish" in nature, so market participants will "look out" for such hints in the Fed's rhetoric. In my opinion, only "direct verbal interventions" of a hawkish nature will help the dollar bulls. In the text of the accompanying statement, as a rule, very streamlined, diplomatic language is used, so all hope is on Federal Reserve Chairman Jerome Powell. He should convey to traders a simple but important message: the Fed is not going to slow down until inflation in the United States shows signs of slowing down; without fulfilling this condition, it is pointless to reduce the pace of the rate hike. The head of the Fed should voice this message categorically and unequivocally. In this case, dollar bulls will be able to organize another rally, returning the EUR/USD pair to the area of 96–97 figures. Whereas all doubts, ambiguous hints, and cautious wording will be interpreted against the US currency. How likely is the implementation of a conditionally "hawkish" scenario? In my opinion, this scenario is basic, given all the previous rhetoric, not only of Powell but also of most of his colleagues. Powell has consistently (since the August economic symposium in Jackson Hole) defended his position that the regulator should curb inflation, while agreeing with the presence of side effects. And now, with the side effects of the Fed's aggressiveness starting to show, and inflation still at unacceptably high levels, can Powell back off? Note that the core consumer price index jumped in September to 6.6% in annual terms. This is the strongest growth rate since 1982. The upward dynamics of the core index is fixed for the second month in a row. The core personal consumption expenditures price index (the Fed's main inflation indicator) strengthened its growth rate to 5.1% year on year after rising 4.9% a month earlier. All these signals indicate that the Fed has not yet completed its number one task. As for the notorious "side effects," there are also some nuances here. Against the backdrop of a slowdown in many macro indicators, data on US GDP growth in the third quarter came out in the "green zone." The US economy expanded by 2.6% (against a growth forecast of 2.3%), after a two-quarter decline in the first half of 2022. Thus, despite the circulating rumors of a "dovish" nature, the likelihood of a "hawkish" scenario being realized today is quite high. Powell is likely to reaffirm his commitment to aggressive monetary tightening, and in one form or another, will repeat his phrase that Americans will have to put up with an economic slowdown, as "this is a sad price for reducing inflation." Nevertheless, given the continued likelihood of an alternative ("dovish") scenario, it is most expedient to take a wait-and-see position for the EUR/USD pair now, at least until the end of the final press conference of the head of the Fed.     Relevance up to 17:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/326042
FX Daily: Upbeat China PMIs lift the mood

In The US, Stocks May Remain Risk-Free | According To Chinese Prime Minister Li Keqiang, The Chinese Economy Is Showing Signs Of Stabilization

Saxo Bank Saxo Bank 03.11.2022 08:25
Summary:  The Nasdaq 100 & S&P 500 drop after the Fed made hawkish remarks post lifting rates 0.75%. Fed says ‘we still have some ways to go’. It will make ‘ongoing increases’ until rates are ‘sufficiently restrictive’. Provided the upcoming economic data is strong, and shows the US economy is, the Fed can keep hiking. However, it could pivot as early as December. Until the next major US eco data release it seems equites could remain in risk-off mode, especially with high PE stocks, like tech, while defensive and commodity plays with rising cash flows could continue to garner interest. China’s Li signals a potential economic recovery, fuelling commodities and China’s markets. Crude oil rocks up after OPEC raised its forecast for oil demand. a2 Milk gets FDA green light. What is happening in markets? The Nasdaq 100 (USNAS100.I) & S&P 500 (US500.I) drop after Fed made hawkish remarks post lifting rates 0.75% US major indices dropped on Powell's hawkish comments. The S&P 500 shed 2.5% and the Nasdaq plunged 3.4% with megacap tech stock copping the brunt of the selloff with Apple (AAPL) down 3.73% and Tesla (TSLA) down 5.6% with the EV giant reportedly shutting its flagship showroom in China, in Beijing as it shift strategy. What prompted high PE stocks being sold off was that Treasuries yields rose across the curve, with the 10-years up 4 bps to 4.08%. The dollar reversed course and rose against every G-10 peer save the yen. So, the bottom line is, the market will now be contending with a risk-off tone, until the next US economic data sets prove the Fed can pivot. Oil moved higher, while corn and wheat dropped on grain-corridor developments. Elsewhere, Boeing (BA) shares rose 2.8% with the plane maker saying it could generate $10 billion in cash annually by mid-decade, once it turns around its operations after years of setbacks. Australia’s ASX200 (ASXSP200.1) futures suggest risk-off mode will be enacted with tech stocks on notice. Focus will be on milk Aussie tech stocks are likely to come under pressure with US bond yields rising again. However, there may be bright sparks today. Iron ore (SCOA) rose 0.4% sitting back above $80.85, which might support iron ore companies shares. That said, BHP closed 3.1% lower in NY. A2Milk (A2M) may garner attention after the US FDA gave approval for a2 Milk to be sold in the US. Bubs Australia (BUB) may likely 'piggyback' on any gains. That said, you could expect infant formula stocks to gain interest, particularly as China’s outgoing premier signal China is striving to build sustainable development. In other news; Rio (RIO) moved in on taking over a Canadian copper-gold company, Turquoise Hill Resources (TRQ). On Wednesday in Australia, Rio offered C$43 per share for the Canadian miner, saying that is its best and final offer. Rio is seeking to buy 49% of the Canadian miner, that it doesn’t already own, in a deal valued at around C$4.24 billion. Turquoise Hill Resources shares surged The Investor meeting to consider the takeover is set for November 8. Rio is also bidding to gain control of Mongolia’s Oyu Tolgoi, one of the world’s biggest copper mines. Crude oil (CLX2 & LCOZ2) rocks up after OPEC raised its forecast for oil demand   Oil rallied for several reason; firstly OPEC rose its forecasts for world oil demand in the medium to longer term, saying that $12.1 trillion of investment is needed to meet this demand. Second, an EIA report showed US gasoline inventories fell to the lowest since 2014 and East Coast distillate stocks slide to a record low seasonally, which intensifies supply concerns. Crude supplies also fell. Natural gas rose in the US and in Europe. Fed says ‘we still have some ways to go’; and it will make ‘ongoing increases’ until rates are ‘sufficiently restrictive’. What to watch next, what it means for equities Federal Reserve Chair Jerome Powell stuck to his campaign to bring inflation under control, saying “we still have some ways to go”, before rates were ‘sufficiently restrictive’ but the path may soon involve smaller hikes. Still, Powell sees it may be appropriate to make smaller hikes, as soon as December, or at the meeting after. But, he also said it was very premature to be thinking about pausing. After the Fed raised rates by 75 basis points on Wednesday, Powell said “incoming data since our last meeting suggests that ultimate level of interest rates will be higher than previously expected.” He also mentioned rate hikes have a lag effect on the economy, and the Fed needs to take this into account. This means, the devil will be in the detail ahead, as in the upcoming economic data which the Fed will respond to. Provided the upcoming economic data is strong, shows the US economy is, then the Fed can essentially keep hiking. For equites this means the risk-off mode in high PE stocks, like tech can possibly continue, inversely, defensive and commodity plays with rising cash flows might continue to garner interest. Saxo’s Head of FX Strategy says, so cue tomorrow’s ISM Services, Friday’s US jobs report, the October CPI due out next week, November 11 next week, and the November CPI report due December 12. China’s Li Keqiang signals a potential economic recovery, fueling commodities and China’s markets China’s outgoing premier Li Keqiang said China will strive for a "better" economic outcome and promote stable, healthy and sustainable development, saying China’s economy is showing signs of stabilizing, as well as “rebounding momentum" thanks to stimulus. This has supported gains in iron ore (SCOA) and also supported optimism in Asian equites. Australian lending and building approvals fall more than expected, giving the RBA greater cause to remain dovish. Keeping AUDUSD on notice House lending in Australia fell 8.2% in September (far more than the market expected) while building construction lending fell 36.6%, with the weaker data sets coming out just a day after the RBA remained dovish - rising Australia’s official cash rate by 25bps (0.25%) to 2.85%. On Tuesday the RBA acknowledged tighter financial conditions and the ‘full effect’ of increased interest rates are yet to be felt in ‘mortgage payments’, but the rate hikes since May, combined with higher inflation have already put pressure on household budgets. We believe the RBA could increasingly become dovish despite inflation running away to the upside. We think the RBA may be forced to potentially pause on rate hikes sooner, as they have done in history, despite peak inflation continuing to rise YoY. The AUDUSD remains under pressure for this reason. Plus until the Fed has reason to pivot the US dollar remains supported. For a global look at markets – tune into our Podcast.   Source: https://www.home.saxo/content/articles/equities/market-insights-today-3-nov-03112022
Forex: US dollar against Japanese yen amid volatility and macroeconomics

Fed hiked the interest rate by 75bp. The final rate target could be higher than estimated. ING expects US dollar index may stay calm, pointing to tomorrow's labour market data

ING Economics ING Economics 03.11.2022 09:53
The dollar is higher after the Fed raised rates 75bp again yesterday. Chair Jerome Powell is trying to switch attention away from the pace of rate hikes to the terminal rate, which he said will likely be higher than what the Fed had estimated in September. Expect the dollar to hold gains - especially versus GBP were the BoE to surprise with just a 50bp hike USD: Higher rates for longer As we discussed in yesterday's Fed reaction piece, the dollar initially sold off on the FOMC statement, but then rallied on what was overall a hawkish press conference. When the dust had settled, the US money market curve had bear-steepened - e.g. 1m USD OIS rates priced six months forward were 6bps higher, but priced 12 months forward were 12bps higher. There were many ways to read the press conference, but one interpretation is that Chair Powell was trying to shift the narrative away from how fast the Fed would be hiking towards how high the terminal rate would have to go and how long it would have to stay there. The press conference also concluded with a sense of frustration from Chair Powell that inflation had not fallen more quickly - and he certainly did not provide any encouragement to those in the market looking for an early fall in rents (a key component of core inflation). With the focus now switching to the terminal rate, Chair Powell has guided expectations that it will be higher than the 4.50-4.75% area the Fed had estimated back in September. That could prepare us for another bullish dollar event risk with the release of the next set of projections on 14 December - assuming neither employment nor core inflation sags quickly.  Expect Fed policy to prove a bullish undercurrent to the dollar and an even more inverted US yield curve to weigh in particular on the high beta activity and commodity currencies, such as the Australian and New Zealand dollars, Norway's krone and Sweden's krona. Where there could be some joy for those a little more bearish on the dollar is amongst high-yielding Latam FX - especially the Mexican peso. Some have made the good point that the slower pace of Fed hikes could reduce volatility in the interest rate markets. Indeed, the MOVE index - a basket of US Treasury implied volatility across maturity buckets - edged lower yesterday. FX volatility typically takes its cue from the interest rate markets. Lower FX volatility will increase risk-adjusted returns, where we think the 11.1% MXN implied yields available through the three-month forward look attractive and could drive USD/MXN to 19.45/50 during brief periods of calm. For today's US session, the focus will be as usual on the weekly jobless claims data. We also have ISM services and the September trade balance. The US monthly trade deficit has narrowed in from $107bn to $67bn this year, no doubt helped by rising US energy exports. Another dollar positive. We favour a flat to higher DXY today (perhaps to 112.50) as the market consolidates ahead of tomorrow's monthly US jobs release. Chris Turner EUR: Dollar hedging costs are 3% again The jump in US short-dated rates has widened the two-year differential between EUR and USD swap rates back to 210bp again - not far from the widest levels of the year. Equally, the shorter-dated yields now indicate that it will cost euro-based companies around 3% per annum to hedge the dollar using rolling three-month forwards - that is expensive. EUR/USD is gradually sinking back towards 0.98 and we feel momentum could easily build for a push to 0.9650 tomorrow if US jobs and wage data do not slow as much as expected. In Europe today, there are a lot of European Central Bank speakers, where the doves are trying to get the message across that the forthcoming recession will do some of the work in taking inflation off its highs. EUR/USD could trade in a 0.9760-0.9850 range today. Chris Turner The Bank of England (BoE) will not be the only European central bank announcing policy today, as Norway’s Norges Bank (NB) is also due to deliver another hike. We note that consensus is split between a 25bp and a 50bp move today: we expect a half point hike, as the September CPI upside surprise (6.9% year-on-year) may have overshadowed concerns about slowing economic activity. We think this can offer some extra help to the krone, which is already benefiting from oil’s good performance and the support from Norges Bank’s reduced daily FX purchases (from NOK 4.3bn to 3.7bn) for November. EUR/NOK may break below 10.20 in the near term, but we suspect that a worsening of risk sentiment conditions into year-end may limit further NOK appreciation. Francesco Pesole GBP: Scope for a 50bp BoE surprise today My colleague James Smith is making the 'courageous' call that the Bank of England will only hike 50bp today. His argument is that the consensus 75bp hike would end up seeing UK CPI undershooting the BoE's 2% target in 2025. In other words, the BoE does not need to increase the pace of tightening right now. As we discuss in that BoE preview, the FX options market attaches a 150 pip GBP/USD range to today's event risk. That could see GBP/USD trading back to the 1.1250 area if we are right with our BoE call. EUR/GBP could trade back to 0.87 too. Sterling also looks challenged from both: i) the international investment environment where US equities sold off 2.5% yesterday on the prospect of higher for longer Fed rates and ii) what is shaping up to be quite a tight fiscal event in the UK on 17 November as the new government struggles to plug its borrowing gap.  Chris Turner  CEE: No change in Czech National Bank approach The highlight of this week's calendar is today's Czech National Bank (CNB) meeting. We expect interest rates to remain unchanged, in line with market expectations. Thus, the key will be the new central bank forecast, which we believe will show lower inflation but also higher wage growth. Also key for the market will be the interest rate forecast, or any indication of the timing of the first rate cut next year and the long-term level. However, the main focus will be on FX intervention, with which the CNB has been defending the koruna since mid-May. However, in our view, the current central bank approach will only be confirmed, and we do not expect any changes.   On the FX market, we see the koruna underperforming the Polish zloty in recent days, which can be attributed to the building of short positions ahead of the CNB meeting. We can expect this trend to continue until the central bank's decision up to 24.60-70 EUR/CZK as a bet on the end of the intervention regime. But after the press conference, we can expect the liquidation of those positions and the return of the koruna to stronger levels. However, we believe that this effect will be smaller compared to the September meeting given the greater clarity that the CNB will not change its intervention regime.  Elsewhere in the region, given the empty calendar, it will be purely about the fallout from yesterday's Fed meeting and as expected, the picture is clearly negative for Central and Eastern European FX. EUR/USD is heading lower while rising core rates are pushing interest rate differentials lower across the region. Thus, we expect the Polish zloty and Hungarian forint to open with losses today.  Frantisek Taborsky  Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Bestway Might Have Larger Designs On The UK's Second Biggest Supermarket

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

Swissquote Bank Swissquote Bank 03.11.2022 10:35
Jerome Powell abated the latest risk rally yesterday, saying that the rate hikes will slow down, but the levels will go higher. Equities sold off, the yields jumped, the dollar gained, and hopes of seeing the end of the market turmoil got completely dashed. US Stock Market The US 2-year yield soared to 4.90%. The Dow Jones lost more than 1.50%, the S&P500 dived 2.50% and Nasdaq fell more than 3%. Forex In the FX, the prospect of higher terminal rate from the Fed boosted the USD appetite. The dollar index gained yesterday, as the EURUSD slipped again below its 50-DMA, Cable slipped below 1.14, the dollar-franc is back above parity, the dollar-yen is set for another advance to 150 on the back of the diverging rate prospects between the Fed that is now set to increase rates slower, but higher, and the Bank of Japan (BoJ), set to do nothing, for now. Gold & Bitcoin Gold is also under the pressure of a stronger US dollar and the higher US yields. Bitcoin, on the other hand, is surprisingly resilient to the broad risk selloff. Crude Oil The barrel of American crude rose to $90, as the latest EIA data showed that the US crude inventories fell by more than 3-million-barrel last week, much faster than a 200’000 barrel decline expected by analysts. Bank Of England Today, the Bank of England (BoE) is also expected to raise rates by 75bp today, but that expectation is down from around 100-150bp hike expected when Liz Truss was busy shaking the financial markets with her crazy mini budget. The BoE should no longer act twice as aggressively to compensate for the actions of an irresponsible government, but it still must fight the rising inflation in Britain. Watch the full episode to find out more! 0:00 Intro 0:25 Powell points at slower but higher rates, investors sell assets 4:13 Oil up on falling inventories 5:00 USD up against majors 7:05 BoE to hike by 75bp today 8:13 Gold under pressure, but Bitcoin surprisingly resilient Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Fed #FOMC #rate #decision #USD #ADP #US #jobs #report #crudeoil #Apple #Amazon #Meta #Google #ExxonMobil #selloff #UK #inflation #BoE #GBP #EUR #XAU #Bitcoin #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH
Russia Look Set To Double Its Exports For The First Half Of 2023

Volatility In The Grain Market May Continue | Global Demand For Containers Will Fall This Year

Saxo Bank Saxo Bank 03.11.2022 10:45
Summary:  Traders were given a case of whiplash yesterday over the FOMC meeting after the new monetary policy statement confirmed the impression that the Fed will soon downshift the size of rate hikes after another 75 basis points hike at this meeting. But then a very hawkish press conference from Fed Chair Powell took Fed terminal rate expectations next year to new highs for the cycle, pummeling risk sentiment and lighting a fire under the greenback. The next key focus will be tomorrow’s US October jobs report.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) Powell delivered a jolt to equities communicating on the FOMC press conference that the terminal rate could be higher than what the market expects and that rates will stay higher for longer. S&P 500 futures could out many support levels on the downside in the last night session and are continuing lower this morning trading around the 3,765 level with the 3,700 level being the next level to watch on the downside. Powell’s remarks confirm our view that inflation and interest rates will remain higher for longer and that equities will be under pressure in the medium term, being negatively impacted by higher interest rates and more margin compression. Euro STOXX 50 (EU50.I) STOXX 50 futures are naturally responding to Powell’s statements yesterday trading lower this morning around the 3,575 level with the 100-day moving average around the 3,528 level being the gravitational point on the downside to watch. FX: USD bull market is back in business after hawkish Fed Chair Powell presser The dollar was first weak yesterday on the new monetary policy statement before the hawkish Powell presser lit a fire under the greenback as he made it clear that the ceiling could be raised next year for the “ultimate level” of Fed funds rate, de-emphasizing the size of rates from here after several 75-basis point moves. The US dollar ripped back to the strong side, generating compelling reversal patterns for USD bulls almost across the board, with the important 0.9876-0.9850 area falling in EURUSD, GBPUSD slipping below the bottom of the 1.1400-1.1500 zone, AUDUSD crushed back below 0.6400, USDJPY support at 145.00 surviving yesterday with the pair lifting back well north of 147.00, etc. Of course, the USD will be sensitive to incoming data, but yesterday established a clear line in the sand that USD bulls will now use for longs, eyeing the cycle highs for the greenback against most other G10 currencies. Gold (XAUUSD) Gold trades lower following a volatile session where Fed Chair Powell managed to wrongfoot most markets. Following the expected 75 bp rate hike the written statement raised the prospect of the FOMC pausing to assess the “cumulative tightening” impact before saying at the press conference “We still have some ways to go. And incoming data since our last meeting suggests that the ultimate level of interest rates will be higher than previously expected”. Most markets, including gold, responded by turning sharply lower with the yellow metal slumping 2% from the high. These comments send a signal that we have not yet reached peak hawkishness and with that the risk of a prolonged period of dollar and yield strength slowing gold’s recovery. It’s the incoming data that everyone will have to watch, starting with US payrolls this Friday. Crude oil (CLZ2 & LCOF3) Crude oil traded lower after the FOMC meeting raised expectations for a higher peak in US rates and together with continued uncertainty over China demand they helped offset support from a tightening fuel market. Earlier in the day the market jumped after the EIA reported US gasoline supplies had fallen to a 2014 low while distillate supplies on the East Coast had reached a near record seasonal low. China’s zero-Covid tolerance remains the overall strategy according to the government, thereby removing some earlier optimism about a change. However, OPEC+ cuts from this month and upcoming EU sanctions is likely to keep the market rangebound with resistance in Brent at $97.25. US treasuries (TLT, IEF) The hawkish Powell press conference yesterday (more below) took Fed rate expectations to new highs for the cycle and the 2-year rate is pushing on cycle highs near 4.62%, while the 10-year merely rebounded above 4.00% as the yield curve is close to its most inverted for the cycle at below –50 bps for the 2-10 spread. Incoming US data will be the focus next for the longer end of the yield curve and whether 10-year yields can threaten the cycle highs well north of 4.25%. What is going on? FOMC one-two as dovish interpretation of new policy statement reversed by hawkish Powell presser The initial read of the FOMC statement was dovish, as the new statement inserted the phrase: “The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time. In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.” This read a bit dovish as the market assumed that this means the anticipated downshift in Fed rate hikes is coming and US yields dropped, risk up, USD down, etc. In the press conference, however, Fed Chair Powell was far more hawkish, saying there is a “ways to go”, and spelling out that the incoming data means that the “ultimate level” that the Fed funds reaches is likely to move to higher levels than was though at the September meeting. This had Fed expectations for the spring of next year edging back toward the cycle highs of 5.00% and then closing the day a full 10 basis points higher near 5.10%. While Powell did say it may be possible that the Fed steps down to smaller hikes as soon as the December meeting, the FOMC felt that the speed of hikes Is becoming “less important” (leaving market to infer that the Fed just keeps hiking at more meetings if incoming data supports doing so. As well, we must remember that the Fed has cranked up the pace of quantitative tightening in the background, which provides its own tightening pressure on markets and arguably equates with several hundred basis points of rate tightening over the course of a year. European earnings this morning Orsted is raising its full-year guidance on EBITDA excluding new partnerships to DKK 21-23bn and Q3 revenue was DKK 36.5bn vs est. DKK 26.7bn highlighting the increased profitability in power generation using renewable energy. BNP Paribas beats on both revenue and net income driven by strong results in its fixed-income, commodities, and currencies trading. BMW is also beating on both Q3 revenue and EBIT and maintaining its EBIT margin fo 7-9%. US earnings recap Fortinet, the industry leader in cyber security, delivered Q3 revenue of $1.15bn vs est. $1.12bn and adj. EPS $0.33 vs est. $0.27 and Q4 outlook on revenue of $1.28-1.32bn vs est. $1.27bn and Q4 EPS outlook of $0.38-0.40 vs est. $0.35, but despite strong figures shares were lower in extended trading. Albemarle delivered high growth in Q3 on revenue and earnings, but lowered its fiscal year revenue and EPS a bit against their previous guidance. Wheat (ZWZ2) prices slump as Russia to resume grain deal participation Amid mounting pressure on Russia to avoid a galloping food crisis, Russia finally agreed to resume its participation in the Ukraine grain deal, allowing safe passage of Ukraine’s crop exports. Wheat prices dropped over 6% on the news and corn was lower as well, with vessels likely to resume normal operations today. Russia however threatens to pull out of the agreement at any time, which suggests volatilities can continue till the war goes on. Better-than-expected US ADP turns attention on NFP US ADP national employment reported a 239k increase in October, above the expected 193k and the prior, revised lower, 192k, ahead of the key NFP on Friday. While there is little confidence in this data set as the methodology has been recently revised and there is limited backward data, a tight labor market is still the clear read. Focus now turns to NFP due on Friday, with unemployment rate and wage growth remaining as the key metrics to track. Bloomberg consensus expectations are still set for a headline gain of 200k for October, with unemployment rate inching a notch higher to 3.6% from 3.5% previously and wage growth slightly weaker at 4.7% YoY from 5.0% YoY previously. Maersk warns about rapid economic deterioration Maersk, the world’s largest owner of container ships, said it expects global container demand to decline by up to 4% this year, as against its previous estimate of +/- 1%. It also warned that next year could be worse, signalling further downturn in global trade may be on the cards. Still, Q3 earnings before interest and tax rose to $9.48bn vs. $8.63bn expected. What are we watching next? Next US data points and impact on US yields Fed Chair Powell made it clear yesterday that he didn’t feel the size of Fed rate hikes are very important after yesterday’s 75 basis point move, but that the Fed could continue to tighten beyond what the Fed itself was forecasting less than two months ago, suggesting a higher peak rate. Currently, peak Fed rates for next year are projected at 5.10% by next spring, a new cycle high and well above the prior highs just above 5.0% after Powell made a hawkish impression at yesterday’s press conference. That leaves the market still very sensitive to incoming data for gauging how high the Fed might take rates next year, with the next data points of note the October US ISM Services survey up today and the October jobs data up tomorrow. Earnings to watch Today’s US earnings focus is ConocoPhillips, PayPal, Starbucks, MercadoLibre, and Cloudflare. Based on previous results in the energy sector we expect ConocoPhillips to deliver good results. PayPal has had headwinds for some time and could disappoint. One of our worst performing theme baskets has been e-commerce which has been hit by difficulties in advertising targeting due to Apple’s data privacy decision, supply chain bottlenecks, and explosive prices on logistics. MercadoLibre is the South American version of Amazon and analysts expect revenue growth of 45% y/y and EPS growth of 24% y/y. Cloudflare will be in focus and given the negative sentiment over Fortinet’s earnings release last night expectations might be too high for any cyber security company to deliver on. Today: Verbund, Barrick Gold, Orsted, Novozymes, BNP Paribas, BMW, Enel, ING Groep, DBS Group, ConocoPhillips, Amgen, PayPal, Starbucks, Regeneron Pharmaceuticals, EOG Resources, Moderna, MercadoLibre, Block, Cloudflare, Coinbase Friday: Enbridge, Societe Generale, Intesa Sanpaolo, SoftBank, Amadeus IT Group, Duke Energy, Economic calendar highlights for today (times GMT) 0730 – Switzerland Oct. CPI 0805 – ECB President Lagarde to speak 0900 – Norway Norges Bank Deposit Rate announcement 1130 – US Oct. Challenger Job Cuts 1200 – UK Bank of England Rate Announcement 1230 – UK Bank of England Governor Bailey press conference 1230 – US Sep. Trade Balance 1230 – Canada Sep. Building Permits 1230 – Canada Sep. International Merchandise Trade 1230 – US Q3 Nonfarm Productivity/Unit Labor Coasts 1230 – US Weekly Initial Jobless Claims 1330 – Czech Central Bank Rate Announcement 1400 – US Sep. Factory Orders 1400 – US Oct. ISM Services 1430 – EIA's Weekly Natural Gas Strorage Change 0030 – Australia RBA Monetary Policy Statement 0030 – Australia Q3 Retail Sales Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: https://www.home.saxo/content/articles/macro/market-quick-take-nov-3-2022-03112022
bybit-news1

Fed raised the interest by 75bp and left us with some reasons to see easier, but a longer way

ING Economics ING Economics 03.11.2022 10:53
The Federal Reserve has delivered the fourth super-size 75bp hike in a row, but signaled more modest moves are in store for December onwards. Nonetheless, there is certainly more work to be done with a possibly higher "terminal" interest rate. Recession risks are rising, but that is the price the Fed is prepared to pay to get inflation under control Jerome Powell, chair of the Federal Reserve 375bp Cumulative interest rate increases in 2022   Fed goes 75bp, but hints at slower hikes ahead No surprise from the Federal Reserve in that we have a fourth 75bp interest rate increase in a row, bringing the cumulative policy tightening to 375bp since March and the Fed funds target range up to 3.75-4%, in what was a unanimous decision. However, there are some major changes to the statement and Jerome Powell’s press conference that suggest we will see a “step down” in the size of rate hikes in the future, but a possibly "higher" end point for interest rates. The Fed continues to “anticipate that ongoing increases in the target range will be appropriate”, adding that hikes will continue until they achieve a “stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time”. But there is an important a caveat in that “the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.” This suggests that they’ve done a lot of work already and it may be time to take things a little slower. This is a key shift that had been signaled by Fed Governor Chris Waller and San Francisco Fed President Mary Daly in October, the latter who has suggested back then that the Fed is "thinking about a step down [in the pace of hikes], but we’re not there yet". That said, it is important to emphasise this does not mean rate hikes are going to stop soon. Chair Powell in the press conference highlighted an important distinction between the pace of rate hikes and what will be the ultimate, or terminal, rate level. Indeed, he commented that the Fed doesn't want to fail to tighten enough and loosen too soon. The current rate hike cycle vs. previous cycles – the orange circle marks where we currently are Source: Macrobond, ING Market scales back hikes, but extends duration Right now, financial markets seem to be thinking the Fed is indeed signaling the prospect of slower paced hikes AND a slightly lower terminal rate. Futures markets are pricing in around 120bp of additional Federal Reserve interest rate increases from here, having been pricing 125bp immediately ahead of the decision. About 57bp is priced for mid-December, 38bp priced for early February 2023 and 18bp priced for the March 22nd FOMC meeting with 8bp for May. We are currently favouring 50bp in December and 50bp in February and calling that the top. As Fed Chair Jerome Powell has repeatedly admitted, monetary policy works with “long and varied lags” and after having hiked rates 375bp, it make sense to hike a little less aggressively. Certainly, the speed with which Treasury yields, mortgage rates and other borrowing costs have been rising in the economy is causing some economic stress, most notably in the housing market, and recession fears are undoubtedly spreading. Inflation remains key and the Fed has two bites of the cherry Nonetheless, the Fed would clearly like to see some evidence that price pressures are starting to moderate. The core (ex food and energy) CPI and core PCE deflator continue to show prices rising 0.5% or 0.6% month-on-month, whereas we need to see numbers closer to 0.1%/0.2% to get annual inflation down to 2% over time. That said, we have got two bites of the cherry with two inflation prints scheduled ahead of the December Federal Open Market Committee (FOMC) meeting – October CPI next Thursday and the November CPI report on December 13th. If we can get a 0.3% or a 0.4% month-on-month for the core CPI in one of those, coupled with further signs a broadening slowdown and easing pipeline price pressures, that would give the Fed the green light to go for a 50bp move. We anticipate a final 50bp for February, but by the time of the March FOMC meeting we are predicting the US to have entered recession with slowing rents, falling used car prices and rapidly receding corporate pricing power contributing to far more convincing signs that inflation is moderating. Market rates still deliberating whether to fall from here. Essentially they shouldn't The Fed has caved to the “pivot camp. A very smart use of phraseology. But the messaging is clear – something different is probably coming from the December meeting. The danger the Fed runs here is a significant fall in market rates. So far the terminal rate at 5% is holding in. But there is open season now for that to be pulled down. This telegraphing from the Fed could reflect worries beyond recessionary ones. We’ve noted before that USD commercial paper prints have become far more concessional of late, with European banks printing in excess of 50bp in the 3mth. While there is no imminent threat of a system break, even the build in the risk could be enough to sway the Fed. It may also be less complex than that. It could also be a preparatory glide path that ultimately guides us to a terminal rate at 5%. If that’s the case, then 10yr still has no business making a structural break below 4% this early. But the risk is as stated, that the door is open now for a lower terminal rate, and if so, a material easing in financial conditions in anticipation of that. The model for the 10yr at this stage of the cycle remains; we still see the 10yr peaking at 25-50bp through the fed funds terminal rate, and we need to see that terminal rate level before the 10yr actual knows with conviction that it is a peak. That’s the argument for market rates not getting too carried away with this, and understanding that we are still in a rate hiking process, with the terminal rate still much higher than where we are now. The main outcome has been a rise in inflation expectations following this aggregate FOMC outcome, and the only rationale for this is from the verbal commentary. Based off this, the market views this, at the margin, as presenting upside risks to inflation. Real rates are lower, which gels with risk assets outperforming as a reaction. Overall this represents a loosening in financial conditions coming from market moves alone. It’s not been dramatic so far, and whether these moves become material enough to wipe out the value of the 75bp hike delivered today will depend on the degree of follow-through in the coming days and weeks. FX Markets: Down and Up The FX markets initially reacted to the FOMC statement by selling the dollar. The insertion into the statement of the need to take cumulative tightening into account recalled events in Europe last week. Last Thursday the market took 30bp off the ECB cycle and sold the euro on news that the ECB had seen ‘substantial progress had been made in withdrawing monetary accommodation’. Today’s FOMC statement briefly took 8bp off the Fed cycle and saw the dollar sell off 0.5-1.0%. But markets read the press conference more hawkishly. Particularly comments from Fed Chair Powell that he expected the Fed terminal rate to be higher than the Fed expected back in September. Those September Dot Plots saw the policy rate ending 2023 in the 4.50-4.75% area. News that the terminal rate could be higher tended to trump the discussion of the pace of hikes – and Chair Powell certainly wanted to shift the narrative to the terminal rate from the pace. As we conclude writing this short update, pricing of the Fed cycle is now higher than it was shortly before the FOMC statement. Equally the dollar has retraced its intra-day losses. Where does that leave us? Expectations of the policy rate being taken to 5% into early next year, inverting the yield curve still further, is a dollar positive. As always, markets will be highly sensitive to incoming US data and based on today’s press conference it does seem that the bar is set very high for the market to start pricing a substantially lower terminal rate. We think the balance of risks still favour a stronger dollar, particularly against European currencies where our macro team see growth substantially below consensus over coming quarters. In practice, this means EUR/USD can still make a run towards 0.95 over coming months and USD/JPY can still retest 150. Where interest in the carry trade could emerge is in Latin America. Here the risk-adjusted implied yields of the Mexican peso are 50% above those for the Brazilian real and USD/MXN could retest the lows of the year at 19.42 should any key US data disappoint. Read this article on THINK TagsUSD US Interest rates FOMC Federal Reserve Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
German Business Confidence Dips, ECB's Lagarde Hosts Central Banking Conference in Portugal, EUR/USD Drifts Higher

Selling price expectations reduced, but still noticeably high

ING Economics ING Economics 03.11.2022 11:04
Despite falling energy prices and weakening demand, a swift drop in core inflation in the eurozone doesn't seem imminent. Business surveys indicate that selling price expectations to consumers remain near all-time highs A swift drop in core inflation in the eurozone doesn't look likely Business inflation expectations still predominantly driven by energy costs Looking at inflation expectations has become key in this day and age. All the more so now that European Central Bank (ECB) board member Isabel Schnabel explained at Jackson Hole that incoming inflation expectations data are an important input in policymaking as medium-term inflation expectations are harder to forecast right now. So let’s look at recent developments. Since April, we have seen the number of businesses expecting to raise prices in the months ahead decline steadily. But they ticked up again in September according to the economic sentiment survey by the European Commission. What has driven the move? When looking at the development of selling price expectations by sectors since April, we find a strong correlation with the energy-intensiveness of production. Clearly, energy prices continue to be the key driver in determining whether prices need to go up or not. At the same time though, we do notice that the August price peak has not resulted in a similar jump in selling price expectations that we saw in March. This suggests that weakening demand is starting to have an impact on whether businesses are comfortable pricing through to their consumers. The drop in selling price expectations correlates with energy intensity of production Energy intensity of production is based on Eurostat input-output tables for 2019 Source: Eurostat, ING Research Selling price expectations remain high for businesses selling straight to the consumer The fact that the peak in selling price expectations seems to be behind us gives the impression that some moderation in core inflation could be around the corner. The question is how fast this will actually start to have an effect. The problem with these business indicators for inflation expectations is that it lumps together companies selling directly to consumers and businesses further down the supply chain, like base metals for example. To distinguish between sectors fueling pipeline inflation and those directly selling to consumers, we look at the final consumption expenditure by households from different sectors. While those sectors in most cases also sell wholesale, it at least gives an indication of whether consumer prices are currently being raised. We lump the ten sectors that sell most to consumers together to create a view of the selling price expectations among businesses selling to consumers. We also average the indicator for the 20 sectors selling to consumers least, which we count as the pipeline selling price expectations. It still seems too early to call the peak in core inflation While we see little difference between the two in selling price expectations historically, they have diverged much more in recent months. The decline in selling price expectations has been much stronger with pipeline sectors. The drop for businesses selling straight to consumers has been far smaller so far. What this tells us is that a quick drop in core inflation is not imminent despite energy price declines and weaker demand. Businesses are still trying to price through a lot of the earlier jumps in energy costs for the moment. This means that despite encouraging signs around prices, with energy costs dropping and weakening demand, it still seems too early to call the peak in core inflation. Selling price expectations have fallen much more for B2B than B2C Source: Eurostat, European Commission DCECFIN, ING Research   We have made the distinction between B2B (business-to-business) and B2C (business-to-consumer) sectors based on final consumption expenditure by household per sector using Eurostat input-output tables for 2019. The direct sales to households category includes those sectors having the highest volumes of final consumption expenditure by households, excluding real estate. The pipeline sectors category includes those with the smallest volumes of final consumption expenditure by households. We included the following sectors in the “direct sales to households” category: retail, food products, motor vehicles, wearing apparel, furniture, land transport and transport via pipelines, telecommunications, travel agency and related activities and computer, electronic and optical products. We included the following sectors in the “pipeline sectors” category: basic metals, repair & installation of machinery & equipment, wood & wood products excluding furniture, machinery & equipment N.E.C., other non-metallic mineral products, fabricated metal products, paper & paper products, rubber & plastic products, electrical equipment, warehousing & support activities for transportation, rental & leasing activities, security & investigation activities, other professionals, scientific & technical activities, other transport equipment, water transport, architectural & engineering activities, postal & courier activities, printing & reproduction of recorded media, computer programming, consultancy & related activities, employment activities, and advertising & market research. Read this article on THINK TagsInflation Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Bank of England Faces Rate Decision: Uncertainty Surrounds Magnitude of Hike

ING hints at "something different" from Fed, as they point to a hidden signal of a 50bp move in December, unless the data turn things upside down

ING Economics ING Economics 03.11.2022 11:26
The Fed has managed to telegraph a glide path ahead for rates, while also maintaining an elevated rate hike alert. The result is tighter financial conditions. Nice job! The BoE has the unenviable task of disappointing markets hawkish expectations. Don’t rule out a 50bp hike but a further drop in gilts depends on whether markets believe this is the right move Federal Reserve delivers a hawkish pivot The Fed has caved to the “pivot camp", through a very smart use of phraseology on the delayed effect of rate hikes and the cumulative effect of hikes already delivered. Fair enough in fact, and the messaging is clear – something different is probably coming from the December meeting. We had always thought the Fed would pivot to a 50bp hike for December. But we had expected the Fed to be a bit more coy on it. The Fed has not told us they will do 50bp with clarity, but there was enough between the lines to determine that a 50bp hike will come provided the data does not dictate that a 75bp hike is really necessary. This can be seen as preparatory glide path that ultimately guides us to a terminal rate at 5%. If that’s the case, then 10yr has no business making a structural break below 4% this early. The model for the 10yr at this stage of the cycle remains; we still see the 10yr peaking at 25-50bp through the fed funds terminal rate, and we need to see that terminal rate level before the 10yr actually knows with conviction that it is a peak. That’s the argument for market rates to still be pressured higher, and understanding that we are still in a rate hiking process, with the terminal rate still much higher than where we are now. We are still in a rate hiking process, with the terminal rate still much higher than where we are now The impact reaction to the Fed decision and commentary was quite different from the more considered reaction. Initially there was a rise in inflation expectations, and real rates feel, helping to put a bid into risk assets. But that reversed within the hour following the FOMC outcome. This is a decent outcome for the Fed, as they have hiked rates by the full 75bp, paved the way for smaller hikes ahead, and still managed to generate an overall tightening in financial conditions. The Fed's hawkish tone should see real rates edge higher in the near term Source: Refinitiv, ING   The risk was the lower rates and risk-on would loosen financial conditions, but that risk has been averted. We think this net reaction so far makes a lot of sense, and in fact in line with what we thought would have happened had Chair Powell not been so open about the prospect of a pivot. What has ultimately driven market rates up is the firm notion that Fed is not done. They are on a glide path now to get done, but the extent of that glide path remains an unconcomfortable one for risk assets as it means that real market rates remain under pressure to continue testing higher. The GBP swap curve has pared down hike expectations since the 'mini budget' debacle Source: Refinitiv, ING The case for a more dovish BoE There is no easy choice for the Bank of England today. Much of the fiscal easing announced at the end of September was subsequently reversed, although we won’t know exactly how much before the November 17th budget, thus removing a key justification for the acceleration from 50bp to 75bp hikes expected by the market. Similarly, the decline in gas prices also adds to the case for a 50bp hike. The list goes on, for more details, read our economics team's note on why they think a 50bp move is more likely. A 50bp hike would bring a jump in inflation expectations and risk a re-steepening of the curve The market disagrees. In our view, the strongest argument in favour of a 75bp hike is that the market is pricing it almost entirely (84% probability), not something the BoE can admit. In fact, the Bank is in a bind. A 75bp hike is likely to be of the dovish sort: accompanied with a warning that the amount of tightening priced by the curve would imply an even deeper recession that is currently anticipated. A 50bp hike is more appropriate in our, and we suspect the BoE’s, view but it would bring a jump in inflation expectations measured by swaps, and risk a re-steepening of the curve. In fact, the curve has steadily been pricing out hikes since the peak in tightening expectations around one month ago. The implied peak in this cycle, around 4.70% at the time of writing, is still roughly 100bp below where we see the Bank Rate eventually land in 2023. This is turn has allowed gilts to trade below 3.50% in yields. Further repricing lower of both would make sense, but it hinges on the BoE’s willingness and ability to deliver a dovish message, not something we have been used to. Gilt lending by the DMO has been insufficient to ensure proper transmission of BoE policy Source: Refinitiv, ING   Another topic threatening to muscle its way into today's BoE meeting is the increasingly scarce conditions at the front-end of the gilt curve. Both in cash gilts and in repo markets, there appears to a shortage of high quality bonds that is threatening to dampen the transmission of BoE policy into to financial markets and to the economy. This is for instance visible in repo rates dipping 42bp below the Bank Rate, and in short-dated gilt yields falling to 125bp below swap rates. This is a monetary policy problem, and a market functioning one, The BoE and Debt Management Office (DMO) have the tools to ease the pressure: they need to lend more bonds from the QE portfolio, and at a more attractive rate. Today's events and market view The day will be off to a strong start with no less than Fabio Panetta, Joachim Nagel, Pablo De cos and Christine Lagarde, due to speak at various events, including the ECB’s money market conference. Gabriel Makhlouf and Mario Centeno are due to speaker later in the session. Primary markets will be no less busy thanks to bond sales from Spain (5Y/10Y/20Y and linkers) and France (10Y/15Y/30Y). Even market participants with no interest in sterling markets have learned the hard way about how exposed they are to UK fiscal and monetary policy. The period of market stress now seems firmly behind us but there is a case to be made for keeping a close eye on today’s BoE meeting. At the headline level, the choice is between a 50bp and 75bp hike in the Bank Rate, with a majority of our peers favouring the latter. The update to the BoE’s economic forecast monetary report and governor Andrew Bailey will also play an important role in shaping future hike expectations. Catherine Mann is also due to speak later in the day. US data consist in no less than trade balance, jobless claims, ISM and PMI services, factory and durable goods orders. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Construction Activity in Poland Contracts in May: Focus on Building Decline and Infrastructure Investment

After the rate hike EUR/USD touched the parity level. Federal funds rate futures let us think about the end of the hiking cycle

Conotoxia Comments Conotoxia Comments 03.11.2022 11:38
Yesterday we saw the long-awaited decision by the US Federal Reserve on interest rates. The range for the federal funds rate was raised by 75 bps to 3.75-4.00 percent, in line with market expectations. US interest rates are presently at their highest level since 2008. How did the dollar exchange rate react to the decision? The dollar and the interest rate hike The U.S. currency, as well as related markets, including gold or silver, but also U.S. stock indexes, seemed to react to the Fed's decision with increased volatility. At first, the U.S. dollar lost value, only to make up the losses during Jerome Powell's press conference. This could have had to do with the fact that Powell dashed the market's hopes for a quick end to the interest rate hike cycle, which he made clear during the conference. U.S. Federal Reserve Chairman Jerome Powell stressed on Wednesday that it is very premature to think about halting interest rate hikes. Powell also added that "no one knows whether there will be a recession, and if so, how dangerous it will be." The road to a soft landing has narrowed, but it is still possible. Powell stressed that spending growth has slowed and the labor market situation is still good. Inflation is well above the Fed's target, and recent inflation data have been above expectations, but long-term inflation expectations remain "well-anchored" - The Fed chairman noted in statements quoted by the BBN service. Reaction of the dollar exchange rate after the Fed decision Source: Conotoxia MT5, EUR/USD, H1 The EUR/USD pair's exchange rate approached parity shortly after the decision, only to fall towards 0.9800 at the end. This could be related to the still high expectations for further interest rate hikes by the Fed. On the morning of November 3, federal funds rate futures indicated that a 50bp hike could occur in December. In February 2023, the market expects another 50 bp hike and only in March 2023, after the last hike from 25 bp, is the end of the cycle expected. The market today is pricing the end of the cycle at 5.00-5.25 percent, and only next December could see a 25bp rate cut in the U.S. to 4.75-5.00 percent, according to futures and CME exchange data. Stock markets with a bump after the Fed The Nasdaq fell 3.4 percent yesterday, the S&P 500 fell 2.1 percent, and the Dow Jones fell more than 1.5 percent. Higher interest rates, typically also mean higher interest rates on bonds and the U.S. dollar, instruments with potentially little investment risk. The higher the interest rates and the lower the risk, capital could turn away from riskier assets until they are attractively priced relative to the risk-free rate. Hence, Wall Street may continue to be under pressure until companies' earnings prospects improve or their prices become more attractive relative to interest rates.  Nevertheless, interesting companies may emerge in such an environment. One of them may be Boeing, which stands out in the Dow Jones index. The company's share price has risen 6 percent in the past week, and is up 16 percent in a month. The company reported yesterday that it could generate free cash flow of $3 billion to $5 billion in 2023, and $10 billion by the middle of the decade, as it believes it would be able to outsource the delivery of the last of its 737 and 787 aircraft to airlines, its CEO David Calhoun said on Wednesday, as quoted by BBN news service. Source: Conotoxia MT5, Boeing, Weekly Did you know that CFDs allow you to trade on both falling and rising prices? Derivatives allow you to open buy and sell positions, and thus invest on rising as well as falling quotes. At Conotoxia, you can choose from CFDs on more than 100 currency pairs. Wanting to find a CFD on USD/PLN, for example, you just need to follow 4 simple steps: To access Trading Universe - a state-of-the-art center of financial, information, investment and social products and services with a single Smart account, register here. Click "Platforms" in the "Invest&Forex" section. Choose one of the accounts: demo or live On the MT5 or cTrader platform, search for the CFD currency pair you are looking for and drag it to the chart window. Use the one-click trading option or open a new order with the right mouse button. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Read more reviews and open a demo account at invest.conotoxia.com Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75,21% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
ECB's Tenth Consecutive Rate Hike: The Final Move in the Current Cycle

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

Saxo Bank Saxo Bank 03.11.2022 11:58
Summary:  Today we look at the hawkish Fed Chair Powell press conference delivering a hammer-blow to sentiment as he managed to both pull off the idea that the Fed may indeed soon pivot to a slower pace of rate hikes as soon as December, but that any talk of a pause is "very premature". The result? Sentiment thrashed and the USD going vertical as the market takes Fed rate expectations and the terminal rate next year higher still. Incoming US data could further aggravate this move if the data remains even resilient, much less hotter than expected. We also talk through the reaction to the FOMC in gold, risks to sterling today if BoE fails to take the hawkish hint from Powell, stocks to watch, perspective on where we are with equity valuations and more. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting an on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app:           If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.
"Private investors will be required to increase their gilt exposure by at least £268bn in FY2023-24"

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

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

US Dollar (USD) Bulls Are Back, The Norges Bank (NB) Raised Only 25bp

Saxo Bank Saxo Bank 03.11.2022 12:11
Summary:  The market caught in a vicious whiplash yesterday by a dovish interpretation of the FOMC statement that was then followed by a Powell presser that delivered a hawkish blow as the Fed Chair managed to both indicate that coming hikes may pivot to a slower pace, but that the ultimate peak in Fed rates could prove higher, with the idea that the Fed is thinking about or talking about pausing rate hikes deemed “very premature”. FX Trading focus: Powell manages to pull off a hawkish pivot. The market reaction yesterday over the FOMC meeting was a whiplash-inducing one-two as the dovish interpretation of the new policy statement was brutally reversed by a hawkish Powell presser. The key new text inserted into the new FOMC statement that allowed some room for a dovish interpretation was the phrase: “The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time. In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”  The market’s first read was dovish on the assumption that this means the anticipated downshift in Fed rate hikes is well on its way – and this phrase was a likely tip-off for a mere 50 bps increase at the December FOMC meeting. US yields dropped, risk sentiment rushed higher, and the USD sold off. In the press conference, however, Fed Chair Powell was unabashedly hawkish, saying there is a “ways to go”, and spelling out that the incoming data means that the “ultimate level” that the Fed funds reaches is likely to move to higher levels than was though at the September meeting (yes, the projection then was 4.6%, below current projections, but the implication was above current market projections). This had Fed expectations for the spring of next year edging back toward the cycle highs of 5.00% and then closing the day a full 10 basis points higher near 5.10% and trading higher still this morning. While Powell did say it may be possible that the Fed steps down to smaller hikes as soon as the December meeting, he felt that the speed of hikes Is becoming “less important” (leaving the market to infer that the Fed just keeps hiking at more meetings if incoming data supports doing so and that we could reach well beyond 5.00%). As well, we must remember that the Fed has cranked up the pace of quantitative tightening in the background, which provides its own tightening pressure on markets and arguably equates with several hundred basis points of rate tightening over the course of a year. All in all, the meeting firmly puts the USD bulls back in business, with only ugly data misses able to reign in the potential for the greenback to trade to new cycle highs against most other, if not all, of the other G-10 currencies. The next currency to get a test is sterling over today’s Bank of England meeting as discussed below. Norges bank only hiked 25 basis points this morning, with NOK somehow only getting an ugly sell-off and not a thorough thrashing. Chart: GBPUSDA very interesting test today for sterling over the Bank of England, which must preserve a hawkish tone despite signs of a weakening economy, one that will be made that much weaker by the fiscal austerity Sunak and Hunt are cooking up for the budget statement on November 16, otherwise, sterling risks an ugly melt-down again versus the US dollar that will aggravate inflation risks on a flailing currency. I wonder how long Governor Bailey will be able to maintain his position as Governor if he messes things up today by indicating caution on rate hikes beyond today’s (presumed) 75 basis point hike because of the risk of an incoming recession. An insufficiently hawkish message could see 1.1000 in GBPUSD trading in a heart-beat. The October UK Services PMI was revised higher to 48.8 vs. 47.5 originally. The US ISM Services survey later today is expected to drop to 55.3 from 56.7 in September, by contrast. Table: FX Board of G10 and CNH trend evolution and strength.The USD is coming roaring back here and will set the tone. Watching JPY as yields rise – the intervention will arrive again at some point – but not until new highs in USDJPY? NOK could be in for some further punishment after the small hike today and watching relative strength in sterling over the Bank of England today. Table: FX Board Trend Scoreboard for individual pairs.Fed Chair Powell has spoken and the USD has asserted a new up-trend, with many USD pairs showing a flip to USD-positive trend today – only sudden negative US data surprises are likely to change that development. Watching GBP pairs after today and a small sub-plot is the risk of NOKSEK tilting into a new negative trend after this Norges Bank meeting today, with EURNOK also risking a flip to a positive trend due to weak risk sentiment. Upcoming Economic Calendar Highlights 1130 – US Oct. Challenger Job Cuts 1200 – UK Bank of England Rate Announcement 1230 – UK Bank of England Governor Bailey press conference 1230 – US Sep. Trade Balance 1230 – Canada Sep. Building Permits 1230 – Canada Sep. International Merchandise Trade 1230 – US Q3 Nonfarm Productivity/Unit Labor Coasts 1230 – US Weekly Initial Jobless Claims 1330 – Czech Central Bank Rate Announcement 1400 – US Sep. Factory Orders 1400 – US Oct. ISM Services 0030 – Australia RBA Monetary Policy Statement 0030 – Australia Q3 Retail Sales Source: https://www.home.saxo/content/articles/forex/fx-update-powell-manages-to-pull-off-a-hawkish-pivot-03112022
Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

Craig Erlam And Jonny Hart Discuss The Fed And Bank Of England (BoE) Rate Decisions

Craig Erlam Craig Erlam 03.11.2022 11:47
OANDA Senior Market Analyst Craig Erlam reviews the latest market news with Jonny Hart. They discuss the Fed and BoE rate decisions and the surge in Chinese stocks amid zero-Covid rumours. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Unlocking the Future: Key UK Wage Data and September BoE Rate Hike Prospects

The Rate Hike Generated An Increase In The Price Of Gasoline In The USA

InstaForex Analysis InstaForex Analysis 03.11.2022 13:15
Oil prices have declined only slightly, and it's all the fault of Federal Reserve Chairman Jerome Powell's statement that interest rates will rise higher than previously forecast. West Texas Intermediate futures fell below $89 per barrel after rising 4% compared to the previous two sessions. Powell said it was "premature to think about suspending the rate hike cycle" after the Fed raised rates again by 75 basis points. All major central banks are currently trying to curb rampant inflation, which puts pressure on demand and energy. The bearish sentiment caused by the increase in rates offset the rise in gasoline prices in the United States, but this was not enough to seriously affect the situation. Growing concerns about the slowdown in the global economy will inevitably affect the oil demand, which will limit the upward potential of the trading instrument. However, the battle between the bearish demand forecast and the bullish supply forecast continues to be waged in full. It is difficult to say how energy carriers will behave in winter since they are largely tied to geopolitical risks and factors. Premarket: Qualcomm shares lost 6% after the company reported weak earnings. Forecasts and targets also fell short of analysts' expectations, as demand was lower than expected due to China. According to Refinitiv, the technology company reported adjusted earnings per share of $3.13. Revenue for the quarter was $11.39 billion, compared with an estimated $11.37 billion. Shares of the Roku streaming TV platform fell nearly 20% after the company said fourth-quarter revenue would be lower than Wall Street expects. The company reported third-quarter results that beat analysts' forecasts: a loss per share of 88 cents compared with a loss of $1.28. Revenue was $761 million, more than the estimated $694 million. However, forecasts for the future have ruined everything. Etsy securities jumped more than 10% after the company reported quarterly profit that exceeded expectations. The online store reported revenue of $594.47 million against the expected $564.48 million. The company also expects continued sales growth in the fourth quarter, leading to a share increase. Zillow shares rose 2.7% after reporting earnings that beat analysts' expectations. The company reported adjusted earnings per share of 38 cents, above the forecast of 11 cents. Revenue was $483 million, while Wall Street expected $456 million. As for the technical picture of the S&P500, after yesterday's decline, demand for the index remains rather sluggish. The main task for buyers now is to protect the support of $3,735. As long as trading is conducted above this level, we can expect a return in demand for risky assets - especially if the US data disappoints. This will create good prerequisites for strengthening the trading instrument and returning $3,773 under control, just above which the level of $3,808 is located. A breakthrough in this area will strengthen the hope for an upward correction with an exit to the resistance of $3,835. The farthest target will be the $3,861 area. In a downward movement, buyers must declare themselves in the $3,735. A breakdown of this range will quickly push the trading instrument to $3,699 and open up the possibility of updating the support of $3,661.     Relevance up to 12:00 2022-11-04 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/326182
Oil Prices Rise as OPEC Cuts Output and API Reports Significant Inventory Drawdown

The Bank Of England (BoE) Is Likely To Follow The Fed

InstaForex Analysis InstaForex Analysis 03.11.2022 14:23
The US stock market continues to fall sharply. Stock index futures continued their decline as Jerome Powell warned that the Federal Reserve would raise interest rates further, if necessary. This undermined risk appetite. The US dollar eventually won. S&P 500 futures declined by 0.7% after falling by 2.5% on Wednesday. The industrial Dow Jones lost about 0.4% and the high-tech NASDAQ index sank by nearly 1.0%. Two-year Treasuries rose to 4.72% and remained below the 5.06% yield peak. The sell-off spread to Europe and Asia. China intends to continue its Covid-Zero policy and this dashed investor hopes. Meanwhile, the market is focused on another central bank. The Fed made a 75 bps hike and the Bank of England is likely to follow suit. Although the interest rate in the UK is much worse than in the US, the regulator is not expected to give up its fight against inflation, even amid an expected severe recession in the economy. Yesterday, Fed Chairman Jerome Powell disappointed traders who had bet on a reversal, saying that the US economy remains resilient, which will continue to spur inflation. A similar situation occurred at the end of the summer of this year, when investors, encouraged by a bullish rally suffered huge losses. History repeats. Every time the market participants hope for a bit of dovish rhetoric, they watch the market crash and burn. While investors are concerned about the impact of the central bank's tightening policies on economic growth, Powell said there was no doubt that the committee was ready to raise rates as high as necessary at any time to calm inflation. ECB President Christine Lagarde also spoke today and warned that a moderate recession in the eurozone may be coming soon but it was not enough to stop price hikes. Meanwhile, the US dollar rose against risky assets. The British pound fell by more than 1%, as fears that the Bank of England's interest rate hike could worsen the situation in the economy increased. The rally in Chinese stocks also came to an end before it could begin amid rumors of Covid Zero cancellation. However, this rumor remained a rumor. Economists see a further sell-off in emerging markets in Asia as the US dollar is rising. Wheat prices fell after Russia agreed to renew a deal allowing the safe passage of Ukrainian crop exports. Oil fell after Powell's comments on interest rates overshadowed supply cuts. As for the technical picture of the S&P 500 index, after yesterday's decline, the demand for the index remains rather sluggish. Bulls need to protect the support of $3,735. As long as the trading instrument is trading above this level, we can expect the demand for the risky assets to come back if the US data occurs to be weak. This may strengthen the index and bring it back to the level of $3,773 under control, opening the way to the level of $3,808. If the price breaks through this level, it may start an upward correction and reach the resistance of $3,835. The next target is located at $3,861. If the index declines, bulls will have to show some activity at $3,735. If this level is pierced, the trading instrument may be pushed down to $3,699 and to a new support of $3,661.     Relevance up to 12:00 2022-11-04 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/326184
The South America Are Looking For Alternatives To The US Currency

Judging from FxPro's commentary, we could say markets weren't full prepared for yesterday's Fed actions

Alex Kuptsikevich Alex Kuptsikevich 03.11.2022 14:30
In recent months the Fed has repeatedly taken a more hawkish stance than the markets expect. However, the markets' preparation for yesterday's meeting and the signal we read in the official commentary were too strikingly different from the markets' interpretation of the press conference. Initially, buyers were encouraged by words that the Fed would consider the time lag between the decision and its impact on financial markets in its future meetings. This innovation in the commentary was taken as a hint of a slower pace in further rate hikes and was the signal buyers had been waiting for.   As a result, the S&P500 jumped 1.4% in the half-hour between the decision's release and the press conference. But that jump only amplified the decline. From the peak to date, the Nasdaq100 has lost 5%, the S&P500 has lost over 4%, and the Dollar Index has added 2.5%. During the press conference, the markets, in our view, reacted quite nervously to Powell's words that it is not yet a time to consider a pause in a rate hike. The markets had not expected one, underlying the base case scenario of a 50-point hike in December and two 25-point hikes in January and March next year.   Also striking is the phrase that, finally, rates will come to a higher level than previously expected by the committee. In our opinion, there should not be a significant rate hike since the market has priced at a peak rate of 5% compared to 4.5% at the last meeting.    Furthermore, comments that a smaller move has already been discussed at the recent meeting have gone underappreciated.   Outside of the stock and currency market, there was also a much calmer movement. The VIX index rose modestly, remaining in a downtrend for more than three weeks. Cryptocurrencies have generally ignored events, and the rate futures market is marking a 48% chance of a fifth rate hike of 75 points in December compared to 50% at the start of the week.   Either way, the market has broken the uptrend in the S&P500 since late September and the downtrend in the dollar index. Strictly speaking, this signals the end of the bear market rally and the start of momentum towards new extremes. However, it cannot be ruled out that someone from the Fed will start to point out that the market has not quite got the chairman's words right in the coming days.
FX Daily: Hawkish Powell lends his wings to the dollar

The US labour market data may play a vital role again. What do we learn from ADP?

Jing Ren Jing Ren 03.11.2022 14:24
The US labor market has taken a bit of a back seat as the Fed focuses everything on getting inflation down. But, that might be about to change. There are some signs that traders need to be aware of for when the Fed might suddenly return to worrying about its second mandate. This is particularly relevant in the context where there is increasing speculation around when the Fed will start slowing its rate hikes.   As inflation was rising, the concern was that a price-wage spiral would develop. But for over a year now, wages have not even kept up with inflation, let alone pushing it forward. As higher interest rates bite, and more and more companies report that they will slow hiring, the next concern is when will the labor market flip. That is, more people seeking work than there are jobs for them.   Looking into the details The latest BLS survey shows that there were 10.7M job openings in September. But there were only 6.1M seeking work. Despite there being over 4.6M jobs than there are jobseekers, there still hasn't been a major increase in average wages. But, over the last couple of months, that gap has started to close. The ratio, on the other hand, has not, with the number of jobseekers to offers matching multi-decade lows. This reflects a trend where the number of job offers has been falling, and so has the number of people looking for work. One of the assumptions over the last few months has been that as inflation rises, more people would be prompted to seek work. But the participation rate has remained stubbornly just above 62%, and is forecast to remain there in the latest data release. As long as the number of job openings remains above the number of unemployed, and the participation rate remains low, the jobs market is likely to remain off the Fed's radar. What to look out for Before the pandemic started, an NFP number of around 200K job adds was considered normal, and would be expected to keep the Fed happy. This time around, NFP are forecast to come in at 200K, down from 288K as last reported. The unemployment rate is expected to tick up to 3.6% from 3.5%, which could give some people deja vu from 2019. But a deeper dive into the figures shows some worrying signs. The ADP jobs survey was released yesterday, and is still not considered predictive of NFP despite the new methodology. However, it does prove some interesting understanding of the jobs market, and what we might see in some of this month's NFP components. The bottom line ADP showed that the bulk of job creation was in the leisure and hospitality sectors, which is to be expected in the middle of summer. However, those jobs tend to be lower paid, and that likely contributes to the expected slowing growth in average hourly wages. That was also reflected in BLS data, showing that job openings increased in accommodation and food services, but declined in manufacturing. In other words, the jobs market continues to be tight in the areas of lower skilled, lower pay. But people who wish to switch to higher paying jobs are starting to struggle. That doesn't mean the labor market is loose, but it could be soon.
Quite aggressive stance of Fed affected stock market, bonds and more

Quite aggressive stance of Fed affected stock market, bonds and more

Monica Kingsley Monica Kingsley 03.11.2022 15:09
S&P 500 was indeed sluggish into the FOMC only to welcome the statement – and then the presser came, with acentuated hawkishness that did sink not only stocks, but also bonds and real assets. The encouraging reprieve on the long end of the curve is giving way to further flattening, which only serves to highlight tight money circumstances. In such an environment, the dollar thrives, and another risk-off day is what we‘re on the doorstep of. The encouraging dialing back of Dec rate hike to only 50bp (assigned 57% probability right after the statement), looks history as bond traders are forcing higher yields across the board today. On one hand, the impact of rate hikes seems to be generating less fear (selling) since the Jackson Hole and Sep FOMC, on the other hand, it invalidates prior constructive moves in bonds, where especially the long-dated ones look to have bottomed in October. It‘s at least reasonable stability if not a modest upswing (or a more decent one in recognition of slowing economy, which isn‘t yet slowing down fast enough to force yields down on this account) that stocks need for a sustainable Q4 rally – rally that should still continue, and reach my 3,950 year end target. Volatility and options activity isn‘t though painting a bullish daily picture in the least – bonds are again doing the tightening for the Fed, and it shows in commodities, precious metals and finally cryptos as well. Relatively resilient is of course only oil, and perhaps copper can show limited bouts of relative strength here and there too. When it comes to daily S&P 500 levels, the bulls want to hold 3,710s, and see any rebound attempts accompanied by risk-on turns in bonds, and I‘m looking more towards TLT today. Overcoming 3,780 seems a pipe dream. Keep enjoying the lively Twitter feed serving you all already in, which comes on top of getting the key daily analytics right into your mailbox. Plenty gets addressed there, but the analyses (whether short or long format, depending on market action) over email are the bedrock, so make sure you‘re signed up for the free newsletter and that you have Twitter notifications turned on so as not to miss any tweets or replies intraday. Let‘s move right into the charts (all courtesy of www.stockcharts.com) – today‘s full scale article features two.
Canada's Inflation Expected to Ease in May, Impacting BoC's Rate Decision

Crude oil amid Fed's actions and stocks in premarket commented by InstaForex

InstaForex Analysis InstaForex Analysis 03.11.2022 15:44
Oil prices have declined only slightly, and it's all the fault of Federal Reserve Chairman Jerome Powell's statement that interest rates will rise higher than previously forecast. West Texas Intermediate futures fell below $89 per barrel after rising 4% compared to the previous two sessions. Powell said it was "premature to think about suspending the rate hike cycle" after the Fed raised rates again by 75 basis points.     All major central banks are currently trying to curb rampant inflation, which puts pressure on demand and energy. The bearish sentiment caused by the increase in rates offset the rise in gasoline prices in the United States, but this was not enough to seriously affect the situation. Growing concerns about the slowdown in the global economy will inevitably affect the oil demand, which will limit the upward potential of the trading instrument. However, the battle between the bearish demand forecast and the bullish supply forecast continues to be waged in full. It is difficult to say how energy carriers will behave in winter since they are largely tied to geopolitical risks and factors.     Premarket: Qualcomm shares lost 6% after the company reported weak earnings. Forecasts and targets also fell short of analysts' expectations, as demand was lower than expected due to China. According to Refinitiv, the technology company reported adjusted earnings per share of $3.13. Revenue for the quarter was $11.39 billion, compared with an estimated $11.37 billion. Shares of the Roku streaming TV platform fell nearly 20% after the company said fourth-quarter revenue would be lower than Wall Street expects. The company reported third-quarter results that beat analysts' forecasts: a loss per share of 88 cents compared with a loss of $1.28. Revenue was $761 million, more than the estimated $694 million. However, forecasts for the future have ruined everything. Etsy securities jumped more than 10% after the company reported quarterly profit that exceeded expectations. The online store reported revenue of $594.47 million against the expected $564.48 million. The company also expects continued sales growth in the fourth quarter, leading to a share increase. Zillow shares rose 2.7% after reporting earnings that beat analysts' expectations. The company reported adjusted earnings per share of 38 cents, above the forecast of 11 cents. Revenue was $483 million, while Wall Street expected $456 million. As for the technical picture of the S&P500, after yesterday's decline, demand for the index remains rather sluggish. The main task for buyers now is to protect the support of $3,735. As long as trading is conducted above this level, we can expect a return in demand for risky assets - especially if the US data disappoints. This will create good prerequisites for strengthening the trading instrument and returning $3,773 under control, just above which the level of $3,808 is located. A breakthrough in this area will strengthen the hope for an upward correction with an exit to the resistance of $3,835. The farthest target will be the $3,861 area. In a downward movement, buyers must declare themselves in the $3,735. A breakdown of this range will quickly push the trading instrument to $3,699 and open up the possibility of updating the support of $3,661. Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/326182
Only Ugly US Data Could Reverse Sentiment | Gilt Yields In UK Were Steady To Lower

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

Swissquote Bank Swissquote Bank 04.11.2022 11:30
Investors got the policy pivot they were looking for this week; unfortunately, not from the Federal Reserve (Fed), but from the Bank of England (BoE) instead. Bank of England In a confusing way, the Bank of England raised its interest rate by 75bp yesterday, but announced that the city analysts have got the BoE’s terminal rate wrong, and that the future rate hikes from the BoE will be softer, given that the economic situation is alarming. Sterling dived, while gilt yields were steady to lower. Mareket Reaction Elsewhere, in an extended market reaction to Wednesday’s Fed decision, the US dollar gained across the board, as investors repositioned for a more aggressive Fed tightening. Fed The thing that could throw cold water on burning hot Fed expectations is soft jobs data from the US. That’s also the only thing that could save the rest of the world from the worsening Fed aggression: rapidly deteriorating economic conditions in the US. Due today, the NFP is expected to reveal 200’000 new nonfarm jobs in October, for an average hourly pay rise steady around 0.3%. Watch the full episode to find out more! 0:00 Intro 0:26 Confusing action & statement from the BoE 2:39 The dollar rally continues post-Fed, pre-US jobs 5:20 Stock selloff intensifies 7:10 Only ugly US data could reverse sentiment 8:22 Stoxx600’s 30% discount to S&P hides risk Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #US #NFP #jobs #wages #data #Fed #hawks #UK #BoE #GBP #dovish #hike #Netflix #Disney #BasicWithAd #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH
China: PMI positively surprises the market

Another Leg Higher In The USD Will Mean Further Pressure On Asian FX

Saxo Bank Saxo Bank 04.11.2022 12:15
Summary:  With the Fed turning markedly more hawkish this week, along with other key central banks such as Bank of England and Norges Bank adding to the list of central banks taking dovish paths, there is potentially scope for another leg higher in the US dollar. A short-term peak in the greenback will only be seen when markets fully price in the Fed path, while a turnaround will have to wait for a shift in US economic data trends. Still, even mounting recession concerns will drive safe-haven flows to US assets. The strength of the US dollar has been the biggest talk of town this year. After a steady increase since 2008, the USD was already in a strong position at the start of the year, but it has gained a further over 17% year-to-date. Questions like when will the USD peak or has it reached a top have been on investors’ minds, and we have often pushed back on these expectations. My previous piece on the US dollar highlighted that a few things may need to change before we call it a top in the USD. These included a possible peak in the yield differential between the US and other Developed Markets, or China to part with its zero Covid policies. Both of those factors, for now, have turned further in favour of another bout of USD strength. Fed’s hawkishness vs. other central banks’ dovishness Fed Chair Powell surprised hawkish at the FOMC meeting this week, managing to reverse the dovish sentiments that developed following the press release. Pivot hopes were crushed, with the only pivot coming through being hawkish to more hawkish. Even as the Fed moves to a smaller pace of rate hikes from here, it has guided for a higher terminal rate compared to the median projection of 4.6% as per the September dot plot. This has sprung fresh strength in US yields, with 2-year printing fresh highs of ~4.75% and 10-year yields inching above 4.20% as well. In fact, the doors to 10-year yields reaching 4.75-5% have been opened with Fed’s terminal rate projections now above 5.1%. This, alone, has the potential to spark a fresh wave of strength in the US dollar. However, to add to the mix, we now have most other DM central banks taking the less hawkish route. This began with the Reserve Bank of Australia stepping down to smaller rate hikes in October, as it highlighted concerns around consumer household budgets. This was followed by dovish hints from the European Central Bank and the Bank of Canada. The latest ones from yesterday, Norges Bank and Bank of England, also surprised dovish. With expectations split between a 25 or 50bps rate hike, Norges Bank took the dovish path and hiked 25bps despite a deteriorating inflation outlook. Bank of England, despite a 75bps rate hike on Thursday, strongly pushed back against expectations for the scale of future moves, saying that the terminal rate priced in currently by the markets would induce a two-year recession. There were also two dovish dissenters at the meeting, one calling for 50bps rate hike and another for a mere 25bps. Markets are still pricing in more than a 50bps hike for the BOE’s December meeting, but expect this pricing to pare back as we approach December. This upward re-pricing of the Fed rate path, together with a downward re-pricing of expectations from other DM central banks is clear indication of further room for the USD to run higher. China’s Zero-Covid won’t disappear overnight While there was some speculation this week that China could start to consider ways to part with its Zero Covid policy, none of that has been confirmed by the authorities. If we do see the China economy open up, that suggests commodity prices could bump higher as China demand comes back online. That should support the commodity currencies such as AUD and NZD, and also bring in a recovery in the Chinese yuan. But any massive shifts or significant steps to open up the economy are unlikely in the near term, and these will likely remain subtle at best. A dynamic Zero-Covid policy is likely to stay for now, potentially with some flexibility around quarantine requirements or PCR tests. Recession risks will bring safe-haven flows to the USD The US economy still remains in a position of strength, with a strong labor market and significant household savings. This, in comparison to rising recession fears in the EU and the UK, suggest that capital flows will continue to be fuelled towards the safety of US assets. Even if we see a mild recession in the US, markets will be scrambling for liquidity which is usually found in US dollar or the US Treasuries. A temporary peak may be seen in the USD later in Q4 or early Q1 as Fed’s upward pricing reaches a peak, but still, a turnaround in the USD will be slow and stretched. What causes the turnaround? In the short run, a peak in USD would be a result of a near peak in pricing in the Fed rate path. But a more sustainable trend lower will have to wait for US economic data to show a materially different trend. Say core PCE down to 0.1-0.2% MoM levels or labor market materially cooling with NFP gains down to about 100k or so. Asian FX to continue to face headwinds Another leg higher in the USD will mean further pressure on Asian FX, especially the Chinese yuan which is facing policy divergence to the Fed and a slowing economy at home. Other tech-exposed currencies like the Korean won (KRW) and Taiwanese dollar (TWD) may be under greater pressure as well, although relative resilience can be expected for the safe-haven Singapore dollar (SGD). The Indonesian rupiah (IDR) will also likely be supported if Bank Indonesia adopts a fast pace of tightening, as a favourable current account situation also lends support. Investment inspiration to consider Long USD and short risk assets is perhaps still the most favourable strategy. We previously listed out tools that can be used to go long US dollar here. In the FX space, this can be traded using options as well with potential short positions on GBP, EUR, TWD, KRW. Also, consider that upward pricing of Fed’s rate path from here can mean short-term headwinds for Gold and Silver. We still expect medium-term upside in precious metals, however, as inflation expectations remain anchored higher in the new deglobalized world. Meanwhile, a lower pace of Fed rate hikes from here could reduce volatility in the interest rate markets, so watch the MOVE index. This could potentially lower the volatility in the FX markets as well. We believe a peak in bond volatility will be the key, and the first sign, for the markets to reverse trend.     Source: https://www.home.saxo/content/articles/forex/us-dollar-still-no-signs-of-peaking-04112022
EUR: Stagflation Returns Amid Weaker Growth and Sticky Inflation

Saxo Bank's Podcast: Eyes On The US October Jobs Report

Saxo Bank Saxo Bank 04.11.2022 12:21
Summary:  Today we look at whether the US October jobs (and earnings!) report later today will extend or disrupt the powerful market reaction to Fed Chair Powell's hawkish FOMC press conference on Wednesday. We also look at the impact of a very dovish Bank of England meeting and the market thumbing its nose at the BoE's rate guidance next year. We also look at crude oil, gold, copper & cotton, stocks to watch including a huge positive beat from SocGen this morning. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting an on FX Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.       Source: https://www.home.saxo/content/articles/podcast/podcast-nov-4-2022-04112022
From UFOs to Financial Fires: A Week of Bizarre Events Shakes the World

Fed Fear That The Dovish Pivot Will Send The Wrong Signal And The Markets Would Overreact

Craig Erlam Craig Erlam 04.11.2022 11:44
It’s been another fascinating week in financial markets and it’s not over yet, with the US jobs report still to come amid some interest rate uncertainty. The Fed meeting on Wednesday left investors scratching their heads a little. What was meant to be the pivot moment quickly became something very different; an admission that markets need to price in more. The central bank had given with one hand and taken with the other and investors were left to sulk once more. But perhaps the takeaway is more positive than the markets would have us believe. In scaling back its tightening (probably) in December, the central bank is buying itself time for the data to improve and justify a lower terminal rate. It’s possible that the fear at the Fed was that a slower pace – or “dovish pivot” would send the wrong message and markets would overreact, undermining its tightening efforts. By adding the terminal rate caveat, it’s kept markets on their toes and bought the Fed more time. Or maybe I’m simply reading too much into it but frankly, who isn’t at this point? The fact remains that the pace of tightening will be slower and the Fed will be able to continue making monetary policy restrictive but in a potentially less damaging way while enabling more visibility on the economy. This puts additional emphasis now on the data which could lower the terminal rate and further slow the pace of tightening. While all of the data will be closely monitored and factor into the Fed’s decision-making in December, the two releases at the top of the list are undoubtedly the inflation and jobs reports. And we’ll get two of each of those, the first of which being the October jobs report, later today. Needless to say, investors are a little on edge ahead of the release. Not only was Powell’s caveat unexpected and unwelcome by investors, the labour market remains extremely healthy which means today’s report is likely to be red hot once more. If that doesn’t turn out to be the case, investors may start to see the upside to the Fed’s statements on Wednesday. Optimism ahead of the jobs report Bitcoin is bouncing back ahead of the jobs report alongside other risk assets. Whether it will be able to hold onto those gains will obviously depend on the strength of the report itself, especially in light of the recent Fed comments. Clearly, there’s some sense of optimism out there and bitcoin could be eyeing up $21,000 once more where it ran into resistance in late October. Of course, a failure to hold onto these gains could see $20,000 come under pressure once more. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Canada's Inflation Expected to Ease in May, Impacting BoC's Rate Decision

Non-farm payrolls and inflation prints coming shortly are crucial

ING Economics ING Economics 04.11.2022 13:41
The Fed delivered a hawkish pivot this week, and the Bank of England a dovish 75bp hike. Barring a clearer decoupling between the Fed and other central banks, today’s US job report and next week’s CPI will be key. Even if both ease, we expect rates to keep rising, and curves to steepen, on supply The Fed takes with one hand and takes with the other Viewed from abroad, the Fed’s balanced message didn’t come across as a hint of less hawkish days to come. The Fed has come to be viewed as one of the main reasons other central banks accelerated their hikes to 50bp or even 75bp increments. Even in case of a slowdown in Fed hikes to 50bp in December, the main risk for markets is now that this hiking cycle stretches well into 2023, and so forces the hand of the Fed’s foreign peers. With a pause in hiking cycles being pushed farther over the horizon, we expect appetite to own duration to remain limited into year-end, save for investors with very long investment horizons. Supply still tips the scales in favour of higher rates Having made the case that Fed policy is so central to the fate of foreign fixed income markets, it is clear that today’s US employment report (non-farms payroll), and next week’s CPI will also play a role. As it happens, consensus is for a cooling of both, so markets can in theory look forward to more stable performance in bonds next week. However, this being one of the last weeks in which bond issuers can practically conclude their 2022 funding plan, or pre-fund for 2023, supply still tips the scales in favour of higher rates in our view. Even if we’re wrong, the US Treasury is due to sell 10Y and 30Y notes/bonds next week, so the odds are that any post-NFP spike will be sold into. A more hawkish Fed is pressuring foreign rates ever higher Source: Refinitiv, ING The BoE actually managed to deliver a dovish message, and markets listened Given the strength of the dovish message that accompanied the BoE’s 75bp hike yesterday, many were left wondering why it didn’t only hike 50bp. In a sense, most of the Bank’s pushback concerned the amount of hikes priced by the curve for subsequent meetings, but the hawkish justifications for accelerating its hiking pace were conspicuously missing. GBP front-end rates did close the day higher, but given the Fed’s hawkish message, and sell-off at the front-end of the EUR and USD curve, we conclude that at least some of the BoE’s dovish message has been heard. This was far from a foregone conclusion, markets have had a well-defined tendency to ignore BoE dovish soundbites at recent meetings. The long-end remains the sector most likely to come unmoored in case of a pick-up in volatility What was more interesting is the underperformance of long-end gilts. That the curve steepens on a dovish message is not altogether surprising but we get the feeling that the long-end remains the sector most likely to come unmoored in case of a pick-up in volatility. Perhaps this is also a reflection of the fact that the shortage of collateral and short-dated gilts is preventing the front-end from participating fully in any sell-off. In any case, we think curve steepening remains the path of least resistance, especially if the BoE joins in on the dovish pivot operated by other central banks globally, such as the Reserve Bank of Australia, Bank of Canada, Norges Bank, and likely the European Central Bank soon. EUR and USD curves should follow their GBP peer into steepening next week Source: Refinitiv, ING Today's events and market view Various measures of eurozone member state industrial production figures are released this morning, alongside services PMIs. Eurozone PPI is expected to decline slightly from dizzily high levels. Central bank speakers will be omnipresent, once again. From the ECB, Christine Lagarde, Joachim Nagel, and Luis de Guindos will be making the headlines. Huw Pill’s take on yesterday’s BoE decision will also be closely watched. In spite of all the interesting central bank comments we’re sure to receive, the most market-moving event will probably be the US job report. Job creation is expected to revert to its long-term average around 200k. An uptick in unemployment and downtick in hourly earnings could take the edge off Jerome Powell’s hawkish comments earlier this week, but a resumption of supply next week tilts the odds in favour of higher rates still, especially at the long-end. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
GBP: BoE Stands Firm on Bank Rate and Mortgage Interest Relief, EUR/GBP Drifts Lower

USA: ING point to strong labour market and incoming data in the context of the December rate

ING Economics ING Economics 04.11.2022 15:04
The rate of job creation continues to slow, but the US still added 261,000 jobs in October, which was much better than expected. Meanwhile, average hourly earnings were also firmer, suggesting ongoing inflation pressures from the jobs market. The prospect of the Fed shifting to 50bp rate from December, while our call, is not guaranteed 261,000 Number of jobs created in October   The downtrend in hiring continues... This report was always going to be viewed in the context of the Federal Reserve signaling earlier this week that it is inclined to moderate the size of rate hikes, but end up at a higher terminal level than they had previously signaled. Well, on the one hand October’s 261,000 increase in non-farm payrolls is the smallest gain since December 2020, while the unemployment rate rose to 3.7% due to the household survey used to calculate the unemployment rate showing employment falling 328,000 and labour force participation declining – not a healthy look! The latest job announcements on job losses in the tech sector are also a concern so there is evidence of a moderation in the labour market that the more dovish members of the Federal Open Market Committee (FOMC) can point to. Monthly payrolls gains (000s) Source: Macrobond, ING But there is ammunition for the hawks too However, the hawks, who think the Fed needs to continue hiking at pace, also have ammunition to back their arguments. The 261,000 figure was well above the 193,000 consensus forecast and there were upward revisions for the past two months totaling 29,000. Importantly, every sector reported job gains with manufacturing up 32,000, education and health up 79,000 and business services up 39,000 the biggest contributors. Remember too that job openings actually rose and there are currently 1.9 job vacancies for every unemployed American, which indicates ongoing excess demand. Perhaps more significantly for the hawks was the 0.4% month-on-month print for average hourly earnings, which supports that excess demand argument. We had been looking for the third consecutive 0.3% print, which would indicate a clear step down in the rate of wage growth from the 0.4-0.5% typical print over the past couple of years. As such, the Fed are likely to remain wary about inflation pressures emanating from the jobs market. In aggregate it suggests the labour market remains fairly robust and it keeps alive the possibility of a fifth 75bp hike. Remember though that we do have another jobs report and two more CPI reports before the December 14th FOMC decision. Within those three reports we still feel there will be enought to justify a step down to 50bp.   Read this article on THINK TagsUS Unemployment Jobs Federal Reserve Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Oanda Podcast: US Jobs Report, SVB Financial Fallout And More

The Next Move Of The Fed Will Depend On The Data Flow

ING Economics ING Economics 05.11.2022 08:11
After four consecutive 75bp hikes, the Federal Reserve will likely look to slow the pace of rate hikes from December. The key US data release next week is month-on-month core CPI, which we expect to be 0.5%. Other releases of note include consumer credit and confidence data, however these are shadowed by the mid-term elections on Tuesday Source: Shutterstock US: Mid-term elections in focus Federal Reserve chair Jerome Powell has successfully brought the market on board with the notion that while the central bank will likely look to slow the pace of rate hikes from December after four consecutive 75bp moves, the terminal interest rate will likely end up being higher than what it signalled back in September. Nonetheless, this will depend on the data flow. If inflation and job numbers continue to come in on the strong side it may be that officials end up doing a fifth 75bp. Given this uncertainty, markets are currently pricing around 58bp for the December meeting and 42bp for February, with a final 25bp hike coming at some point in the second quarter. Next week’s data will be important, but not critical in determining the path forward. The key release is the consumer price index with the focus within that being the month-on-month core (ex-food and energy) number. Over the past six months, we have had one 0.7%, four 0.6% and one 0.3% print. We need to see numbers closer to 0.2% to bring the annual rate down toward the 2% target over time. The consensus right now is for 0.5% next week, which is also our prediction. There is a second bite of the cherry ahead of the December FOMC meeting on 14 December given November CPI is published on 13 December. Nonetheless, if we get a downside surprise we could see markets looking to price in a greater chance of a 50bp December hike and possibly a slightly lower terminal rate. Other data includes consumer credit and consumer confidence along with small business optimism. However, these will be overlooked given the mid-term elections on Tuesday. Opinion polling appears to show momentum is building for Republican party candidates with a majority in both the House and the Senate now looking like the most likely outcome. We have written up a scenario analysis of the possible outcomes, but essentially if the Republicans gain control of Congress, President Joe Biden’s ability to pass legislation will be severely curtailed. Indeed, there is far less probability of any fiscal support for the economy through the recession than if the Democrats retained control of Congress given Republicans will look to block it. Consequently, if the Democrats lose then it is more likely that we will see interest rate cuts in the second half of 2023 to provide the stimulus to help the economy rebound, rather than if they win where fiscal policy would likely do more of the heavy-lifting and interest rates stay higher for longer to offset any inflation impulse. Key events in developed markets next week Source: Refinitiv, ING TagsUS   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Commodities Digest: US Crude Oil Inventories Decline Amidst Growing Supply Risks

Inflation In The USA Has A Chance Of Cooler

Kamila Szypuła Kamila Szypuła 05.11.2022 11:05
Inflation is at the top of the world worry list in 2022. The situation in the United States proves that inflation is a global problem. Although the local market is in better shape than, for example, the European one, the level of inflation in the US has not been so high for over 40 years. Undoubtedly, the most anticipated macroeconomic data in the world will be those on the behavior of the CPI and the "base" (core) version of this indicator that does not take into account energy and food prices in the USA. Previous reading Data provided by the Bureau of Labor Statistics (BLS)show that inflation in the country is now 8.2% according to the latest publication. The CPI data were perhaps not that bad, although economists expected a drop to 8.1%. but it was the third consecutive month of decline in this indicator. Core inflation (CPI) in September 2022 was 6.6%. y/y versus 6.3% in August and forecasts at 6.5 percent. Month-on-month was 0.6%, against the forecast of 0.5%. Expectations Inflation data, especially on core inflation, are to be of key importance when it comes to the next decisions of the US central bank concerning interest rate hikes. CPI data are scheduled to be released on November 10, 2022. Inflation is expected to reach 8.0% y/y against the previous reading of 8.2%. This may mean that the Fed's actions are paying off. The monthly CPI change is forecast to be 0.7%. However, if it turned out to be higher, the market could take it very badly. It would be a strong argument for the Fed to continue to aggressively tighten monetary policy. Source: investing.com Core inflation also expects a decline of 0.1% from 6.6% to 6.5%. This inflation is of particular importance as it does not take into account price changes excluding food and energy, which are the main factors influencing the overall CPI. Fed's fight with inflation and its price For the past year and a half, consumer inflation in the world's largest economy has been spinning out of the control of central bankers. The Fed is trying at all costs to bring inflation back to a stable 2% level. The Fed started a cycle of interest rate hikes in March, raising the cost of money by 25 bp to 0.25-0.5%. In April, FOMC members decided to move by 50 bp. up. At subsequent meetings it is already by 75bp. With today's rate increase, the benchmark federal funds rate is a range of 3.75% to 4%. Rates are expected to peak at 4.5% to 4.75% in 2023, according to the U.S. central bank's own projections. In simple terms, the Fed's approach can be described as an attempt to destroy demand while encouraging businesses and individuals to save. At every opportunity, business owners will cut back on their expenses, which can result in the employment rate stagnating, leaving workers' wages unchanged and discouraging them from spending more. Inflation in the USA is a major problem for the markets The more the American central bank tightens its monetary policy in 2022, the more the dollar strengthens, and this is painfully felt by other currencies in the world, e.g. the euro (EUR), the Japanese yen (JPY) or the British pound (GBP). The rate hikes cycle in the US turned out to be a difficult period for assets. The main indices of American stock exchanges, as well as markets practically all over the world, have been recording drastic drops since the end of 2021. In the bond market, for the first time in 40 years, we have a bearish market, and cryptocurrency rates were losing by 50 to 90 percent in the first half of 2022. your worth. On the other hand, assets like gold have gained significant importance as a hedge against inflation. Cryptocurrency has also proved to be an ideal option compared to gold as an investment against severe inflation. Source: investing.com, www.federalreserve.gov/data.htm, www.bls.gov/cpi/
EUR: German IFO Data and Central Bank Hawkishness Impact Euro/USD Range Trade

US President Joe Biden Will Continue To Sit In The White House

InstaForex Analysis InstaForex Analysis 06.11.2022 11:01
In 2022, Forex does not let investors get bored. Strong trends, numerous shocks and volatility growing by leaps and bounds attract increased attention to the international currency market. It is not for nothing that the trading volume on it, according to BIS research, has grown to $7.5 trillion per day, which is 14% more than in 2019. Still, Forex lacks the spice that Donald Trump once added with his antics. And now the eccentric Republican has the opportunity to return. Will the spectacle become even more interesting? Investors are shifting their attention on the US midterm elections. Markets predict with a 70% probability that Republicans will seize control of the Senate and the House of Representatives, while the chances of Democrats to remain in power are estimated at a modest 10%. However, US President Joe Biden will continue to sit in the White House until 2024, and in theory this means that fewer laws will be passed in the next couple of years. For Forex, the Republicans' emphasis on fiscal consolidation is important, which will lead to a reduction in the budget deficit, reduce the volume of bonds issued and increase demand for them from non-residents. The inflow of capital into America will support the US dollar. Dynamics of the US budget deficit However, no matter how much politicians would like to influence the exchange rate, the prerogative in this matter clearly belongs to the Federal Reserve. Following the November FOMC meeting, CME derivatives raised expectations for expected rates for 2023-2025. The ceiling has shifted to 5.15%, above the Open Market Committee's September forecast of 4.6% and is bullish for the US dollar. Dynamics of the expected federal funds rate As the cost of borrowing rises, so will the yield on US Treasury bonds, which has already reached its highest level since 2007-2008. This worsens the fundamental valuation of US stocks, contributes to the fall of stock indices, worsening global risk appetite and increases demand for the dollar as a safe-haven asset. Yield The yield on debt obligations will fall only in case of deterioration of macroeconomic statistics in America. However, as long as the US labor market remains strong and inflation wanders at the highest levels in the last 40 years, the Fed will consider its work not done and will continue to raise rates. This circumstance gives grounds to classify any growth of EURUSD as a correction. The downward trend remains in force, especially since due to the relative weakness of the eurozone labor market compared to the US, the European Central bank cannot afford to raise rates as high as the Fed. EUR/USD Technically, on the EURUSD daily chart, returning above the fair value by 0.978 to the limits of the corrective ascending channel delays the sad end for the bulls, but does not cancel it. The rebound from the resistance at 0.9845 and 0.987, as well as the fall below the support at 0.978 are the basis for short positions. The bearish targets are 0.964 and 0.949.     Relevance up to 13:00 2022-11-09 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/326298
The China’s Covid Containment Continued To Negatively Impact The Output At The End Of 2022

China Is The Biggest Consumer Of Such Commodities

Saxo Bank Saxo Bank 07.11.2022 09:04
Summary:  The October US CPI release this week will be key to watch after Fed’s hawkish shift last week. Market pricing for December’s Fed rate hike is closer to 50bps for now, but a stronger than expected core print could move that towards another 75bps expectation. Midterm elections could also cause some volatility given the risk of policy paralysis if Democrats lose control of the Congress. More economic data is due, from UK’s Q3 GDP to China’s credit update and inflation, but a key driver of volatility will likely be further developments on China’s reopening story. In the commodities space, this means industrial metals, iron ore, copper, gold, energy and cotton are key to watch. The earnings calendar cools down, but keep Walt Disney and Adidas on your radar. components Bloomberg consensus expects US October CPI to drop below the 8% mark and come in at 7.9% YoY from 8.2% previously, but still higher at 0.6% MoM from 0.4% in September. The core measure is also expected to ease slightly to 6.5% YoY, 0.5% MoM (prev. 6.6% YoY, 0.6% MoM) but still remain elevated compared to historical levels. Key to watch also will be the drivers of inflation, particularly the stickier shelter and services costs, which if stuck higher could move the December Fed funds future pricing more towards another 75bps rate hike, resulting in another round of selloff in equities and dollar gains. However, with another CPI report due before the next Fed meeting in December, market impact of this week’s report will likely remain restrained unless a major deviation from expectations is seen. For this week’s CPI data, we will be watching the USD, and bond yields, which may be expected to rally up if the data is hotter than expected. What next for the China reopening chatter, and what does that mean for commodity markets? Last Saturday, China’s National Administration of Disease Control and Prevention reiterated China’s adherence to the dynamic zero-Covid policy but at the same time pledged to improve the implementation of the policy so as to avoid massive and protracted lockdowns. Investors will focus on if subtle relaxation of implementation will gather momentum in the coming weeks. This will be key not just for mainland/HK markets, but also for commodity markets. The biggest impact will be seen on industrial metals (watch Copper, Iron ore) and energy prices, as China is the biggest consumer of such commodities. HG Copper broke through several resistances last week, but is seen lower back at $3.60 on Monday morning after Chinese officials hinted at adherence to the zero covid policy. Crude oil prices also remain on watch especially with OPEC+ production cuts set to take effect this month and upcoming EU sanctions against Russian oil, all leading to a tight market. Gold (XAUUSD) reversed its post-FOMC slump on China reopening optimism at the end of last week, and remains supported above $1670 for now. Will it break the short-term downtrend? Also worth watching Cotton, which bounced more than 20% from their low on signs of China’s improving yarn production, but still remains down on a YTD basis. US mid-term elections this Tuesday Pundits suggest that the Republicans have very strong odds of flipping the House of Representatives in their favour, while the odds look finely balanced for whether the Senate ends retaining the slimmest of Democratic majorities. Republicans taking both houses has few immediate ramifications, as US President Biden has the presidential veto, but a stronger than expected Democratic showing that somehow sees them retaining the House and strengthening their Senate majority would be a game changer – opening for more policy dynamism from the US over the next two years rather than the expected lame-duck presidency. Uncertainty is high as pollsters have had a hard time gathering accurate indications for the election results since Trump’s victory in 2016. China is scheduled to release credit data, CPI, PPI, and trade data Among the data scheduled to release this week, investors are likely to focus on the new RMB loans and aggregate financing numbers. After a very strong September in which banks were urged to lend, new RMB loans were expected to decelerate to RMB800 billion in October from RMB2,470 billion in September. New Aggregate Financing was forecasted to fall to RMB 1,600 billion in October from RMB 3,530 billion in September. On the inflation front, China’s PPI is expected to fall 1.6% Y/Y in October, due to the high base last year resulting from increases in material and energy prices. Unlike other major economies, CPI in China is expected to slow to 2.4% in October. On trade, while export growth in RMB terms is forecasted to rise to +12.7% YoY in October from +10.7% in September, exports in US dollar terms are expected to decelerate. China’s Singles’ Day this Friday, Nov 11 Investors will watch closely Alibaba, JD.com, and other online retailers’ sales on Singles’ Day this Friday to gauge the strength of China’s private consumption. Analysts are expecting slower sales growth as recent data indicated slower user growth across online shopping platforms. UK GDP to confirm the onset of a recession On Friday, UK’s Q3 GDP is released and the first negative print of the current cycle is expected to be seen. Consensus forecast is seen at 2.1% YoY, -0.5% QoQ, significantly lower than the second quarter print of 4.4% YoY, 0.2% QoQ. August GDP data had already begun to show a negative print with -0.3% MoM and the trend will only likely get worse in September, exacerbated by a one-off factor relating to Queen Elizabeth II’s funeral in the month, which was a national holiday. The economy is already facing a cost of living crisis, and both fiscal and monetary policy have to remain tight in this very tough operating environment. Technically, a recession may still be avoided as activity levels picked up in October, but still it will remain hard for the UK to dodge a recession going into 2023. This suggests more downside for the sterling may be in store, especially as the market refuses to cater to the Bank of England’s warning that the current expectations of terminal rate may be too steep. Key Earnings to watch Saxo’s Head of Equity Strategy, Peter Garnry, wrote the following, for key focus areas for corporate earnings this week. On Monday our focus is Activision Blizzard which is struggling with negative top-line growth like the rest of the gaming industry as the pandemic boom is over. Analysts are expecting revenue growth of -17% y/y and EPS of $0.50 down 39% y/y. Walt Disney is next week’s biggest earnings release scheduled on Tuesday with analysts expecting Q4 (ending 30 September) revenue growth of 15% y/y but EBITDA at $3bn down from $3.86bn in Q3 highlighting the ongoing margin pressure. Adidas, reporting on Wednesday, is also key due to its size in consumer goods but also because of its costly partnership breakup with Ye; analysts estimate revenue growth up 13% y/y but EPS at €1.24 down 47% y/y due to one-off items. On Thursday, we will focus on ArcelorMittal, because Europe’s largest steelmaker is an important macro driver, and analysts are getting increasingly negative on the steel industry expecting ArcelorMittal to announce a 14% drop in Q3 revenue and a 66% drop in EPS. The week ends with Richemont expected to see revenue growth coming down fast to just 7% y/y in Q3.   Key company earnings releases Monday: Westpac Banking, Coloplast, Ryanair, Activision Blizzard, BioNTech, Palantir Technologies, SolarEdge Technologies Tuesday: Bayer, Deutsche Post, KE Holdings, Nintendo, Walt Disney, Occidental Petroleum, Lucid Group, DuPont Wednesday: National Australia Bank, KBC Group, Genmab, Siemens Healthineers, E.ON, Adidas, Honda Motor, Coupang, Rivian Automotive, Roblox, DR Horton, Trade Desk Thursday: Brookfield Asset Management, Fortum, Engie, Credit Agricole, Allianz, Merck, Hapag-Lloyd, RWE, SMIC, Nexi, AstraZeneca, ArcelorMittal, Siemens Gamesa Renewable Energy, Becton Dickinson, NIO Friday: Richemont Key economic releases & central bank meetings Monday 7 NovemberChina (Mainland) Trade (Oct)Germany Industrial Production and Output (Sep)Eurozone S&P Global Construction PMI (Oct)Indonesia GDP (Q3) Tuesday 8 NovemberJapan BOJ Summary of Opinions (Oct)Japan All Household Spending (Sep)Eurozone Retail Sales (Sep) Wednesday 9 NovemberJapan Current Account (Sep)China (Mainland) CPI and PPI (Oct)United States Wholesale Inventories (Sep) Thursday 10 NovemberUnited States CPI (Oct)United States Initial Jobless ClaimsChina (Mainland) M2, New Yuan Loans, Loan Growth (Oct) Friday 11 NovemberNew Zealand Manufacturing PMI (Oct)Germany CPI (Oct, final)United Kingdom monthly GDP, incl. Manufacturing, Services and Construction Output (Sep)United Kingdom Goods Trade Balance (Sep)United Kingdom GDP (Q3, prelim)United Kingdom Business Investments (Q3)United States UoM Sentiment (Nov, prelim)     Source: https://www.home.saxo/content/articles/macro/saxo-spotlight-7-nov-2022-07112022
The German Purchasing Managers' Index, ZEW Economic Sentiment And More Ahead

Maersk Expects The Eurozone Enter Into A Recession | iPhone's Demand Is Coming Down

Saxo Bank Saxo Bank 07.11.2022 09:12
Summary:  Traders witnessed a wild session on Friday as the market decided that the US data would not add any further risk of a hawkish Fed for now, helping risk sentiment to rebound sharply as US treasury yields eased a bit lower. The US dollar was pummeled for sharp losses, particularly against commodity currencies that rebounded on chatter of China moving to ease Covid restrictions, only to see those hopes dashed over the weekend. Focus this week on US October CPI release this Thursday.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities are holding up pretty well given the remarks on Wednesday from Fed Chair Powell and assessment by Larry Summers that the terminal rates probably should be closer to 6% than 5%. S&P 500 futures are trading around the 3,767 level with the index futures likely trying to attempt again to move to the 3,800 level, but our view is that tighter central bank policy will begin to impact US equities negatively again and the 3,600 level is our shorter-term target for S&P 500 futures. Euro STOXX 50 (EU50.I) European equities are up 13% from late September as European earnings have been better than expected and the energy situation has eased. But this optimistic view might be premature as the economic activity in the euro area is slowing down fast and the winter has not even started, so we do not know the true strength of the European energy market. Also, the idea that ECB will begin pausing is not credible as the inflationary pressures are very high and will force ECB to continue being more aggressive on policy rates. STOXX 50 futures are trading just above the 200-day moving average this morning at the 3,680 level, with some potential to move higher if the index futures can close above Friday’s close. But overall, we maintain that it is more likely that equities will begin to roll over here as central bank hawkishness on terminal rates will sink in. Hong Kong’s Hang Seng (HSIX2) and China’s CSI300 (03188:xhkg) While China’s National Administration of Disease Control and Prevention reiterated its adherence to the dynamic zero-Covid policy at a press conference last Saturday, the health officials added that local governments should not unreasonably double down on the implementation and must ensure people’s livelihood and economic activities remain normal.  Investors took note of the above and recent signs of incremental flexibility in the implementation of pandemic control measures in China and saw the Hang Seng Index more than 3% higher as of writing. The resumption of large-scale sports events including the Beijing Marathon last Sunday, multinational sports events scheduled for 2023 such as Shanghai F1 and Hangzhou Asian Games, relaxation of PCR test requirements, increases in international flights, cancellation of circuit breaker for international flights, and approval of BioNTech vaccine for foreigners living in mainland China are among the factors cited by investors who anticipate gradual reopening in the coming months. Mainland A-shares’ reactions were more modest, with CSI300 climbing only 0.2%. FX: USD bounces back as China reasserts Zero Covid commitment after Friday’s huge sell-off The market absorbed Friday’s US data without further punishing US treasuries, as yields were capped and eased back. This saw the former USD strength reversing sharply to pronounced weakness Friday as risk sentiment also rebounded. Chatter late last week about China’s reopening added to brightening of sentiment. Commodity currencies had been supported with NZD leading the gains against the USD and being up over 2%. AUDUSD also surged above 0.6450 into the end of the week on hopes of a recovery in commodities demand. However, weekend reports from China’s Health Ministry confirmed that China will maintain its present zero-Covid regulations but improve the pandemic control measures, hinting that protracted lockdowns will be avoided. This has sent dollar back higher overnight, with AUD and NZD leading the declines, but this still appears merely a small consolidation of Friday’s weakening move. Focus this week on US CPI release on Thursday (more below). Gold (XAUUSD), silver (XAGUSD) and copper (HGZ2) … all raced higher on Friday, before giving back some of those gains overnight. The China reopening story gained its own momentum last week and while the official line has not changed, the tone has softened (see HK and China update above).  The extended rally despite a stronger-than-expected US report was driven by copper which recorded its best day since 2009, rallying close to 8% and in the process breaking through several key levels of resistance, thereby triggering some extra buying momentum from traders, not positioned for a bounce. The strong surge fed through to silver, up 7% on day, which found its own momentum above $20 and finally also Gold which had its biggest jump since March 2020. It may still be too early to call for a reversal given continued worries about the global economic outlook and Fed action, but Friday’s action will force a rethink of whether the sell-into-strength strategy is still valid. China developments, the dollar and incoming US data will provide most of the answers to this question.  Crude oil (CLZ2 & LCOF3) Crude oil trade lower following Friday’s strong gains with the market responding negatively to weekend headlines about zero-Covid policies being maintained in China. However, looking a bit deeper there is no doubt a softening approach is happening. The People’s Daily in an article on November 3 told people not to worry too much about “long Covid” ie the aftermath health problems from Covid while the health officials told local government not to make measures over stringent. With demand in China potentially starting to recover, the ill-timed OPEC+ production cut and EU sanctions against Russian crude is likely to keep the price risk focused to the upside, but with Brent failing to break above $98.75, and WTI above $93.65, the October highs, the market may spend the start of the week consolidating last week’s strong gains. US treasuries (TLT, IEF) US Treasury yields dropped back slightly on Friday as the US data was not seen stoking additional fears of the Fed intensifying its hawkish stance further for now, with this Thursday’s CPI weighing more in the balance than the mixed jobs report Friday. Focus is on the 4.32% top in the US 10-year treasury benchmark yield and the 3.90% low-water mark of the recent consolidation lower. What is going on? Mixed US jobs report US NFP headline gains of 261k were above expectations of 200k but slowed from last month’s 315k which was revised higher from 263k. Job gains were broad-based with strong gains in healthcare, professional and business services and manufacturing. Wage growth also held up strongly, coming in at 0.4% MoM in October from 0.3% MoM previously although a tad softer on a YoY basis at 4.7% from 5.0% YoY previously. However, the unemployment rate ticked up to 3.7% from 3.5% (exp. 3.6%) on a rather weak Household Survey although it was met with a 0.1% decline in the participation rate to 62.2%. However, with layoffs rising recently, especially in tech, it will be interesting to see how that impacts the headline NFP and the Fed tightening path in the months to come. Apple lowers iPhone output by 3mn units The demand for iPhones is coming down and Apple is now announcing a cut of 3mn units as consumers are under pressure from inflation and might be extending the life of their old phones. Apple has recently hiked prices on some of its services aiming to offset the weakness in its hardware business. Meta to start layoffs according to WSJ Investors have been frustrated with Meta following the Q3 earnings release as Mark Zuckerberg has reinforced the image that he does not listen to the concerns of investors that Meta is spending too much capital on its metaverse bets. According to Wall Street Journal, Meta might have listened after all as the technology company is expected to begin laying off thousands of employees. Ryanair lifts passenger target If there is an airliner that can do well during a recession in Europe it is Ryanair and the first half result this morning is a bit better than expected and the airliner expects net income of €1-1.2bn in the FY23 (ending 31 March). The Danish shipping giant Maersk sees the world entering a recession Maersk cut its forecasts for container demand this year. The drop is expected to reach minus 2 to 4 %. This matters because the company is often seen as a barometer for global trade. This is explained by well-known factors we have mentioned several times here: high inflation across the board, structural energy crisis in Europe, the geopolitical tensions and higher cost of capital. All of this weighs on consumer purchasing power and can potentially cause a global recession. Maersk expects the eurozone to be already or to enter into a recession, and potentially the United States as well. At Saxo Bank, we share this view, especially regarding the recession risk in the eurozone. Last week, ECB governor Martins Kazaks (which is seen as a hawk) acknowledged that the eurozone recession is now the baseline. This was the first time that an ECB governing council member said that officially.  The number of penny stocks is increasing on Euronext Paris With the significant equity drop that started earlier this year, many stocks are now close to zero. In Euronext Paris, the number of listed companies with stock value below 0.01 euro has jumped in recent months. For instance: Pharnext (biopharmaceutical company), NFTY (NFT and blockchain marketing services), Safe (specialized in the design and manufacture of medical devices) etc. Retail investors need to be very careful regarding small caps investment (especially when the valuation of the company is below 100 million euros). There are a lot of stocks that are not liquid enough and can represent a high risk of losses. What are we watching next? US inflation to test the 8% level, watch core and stickier components Bloomberg consensus expects US October CPI to drop below the 8% mark and come in at 7.9% YoY from 8.2% previously, but still higher at 0.6% MoM from 0.4% in September. The core measure is also expected to ease slightly to 6.5% YoY, 0.5% MoM (prev. 6.6% YoY, 0.6% MoM) but still remain elevated compared to historical levels. Key to watch also will be the drivers of inflation, particularly the stickier shelter and services costs, which if stuck higher could move the December Fed funds future pricing more towards another 75bps rate hike, resulting in another round of selloff in equities and dollar gains. However, with another CPI report due before the next Fed meeting in December, market impact of this week’s report will likely remain restrained unless a major deviation from expectations is seen. For this week’s CPI data, we will be watching the USD, and bond yields, which may be expected to rally up if the data is hotter than expected. US mid-term elections tomorrow Pundits suggest that the Republicans have very strong odds of flipping the House of Representatives in their favour, while the odds look finely balanced for whether the Senate ends retaining the slim Democratic majorities. Republicans taking both houses has few immediate ramifications, as US President Biden has the presidential veto, but a stronger than expected Democratic showing that somehow sees them retaining the House and strengthening their Senate majority would be a game changer – opening for more policy dynamism (and inflation from fiscal stimulus) from the US over the next two years rather than the expected lame-duck presidency. Uncertainty is high as pollsters have had a hard time gathering accurate indications for the election results since Trump’s victory in 2016. Earnings to watch The Q3 earnings season is slowing down this week but there are still important earnings releases to watch in certain industries or equity themes. Today our earnings focus is Ryanair, Palantir, and SolarEdge. Palantir is part of the technology segment that has been hit hard on valuations and with revenue growth slowing down and a negative EBITDA in Q2 the pressure is on Palantir to deliver a credible path to profitability; analysts expect 21% y/y revenue growth. Solar panel growth is still high and SolarEdge is enjoying this tailwind with revenue expected to grow 57% y/y and EPS up 57% y/y to $1.46. Monday: Westpac Banking, Coloplast, Ryanair (see earnings review above), Activision Blizzard, BioNTech, Palantir Technologies, SolarEdge Technologies Tuesday: Bayer, Deutsche Post, KE Holdings, Nintendo, Walt Disney, Occidental Petroleum, Lucid Group, DuPont Wednesday: National Australia Bank, KBC Group, Genmab, Siemens Healthineers, E.ON, Adidas, Honda Motor, Coupang, Rivian Automotive, Roblox, DR Horton, Trade Desk Thursday: Brookfield Asset Management, Fortum, Engie, Credit Agricole, Allianz, Merck, Hapag-Lloyd, RWE, SMIC, Nexi, AstraZeneca, ArcelorMittal, Siemens Gamesa Renewable Energy, Becton Dickinson, NIO Friday: Richemont Economic calendar highlights for today (times GMT) 0700 – Germany September Industrial Production Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app:   Source: https://www.home.saxo/content/articles/macro/market-quick-take-nov-7-2022-07112022
FX Daily: Upbeat China PMIs lift the mood

Disappointment Of Chinese Data | Disney, Occidental, Rivian Earnings

Swissquote Bank Swissquote Bank 07.11.2022 10:11
Week starts with blurred sentiment on the back of mixed US jobs data, and soft Chinese trade figures. Previous data Chinese exports and imports unexpectedly shrank in October; this was the first synchronized drop since May 2020. US jobs data was mixed, and triggered mixed market reaction, a rally that may not last long into the inflation data. US events ahead This week, US midterm elections & latest CPI update will be the major talking point. Earnings On the corporate calendar, Disney, Occidental Petroleum and Rivian are among companies that are due to go to the earnings confessional this week. Watch the full episode to find out more! 0:00 Intro 0:31 Chinese trade data disappoints 1:59 Over-optimistic reaction to the US jobs data’ 6:50 What to expect from US midterm elections? 8:39 Corporate calendar: Disney, Occidental, Rivian earnings Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #US #midterm #election #2022 #NFP #jobs #wages #inflation #data #Fed #hawks #Disney #Occidental #Petroleum #Rivian #earnings #China #trade #data #Covid #zero #policy #Foxconn #Apple #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH
Gold Is Showing A Good Sign For Further Drop

Low Economic Growth And High Inflation Would Be Bullish For Gold

InstaForex Analysis InstaForex Analysis 07.11.2022 11:38
Gold's bounce off a two-year low, followed by a nearly 3% gain on Friday, is creating solid bullish momentum among Wall Street analysts; however, some also point out that the precious metal still has some work to do to reverse the months-long downward trend. The latest survey shows that market sentiment continues to improve and most market analysts expect prices to rise in the near future. Retail investors are also looking positively. Bullish sentiment has been on the rise all week after gold prices ended October with their seventh straight monthly drop, the longest losing streak in 50 years. Rising bond yields and the US dollar, which is at its highest level in 20 years, remain critical headwinds for gold; however, some analysts note that growing fears of a recession are driving demand for gold as a safe-haven asset. Ole Hansen, head of commodity strategy at Saxo Bank, said the US recession would force the Federal Reserve to end its tightening cycle before it reaches its 2% inflation target. He added that a stagflationary environment of low economic growth and high inflation would be bullish for gold. However, in anticipation that gold prices will have enough momentum to rise, a return to $1,680 will simply return the market to neutral territory. Christopher Vecchio, senior market analyst at DailyFX.com, said he is neutral on gold as he would also like to see an initial push above $1,680 leading to $1,730. Last week, 20 market professionals took part in the Wall Street survey. Ten analysts, or 50%, said they are optimistic this week. Two analysts, or 10%, said they were bearish. Eight analysts, or 40%, said they were neutral about the precious metal. As for retail, 520 respondents took part in online surveys. A total of 240 voters, or 46%, called for an increase in the price of gold. Another 169, or 33%, predicted a fall in prices. While the remaining 111 voters, or 21%, were in favor of a side market. Friday's rally helped gold prices end the week positively. Problems in the labor market adds to the recession fears. On Friday, the Bureau of Labor Statistics said 261,000 jobs were created in October, exceeding all expectations. However, some analysts believe that if you delve into the essence, you can see a growing weakness. Along with rising bullish fundamentals for gold, many analysts note that the technical outlook has turned positive as well. "Gold had been building a technical base above $1,620 support and appears to be starting to launch up off of there," said Colin Cheshinsky, chief market strategist at SIA Wealth Management. He added that bond yields remain well above 4%, which would be a deterrent for gold. And the Fed continues to raise interest rates, and in these conditions, gold's rally may turn towards sales.         Relevance up to 10:00 2022-11-10 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/326394
US Inflation Rises but Core Inflation Falls to Two-Year Low, All Eyes on ECB Rate Decision on Thursday

Saxo Bank's Podcast: Discussion On US Consumer Credit Growth, China Is In Focus Over Its Covid Situation

Saxo Bank Saxo Bank 07.11.2022 11:54
Summary:  Today we step back and look at last week's price action and especially after the FOMC rate decision. China is in focus over supposedly easing its Covid restrictions lifting copper and other industrial metals including emerging market equities. The USD also seems to be rolling over in the short-term easing financial conditions a bit and lifting risk sentiment. On the macro side, we discuss US consumer credit growth and what it means for the cycle and we highlighting the plunge in European economic activity over the past three months. On equities, we discuss rumoured Meta layoffs and Apple cutting its iPhone production target. Today's podcast features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting an on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: https://www.home.saxo/content/articles/podcast/podcast-nov-7-2022-07112022
Bank of England Faces Rate Decision: Uncertainty Surrounds Magnitude of Hike

USD corporate supply may reach less than $600bn in 2023, ING Economics expects

ING Economics ING Economics 07.11.2022 13:17
We forecast USD corporate supply to be no more than US$600bn next year. While we forecast Reverse Yankee supply to be 38% (€15bn) lower than the normal % of US corporate and EUR corporate supply and hit €40bn in 2023. Low corporate net supply forecast next year of just US$276bn As outlined in calls 4 and 5 in our full report Credit Outlook: 23 calls for 2023 - A kind of magic we feel USD supply will be manageable in 2023 as we expect another year of very low net supply. We forecast USD corporate supply to be no more than US$600bn next year, up on the expected US$510bn by the end of this year (currently US$479bn). This is still below the average US$700bn of the past number of years. Furthermore, redemptions are up in 2023, up to US$334bn, and net supply in expected to be rather low at just US$276bn, lower than the average US$400bn. We forecast US corporate supply (in $ and €) to be up in 2023 vs 2022. Normally US corporate supply is 93% of USD corporate supply, which as stated we forecast to be US$600bn. Thus, in 2023 we forecast US corporate supply (in $ and €) to be US$560bn. Corporate Reverse Yankee supply to remain slow at €40bn in 2023 Historically, Reverse Yankee supply generally accounts for 10% of US corporate supply, which should amount to US$55bn (€55bn). Furthermore, Reverse Yankee supply is on average 19% of Euro corporate supply which we have forecast at €270bn. This also suggests €55bn for Reverse Yankee supply in 2023. However, much like what has been seen in 2022, we expect somewhat lower Reverse Yankee supply in 2023 relative to what is mathematically indicated above, due to: Instability in markets often leads to safe-haven issuance. Many US corporates will be tempted to issue domestically in USD due to the headwinds facing the market next year. The unattractive cross-currency basis swap, and our expectation that it will remain so. Initial, expected USD outperformance in 1H23, creating less attraction early in 2023. Therefore, we forecast Reverse Yankee supply to be 38% (€15bn) lower than the normal % of US corporate and EUR corporate supply and hit €40bn in 2023.This would still be up on this year’s c.€30bn. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Belgian housing market to see weaker demand and price correction

The Residential Real Estate Market Is Suffer The Most

ING Economics ING Economics 05.11.2022 09:20
The Federal Reserve is focused on defeating inflation, whatever the economic cost. Nonetheless, after four consecutive 75bp rate hikes the pace is set to slow. We look for Fed funds to peak at 5%, but with nascent signs that inflation will fall sharply next year and the likelihood that recession will bite hard, the chances of a policy reversal in 2023 are high In this article Recession risks rise as the Fed stays focused on inflation Fed set to step down to 50bp from December Inflation is set to slow in 2023 2023 rate cuts remain our call Recession risks rise as the Fed stays focused on inflation The Federal Reserve has now raised interest rates by 375bp this year, the fastest pace of policy tightening since Paul Volker led the Fed in the late 1970s/early 80s. The danger is that the harder and faster a central bank moves into restrictive territory – to get a grip on inflation – the less control over the outcome and the greater chance of a recession. That is now our big fear. The residential real estate market is where the pain is currently most acute with surging mortgage rates prompting a plunge in mortgage applications and falling housing transactions. Home prices have fallen for two months in a row, but we feel this is just the start. To return house price-to-income ratios back to 30-year averages it would require prices to fall more than 20%. This would be dire news for residential investment and the construction sector more broadly while retail activity that correlates with home sales – household furniture, furnishings and home appliances – will also be heavily hit. House price-to-income ratios 1999-2022 Source: Macrobond, ING   The corporate sector is also now facing some strains as demand slows, yet cost pressures remain intense. This deteriorating profit outlook is forcing boards to dial back their expansion plans with falling capital goods orders pointing to declining investment, while the trending lower in the number of job openings signals increased caution. A cooling jobs market comes at a time when household spending power is squeezed by high inflation with confidence under additional pressure from broad asset price falls. Fed set to step down to 50bp from December Unfortunately, there will be no let-up in interest rate hikes until the Fed is confident inflation is coming under control. Currently, both the core CPI (ex-food and energy) and personal consumer expenditure deflator are reporting monthly price rises of 0.5% or 0.6%, but to get inflation to average 2% over time we need numbers closer to 0.2% month-on-month. In the very near term, we are not hopeful that momentum will slow, but it does appear that the Fed, like other central banks, is looking to moderate the pace of future hikes as recession fears spread. We continue to expect a 50bp rate hike in December, but given the stickiness in core inflation we now look at a final 50bp hike in February, which would take the Fed funds target range up to 4.75-5%. We don’t think the Fed will keep hiking into the second quarter though. Despite the near-term stickiness, there are encouraging signs that suggest inflation could slow quite quickly through the first half of next year. Inflation is set to slow in 2023 Normally house price moves lead to changes in the housing CPI components by a year, but there is evidence to suggest actual rents are already falling, as reported by rent.com and realtor.com, amongst others. If so, the heavy 32% weighting of housing within inflation can contribute to a steep CPI slowdown more quickly than would typically be the case. Furthermore, the Manheim used car data points to used vehicles (4% CPI weight) falling 15% over the next couple of months, which can make a big dent in annual inflation rates. NFIB survey suggests fewer companies are looking to raise prices, meaning core inflation could plunge     Source: Macrobond   The most interesting guide though is from the National Federation of Independent Businesses, whose price plans series, which shows the proportion of companies looking to raise their prices in the next few months, suggests that corporate pricing power is rapidly weakening. This is highly correlated with the Fed's favoured measure of inflation – the core PCE deflator (see chart above). A recession will only intensify competitiveness pressures as businesses fight for customers. 2023 rate cuts remain our call We now forecast three quarters of negative GDP growth in 2023 as the deteriorating domestic backdrop is compounded by a weakening external environment and ongoing dollar strength. But we also believe inflation will fall to close to 2% by the end of next year. With the Republicans likely to gain control of Congress after next week’s mid-term elections, this will severely curtail President Joe Biden’s ability to offer any support from fiscal policy. This means the onus will be on the Fed to promote a return to growth. We feel that in the second half of 2023 it will be in a position to do so with rate cuts. TagsUS Recession Inflation Federal Reserve   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Assessing 'Significant Upside Risks to Inflation': Insights from FOMC Minutes

In USA Inflation Is Showing Little Sign Of Slowing

ING Economics ING Economics 05.11.2022 09:13
We're now expecting the Fed Funds Rate to hit 5% early next year, albeit in more modest steps. We also think there are limits to how much further both the European Central Bank and Bank of England can hike rates amid a looming recession In this article Federal Reserve European Central Bank Bank of England People's Bank of China Central banks: Our forecasts Source: Macrobond, ING Federal Reserve After four consecutive 75bp Federal Reserve interest rate increases officials have opened to door to a slower pace of hikes from December. The harder and faster a central bank moves into restrictive territory, the less control over the outcome and the greater chance of an adverse reaction. Given the state of the residential real estate market and the deteriorating corporate and consumer outlook, recession in the US now looks unavoidable. However, inflation is showing little sign of slowing. We need 0.1% or 0.2% month-on-month core inflation readings to get the annual rate down to 2% rather than the 0.5% or 0.6% MoM increases in ex-food and energy prices we are seeing. So, while the pace of hikes may slow, the expected terminal rate keeps moving higher. Nonetheless, with housing rents and used car prices now falling, and corporate pricing power being squeezed by the downturn, we think a 5% Fed Funds Rate will mark the peak in February and the door will open for rate cuts through the second half of 2023. European Central Bank The ECB’s October meeting had something for everyone. Another jumbo rate hike of 75bp and the opening for more for the hawks, but also more recession warnings and an opening to a dovish pivot in December for the doves. Consequently, the times of uncontested decisions at the ECB seem to be over. The December meeting will be much more controversial with a looming recession and a high chance that the ECB’s longer-term inflation forecasts will point to a sharp inflation retreat in 2024 and 2025. These aren't really the best arguments to hike into restrictive territory. We expect the ECB to deliver rate hikes totalling 75bp at the December and February meetings. The balance sheet reduction has started with the announced changes to the ECB’s longer-term loans to banks and the option for earlier repayments. More will follow as a gradual phasing out of the reinvestments of asset purchases could become a substitute for additional rate hikes in 2023. Bank of England Markets have pared back interest rate expectations in light of a more stable fiscal backdrop but are still pricing Bank Rate to near 5% next year. Bank of England officials have begun to hint more explicitly that this would come with huge damage to the economy and is inconsistent with the amount of tightening needed to get inflation lower. Still, policymakers face an unpalatable decision. If they undershoot market rate expectations, the risk is that we see a renewed downside for the pound – not least because a full-blown pivot from the Federal Reserve seems at least a few months off. That helps explain why the BoE accelerated the pace of rate hikes in November. But doing so repeatedly risks baking in mortgage rates and corporate borrowing costs which risk material stress in the economy. Around a third of mortgages are fixed for two years, while small and medium-sized enterprises (SMEs) are typically on floating interest rate products. We therefore expect the Bank to undershoot market expectations and remain unconvinced Bank Rate will go above 4% next year. We think the 75bp hike was a one-off. People's Bank of China The PBoC seems to have abandoned the traditional monetary policy tool of policy rate cuts and Reserve Requirement Ratio (RRR) cuts as a means to support the economy. Instead, the central bank has increased liquidity via policy banks in China. These policy banks lend directly to local governments for a specific policy target, for example, to finish unfinished home construction projects. This should be more time efficient as commercial banks would not be able to lend to property developers due to the still restrictive policies set for property developers, and they would be reluctant to lend to construction companies. This kind of direct lending to local government avoids them having to increase bond issuance, and therefore reduces interest costs of local governments in general. We expect the central bank to increase liquidity injections through policy banks until all unfinished residential projects are completed. TagsPBoC Federal Reserve ECB Central banks Bank of England   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Friday’s Dollar drop - wind of change?

Friday’s Dollar drop - wind of change?

Alex Kuptsikevich Alex Kuptsikevich 07.11.2022 15:30
The dollar index lost over 1.9% on Friday, one of the ten most significant daily declines in the last 20 years. Given that the pressure on the dollar was throughout Friday and remained in place on Monday, dollar bulls are clearly capitulating, unable to push the US currency up. We last saw more significant intraday volatility in the dollar index in 2015 and all other times in 2008-2009. And the more remarkable thing is that there was no disruptive data or historical moves by governments or central bankers behind such dramatic fluctuations. The hard data showed us a comparatively strong employment report in the USA (an argument for a rate hike). An increase in the unemployment rate from 3.5% to 3.7% does not count, as traders are much more focused on the absolute change in the number of employed people and wages. Market participants paid more attention to the clarifying remarks of the FOMC members. On Friday and later in the weekend, Fed commentators indicated a willingness to lower the rate hike - repeating the message we heard on Wednesday evening in the official FOMC commentary and the press conference that followed. On Friday, however, the major central banks also had hardly any active play. The Chinese yuan rose against the dollar throughout Friday, rising more than 2.2%. The hand of the Swiss National Bank is also likely, with the USDCHF losing 2.4% from the beginning of the day on Friday until now, repeating the moves we saw precisely a fortnight ago from the same levels. A more interesting play can be seen in the USDJPY. After the decisive assault on October 21, the pair reversed to the downside from increasingly lower levels: 149.3-148.7-148.3. While this still doesn't look like a break of the uptrend (previous lows remain intact), it’s an impressive bid for a trend change. EURUSD, the key currency market pair, is storming back to parity and the area above the 50-day moving average. Despite the breakdown of the brisk October uptrend, the uptrend as a sequence of rising local lows and highs has been maintained. The Dollar index is down to 110.2, trading below its 50-day average. The dollar rally triggered by Fed policy has aged too much, and both Fed officials and market reaction on Friday indicate that the dollar is entering a new phase of the global cycle.
Brent hits one-month high! Saudi and Russian cuts supporting recent moves

According to Oanda's Ed Moya Fed needs two "healing" inflation prints to make markets feel better

Ed Moya Ed Moya 07.11.2022 23:02
It’s been a relatively lackluster start to the trading week, following the one previous that was anything but. There’s no doubt that the last seven days have left investors with plenty to work out and the jobs report on Friday yielded a response in the markets which probably sums up how confused investors appear right now. It was another hot report with little in it to suggest we’re seeing cracks appearing that will deliver the slack that the Fed thinks it needs. Trade around the report was volatile, clearly, with the final view seeming very positive. I’m not sure how sustainable that is under the circumstances, especially considering the response to the Fed two days earlier. But again, perhaps that’s a sign of where things stand. After the Fed, I thought the markets were too negative. The focus on where rates could rise to overshadowed the fact that the pace is likely to slow, buying time for the data to deliver what the Fed needs to warrant doing so more. But that jobs report on Friday does not fall into that category so I think confused probably sums up where markets stand now and how today has started. Read next: Facebook’s plan for large scale layoffs, the US dollar rally halted on Monday, Corporate America under investigation| FXMAG.COM Which brings us to the inflation report on Thursday and what that could do for sentiment as we move toward the end of the year. It is one of two inflation reports before the next meeting but you have to think we need two good readings for the Fed to scale back its expectations and give markets the festive cheer they so clearly want. Until then, more choppy and confused trade may be what we get. Bitcoin rally stalls Bitcoin did well following Friday’s jobs report but it has stalled since, even gone into reverse today after struggling around $21,500 over the weekend. If sentiment can hold up in broader financial markets, that should be a big positive for bitcoin which could be eyeing up a run toward the September highs, maybe even the August peak. As ever, there’s a lot of uncertainty around this, perhaps more so now. The inflation report on Thursday could lay the foundation for the next big move in financial markets, with a lower reading potentially boosting sentiment in the weeks that follow. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. A choppy start to the week - MarketPulseMarketPulse
The Melbourne Institute Inflation Gauge For Australia Rose More Than Expected

Australia’s Consumer Sentiment Dropped | USA: A Stronger Than Expected Democratic Showing

Saxo Bank Saxo Bank 08.11.2022 08:39
Summary:  Equities extended their rebound from post-Powell lows on Monday with China reopening reports not taking any clear direction. US treasury yields jumped higher, but more so on a heavy corporate calendar rather than macro-driven, and dollar continued to slip for a second consecutive day. Asian economic data sending some warnings signs with China export/import growth turning red and Australian confidence dropping to fresh lows. US midterms ahead, and a clean Republican sweep can be further dollar negative. Earnings focus on Walt Disney in the day ahead. What’s happening in markets? The Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) rose with tech and energy leading gains Ahead of the U.S. midterm election, equity market sentiments maintained a risk-on tone. Both S&P 500 and NASDAQ rose about 1%.  Community services, energy, and information technology led gains while utilities were the largest loser in S&P 500. On corporate news, Meta (META:xnas) gained 6.5% after the company announced plans to cut staff. Viatris (VTRS:xnas) surged 13% after the pharma company agreed to acquire Oyster Point (OYST:xnas). Lyft (LYFT:xnas) plunged 15% in extended-hour trading after reporting weaker-than expected ridership growth. Tesla (TSLA:xnas), losing 5%, dragged the benchmarks indices most. US  treasury (TLT:xnas, IEF:xnas, SHY:xnas) edged higher on incoming supply Yields across the treasury curve rose around 6bps ahead of refunding auctions of the 3-year notes, 10-year notes, and 30-year bonds for a total of USD96 billion from Tuesday to Thursday. A rise of 16bps across the pond in the 2-year UK Gilt yield also added to the pressure on treasuries. Investors will be watching closely the U.S. mid-term election on Tuesday and CPI on Wednesday. Hong Kong’s Hang Seng (HSIX2) China’s CSI300 (03188:xhkg) continued to rally on China reopening hopes Stocks in Hong Kong shrugged off the headlines about China’s National Administration of Disease Control and Prevention reiterating adherence to the dynamic zero-Covid policy over the weekend. Investors took note that the health officials added that local governments should not unreasonably double down on the implementation and must ensure people’s livelihood and economic activities remain normal.  In addition, the resumption of large-scale sports events, relaxation of PCR test requirements, increases in international flights, cancellation of circuit breaker for international flights, and approval of BioNTech vaccine for foreigners living in mainland China were among the factors cited by street analysts in their reports anticipating gradual reopening in the coming months. The Hang Seng Index rose for the second day in a row, finishing 2.7% higher. Financials outperformed, with HKEX (00388:xhkg) up 5.4%, HSBC (00005:xhkg) up 3.7%, and AIA (01299:xhkg) up 3.3%,  China property names surged on better-than-expected home sales data from some tier-1 cities. Country Garden (02007:xhkg), up 11%, was the top gainer in the Hang Seng Index. Despite Apple (AAPL:xnas) cutting iPhone production, Sunny Optical (02382:xhkg) jumped 11%. MMG (01208:xhkg) surged 16%, following the removal of blockage by locals to the company’s copper mine in Peru. Zinjin Mining (02899:xhkg), up 10.3%, announced to buy a 20% stake in Zhaojin Mining (01818:xhkg), up 9.7%.  China’s October trade data came in weaker than expected but it did not have much impact on the market on Monday. FX: Dollar’s decline extends despite rise in 10-year yields The US 10-year yields rose to last week’s post-Powell highs at 4.20%+, but the dollar tumbled for a second day in a row to drop to over one-week lows. Dollar decline was broad-based, against all G10 currencies barring the loonie. Gains were led by sterling, with GBPUSD above 1.1500 and EURGBP also sliding lower to 0.8700. EUR benefitted from the weaker dollar which helped EURUSD rise above parity from lows of 0.9900 even as President Lagarde reiterated her usual tone noting inflation must be brought back down to 2%. Midterms bring further volatility risks to FX, with a clean Republican sweep likely being dollar negative as yields will likely plunge amid speculation of a hamstrung administration limiting scope for fiscal support.    Crude oil (CLX2 & LCOZ2) lower despite dollar weakness Oil prices ended lower as hopes of China easing its zero covid policy faded, even as near-term supply constraints continued to limit the slide. OPEC has begun reducing output in line with the agreement to reduce quotas by 2mb/d at its last meeting. The market is also facing the deadline for European imports of Russian oil before sanctions kick in on 5 December. This has left fuel inventories tight, with Brent crude oil futures still below $100 per barrel and WTI futures staying above $91. Meanwhile, US natural gas futures soared on cold weather fears in the West and the Northeast. December natural gas futures contracts climbed as much as 12.8% to $7.22 per MMBtu before trimming the advance later. Copper (HGZ2) trimmed last week’s gains Copper reversed back to $3.60 after racing to $3.70+ levels on Friday on China reopening optimism. However, reports that China would stick with its adherence to strict virus controls, made the metal reverse some gains. Weak economic data also weighed on sentiment with China’s imports of Copper ore down and overall imports also unexpectedly falling for the first time in more than two years. Gold (XAUUSD) held steady despite the lower USD, and it may still be quite early to call a reversal in the short-term downtrend.   What to consider US mid-term elections to spook market volatility Pundits suggest that the Republicans have very strong odds of flipping the House of Representatives in their favour, while the odds look finely balanced for whether the Senate ends retaining the slimmest of Democratic majorities. Republicans taking both houses has few immediate ramifications, as US President Biden has the presidential veto, but a stronger than expected Democratic showing that somehow sees them retaining the House and strengthening their Senate majority would be a game changer – opening for more policy dynamism from the US over the next two years rather than the expected lame-duck presidency. Uncertainty is high as pollsters have had a hard time gathering accurate indications for the election results since Trump’s victory in 2016. China’s October trade data disappointed China’s exports in USD terms declined 0.3% Y/Y in October, much worse than the growth of 4.5% expected in the Bloomberg survey and the 5.7% in September. It was the first decline in export growth since May 2020 and might point to a turning point of deceleration in exports as the global economy slowed. If adjusting for inflation in export prices, the decline of China’s exports would be even larger in the real term. Imports in USD terms declined 0.7% Y/Y (vs consensus 0.0%, Sept: +0.3%). Bank of Japan affirms easy policy, but not without some mention of a future exit The Bank of Japan released summary of opinions of the October policy meeting today, broadly reaffirming the easy monetary policy stance. Still some members stuck a slightly different tone, noting that Japan's inflation likely to remain fairly high as there are signs service prices starting to rise, and “cannot rule out chance prices will sharply overshoot forecasts.” Still, sustained wage gains remained the base case for Japan to achieve its price target and members agreed that there was no immediate need to tweak monetary policy. Importantly, one member noted that the Bank of Japan must continue examining how a future exit from ultra-low interest rates could affect financial markets, in a rare mention of an exit. Big slump in Australian business and consumer confidence Australia’s consumer sentiment tumbled to its lowest level in 2.5 years and business confidence also weakened as higher interest rates and surging inflation stoke caution over the economic outlook. NAB business confidence plunged to 0 from 5 in September, while the Westpac consumer confidence index was down to 78 for November from 83.7 previously. This bodes ill for spending ahead, suggesting RBA’s caution on rate hikes may continue to prevail despite the continued hot CPI reports. Walt Disney earnings ahead Walt Disney is scheduled to report on Tuesday with analysts expecting Q4 (ending 30 September) revenue growth of 15% y/y but EBITDA at $3bn down from $3.86bn in Q3 highlighting the ongoing margin pressure. Layoffs are coming to Meta and Apple cuts iPhone production The demand for iPhones is coming down and Apple is now announcing a cut of 3mn units as consumers are under pressure from inflation and might be extending the life of their old phones. Apple has recently hiked prices on some of its services aiming to offset the weakness in its hardware business. Meanwhile, investors have been frustrated with Meta following the Q3 earnings release as Mark Zuckerberg has reinforced the image that he does not listen to the concerns of investors that Meta is spending too much capital on its metaverse bets. According to Wall Street Journal, Meta might have listened after all as the technology company is expected to begin laying off thousands of employees. Read our equity strategist Peter Garnry’s note here.   For our look ahead at markets this week - Listen/watch our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: https://www.home.saxo/content/articles/equities/market-insights-today-8-nov-08112022
Rates and Cycles: Central Banks' Strategies in Focus Amid Steepening Impulses

The Average Hourly Earnings Adding To Inflationary Pressures

TeleTrade Comments TeleTrade Comments 08.11.2022 09:12
The US 10-year Treasury bond yield extends its gains ahead of the US Consumer Price Index (CPI) for October. The US 10s-2s yield curve inverted the most since the Paul Volcker era, and the spread widened the most, more than 60 bps. Money market futures have priced in a 50 bps rate hike, as shown by the CME FedWatch Tool. As the Asian Pacific session gets to an end, the US Treasury bond yields continued to advance, courtesy of the last week’s rate hike by the US Federal Reserve, lifting 75 bps to the Federal Funds rate (FFR) to 4%, while Fed officials laid the ground for additional increases though seen as a dovish rate hike. However, Federal Reserve Chair Jerome Powell commented that even though the pace of increases would be “less aggressive,” the peak would be higher. Therefore, the US 10-year benchmark note rate sits at a 4.229% gain of one bps. The US 10-year Treasury bond yield retreated on US jobs data US and European equity futures edge higher. Last week’s US employment data, which reflected that ha labor market is still tight, showed signs that it could be easing as the Unemployment Rate increased from 3.5% to 3.7%. Nevertheless, the Average Hourly Earnings, although lower than the previous month’s reading, they’re adding to inflationary pressures. The United States bond market reacted negatively to date, with the 10-year benchmark rate sliding from 4.209% to 4.163%.  Fed officials reiterated Jerome Powell’s message for higher rates, while the US 10s-2s yield curve further inverted Regarding inflationary pressures, the Boston and Richmond Fed Presidents Susan Collins and Thomas Barkin said that the United States economy needs more interest rate increases, but not at an aggressive pace. Collins said that the Federal Reserve might slow down the pace to balance growth and inflation risks as the Fed struggles to achieve a “soft landing.” Echoing her comments was Thomas Barkin, who added that the peak of rates would surpass the September projections. That said, the US 2-year Treasury bond yield, the most sensitive to the Federal Funds rate (FFR) adjustments, tumbled to 4.663%, following the jobs report after hitting a YTD high at 5.134%. It should be noted that the 2-year yield exceeded the 10-year benchmark note rate by 60 bps during the last week, as the 10s-2s yield curve inverted the deepest since the 1980s, which is usually seen as a leading indicator that precedes recessions by 12 to 18 months. Meanwhile, some sources cited by Bloomberg said that “Now it’s about the ultimate destination” of the policy rate, according to analysts at Bank of America Corp., whose forecast for the terminal level ranges from 5%-5.25%. Traders focus on October’s CPI, and expectations for a Federal Reserve 50 bps increase are at 52% In the meantime, investors are bracing for the October Consumer Price Index (CPI) report. Asides from this, money market futures expect that the US Federal Reserve would hike 50 bps, as shown by the CME FedWatch Tool, with odds of lifting 50 bps at 52%, while for 75 bps, chances lie at 48%.    
The US PCE Data Is Expected To Confirm Another Modest Slowdown

All Eyes On The US Midterm Elections | Republicans Are Favoured To Take The House

Swissquote Bank Swissquote Bank 08.11.2022 10:08
Investors are tense and undecided into the US midterm elections today.Joe Biden had a rough time since he is in office: he Covid pandemic, the war in Ukraine, the global energy crisis, the skyrocketing inflation, a pitilessly tighter Federal Reserve (Fed) policy, rising mortgage rates… all these factors will weight on the wrong side of the balance for Democrats at today’s election. The consensus expectation is a divided government between White House and Congress. Republicans are favoured to take the House and have at least 50/50 seats at Senate. What does that mean for the US monetary and fiscal policies, the financial markets, and the dollar? Watch the full episode to find out more! 0:00 Intro 0:20 US midterm elections: what to expect? 2:03 Impact on the Fed policy & USD 5:41 Impact on the fiscal policy & USD 7:34 Impact on stocks Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #US #midterm #election #2022 #USD #JPY #EUR #Gbp #CHF #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH
Tesla Does Not Say Much Directly About The Demand Situation, Ally Financial Sees A Slowdown In Car Loans

Investors Are Worried That Elon Musk Is Losing His Focus | The Eurozone Recession Can Dampen Investors’ Hopes

Saxo Bank Saxo Bank 08.11.2022 09:40
Summary:  Markets are trying to build some positive energy as the volatility in the US treasury market has eased in recent days, although Fed tightening expectations remain near the peak for the cycle ahead of another important CPI release on Thursday, certainly the macro event of the week. Today is mid-term election day in the US, where the Republicans are expected to take back at least the House of Representatives.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities gained 0.8% pushing above the 3,800 level and the 50-day moving average. The resistance level is up at around the 3,900 level with the 3,724 level being the short-term support level to watch. For US equities the biggest event to watch is today’s Midterm elections in the US which could change the political landscape in favour of the Republicans flipping the House. But for years polls have been terrible in predicting anything on US politics, so we remain neutral on the outcome. The US 10-year yield is advancing to 4.22% adding headwinds on equity valuations. Hong Kong’s Hang Seng (HSIX2) and China’s CSI300 (03188:xhkg) The China reopening trade took a pause in Hong Kong and the mainland bourses as domestically transmitted new cases in the mainland doubled to 7,455. Guangzhou, the capital city of the Southern Guangdong province reported 2,377 new cases and launched mandatory testing in 9 of the 11 districts of the city and extended the lockdown of Haizhu district to Friday. Hang Sang Index fell 0.7% and CSI300 dropped 1.3%. FX: USD near important support ahead of Thursday’s US CPI The US dollar traded in a narrow range yesterday, with EURUSD near parity this morning after trading solidly above yesterday, but not yet threatening the 1.1094 pivot high from late October. Elsewhere, GBPUSD has traded briefly above 1.1500 but is still bottled up below the key range high above 1.1600, while AUDUSD is closer to the cusp of a break-out as it has traded as high as 0.6491, just shy of the 1-month pivot high of 0.6522 and the AUD likely keying off developments in China (hopes for an easing of Covid restrictions, commodities following through higher after last week’s rally, etc.) It feels like the next move for the greenback will key off the Thursday October CPI release, as CPI releases have sparked considerable volatility in recent months. Crude oil (CLZ2 & LCOF3) Crude oil remains in consolidatory mode after failing to find additional buying interest during Monday’s temporary break above the October high in Brent at $98.75 and $93.65 in WTI. The themes driving markets remain the same with supply worries driven by OPEC+ production cuts and EU sanctions against Russian oil from December 5 being offset by concerns about the health of the global economy and China’s prolonged battle with Covid with daily infections hitting a six-month high. Despite this latest acceleration in cases, the market has started to price in a lifting of restrictions sometimes early next year, an event Goldmans estimate could add between $6 and $15 upside risks to prices.  Today, the US Midterm elections is likely to steal some of the attention ahead of API’s weekly stock report tonight. Meanwhile, US natural gas (NGZ2) futures soared beyond $7/MMBtu on cold weather fears in the West and the Northeast before trimming the advance overnight. US treasuries (TLT, IEF) The MOVE index, a measure of the implied volatility of the US treasury market, has dipped sharply in recent days, posting its lowest levels since early September, perhaps as the market feels there are few surprises left in store from the Fed now that Fed funds expectations have reached above 5.00% and US yields at the longer end have remained bottled up in the 3.90%-4.30% range. The October US CPI release on Thursday is the next test for the US treasury market. What is going on? Bank of Japan affirms easy policy, but not without some mention of a future exit The Bank of Japan released summary of opinions of the October policy meeting today, broadly reaffirming the easy monetary policy stance. Still some members stuck a slightly different tone, noting that Japan's inflation likely to remain fairly high as there are signs service prices starting to rise, and “cannot rule out chance prices will sharply overshoot forecasts.” Still, sustained wage gains remained the base case for Japan to achieve its price target and members agreed that there was no immediate need to tweak monetary policy. Importantly, one member noted that the Bank of Japan must continue examining how a future exit from ultra-low interest rates could affect financial markets, in a rare mention of an exit. Tesla shares hit the lowest level since June 2021 Tesla shares were 5% lower yesterday as investors are getting more nervous about CEO Elon Musk intense focus on Twitter after he acquired the social media platform. Many advertisers have pulled back on advertising on Twitter leaving the company losing around $4-5mn a day with sizeable debt due. Investors are worried that Elon Musk is losing his focus but also that he will be forced to sell Tesla shares to fund Twitter operations. Nintendo still sees strong demand for Switch The gaming company lifts its FY net income projection to JPY 400bn from previously JPY 340bn on strong demand with the company seeing little impact on its sales from global inflation. Big slump in Australian business and consumer confidence Australia’s consumer sentiment tumbled to its lowest level in 2.5 years and business confidence also weakened as higher interest rates and surging inflation stoke caution over the economic outlook. NAB business confidence plunged to 0 from 5 in September, while the Westpac consumer confidence index was down to 78 for November from 83.7 previously. This bodes ill for spending ahead, suggesting RBA’s caution on rate hikes may continue to prevail despite the continued hot CPI reports. The Eurozone Sentix Index improved substantially, albeit from a awful level The Eurozone Sentix Investor confidence index was out at minus 30.9 in November versus 38.3 in October. This is a strong improvement. But the index was actually at its lowest level last month since March 2020. The other components increased too. The current situation improved to minus 29.5 while the expectations index jumped to minus 35.5. The uptick is clearly not a reversal trend. This is more of a rebalancing. Investors were too pessimistic in recent months regarding the evolution of the European energy crisis. The risk of energy rationing was overestimated, for instance. High gas storage and better weather will help avoid this nightmare scenario. This does not mean that the improvement in the Sentix index will continue, however. The eurozone recession will likely dampen investors’ hopes.  U.S. used car prices continue to move lower According to the Manheim index, used car prices continue to crash, with a year-over-year change at minus 10.4 % in October. This is the worst drop since December 2008. This matters because until the summer used car prices were one of the main contributors to U.S. inflation. Cryptocurrencies The crypto market is in negative territory today after growing concerns about the liquidity of the crypto exchange FTX - specifically tied to its hybrid investment fund/market maker Alameda Research. The selloff in cryptos was partly triggered by the nosedive of the FTX token, which together with the Solana token makes up a notable portion of Alameda's balance sheet. What are we watching next? US mid-term elections today Pundits suggest that the Republicans have very strong odds of flipping the House of Representatives in their favour, while the odds look finely balanced for whether the Senate ends retaining the slim Democratic majority or moves to Republican control, which would only require one more Republican seat. There are few immediate ramifications if Republicans take both houses, as US President Biden has the presidential veto, but a stronger than expected Democratic showing that somehow sees them retaining the House and strengthening their Senate majority would be a game changer – opening for more policy dynamism (and inflation from fiscal stimulus) from the US over the next two years rather than the expected lame-duck presidency. The latter is a very unlikely scenario, but uncertainty is high as pollsters have had a hard time gathering accurate polls, especially for specific states, for every election since Trump’s victory in 2016. Earnings to watch Today’s US earnings focus is Walt Disney which is expected to deliver revenue growth of 15% y/y but also significant margin pressure with gross margin expected at 32.5% the lowest Q1 2021. EPS is expected at $0.51 down from $0.91 in Q2. Monday: Westpac Banking, Coloplast, Ryanair (see earnings review above), Activision Blizzard, BioNTech, Palantir Technologies, SolarEdge Technologies Tuesday: Bayer, Deutsche Post, KE Holdings, Nintendo, Walt Disney, Occidental Petroleum, Lucid Group, DuPont Wednesday: National Australia Bank, KBC Group, Genmab, Siemens Healthineers, E.ON, Adidas, Honda Motor, Coupang, Rivian Automotive, Roblox, DR Horton, Trade Desk Thursday: Brookfield Asset Management, Fortum, Engie, Credit Agricole, Allianz, Merck, Hapag-Lloyd, RWE, SMIC, Nexi, AstraZeneca, ArcelorMittal, Siemens Gamesa Renewable Energy, Becton Dickinson, NIO Friday: Richemont Economic calendar highlights for today (times GMT) 0900 – UK Bank of England’s Chief Economist Huw Pill to speak 1100 – US Oct. NFIB Small Business Optimism 1600 – UK BoE’s Pill to speak 1700 – EIA's Monthly Short-term Energy Outlook (STEO) 2030 – API Weekly Report on US Oil Inventories 0130 – China Oct. PPI/CPI Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher     Source: https://www.home.saxo/content/articles/macro/market-quick-take-nov-8-2022-08112022
Oanda Podcast: US Jobs Report, SVB Financial Fallout And More

Ahead Of The Midterm Elections In The USA | The EUR/USD Pair Is In Downtrend

InstaForex Analysis InstaForex Analysis 08.11.2022 11:58
Markets are anticipating the preliminary results of the midterm elections in the US, which are expected to have a significant impact on government financial policy, on inflation and, of course, the actions of the Fed. Many believe that a change will be seen if Republicans take control of both houses of Congress. This means that many decisions may be changed, especially in taxes, spending and support for the Ukrainian regime, which largely caused the high inflation in the country as demand increased amid significantly low supply, primarily in goods for everyday life. Such a scenario may cause a cautious rally in the stock markets and the weakening of the dollar. And if the data on consumer inflation, which will be presented on Thursday, show at least a slight downward correction, positive sentiment will grow, So far, about half of the Fed members are in favor of raising the rate not by 0.75%, but by 0.50% at the December meeting. This in itself may serve as a signal that the bank may start easing the rate hike, moreso if US inflation does not show a sharp increase. Forecasts for today: EUR/USD The pair is demonstrating a local downward reversal on the wave of a possible downward rollback on the stock markets today ahead of the results of the US Congress elections. But it found support at 0.9990, so a rise above this level may lead to a growth, albeit short-lived. Meanwhile, the pair's decline below 0.9990 may lead a local fall to 0.9895. GBP/USD The pair broke through 1.1465 amid lower risk appetite ahead of the midterm elections in the US. A further decline below this level will lead to a fall to 1.1350.     Relevance up to 09:00 2022-11-10 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/326503
From UFOs to Financial Fires: A Week of Bizarre Events Shakes the World

The Fed Has Made Clear It Intends To Slow The Pace Of Tightening

Craig Erlam Craig Erlam 08.11.2022 12:45
A cautious start to trading on Tuesday, with investors seemingly having one eye on midterm results in the US and another on Thursday’s inflation data. It’s hard to see past both of these things this week. The question for many is whether investors will respond positively to the deadlock in Washington. On the one hand, the prospect of less spending could be viewed as aiding the inflation fight but on the other, the economy could be headed for recession, and inaction in government won’t help the situation. The Republicans are strongly favoured to take back control of the House and with the Senate currently split, they are likely to edge that as well, meaning Biden’s economic agenda will come to a standstill ahead of the 2024 election. Arguably the most important takeaway from the midterms will be how Trump-supporting Republicans fare, particularly those so fiercely sticking to the “stolen election” line, among others. With Trump himself due to make a “big announcement” soon, it would appear he’s about to throw his hat into the ring and declare any victories a show of support for his own nomination. With the US likely heading for recession, whoever wins the Republican race stands a good chance of winning the race in 2024. It may now become a question of how much of a grip Trump still has on the Republican party and whether the manner of his exit will prove to be a barrier or a supportive factor within the base. Of course, the more pressing issue in the near term is inflation and so, regardless of the midterm results, we may still see some trepidation in the markets ahead of Thursday’s release. The Fed has made clear it intends to slow the pace of tightening in December and this data could either throw that into question or start to build the case for a lower terminal rate than the central bank hinted at last week. Bitcoin plunges below $20,000 It’s been a rough couple of days for bitcoin which finds itself back below $20,000 and down more than 4% on the day. It has recovered a little after previously being off more than 6% but this is a far more severe decline than we’re seeing in other risk assets which may be a worrying sign for crypto bulls. The declines may be linked to the plunge in FTT which nosedived amid reported concerns over Alameda’s balance sheet. We’ve seen this kind of situation have ripple effects on prices before and this may explain the sharper declines we’re seeing this week. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Nasdaq 100 Faces Bearish Breakdown Below Ascending Wedge and RSI Momentum Indicator

The Democrats Will Lose Control Either Of Both Chambers

InstaForex Analysis InstaForex Analysis 08.11.2022 13:37
Buyers of the EUR/USD pair demonstrated an impressive rally: within two trading days, the price rose by almost 300 points after a prolonged downward decline into the 97th figure area. Such a serious upward breakthrough was due to several reasons, which, so to speak, resonated. The starting point was nonfarm data: unemployment unexpectedly rose to 3.7%, and the growth rate of average wages slowed to 4.7%. However, the report on the labor market in the United States was only the first link in the chain of events. Traders extrapolated this release to the words of Jerome Powell, who, following the results of the Fed's November meeting, warned of a possible slowdown in the pace of interest rate hikes in the coming months. Contradictory nonfarm payrolls suggested that this would happen at the next meeting, that is, in December. According to the CME FedWatch Tool, the probability of implementing a 50-point scenario at the December meeting increased to 52%. Accordingly, the probability of an increase in the rate by 75 points is estimated at 48%. This is the main reason for the weakening of the US currency. But not the only one. The fact is that, at the start of a new trading week, the market has increased interest in risk. Traders reacted positively to the geopolitical news, which is of a de-escalation nature. In particular, a representative of the Russian Foreign Ministry said today that the governments of Russia and the United States continue to maintain point-to-point contacts "in the areas necessary for each other." A similar statement was made by the US President's national security adviser. In addition, yesterday, it became known that Russia and the United States may soon hold a meeting of the bilateral advisory commission on the Strategic Arms Reduction Treaty (START III). Although this information is unofficial, it also had a certain impact on the mood of traders. Interest in risk also increased against the backdrop of German macroeconomic reports. Germany has published data on industrial production for September. The release came out in the "green zone": on a monthly basis, the indicator rose by 0.6% (with a forecast of growth to 0.2% and a decline of 0.6% in the previous month), and in annual terms jumped immediately by 2.6% (with a growth forecast of only 0.5%). The above fundamental factors allowed EUR/USD buyers to strengthen the upward momentum: the pair ended yesterday's trading day at 1.0020. However, traders failed to stay above the parity level again. Today, the upward momentum has actually faded. First, it must be emphasized that any upward spikes in the pair are in the nature of corrective pullbacks, which are a priori temporary. It will be possible to talk about the first signs of a trend reversal only when the price consolidates above the 1.0060 resistance level (the upper line of the Bollinger Bands indicator on the daily chart). Secondly, many traders, in my opinion, exaggerate the significance of the fact that the Fed will soon weaken the pace of quantitative tightening. And in general, it does not matter when exactly this will happen—in December or February. After all, the main trump card of the US currency is that the regulator has expressed willingness to expand horizons by exceeding the 5 percent rate level. By the way, Goldman Sachs experts this week updated their three-month forecast for the EUR/USD pair: in their opinion, the price will decline not to the area of the 97th figure but to the area of the 0.9400 mark. Justifying their opinion, currency strategists refer to the results of the Fed's November meeting. In their opinion, the Central Bank has actually recognized that measures to tighten monetary policy are a "moving target" that is moving higher and higher. Thirdly, the issue of slowing down the pace of monetary policy tightening is debatable: Fed members at the December meeting will discuss the feasibility of this step. And here, a lot will depend on the dynamics of inflation growth in the United States. Note that the day after tomorrow, November 10, we will find out the value of the consumer price index (for October). If the data turns out to be in the "green zone," then the hawkish position of the Fed will manifest itself more clearly, while the speed of the rate increase will become a secondary factor. That is why, in my opinion, it will be difficult for buyers of EUR/USD to gain a foothold above the parity level, not to mention overcoming the price barrier of 1.0060 (if the inflation report comes out at least at the level of forecasts). At the same time, it is quite risky to open trading positions on the EUR/USD pair in the coming days, given the high degree of uncertainty. This uncertainty is due to the midterm elections to the US Congress. According to experts, the Democrats will lose control either of both chambers, or only of the House of Representatives (retaining control of the Senate). It is noteworthy that there is no consensus in the market on how the dollar will react to this fact. For the most part, analysts are talking about a negative reaction, although some experts admit the possibility that the greenback will be in high demand as a protective asset. In any case, there is a high probability of increased turbulence, and in such conditions, it is best to take a wait-and-see attitude.     Relevance up to 10:00 2022-11-09 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/326513
The French Housing Market Is More Resilient | The Chance Of Republicans Winning The Senate Is Up

The French Housing Market Is More Resilient | The Chance Of Republicans Winning The Senate Is Up

Saxo Bank Saxo Bank 09.11.2022 08:31
Summary:  Risk sentiment remained upbeat despite the fallout in the crypto world as equities focused on the results of the midterm elections. Bitcoin made fresh YTD lows in the wake of Binance's acquisition of FTX. But US yields and the dollar tumbled, helping Gold and Silver to run higher breaking some key resistances. Another surge in China’s Covid cases still kept a check on gains in oil prices, and focus today will be on inflation data from China. Disney’s disappointing results further add to this quarter’s earnings misery, and Rivian and Roblox report today. What’s happening in markets? The Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) closed higher in a choppy session A political gridlock with a divided Congress after mid-term elections was historically positive for the equity market. S&P 500 gained nearly 1.4% and Nasdaq 100 rose as much as 2% at one point before paring all the gains and more in the early afternoon, dragged by a selloff in the crypto space. Stocks managed to bounce in the late afternoon and recover some of the early gains, with S&P 500 and Nasdaq 100 finishing a volatile session 0.6% and 0.8% higher respectively. Lyft (LYFT:xnas) tumbled 23% after weak rider growth was reported the day before. Walt Disney (DIS:xnys) plunged 6.4% in extended-hours trading on earnings miss which was dragged by weak streaming results. US  treasury (TLT:xnas, IEF:xnas, SHY:xnas) yields fell on hopes for political gridlock and strong demand in the 3-year auction US treasury yields fell 4bps to 9bps across the curve with the best performance in the 5-year to 10-year segment, with the 10-year yield down 9bps to to 4.12%. Anticipations of political gridlock in Washington that historically restrained fiscal policies saw buying in treasuries. Demand in the 3-year auction was solid with awarded yields stopped at more than 1bp richer from the time right before the auction. Hong Kong’s Hang Seng (HSIX2) China’s CSI300 (03188:xhkg) took a pause as Covid cases surged The China reopening trade took a pause in Hong Kong and the mainland bourses as domestically transmitted new cases in the mainland doubled to 7,455. Guangzhou, the capital city of the Southern Guangdong province reported 2,377 new cases and launched mandatory testing in 9 of the 11 districts of the city, and extended the lockdown of Haizhu district to Friday. Hang Sang Index fell 0.2% and CSI300 lost 0.7%. China’s passenger vehicle sales growth slowed in October to +7.3% Y/Y but new energy vehicles sales, rising 75% Y/Y, remained solid. However, EV stocks declined, with NIO (09866:xhkg) falling the most, down 9% following analysts cutting price targets on the stock. Among China internet names, Alibaba (09988:xhkg) underperformed, losing 3.7%. Macau casino stocks were the top performers, rising 2% to 4%, following Macau’s decision to relax entrance rules for some visa holders starting Sunday. FX: Weaker dollar and lower yields amid an expected Republican sweep Expectations of a split Congress saw lower US yields and further USD selling on Tuesday, and eyes are now on US CPI due later this week. Meanwhile, the crypto fallout in the wake of FTX being acquired by Binance sparked a wave of volatility. Yen gained with USDJPY falling below 146. EUR gained a firmer footing above parity amid the latest ECB rhetoric including from de Guindos who noted they will continue raising rates to levels that ensure price stability, while ECB's Nagel said he will do his utmost to make sure the ECB does not let up in the inflation fight and said that large rate hikes are necessary. GBPUSD also reclaimed 1.15 handle. Crude oil (CLZ2 & LCOF3) slid with API inventory build WTI futures slid below the key $90 mark on Tuesday and Brent slid to $95 despite a weaker dollar as a fresh surge in China’s Covid cases further sparked concerns on whether China will part ways with its Zero Covid policy. Xinjian reported its fourth highest number of new cases nationally on Monday. Inner Mongolia, which was sealed off in early October, saw cases jump to almost 1800. New infections in the province of Henan almost doubled. Meanwhile, supply concerns eased with API inventory build coming in larger than expected with crude oil inventory up 5.6mm barrels last week and gasoline inventory also coming in higher. Still, US EIA also cut its 2023 oil production estimate to 12.31mm barrels/day, suggesting structural supply concerns are here to stay. Copper (HGZ2), Gold (XAUUSD) and Silver (XAGUSD) The weakness in the dollar drove metals higher. Copper led the base metals sector higher on dwindling inventories amid positive signs for demand, challenging the September high of $3.6925 once again, ahead of $3.78. Bold move higher in gold and silver as well last night with renewed USD weakness, with the most notable being gold up at one-month highs breaking through $1680/85. A break above $1735 would likely confirm a low in the market. Silver finding some technical resistance here at $21.50 but the break above $21.15 has opened up for a move to $22.25.   What to consider Republicans likely in a strong position in the US mid-term elections Looking at the latest odds on Predictit, the chance of Republicans taking the House is up to 95% from 90% earlier. The chance of them winning the Senate is up to 83% from 74% earlier. All the closest races have tilted towards the Republicans as well. It can take several days to confirm which party will prevail, especially in the Senate. More so if we go to recounts, where the votes cast in a close race are retabulated to verify the initial results. A split Congress, as we wrote yesterday, lowers the expectation of fiscal support measures thereby leading to investors expecting a sooner Fed pivot again. This can spark a further tactically rally in equities and will likely be USD negative. Risk of a contagion in the crypto market After a weeklong dispute between crypto exchanges Binance and FTX, the former is set to acquire FTX, stating a significant liquidity crunch for FTX. This may fuel further contagion throughout the crypto market, as not only FTX but also Alameda Research - the highly linked trading firm to FTX - may be insolvent. Our crypto analyst expects increased volatility in the next couple of days and weeks. Further, this may lead to contagion across the crypto market as experienced in May and June this year, so in our view, traders and investors in the crypto market should act cautiously in the foreseeable future. Likewise, Bitcoin's correlation with NASDAQ has been record-high throughout this year - and relatively high today. Please be aware that the development of crypto may impact particularly NASDAQ. Read more here. China’s PPI and CPI are expected to slow in October China’s PPI is expected to fall -1.5% Y/Y in October vs +0.9% Y/Y in September, due to the high base last year resulting from increases in material and energy prices. Unlike other major economies, CPI in China is expected to slow to +2.4% Y/Y in October from +2.8% in September. Walt Disney reported disappointing FYQ4 results Walt Disney reported FYQ4 revenue at USD20.2 billion, about USD1 billion below street consensus estimates. Adjusted EPS declined to 30 cents, missing substantially the Bloomberg consensus of 51 cents. Subscriptions rose to 164.2 million in FYQ4, up 12 million from 152 million in FYQ3, beating expectations. The operating loss in the direct-to-consumer segment, driven by the Disney+ streaming service, however, jumped to USD1.47 billion in FYQ4 from USD1.05 billion in FYQ3. The management told analysts that they expect the direct-to-consumer segment losses “to narrow going forward and that Disney+ will still achieve profitability in fiscal 2024, assuming [they] do not see a meaningful shift in the economic climate.” France’s housing market is cooling down The combination between high inflation across the board (CPI hovering close to 6% on a year-on-year basis), lower purchasing power and higher interest rates is pushing housing prices down in France. According to the real estate promoter Century21 (one of the leading player in this market), real estate prices went down under the threshold of 10.000 Є per square meter in Paris. The deceleration in prices is however limited so far. Contrary to Tel Aviv, Amsterdam and Hong Kong, the parisian housing market is not in a situation of a speculative bubble. Prices are overvalued however. Expect prices to go down a bit more due to a drop in solvent demand. But we won't see a large decrease in prices as it is currently happening in several major cities in the United States, for instance. The French housing market is more resilient for mostly two main reasons: fixed interest rates and a comparatively low household debt (it represents about 124% of net disposable household income versus a peak at 249% in Denmark). For our look ahead at markets this week - Listen/watch our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: https://www.home.saxo/content/articles/equities/market-insights-today-9-nov-09112022
Technical Analysis: Gold/Silver Ratio Still On The Rise

Gold, Silver And Copper All Resumed Their Upside Push | The US Dollar (USD) Fell Sharply

Saxo Bank Saxo Bank 09.11.2022 09:51
Summary:  Market sentiment improved further yesterday before dipping slightly overnight, as China Covid cases are on the rise, pushing back against hopes for a lifting of Covid restrictions. In the US mid-term elections, Democrats are slightly outperforming expectations, possibly set to retain control of the Senate even if Republicans look likely set to take narrow control of the House of Representatives.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities exhausted themselves yesterday pulling back from intraday highs to close around the 3,835 level. Sentiment has weakened overnight amid the ongoing impact from the US midterm elections, bad Disney and the fallout from the implosion of FTX in the crypto industry with S&P 500 futures trading down to the 3,829 level. Tesla shares continued lower yesterday, and Elon Musk announced overnight in a filing that he had sold 19.5mn shares in Tesla, and the negative momentum could broaden as many retail investors have sizeable exposure to the stock. The next big event for the US equity market is tomorrow’s October inflation figures which are expected to show core inflation is easing a bit. Hong Kong’s Hang Seng (HSIX2) and China’s CSI300 (03188:xhkg) The China reopening continued to fade as new Covid cases surged further to 8,176 yesterday. Hang Seng Index retreated 1.6% and CSI 300 slid 0.8%. China’s PPI declined 1.3% Y/Y in October due to falls in energy and materials prices and weaknesses in metal processing. CPI inflation was also weaker than expected and fell to +2.1% in October from 2.8% in September on weak consumer demand and property prices. Share prices of Chinese developers however surged, following the Chinese authorities pledged to provide credit support, including credit insurance and bond buying, to private enterprise developers. FX: USD remains on back foot after testing important support. Thursday CPI key focus The US dollar fell sharply yesterday, with EURUSD testing the pivot high of 1.0094 before pulling back slightly into this morning and USDJPY had a look toward the pivotal 145.00 level without breaking through. Elsewhere, AUDUSD tested above the 0.6522 pivot late yesterday before pulling back again, likely on concerns that rising China Covid cases are frustrating hopes that a shift away from lockdowns will provide a further boost to the commodity market. Lower US treasury yields yesterday helped drive the US dollar lower and are a key focus over the Thursday October US CPI release, as CPI releases have sparked considerable volatility in recent months. Crude oil (CLZ2 & LCOF3) slid on API inventory build and China’s Covid Challenges WTI futures trade back below $90 and Brent near $95 after a fresh surge in China’s Covid cases sparked concerns over whether China will part ways with its Zero Covid policy. Also weighing on prices was the API reporting a 5.6m build in crude and 2.6m build in gasoline stocks. On the supply the EIA made another downgrade to its forecast for US 2023 production, down 0.7m b/d since March to 12.3m b/d driven by labor shortages, high equipment costs, supply-chain constraints and not least commitment to profits over production. Precious and industrial metals pause following another upside push After pausing on Monday, gold, silver and copper all resumed their upside push yesterday with the moves being triggered by renewed dollar weakness and softer bond yields ahead of tomorrow’s US October CPI release. A selloff in cryptocurrencies potentially helped get the ball rolling, especially gold which found fresh momentum buying on the break above $1680/85 area. Technical resistance levels in silver at $21.50 and copper at $3.69 together with the EURUSD hitting resistance at the pivot high of 1.0094 paused the rally. Gold, up 83 dollars in three sessions, will be watching $1735 closely as a break above could be signalling an end to the month-long correction. Crypto market getting nervous After a weeklong dispute between crypto exchanges Binance and FTX, a letter of intent was signed yesterday for Binance to acquire FTX, stating a significant liquidity crunch for FTX. The announcement was initially a brief relief for the crypto market, but it was followed by a steep crypto sell-off, likely dragging major equity indices such as S&P 500 down as well. Nervousness is spreading throughout the crypto markets in fear of further contagion as we saw earlier this year, and a higher degree of volatility should be expected in the crypto markets. Read more here. US treasuries (TLT, IEF) US Treasury yields fell yesterday all along the curve ahead of the macro data point of the week – tomorrow's US October CPI release. Focus on the 3.90% yield on the 10-year treasury yield to the downside and 4.3% area cycle high to the upside in the wake of that release. What is going on? Disney sees margin compression in Q4 Disney+ delivered Q4 subscribers of 164.2mn vs est. 162.5mn but EPS came in at $0.30 vs est. $0.51 as energy costs and wage pressures are pressuring the operating margin. Disney+ is still on track to be profitable in the FY24 (two years from now). Disney’s Q4 revenue was $20.2bn vs est. $21.3bn. Shares were 7% lower in extended trading. Tesla shares fall another 5% and Elon Musk sells $4bn of shares The rumours about the big losses at Twitter and that Elon Musk would be forced to fund its operations were true as he filed overnight that he had sold $4bn of Tesla shares pushing the price down by another 2% in extended trading. Negative momentum could easily extend here with Tesla shares sitting a crucial support area back from March and June 2021. US Mid-term elections avoid the “red wave” of Republican gains, although Dems likely to lose House The final results are too early to call, but the Democrats may possibly retain control of the US Senate, with one race in Georgia possibly requiring a run-off as was the case in the 2020 election before any final outcome is known. Final tallies are not available for the House of Representative results, but the lean in the results makes it likely that the Republicans will take control of the House by a fairly comfortable margin (NYT estimates 225-210 this morning). Democrats losing the House means that the last two years of the Biden presidency will be “lame-duck”, with no real ability to shape new policy. At the same time, given the situation coming into this election, with soaring inflation and poor popularity for the sitting president, the Republican performance looks quite weak. As well, if the Democrats do retain control of the Senate, Republican-driven legislation will be unlikely to reach Biden’s desk, meaning he won’t have to formally veto their bills. France’s housing market is cooling down The combination between high inflation across the board (CPI hovering close to 6 % on a year-on-year basis), lower purchasing power and higher interest rates is pushing housing prices down in France. According to the real estate promoter Century21 (one of the leading players in this market), real estate prices went down under the threshold of 10.000 Є per square meter in Paris. The deceleration in prices is, however, limited so far. Contrary to Tel Aviv, Amsterdam and Hong Kong, the Parisian housing market is not in a situation of a speculative bubble. Prices are overvalued, however. Expect prices to go down a bit more due to a drop in solvent demand. But we won't see a large decrease in prices as it is currently happening in several major cities in the United States, for instance. The French housing market is more resilient for mostly two main reasons: fixed interest rates and a comparatively low household debt (it represents about 124 % of net disposable household income versus a peak at 249 % in Denmark). What are we watching next? US October CPI release tomorrow is macro event of the week Many recent US CPI releases have sparked considerable market volatility, not least the September release last month which strongly surprised by showing core inflation reaching a new cycle high of 6.6% year-on-year. Tomorrow’s October CPI release, ex Fresh Food and Energy is expected to come in at +0.5% month-on-month and +6.5% year-on-year, with the headline expected at +0.6%/7.9%, which would be the first sub-8.0% year-on-year print since February. Earnings to watch Today’s US earnings focus Rivian Automotive and DR Horton. The electric vehicle industry is in high growth phase and Rivian is also expected to report revenue of $561mn up from $1mn a year ago as the company ramps up production of its delivery vans. DR Horton is expected to deliver FY22 Q4 (ending 30 September) revenue growth up 25% as the tailwind from the backlog is still feeding through, but revenue growth y/y is expected to collapse to –6% y/y in the current quarter so the outlook is the key watch in this earnings release. Wednesday: National Australia Bank, KBC Group, Genmab, Siemens Healthineers, E.ON, Adidas, Honda Motor, Coupang, Rivian Automotive, Roblox, DR Horton, Trade Desk Thursday: Brookfield Asset Management, Fortum, Engie, Credit Agricole, Allianz, Merck, Hapag-Lloyd, RWE, SMIC, Nexi, AstraZeneca, ArcelorMittal, Siemens Gamesa Renewable Energy, Becton Dickinson, NIO Friday: Richemont Economic calendar highlights for today (times GMT) 0800 – Hungary October CPI 0800 – US Fed’s Williams (Voter) to speak 0905 – Australia RBA’s Bullock to speak Poland Announces Interest Rate 1200 – Mexico Oct. CPI 1300 – UK Bank of England’s Haskel to speak 1530 – EIA's Weekly Crude and Fuel Stock Report 1630 – UK Bank of England’s Cunliffe to speak 1700 – World Agriculture Supply and Demand Estimates (WASDE) 0001 – UK Oct. RICS House Price Balance 0100 – US Fed’s Kashkari (Voter 2023) to speak Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: https://www.home.saxo/content/articles/macro/market-quick-take-nov-9-2022-09112022
Oanda Podcast: US Jobs Report, SVB Financial Fallout And More

USA: According to ING, Republicans may move in on the House. Forex market may see indecisiveness today. In Poland NBP decides on the interest rate

ING Economics ING Economics 09.11.2022 09:51
It looks as though the Democrats are doing a little better than expected in the US mid-terms. This news looks unlikely to unlock some of the equity gains that had been envisaged and we have yet to see the dollar extending its correction. Expect a day of FX consolidation ahead of US CPI tomorrow. Today's Polish monetary policy decision could weigh on the zloty United States Capitol building silhouette and US flags at sunrise Source: Shutterstock USD: Mid-terms point to a challenging two years of US policy What we have seen so far from the US mid-term results are: i) the Republicans likely taking control of the House, ii) a much closer Senate race than expected with a possibility the Democrats could retain it, and iii) the swing to Republicans not being as large as expected. How the US mid-terms play out in FX markets is rather a loose proposition - suggestions had been that a likely equity rally on the back of Republican control of Congress had been weighing on the dollar this month. In reality, buy-side surveys seem to have been split on what various mid-term outcomes would mean for equities, and hence the link between mid-terms and FX looks tenuous at best. In our US mid-term election preview, we suggested the scenario of a Republican House and a Democrat Senate might be slightly positive for the dollar in that a hamstrung Biden administration might be left to focus on Presidental executive orders including more hawkish policy on China. Additionally, reports suggest a Republican House will use next year's debt ceiling for policy leverage (such as tighter fiscal policy) and also launch a series of House investigations. On the former, a debt-ceiling stand-off in 2H23 could hit investor appetite for US asset markets and weaken the dollar - and our baseline forecasts already assume that the dollar will be turning by that stage. Back to the short term, it looks as though calls for an uninterrupted US equity rally into year-end are built on weak foundations and instead the core story of tighter US financial conditions will continue to dominate. Tomorrow's release of the October US CPI will have an important say here. An outcome in line with the consensus estimate of a 0.5% month-on-month rise in core inflation would likely keep expectations of Fed funds at 5% next year on track and keep the dollar supported. DXY is trading back under 110 again and barring a very soft US inflation release tomorrow, we see very little reason for the correction to extend much further. Favour a 109.50-110.50 range in DXY into tomorrow's CPI. Barring the mid-term results, the US calendar is light today. Fed speakers are Thomas Barkin and John Williams, both seen to the modestly hawkish end of the Fed spectrum.  Chris Turner EUR: Unpacking the EUR/USD correction EUR/USD is now around 5% off its late September lows. What has driven it? Fed communication has been reasonably hawkish and pricing of the Fed cycle is still near its highs - thus we cannot blame the correction on the Fed. What about a hawkish ECB? Two-year EUR:USD swap differentials have narrowed a little (10bp since the start of the month) and the 10-year US Treasury-German Bund spread has also narrowed 10bp this month, too. However, interest rate differentials have not been a big driver of EUR/USD over recent months. What probably is making the difference are equity markets. Since early October, European equity benchmarks are up 11% versus the 5-6% recovery in their US equivalents. Some bottom-fishing in European assets markets (including FX) may be at work here. We would argue that both the Fed and the ECB intend to take real rates even higher to turn the inflation trajectory around - meaning that further equity gains remain challenging. Above 1.0090/1.0100 EUR/USD could briefly see 1.02, but we would be in the camp saying that this correction does not endure and would still favour a return towards 0.95 into year-end as the Fed tightens the monetary knot still further. Chris Turner GBP: Holding pattern UK policymakers will appreciate the fact the UK asset markets have fallen out of the financial headlines for the time being. The UK's 5-year sovereign CDS is flat-lining near 30bp, back where it was in early September, if not early August (sub 20bp). When it comes to expected volatility in FX markets, EUR/GBP 3m volatility is trading around 8.5% - back to early September levels, while 3m GBP/USD volatility is also consolidating just below 13% and way off the near 20% levels seen in late September. So it is fair to say that some calm has returned to sterling FX markets. We continue to favour some sterling underperformance going into year-end, however. A tight UK fiscal budget on 17 November could be the catalyst to wipe a lot more off the expected Bank of England tightening cycle than is to come off the ECB cycle. And our call for a difficult, not benign external environment should see sterling soften again. EUR/GBP dips below 0.87 could provide hedging opportunities for European corporates with GBP revenue exposure. Chris Turner CEE: Difficult decision-making by the National Bank of Poland A heavy calendar continues today in the Central and Eastern Europe region. October inflation will be released in Hungary and we expect another jump from 20.1% to 21.0% year-on-year in line with expectations. The common drivers here will be rising processed food and services prices with some extra pressure coming from durables as well as the forint hitting its weakest level versus all the majors during October. Later today, the National Bank of Poland's decision will dominate CEE markets. We expect a 25bp rate hike to 7.00%, but our economists admit it will be a close call and unchanged rates are also a possibility. Inflation continues to rise, but on the other hand, the Polish zloty has strengthened significantly since the last meeting and the situation in the CEE region has generally calmed down, which should make the MPC more complacent and continue with its dovish rhetoric. Surveys are also expecting a 25bp rate hike and markets seem to be leaning on the hawkish side in our view. Hence, we believe the overall tone of today's NBP meeting and tomorrow's press conference will be dovish regardless of the pace of monetary policy tightening and the meeting will be negative for the Polish zloty, which has strengthened from levels around 4.850 to below 4.70 EUR/PLN in the last three weeks. Hence, we see the zloty vulnerable and furthermore, this is supported by the significant decline in the interest rate differential in recent days and the drop in costs of funding, which make it less expensive to be short the zloty. So as we mentioned earlier, we expect the zloty to trade above 4.750 EUR/PLN. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Czech National Bank Prepares for Possible Rate Cut in November

Some Comments On Inflation Expectations By John Williams (Fed)

TeleTrade Comments TeleTrade Comments 09.11.2022 09:54
New York Federal Reserve  (Fed) President John Williams made some comments on inflation expectations in the text of a speech to be delivered to an audience in Zurich. Additional quotes “Relatively stable long-term inflation expectations are good news.” “Surprising how much of the public expects deflation.” Market reaction The above comments failed to move the needle around the US Dollar when compared with six major currencies. The US Dollar Index is trading almost unchanged on the day at 109.65, at the time of writing.
In Crypto, You Could Prove You Own A Private Key Without Revealing It

Saxo Bank's Podcast: Huge Liquidity Pressures In The Crypto Space

Saxo Bank Saxo Bank 09.11.2022 12:41
Summary:  Today we look at the US mid-term election results, where the House looks set to flip Republican and the Senate may go down to a December 6th run-off in Georgia (as in 2020 and providing fodder for election denier conspiracy theories, etc...) but either way cementing the lame duck second half of Biden's presidency. Elsewhere, we look at the massive gold rally yesterday, in part on huge liquidity pressures in the crypto space that have prices tumbling there. Also, Tesla, Disney, stocks to watch, the USD on edge ahead of critical CPI release tomorrow and more on today's pod, which features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting an on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app:           If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.     Source: https://www.home.saxo/content/articles/podcast/podcast-nov-9-2022-09112022
Oanda Podcast: US Jobs Report, SVB Financial Fallout And More

Republicans Will Call On Reducing Budget Spending On Social Security And Medical Care

InstaForex Analysis InstaForex Analysis 09.11.2022 13:33
The euro/dollar pair is trying to settle above the resistance level of 1.0060, which is the upper border of the Bollinger Bands indicator on the D1 timeframe. If the pair succeeds, it will definitely resume a long-term bull run. However, the midterm election may limit its upside potential. Fundamental factors of political nature tend to have a short-lived impact on Forex. Traders are now assessing the possibility of a split in Congress. This is why the EUR/USD pair is unlikely to settle above the parity level for a long time. Buyers need stronger drivers to push the pair higher. Apart from that, the US will unveil inflation data tomorrow, which may drastically change the trajectory of the pair. Let's discuss the main political event of this week and of the month, namely the preliminary results of the midterm elections. Overall, we can draw some conclusions. Before the vote, many analysts assumed that Republicans would wrestle control over the Senate and the House of Representatives. Apparently, the battle will last until December. According to preliminary estimates, the ratio of seats in the Senate is 50:49 in favor of the Democratic Party after the second round in Georgia and a mixed result in Nevada. It means that Democrats may retain control even if Republicans win in Georgia but lose in Nevada. In this case, the situation of the last two years may repeat itself. In the previous elections, Republicans and Democrats had 50 seats each in the Senate. Kamala Harris, the Vice President of the United States, supports the Democratic party. She had the decisive vote back then. Under certain circumstances, if the above-mentioned states do not give their votes to Republicans, there will be no change in power in the Senate for the next two years. As for the House of Representatives, as widely expected, Republicans won the majority of seats. However, it hardly surprised anyone. The Republican Party has approximately 223-225 mandates, while Democrats have 210-212. Republicans have already won the majority of seats (218). So, Democrats lost the battle for the House of Representatives. Although the Republican Party failed to regain the upper hand in both chambers, it definitely took control of the House of Representatives. When it comes to the gubernatorial election, the situation is as follows: Democrats won 21 seats (they won in two states) and Republicans won 24 seats (they lost in two states). Therefore, it is quite logical why traders are alert now. For almost two years, the House of Representatives, the Senate, and the White House have worked in unison. There were almost no conflicts. Now, the situation will change sharply as Republicans will call on reducing budget spending on social security and medical care. otherwise, they could block an increase in the debt limit. Among the possible risks of a split Congress is a shutdown. It refers to a funding gap period that causes a full or partial shutdown of federal government operations when the government fails to pass funding legislation for its next fiscal year The greenback is also facing bearish pressure. In my opinion, this political driver will have a short-term influence on the market. No economic or political changes will happen in the foreseeable future because the Congress with its new members will begin work only in January 2023. As a rule, market participants rarely focus on long-term hypothetical events that could occur in several weeks or months. Apart from that, Democrats still have leverage in the House of Representatives (the filibuster tactic, the right of the President's veto, the Republicans' inability to revoke the veto, etc.), including possible control over the Senate. However, Democrats will have the same leverage if they lose control over the upper chamber. Therefore, there will hardly be crucial shifts in the political situation in the United States. Do not forget about tomorrow's release of inflation data. If the report is positive, traders will switch their attention to the Fed. They will be waiting for hints on whether the Fed will raise the key rate by 75 or 50 basis points. It is rather risky to open short and long positions in times of market uncertainty. Therefore, I would recommend you today to take a wait-and-see approach e and wait for the release of inflation data.   Relevance up to 12:00 2022-11-10 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/326653
S&P 500 ended the session 1.4% higher. This evening Japan's inflation goes public

US dollar has got back in the game and a 50bp rate hike may deliver greenback with fuel. US inflation released tomorrow is expected to show lower values

Kenny Fisher Kenny Fisher 09.11.2022 23:22
EUR/USD has reversed course today and is in negative territory. In the North American session, the euro is trading at 1.0043, down 0.30%. US dollar bounces back The US dollar has rebounded after a 3-day slide against the major currencies. The dollar downswing started on Friday after a lukewarm employment report raised expectations that the Fed will deliver a “modest” 50-basis point, rather than a 75 bp move at the December meeting. This was followed by a short covering move on Monday which sent the dollar sharply lower, as risk appetite jumped ahead of the US midterms and Thursday’s inflation report. The euro made the most of the dollar’s weakness, rising 250 points in an impressive 3-day rally. The US dollar has rebounded against the majors today, including the euro. With the Federal Reserve remaining aggressive, even a 0.50% should be enough to give the dollar a boost, as rate differentials continue to widen. Inflation is running at a double-digit clip in the eurozone, but it’s doubtful that the ECB will keep pace with the Fed, as the eurozone economy remains weak and higher rates are likely to tip the economy into a recession. The markets are keeping an eye on the US midterm elections, which are tighter than expected, as the Democrats are fighting to retain control of both the House and the Senate. Investors are focussing on Thursday’s October US inflation report, which will be a key factor in Fed rate policy. Inflation is expected to have eased slightly, with headline inflation dropping to 8.0% (8.2% prior) and core inflation slowing to 6.5% (6.6%).  A drop in the October reading will raise expectations for the Fed to raise rates by 0.50% at the December meeting. EUR/USD Technical EUR/USD faces resistance at 1.0134 and 1.0293 There is support at 1.0047 and 0.9888 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Euro backtracks after strong rally - MarketPulseMarketPulse
EUR/USD Pair: The Bulls Might Remain Inclined To Be Back In Control

The EUR/USD Pair Is Likely To Continue Its Unstable Dynamics

InstaForex Analysis InstaForex Analysis 10.11.2022 08:10
On Wednesday, the greenback was recovering from three consecutive days of rollbacks, while votes in the congressional elections continue to be counted in America. Over the past three days, the dollar has declined by more than 3% against its main competitors, including the euro. During the same time, the S&P 500 index gained about 2.8%. Market participants preferred risky assets amid increased confidence that Republicans would regain a majority in at least one or even both chambers of Congress in the midterm elections. "The idea that the Republicans will regain the House of Representatives has caught on well in the market. We're not saying it won't be good for stocks, or we won't have a few pleasant days, or it won't provide some stability. But we think that in order for the S&P 500 to really rise, Republicans also need to regain the Senate," said strategists at RBC Capital Markets. Apparently, investors were putting in quotes a scenario according to which the outcome of the midterm elections would be either a so-called "split government" (when the executive power is controlled by a Democratic president and the legislative power is controlled by Republicans), or a divided Congress (if Republicans gain control in the lower house and Democrats retain a slight advantage in the upper house). It is assumed that such an outcome will have negative consequences for the dollar and positive for stocks. According to RBC Capital Markets, the average annual return of the S&P 500 with a divided Congress is 14%, and with a Republican-controlled parliament and a Democratic president – 13%. The yield of the index under the full control of the Democrats is 10%. According to experts, a possible political impasse in Washington may exclude US President Joe Biden's proposed increase in taxes on corporate income and wealthy citizens. At the same time, the prospect of another dispute about raising the US debt ceiling is more important. The Republican Congress can put an end to fiscal stimulus and make it a little easier for the Federal Reserve to curb inflation, FS Investments analysts say. "If Republicans do get some power in the House and Senate, they could make raising the federal debt ceiling a really difficult process," Ingalls & Snyder analysts said. US politics is once again becoming a burning topic in connection with the midterm elections. Republicans are on track to achieve a majority in the House of Representatives, while Democrats may lose the Senate. In this case, the shares may rise, which will harm the dollar, Credit Suisse believes. "Although the final results of the midterm elections may be known only in a few days, it is highly likely that the Democrats will lose control of the House of Representatives, and possibly the Senate. This will lead to another phase of the "split government". We are inclined to believe that the likely result of such an outcome will be a strengthening of stocks," the bank's economists said. "Since the growth of stocks also usually goes hand in hand with the weakening of the dollar, it is logical to expect that the strengthening phase of stocks associated with the midterm elections may damage the greenback," they added. The political impasse in Washington will dispel investors' concerns about increased budget spending, exacerbating inflation, and increase the chances of the party freezing spending with the help of the debt ceiling. This will facilitate the work of the Fed, help stocks extend their recent growth, and also restrain the yield of US Treasury bonds and the dollar, analysts at Morgan Stanley believe. Meanwhile, the unexpected victory of the Democrats, according to experts, will lead to an increase in the yield of treasuries, a strengthening of the dollar and will put pressure on stocks, since a possible budget expansion will require a greater increase in rates from the Fed. Berenberg analysts believe that the election results will not have any significant impact on fiscal or monetary policy in the United States, and that the Fed's actions to curb inflation will continue to set the tone for the markets. The S&P 500 index may fall by another 16% before it reaches the "bottom" in nine months after the Fed refuses to raise interest rates, UBS strategists say. They expect that the slowdown in economic growth in the US will continue to pull stocks down until the second quarter. According to the bank's forecast, in 2023, global GDP will grow by only 2.1% year-on-year, which will be the third lowest in the last three decades. "Our forecast is approaching something like a 'global recession,'" UBS economists said. "For the US, we now expect almost zero growth in both 2023 and 2024, and a recession will begin in 2023," they added. According to experts, this economic downturn is likely to lead to a period of disinflation. Given that the US central bank has quickly raised interest rates to try to curb inflation, which has reached a 40-year high, this would give policymakers the opportunity to switch to lowering rates to stimulate economic growth, according to UBS. "In combination with the rapid fall in inflation, the Fed will reduce the key rate from the current 4% to 1.25% by the beginning of 2024," the bank's analysts said. "The speed of this reversal will stimulate every asset class next year," they believe. According to UBS estimates, expectations of a Fed reversal could raise the S&P 500 to 3,900 points by the end of 2023. The bank also predicted that future rate cuts would cause the yield on 10-year treasuries to drop by 155 basis points to 2.65%, and the dollar would slowly fall against a basket of leading currencies. US stock indexes showed a steady rise on Tuesday. Thus, the S&P 500 rose by 0.56% to 3,828.11 points. Meanwhile, the greenback fell in price against its main competitors by almost 0.5%, sinking to multi-week lows around 109.25 points. The market's increased hopes that Republicans would gain a majority in the Senate and the House of Representatives allowed risk appetite to dominate financial markets, as a result of which the safe dollar lost demand. Increased selling pressure on the US currency spurred the EUR/USD rally, as a result of which the pair reached the highest values in almost two months in the area of 1.0090. However, on Wednesday, investors were forced to turn to the defensive dollar again, since there was no clarity as to who would control Congress following the midterm elections. It is possible that the final results will have to wait a few days or even weeks, as it was in 2020. As you know, markets most of all do not like uncertainty. Key Wall Street indicators are trading in negative territory on Wednesday. In particular, the S&P is losing about 0.9%. Meanwhile, the greenback attracted bulls and tested the area just above 110. Amid renewed demand for the dollar, the EUR/USD pair lost its bullish momentum. Cautious market sentiment limits the pair's growth opportunities while investors wait for the final results of the midterm elections in America. In addition, important data on consumer inflation in the United States are looming on the horizon, which will be published on Thursday. Recently, the greenback has been under downward pressure from expectations that the Fed will soon abandon a tough rate hike cycle, possibly as early as December. However, a surprise in the form of an increase in inflation may change this opinion and contribute to the strengthening of the US currency. "The worst outcome for the markets will be core inflation, which will exceed expectations not at the expense of housing, which is easy to write off as a lag, but due to a wide range of rapidly rising prices in various categories. Given that expectations of a Fed rate hike by 75 bps next month have already been largely played back, there is a risk that such a surprise will force investors to re-evaluate at least a 50% probability of such an outcome, which will put pressure on risky assets and lead to a rise in the dollar," Credit Suisse economists said. Markets interpret any weaker data in favor of a reversal of the Fed's policy, pushing EUR/USD up. However, Thursday's high value of the consumer price index (CPI) in the US may send the pair down, Nordea believes. "Of course, the recent fluctuations in EUR/USD contradict our opinion about the upcoming strengthening of the dollar, but we believe that the recent price movements are more a reflection of tactical positioning, rather than changes in fundamental indicators," the bank's strategists said. "The Fed has clearly stated that a pause in raising rates is not discussed as long as inflation is high. Fighting inflation means raising rates and even more pain for risky assets and the real economy. It seems that investors in the stock markets refuse to take this into account and interpret any softer data in favor of a reversal of the US central bank, which leads to an increase in risk appetite and a weakening of the dollar. Eventually, the situation should change, and investors will feel the pain again and remember the old adage: "don't fight the Fed," they noted. "The US inflation report is the next key indicator in the short term. Higher-than-expected CPI data are a trigger for strengthening the dollar (6 out of 10 recent inflation releases this year), and this may well happen this week, especially if players hold a net short position on the US currency. In the future, EUR/USD is likely to continue its unstable dynamics, but we still adhere to our opinion that the pair will decline to the area of 0.9500 by the end of this year," Nordea said.   Relevance up to 18:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/326693
Warsaw Stock Exchange SA Approves Dividend Payout: Neutral Impact Expected

The End Of The US Dollar (USD) Growth Will Be The End Of The Cycle Of Rate Hikes

InstaForex Analysis InstaForex Analysis 10.11.2022 08:21
The dollar index regained positions above 110.00 on Wednesday. Investors are evaluating the results of a tougher-than-expected midterm election. The Republicans are in the lead, but not as confidently as expected. It may take a second round to determine the winner. The Democrats have failed. However, there is nothing surprising. Historically, events since the Second World War have developed in this way. In the middle of the presidential term, the party of the current head of the United States loses seats in the House of Representatives in the midterm elections. Analysts initially said that the Joe Biden administration was not among the rare lucky ones. And so it happened. Despite the fact that the Republicans failed to fully implement their plans, their party is likely to take control of the House of Representatives, which, according to analysts, may support the dollar in the short term. However, how the US currency ends the week will ultimately depend on the results of the inflation report on Thursday. A key catalyst for the markets is the October CPI report, which will provide insight into the Federal Reserve's rate. Money markets are currently pricing in a more moderate 50 basis point rate hike in December. However, a hotter-than-expected inflation report could spur bets on another 75 bps hike. Until the release of the data, investors will continue to follow the news feed on the elections, although this is not such a significant topic for them. Markets are more likely to fill the gap until the next really important event. Elections are a minor factor influencing the outlook for the dollar, however, they may have some implications for price action in the short term. This is what happened on Wednesday. If the weekly close is below 110.05, then analysts will have another reason to start talking about the formation of the top for the US currency index. While it is too early to talk about it, we are waiting for the CPI. "The first results of the midterm elections indicate that the Republican wave is unlikely to materialize. The most likely outcome will be a split in Congress, with Republicans seizing power in the House of Representatives and Democrats retaining the Senate. If the result is confirmed by the final vote count, Joe Biden will have to resort to executive orders, as his legislative powers will be severely curtailed," UniCredit Bank notes. The split between the government and Congress is more of a market story next year, when debt ceiling concerns resurface. "If the Democrats still surprise the world and hold the House of Representatives, it will be negative for the dollar, but not more than 1% on the index," economists believe. Dollar 2023 The dollar has shown a breathtaking rally this year. The US currency index reached levels not seen in more than 20 years. Since the beginning of the year, it is up 13% against the euro, 17% against the pound and 22% against the yen. This has important implications for international portfolios and, since it is the world's reserve currency, also for global financial conditions. And the reason for this is higher interest rates, the Fed's hawkish attitude, the strong economic outlook, and the unwillingness of investors to take risks. A weaker dollar will weaken financial conditions and increase global risks. For this to happen, an improvement in global economic growth prospects will be required to begin with. An important component of the end of the dollar growth is the end of the cycle of rate hikes. Given these two factors, it is reasonable to assume further growth of the dollar in 2023. Some central banks have recently slowed down their rate hikes. The Fed, unlike them, focuses solely on inflation and plans to raise rates above 5%. Higher US rates continue to attract global capital flows seeking higher returns. As global economic risks emerge or continue, the dollar is likely to remain the best safe haven. Although it may peak when the Fed eventually slows down its policy of tightening monetary policy. This alone may not be enough to cause a significant depreciation of the dollar. Although there are doubts about the forecasts for further growth of the dollar, the driving forces of its strength have not yet been exhausted.     Relevance up to 21:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/326705
Bank of England Faces Rate Decision: Uncertainty Surrounds Magnitude of Hike

A slower decrease of inflation has made Jerome Powell confused recently. Today's headline inflation print is expected to hit less than 8%

ING Economics ING Economics 10.11.2022 09:03
Today's focus will be the October US CPI release which will have implications for Fed policy, risk assets and the dollar. News from Canada that a mortgage investment fund is suspending redemptions could also be a first signal of the cross-over from higher interest rates to financial stability risk. We would continue to favour the dollar USD: What has core inflation got to say? At last month's FOMC meeting, Federal Reserve Chair Jay Powell concluded the press conference with a sense of frustration that inflation had not fallen more quickly. Inflation data understandably is now one of the biggest market movers of the month and today sees the US October CPI release. Headline inflation is expected to dip to 7.9% from 8.2% year-on-year, but the market's focus will be on the core rate - i.e. what is happening to underlying prices outside of food and energy. Here, the market will be looking at the core monthly figure - expected at 0.5% after two months at 0.6% month-on-month. Our US economist, James Knightley, favours a 0.5% core MoM figure, with the range of analyst expectations stretching from 0.3% to 0.6%. James says medical costs have been generating upside pressure of late, but that pressure could start to ebb. Elsewhere, core goods prices are being lowered by falling freight costs, the strong dollar, and weakening demand, while used car prices should fall and anecdotal evidence of rent declines is spreading. However, as Chair Powell noted last month, the point when rents start dragging down core CPI may be some time off. Today's release will have some bearing on what the market prices for the Fed meeting on 14 December, where a 56bp rate increase is currently priced. Today's CPI data will not be the final say on that decision (we have jobs data and another CPI release before then), but it can set the tone regarding the Fed's comfort level. Expect the dollar and the positively correlated bond and equity markets to trade off today's data - where any upside surprise could do some damage to the recent benign risk environment and end the recent correction in the dollar. Separately, an item catching our attention was that a Canadian fund, the Rompsen Mortgage Investment Fund, had halted redemptions since 'loan payoff activity remains suppressed'. The real estate sector is on the front line when it comes to aggressive rate increases and we wonder whether investors will view this as one of the first casualties and a possible cross-over from macro risk (recession) to financial stability risk. Let's see how the Canadian dollar deals with the news today and whether any pressure builds on those currencies normally associated with stretched housing markets, which beyond Canada are normally seen as those in Scandinavia. DXY to trade 109.50-110.50 range, with a slight upside bias. Chris Turner EUR: Rangebound EUR/USD continues to drift towards the upper end of recent ranges. As above, the US inflation data will be a key driver. Despite the recent recovery in equities, the external environment is still mixed, including lockdowns spreading across China. For today, the eurozone data calendar is light and we have a few European Central Bank speakers at an event at 14CET. The market is currently split on whether the ECB hikes 50bp or 75bp at the 15 December meeting. Our team favours 50bp. Today's US data is big enough to put an end to the recent EUR/USD correction - should inflation surprise on the upside.  Chris Turner GBP: House prices starting to feel the crunch Earlier today we saw the RICS house price balance data for October. UK estate agents now see house prices declining for the first time since the summer of 2020 - a clear response to the recent surge in mortgage rates. This will again question the market's pricing of the Bank of England's tightening cycle, where we think rates priced at 4.65% next summer are way too high. Sterling saw a big intra-day sell-off yesterday - which looked more flow than macro-driven. 1.1150 is a clear target for GBP/USD were the dollar to strengthen today. Again, we doubt any gains over 1.15 endure. Chris Turner CEE: Czech inflation to test CNB new forecast Today, we will see inflation data for October in the Czech Republic. We expect a further rise from 18.0% to 18.2% YoY. However, the main issue, as in recent months, is energy prices and since October the impact of government measures on CPI. The unclear approach of the statistical office is reflected in the extremely wide range of surveys from 17.2% to 19.0% YoY. The Czech National Bank expects a decline to 17.4% YoY. However, it is clear that we can expect surprises on both sides. We believe the CNB has a solid buffer for upside surprises and any market bets on additional central bank rate hikes would be short-lived. The Czech koruna has been moving to stronger levels since the November meeting and briefly touched its strongest levels since the beginning of February. Higher inflation should again support the interest rate differential and keep the koruna at its current strong levels.  Later today, National Bank of Poland Governor Adam Glapinski is set to speak in a press conference after the Bank left the policy rate unchanged at 6.75% yesterday, against the consensus of a 25 basis point hike. The central bank's new forecast brought lower economic growth and also higher inflation, especially next year. The post-meeting statement indicates that the NBP targets a reversal of the inflation trend and wants to facilitate a soft landing for the economy rather than bring inflation down to 2.5% as quickly as possible. Today we will hear more details of the governor's view and what we can expect next from the NBP. As we mentioned earlier, we see the zloty as vulnerable and just yesterday it lost 0.9% against the euro. We expect it to continue to trade above 4.75 EUR/PLN today.  Frantisek Taborsky  Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The USD/JPY Price Seems To Be Optimistic

Correlation Between The USD/JPY Pair And US 2-Y Treasury Yield Remains High

Saxo Bank Saxo Bank 10.11.2022 09:17
Summary:  When Sep CPI came lower than prior but higher than expected, S&P 500 index futures (ESZ2) had immediate reaction selling off ~3% and USDJPY - best carry trade among G10 yielding 5% - also rallied 100 pips so these two are expected to be most obvious ones to trade and show instant price action in terms of sensitivity to the data. First headline squawk highlighted in red that I saw this morning on my Bloomberg terminal was “BITCOIN DROPS BELOW $16,000…”. Last time Bitcoin (BTCUSD) dipped below $16,000 was 2 years ago and now it has fallen 77% from all time high $69,000 that was traded 1 year ago. Also to put this price action into perspective, Bitcoin/gold ratio has declined to just over 9 times compared to 35 times last year. When I checked on coinmarketcap.com, FTX - on the verge of potential bankruptcy - was the fourth biggest cryptocurrency spot exchange based on traffic, liquidity & volume, hence the risk-off sentiment has well and truly arrived as some of the notable crypto related stocks got hammered – COIN -10%, MSTR -20%, GLXY -16% while safehaven US dollar bid up broadly heading into October US CPI release tonight at 9:30pm. However we are yet to see significant systematic risk as VIX sitting at 26 with futures term structure of contango and high yield junk bond ETF (HYG) has not crashed trading 2.2% above recent low $70.40 as well as credit spread is also off 100bps below from the recent high 600bps. The current macro backdrop continues to focus and assess on the relative impact on inflation from rising real yield (10 year at 1.7%) or aggressiveness of interest rates hikes while Fed’s QT has been shrinking its balance sheet by about 3.2% from $8.9t to $8.6 in the last seven months. Even though last week’s unemployment rate looks to have bottomed from 3.5% to 3.7%, two of the mostly watched yield curves – 3m10y and 2y10y - still remain inverted at 9bps & 48bps respectively and we are not seeing substantial steepening happening yet therefore the futures implied terminal rate ~5% in 2Q next year may still have further rooms to move higher despite recent FOMC meeting’s down-shift signal and Powell’s cumulative tightening of 375bps, the most in one year since 1980.  The previous headline Sep CPI numbers 8.2% YoY showed major drivers were food, medical and shelter contributing nearly 1% each while energy and cars cooled. This time, energy may have gone up a bit and services would remain as a key area to watch as it has not stopped rising every month since Aug last year. The most recent PCE figures for Sep was 6.2% that is not only above Fed’s projection of central tendency 5.3%-5.7% but also far from its longer run target of 2%. After all, we have not seen sub 8% headline CPI since February number this year and actual result was less than estimate only once for July but given the estimate for tonight’s figures is anticipated at 7.9%, meeting this estimate may be sufficient for the equity market to find some relief rally. On 13 October, when Sep CPI came lower than prior but higher than expected, S&P 500 index futures (ESZ2) had immediate reaction selling off ~3% and USDJPY - best carry trade among G10 yielding 5% - also rallied 100 pips so these two are expected to be most obvious ones to trade and show instant price action in terms of sensitivity to the data. S&P 500 had a decent rebound last month digesting earnings as 456 companies have now reported with earnings surprise of 3% that is lowest in the last two years post Covid. S&P 500 forward earnings per share (EPS) estimated at 226 makes the PE ratio 16.6 times or 6% yield based on last night’s close 3,748 but again there-are-reasonable-alternatives (TARA) as 2 year treasury is at 4.6% and IG corporate bond ETF (LQD) giving nearly 6% with relatively lower implied volatility compared to SPY (13 vs 24). Lastly USDJPY is trading near a key level 145 that previously acted as resistance in September then turned into support level in the last two weeks. Correlation between USDJPY and US 2 year treasury yield remains high so the pair should be able to at least consolidate assuming 145 holds while long out-of-the-money call options could also work given 1 month implied volatility has fallen from 17 to 11 in recent weeks and 2 vol lower than realised volatility. Alternatively by taking more neutral to bullish view with possible Japan intervention, bull put spread (credit) could be considered using the same level 145 as the lower strike to long put and sell higher strike – say 148.50 that is half way between the recent high 152 and 145 – giving net premium of about 200 pips for one month expiry. Source: https://www.home.saxo/content/articles/forex/st-note---us-oct-cpi-preview-10112022
Saxo Bank Podcast: The Risk Of An Escalation In The US-China Confrontation, The Risk Of An Escalation In The US-China Confrontation And More

The Russia Has Announced The Intention To Withdraw Its Troops | Hopes For A Covid Zero Exit In China Fades

Saxo Bank Saxo Bank 10.11.2022 09:22
Summary:  Markets are increasingly spooked by the liquidity pressure in the crypto space, as the major crypto exchange FTX.com and its associated trading house Alameda Research may be set to go bust without a multi-billion dollar rescue, and as total market cap in crypto currencies has plunged over $100 billion over the last month. Elsewhere, the focus was meant to be on today’s US October CPI release. What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities saw a hit to sentiment yesterday as Binance walked away from the deal to save the crypto exchange FTX setting in motion a plunge in cryptocurrencies. One of the largest shareholders in FTX, Sequoai Capital, is marking down its investment to zero suggesting little faith in the company and its ability to function. The risk-off moves spilled over into equity market with Tesla leading the declines among the mega caps down 7% with US President saying that Elon Musk relationships with foreign powers could be a national security issue. S&P 500 futures took out gains over the previous two sessions closing at 3,755 but the index futures are attempting to rebound this morning. Note the critical support level at 3,727 which could come into play later today if we get a negative surprise on the US inflation figures suggesting more sticky inflation. Hong Kong’s Hang Seng (HSIX2) and China’s CSI300 (03188:xhkg) Following the risk-off sentiments spilling over from the crypto space and then global equities, Hong Kong and mainland China stocks declined, with Hang Seng down 2% and CSI 300 0.6% lower. China EV and Internet stocks are the top losers.  Among Hang Seng Index constituents, LINK REIT (00823:xhkg) was the performer, gaining more than 2%. AAC (02018), Apple’s acoustic product supplier, surged 5.7% on earnings beat and analysts expecting the company gaining market shares from its arch-rival after the latter losing orders from a key foreign client (most likely Apple).  FX: USD finds bids on weak risk sentiment. US October CPI release key focus later today The US dollar clawed back some of its losses as cratering crypto prices are seeing widening contagion, and rising Covid cases in China continue to drive concerns that further lockdowns are on the way. The weakest currencies were those normally associated with risk sentiment, like the smaller G10 currencies, as AUDUSD trades this morning not far above 0.6400 after a spike to 0.6550 at the beginning of the week. Overall USD direction remains in play as the USD is somewhat down, but by no means out and today’s US October CPI to theoretically set the tone, although a liquidity crisis in crypto that continues to drive contagion elsewhere could yet steal the spotlight in the near term, with poor liquidity generally associated with USD strength. A weak US treasury auction yesterday is also a concern on that front (more below). Crude oil (CLZ2 & LCOF3) Trades lower for a third day as hopes for a Covid zero exit in China fades after the country increased restrictions in a key manufacturing hub and new cases in Beijing jumped to the highest level in more than five months. WTI has returned to the $85 handle, down 9% from Monday’s peak, while Brent trades sub-$93. In addition, the market has also been hurt by the loss of risk appetite filtering through from the carnage in cryptos and after the EIA reported US crude stocks rose by 3.9 million barrels to the highest since July 2021. This was somewhat offset by tightness in the fuel product markets with gasoline inventories dropped to an eight-year low. Focus on China, the general level of risk appetite signaled through the dollar and today’s US CPI print for October.  Precious metals hold gains ahead of today’s US CPI print Gold trades above $1700 for a second day with shallow correction attempts since Tuesday's surge so far pointing to underlying support. However, with most of that currently being provided by a drop in Treasury yields and a softer dollar, today’s US CPI print for October will be watched closely. Another upside surprise may cause a temporary drop before potentially supporting prices as the market will start wondering whether the FOMC will be successful in getting inflation control. Some support also emerging from the chaos across the crypto market where the risk of contagion to other coins from the FTX fallout remains elevated. Gold support at $1682 and silver at $21 followed by $20.27. Crypto market: another plunge in crypto as Binance walks away from FTX acquisition  The contagion in the crypto and equities we mentioned yesterday is already here, and getting worse as latest developments suggest that Binance backed away from its earlier pledge, tweeting Wednesday afternoon that it would not pursue the acquisition of FTX. It cited due diligence and a reported US investigation into the exchange. Bitcoin plunged below $16,000, while Ether followed and dipped to its lowest price since July, barely hanging on to the $1,100 level. According to a research note from JPMorgan the crypto market is right now facing a cascade of margin calls and liquidity disappearing in the system. US treasuries (TLT, IEF) US Treasury yields are sharply lower this morning, with the 2-year treasury yield closing below 4.60% yesterday, the lowest since the hawkish Fed Chair Powell press conference last Wednesday. Weak risk sentiment and contagion from the melt-down in crypto markets may finally be driving safe haven flows into what is traditionally the world’s most liquid asset: UYS treasuries. The 10-year treasury benchmark yield edged below 4.10% after a very weak 10-year auction, with bidding metrics the worst in years. The US Treasury is set to auction 30-year T-bonds today. What is going on? Wheat (ZWZ2) prices lower, along with Corn (ZCZ2), after USDA report The USDA released its November World Agricultural Supply and Demand Estimates report, which led to mixed but mostly lower grain prices. While the overall wheat consumption outlook was raised, USDA said demand may drop in some EM countries due to high prices. Wheat prices plunged 2.5% with additional selling from the announcement Russia is moving its troops out of Kherson, a development that may clear the way for more crop shipiments out of Ukraine. The agency also lifted its soybean output and stockpiles outlook, but robust export demand lifted prices. Meanwhile, USDA expects to see the seventh-largest corn crop on record this year, with a new estimate of 13.93 billion bushels. Foxconn still sees high demand for high-end electronics  The electronics maker, and the biggest supplier to Apple, reported Q3 results today with operating profits and revenue beating estimates. The company still sees strong demand for consumer electronics at the high-end of the market, but sees overall consumer electronics falling in Q4 y/y. US earnings recap: Beyond Meat and Rivian The EV delivery van maker Rivian missed estimates on Q3 revenue yesterday due to supply constraints, but the EPS loss of $1.57 was less than estimated at $1.86. The EV maker still sees 2022 production target at 25,000 vs est. 26,166. Rivian shares gained 8% in extended trading hours. Beyond Meat missed big on both revenue and EBITDA, but tries to calm investors by putting out a positive cash flow level around the second half of 2023. Russia said to be set to pull troops from embattled Kherson  In the hardest fought area of the war after the Russian invasion of Ukraine, the Russian side has announced the intention to withdraw its troops to the Eastern side of the river after an intense battle to maintain control of the strategic city, which is the closest major city to the Crimean Peninsula and would bring many Russian targets, including key supply routes from Crimea, within range of Ukrainian artillery if Ukraine takes control of Kherson. UK October Home Price Survey shows massive deceleration in UK housing  The RICS House Price Balance has been tumbling in recent months as mortgage rates have spiked on the overall rate rise, but also as spreads have widened due to by poor liquidity in the market. The positive 30% reading in September was already a sharp drop from the very strong levels above 50% just two months prior, and the October survey was expected to show +19% (still shownig prices generally rising). Instead, it plunged all the way to –2%, suggesting that UK housing market pricing is decelerating at a record clip, with deeper negative readings ahead that will impact overall UK confidence. What are we watching next? US October CPI release today suddenly looking less pivotal? The crypto panic has quickly stolen focus from the US CPI data release here, possibly to a sufficient degree that even an inflation print that is solidly below the expectations could fail to spark notable relief across markets, as weak liquidity concerns possibly keep the US dollar firm and equity markets weak even if yields ease lower. The ex-Fresh Food and Energy number is expected to come in at +0.5% month-on-month and +6.5% year-on-year, after the multi-decade high of 6.6% YoY in September, with the headline expected at +0.6%/7.9%, which would be the first sub-8.0% year-on-year print since February.) Earnings to watch Today’s US earnings focus is NIO which will be latest test for the EV market as maybe providing information on the factory situation in China amid rising Covid cases. The Chinese market is the most important market for Tesla so a dire outlook from NIO could translate into negative sentiment on Tesla shares. Thursday: Brookfield Asset Management, Fortum, Engie, Credit Agricole, Allianz, Merck, Hapag-Lloyd, RWE, SMIC, Nexi, AstraZeneca, ArcelorMittal, Siemens Gamesa Renewable Energy, Becton Dickinson, NIO Friday: Richemont Economic calendar highlights for today (times GMT) 1330 – US Oct. CPI 1330 – US Weekly Initial Jobless Claims 1400 – US Fed’s Harker (voter 2023) 1400 – Poland Central Bank Governor Glapinski news conference 1530 – EIA’s Weekly Natural Gas Storage Change 1730 – US Fed’s Mester (Voter 2022) to speak 1800 – US Treasury auctions 30-year T-bonds 1830 – US Fed’s George (voter 2022) to speak 1900 – Mexico Central Bank Rate Announcement     Source: https://www.home.saxo/content/articles/macro/market-quick-take-nov-10-2022-10112022
Forex: US dollar against Japanese yen amid volatility and macroeconomics

Although Democrats may keep the Senate, having House not clinched mean tougher challenge for Joe Biden, ING says

ING Economics ING Economics 10.11.2022 09:42
Pollsters indicated the US mid-term elections were all about the economy and inflation, but a focus on social issues resonated and helped Democrats outperform expectations. They could even remain in control of the Senate, but the likely loss of the House will make President Biden's job more challenging and will limit his economic policy options President Biden and his wife, Jill, campaigning at a Democrat rally in Maryland earlier this week Closer than thought, but Republicans still likely to win the House Heading into the mid-term elections there was lots of focus on crime, health care, abortion rights and the future of democracy, but polls repeatedly showed that it was inflation and the impact on household finances that was at the top of voters’ minds. It was also thought that President Biden’s personal approval rating, at just 40% it’s the lowest of any incumbent President heading into their first mid-term election, would be toxic for the Democrat vote. Commentators and betting markets had the Republicans taking control of the House of Representatives by a healthy margin while the Senate could also have come under their control. There doesn't appear to be a high success rate for the Donald Trump-endorsed candidates The results so far suggest it is much closer. While the Republicans are still favoured to win control of the House, it will be by a much smaller margin than envisaged – NBC's Decision Desk is projecting 222 Republican House seats to 213 for the Democrats. In the Senate, the Democrats managed to flip Pennsylvania after John Fetterman defeated Donald Trump-backed Mehmet Oz. This means for the Republicans to win the Senate they need to take two of the “toss-up” seats from the Democrats in Nevada and Georgia – in Nevada the Republican candidate is narrowly ahead, but in Georgia, the Democrat incumbent Raphael Warnock is ahead. That said, it could be several days for a winner to be declared in Nevada given "floods" of mail-in ballots, while Georgia’s election law requires the winner to take 50%+1 vote, meaning a run-off on December 6. One of the key takeaways is that there doesn't appear to be a high success rate for the Donald Trump-endorsed candidates and given the Republicans' strong showing in Florida this could give the state's Governor Ron DeSantis' campaign to be the Republican candidate in 2024 a major boost. A President constrained So what does this all mean? Well, President Biden struggled to pass legislation when he had a Democrat majority in both the House and the Senate (via Vice-President Kamala Harris’s deciding vote). Without a majority in Congress, as seems likely, it is nigh on impossible. Intense partisanship with just two years to go until the next presidential elections means major legislation is unlikely to pass unless there is a national emergency. President Biden’s legislative actions are therefore likely going to be limited to the use of executive orders and actions to circumvent Congress, where allowed. This is a much more limited form of government. For example, the president cannot use an executive order to change taxes because that power is held by Congress. Consequently, President Biden’s focus may have to focus on tinkering with social policy via Executive Orders with a broader shift towards international relations and trade policy where the president is less constrained by Congress. Republican Ron DeSantis celebrates his second election win as Governor of the State of Florida The economic implications It appears that investors were positioning for a stock market rally in recent days, but this has been undermined by the latest negative crypto headlines. A rally typically has happened after mid-term elections which result in a split Congress, largely on the rationale that it diminishes the prospect of painful new regulations and leaves corporates to focus on what they do best. But with the recessionary forces building, any bounce might not last long. Moreover, given that the fear of recession is rising, there would typically be an expectation of some government efforts to support households and businesses, but the President will have less scope to offer fiscal support given the requirement of having Republican legislators on board. This suggests that once inflation is under control, the onus is going to be on the Federal Reserve to offer stimulus to the economy. This is consistent with our base case forecast for interest rate cuts from the second half of 2023 onwards. A split Congress will raise issues about what happens surrounding the debt ceiling Perhaps more significantly for fiscal policy, a split Congress will raise issues about what happens surrounding the debt ceiling, which is currently $31.381tn and is on track to be breached at some point in the third quarter of next year; to read up on the background, click here. This is the “limit on the total amount of money the United States government is authorised to borrow to meet its existing legal obligations”. Failure to raise the limit in time would cause the government to default and would have dire consequences for global markets and the global economy. In the absence of an agreement, we can expect to see the government take extraordinary measures to delay default, including putting non-essential Federal government workers on furlough with key parts of the government shut down until sense prevails and an agreement to raise the limit is reached. Republicans may use a House majority (and potential Senate majority) to push for tough policy concessions from President Biden before they sanction the debt limit’s increase. Many Republicans have argued that government needs to contribute to directly lowering inflation with several pushing for government spending and hiring freezes and some demanding outright spending cuts. This is not something President Biden will readily accept. We could see extreme brinkmanship, economic disruption and higher government borrowing costs at a time when the economy is potentially in recession next year. Together with our expectation for Federal Reserve interest rate cuts, this would likely lead to the dollar coming under some significant downward pressure in the second half of 2023. What it means for 2024 The likely loss of the House may lead some Democrats to question whether President Biden is the best person to lead the party into the next election, although those calls will be muted given the better-than-expected Democrat vote so far. Moreover, only three out of the last 22 mid-term elections have seen the incumbent president’s party make gains in the House with the median loss since 1934 being 28 seats. At the time of writing it appears this mid-term election will see the best performance for an incumbent President’s party since George W Bush’s Republicans made a gain of eight seats in 2002. The lack of a credible alternative favours Biden standing again and defeating any Democrat challenger.  The last time an incumbent President was seriously challenged by someone within his own party was in 1992 when President George HW Bush convincingly saw off Pat Buchanan. Donald Trump has strongly hinted that he will formally announce he is running for president Donald Trump has strongly hinted that he will formally announce he is running for president on November 15, setting us up for a re-run of the 2020 contest. That won’t deter other Republicans from throwing their hat into the ring with Florida Governor Ron DeSantis’ very strong performance in his gubernatorial contest boosting his credentials while the mixed showing for Trump’s favoured picks in the mid-terms could raise doubts over whether he is the candidate most likely to win. However, at this very early stage polls amongst Republican supporters suggest Trump is well out in first place (on just under 50% versus DeSantis's mid-20s polling for the Republican Presidential candidate). With control of the House, Republicans gain congressional investigative powers, with some on the right already proposing looking into the president’s son, Hunter Biden’s, business dealings. They can also stall or disband other inquiries, including the committee investigation into the 6 January insurrection. President Trump’s backers could also call for investigations into the FBI search at Mar-a-Lago, all of which could cause major headaches/distractions for President Biden Also, over the coming days, we should watch for how some of the “election denier” Republican candidates do in some of the key local state official races. Some of these roles have influence over election processes and the certification of results so if you thought the 2020 election was angry and contentious, just wait for 2024… Read this article on THINK TagsUS Trump Mid-terms Election Biden Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Inflation Reports In Australia And New Zealand Were Higher Than Expected

Inflationary Momentum In New Zealand Remains Strong

InstaForex Analysis InstaForex Analysis 10.11.2022 10:24
Risk appetite noticeably fell this Thursday morning. The S&P 500 already lost more than 2% the previous day, while stock markets in Asia-Pacific countries traded in the red zone. Europe is also likely to open lower, which can not be said to government bond yields as it showed somewhat higher stability. 10-year US Treasures stayed above 4%, confidently indicating an increase in the risk of stagflation. Part of the reason why risk appetite decreased is the preliminary results of the US elections, according to which the Republicans will receive a majority in the House of Representatives and thus be able to influence the government's budgetary policy. There is still no clarity on the Senate, as the state of Georgia will hold a second round, scheduled for December 6. The second factor is the increase in the number of Covid patients in China, which reduces the likelihood of lifting restrictions. Today, the focus will be on the US inflation report, which has a base rate forecast of +6.5%, slightly below September's 6.5%. It is very important because if inflation does not show at least some signs of slowing down, then Fed rate forecasts could rise to 6% for 2023, which will increase panic and push up demand for dollar. Conversely, a data release of 6.5% or lower could dampen anti-risk sentiment slightly and boost demand for commodity currencies. NZD/USD Inflationary momentum in New Zealand remains strong and there is no slowdown yet. But the labor market is very stable, thanks to the very large decrease in the number of workers dropping out of the labor force. Another record performance for the 3rd quarter is the growth in average hourly wages, which in the private sector grew by 8.6% y/y. It is expected that by the end of the year, this figure will exceed 9%, which leaves the RBNZ no choice but to raise rates higher. The latest RBNZ survey on inflation expectations showed that inflation is expected to reach 5.08% in 1 year versus 4.86% in September. Then, it will return to 3.62% in 2 years versus 3.07% earlier. Obviously, inflation expectations continue to rise even though the RBNZ is raising rates quite aggressively. The ANZ Bank predicts that the rate will be raised to 5% in February, then peak in the end of 2023, which looks more aggressive than the Fed's policy, and will contribute to the growth of the yield spread in favor of the kiwi. But if prices for dairy products continue to drop, NZD will halt growth. That, however, is quite unlikely as a peak in stocks of dairy products has been formed and a reduction in production is expected, which will help support prices. According to reports, NZD net short position decreased for the second week in a row. There is a bearish advantage of -0.22 billion, but the estimated price turned up, increasing the probability of a bullish correction. Kiwi broke through the resistance level of 0.5866. In case of a rebound, support will be found in 0.5810/20, while resistance will be in 0.5960 (23.6% retracement level of the fall since February 2021). AUD/USD The consumer sentiment index reportedly fell 6.9%, from 83.7 in October to 78.0 in November. Obviously, inflation in Australia continues to grow, reaching 7.3% in the 3rd quarter against 6.1% earlier. Forecasts suggest further inflation growth. This is why the Australian government is very careful in making changes to tax policy. Rate forecasts are also rising to a higher level, which leads to a drop in consumer spending. There is also a marked decrease in labor market confidence, as well as in the possibility of buying a home. In terms of positioning, the latest data says net short position in AUD decreased by 0.1 billion over the reporting week. The bearish advantage remains, with the estimated price being below the long-term average and is directed downwards. Although the trend is bearish, there will be attempts of upward correction. Support is at 0.6320/30, while resistance is at 0.6510/30. But trading will move into a side channel, the exit from which is more likely down. When trying to grow to 0.6510/30, traders must sell first in order to return the quote to 0.6320/30. However, there is no reason yet to expect a full-fledged bullish reversal.   Relevance up to 07:00 2022-11-15 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/326725
The Commodities Digest: US Crude Oil Inventories Decline Amidst Growing Supply Risks

A Reaction In Equities Will Likely Remain Worth Noting

Saxo Bank Saxo Bank 10.11.2022 10:30
Summary:  A potentially weaker US CPI print today doesn’t seem to have much of a power to change anything for the Fed or the markets. The focus for equity markets has gone beyond interest rates to earnings/recession risks and liquidity risks. Meanwhile, the dollar’s safe-haven bid may remain in play. The bigger risk remains on the upside surprise, which can turn things more ugly with a number of simultaneous risks playing out. Markets face a big test ahead with the release of US inflation figures later today. While some may still be hoping for a Fed pivot if we see a softer print, it is probably time for them to wake up and smell the coffee. There is no doubt that some indicators are pointing towards some easing of price pressures. That has to happen – maybe today, maybe in another 1-2 months. This month, we have had the price paid component of ISM manufacturing dip below 50, which marks the dividing line between expansion and contraction. Still, ISM services hinted at further gains in prices for the services sector, which continue to point towards stickier and broader price pressures. Meanwhile, commodity prices have once again remained in a range in October, while China reopening has not materialised in any substantial way. The wave of tech layoffs that we have seen over the last few weeks also suggests there will be some downward pressure on wages in the coming months. Expectations take this into account, with the headline CPI print for October seen softer at 7.9% YoY from 8.2% YoY previously. Core is expected at 6.5% YoY and 0.5% MoM, still way too high from the 0.2% MoM levels needed to bring inflation close to the Fed’s 2% target. However, any softness, if seen today, is unlikely to change the Fed path. The Fed has already communicated a downshift in its rate hike trajectory without exiting its hawkish bent. Could there be room for them to pursue more dovishness despite inflation being still far from its target? I would doubt that. December Fed rate pricing is currently closer to a 50bps rate hike, there is no way we will get a smaller hike than that. A poor showing of the Republicans in the US midterms has also given the Fed more ammunition to remain focused on inflation, rather than the markets. The biggest risk, therefore, is still a beat of expectations, as that could mean further higher terminal rate pricing and a move towards 75bps in terms of December rate hike pricing. An upside surprise in inflation and a move in US 2-year yields back towards 4.7% could be USD positive and move the yield-sensitive Japanese yen. But its better to still be wary of too much pressure on the USD, beyond a knee-jerk reaction, even if we see a softer CPI print because we are going into today’s release with a very weak risk sentiment on the back of the crypto turmoil and the tech sector layoffs sounding a louder alarm on recession concerns, suggesting the safe-haven reputation of the US dollar may come into play. A reaction in equities will likely remain worth noting. A core print of below 0.5% could spark a relief rally, but eventually the focus will turn back to Fed’s terminal rate target which will still be above 5%, mounting earnings pressures and liquidity woes stemming from the crypto crash and other financial risks in the markets. Also, a number of Fed officials are scheduled to speak after the CPI release, including the Fed's Daly, Mester and George – and they would potentially be ready to up their hawkish stance if we see a CPI miss. But a higher print, together with the risk mood we are in, can be quite painful for equities. We also have a 30Y treasury auction due, and such long duration supply could well extend a push towards higher yields.   Source: https://www.home.saxo/content/articles/macro/macro-insights-a-softer-us-cpi-expectation-does-not-materially-change-the-fed-path-10112022
Positive Shift in Inflation Structure: Core Inflation Falls in Hungary

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

Kamila Szypuła Kamila Szypuła 10.11.2022 11:30
Today there are no major economic events than the result of the US CPI report. In addition, there will be important speeches by members of the FOMC and other central banks, including the Bank of England of Canada. RICS House Price Balance The Royal Institution of Chartered Surveyors (RICS) House Price Balance was published early in the day. The result showed that the index fell sharply below zero. The current reading is at -2%. A drop from 30% to 20% was forecast, but the current figure has turned out to be more drastic. This means that house prices in the designated area have dropped drastically. There has been a decline in prices since May, and the present one signifies a significant deepening of this trend. The first speeches The first speech of the day took place at 2:45 CET. The speaker was Michele Bullock serves as an Assistant Governor of the Reserve Bank of Australia (RBA). The next speech was from America. Fed member Christopher J. Waller spoke at 9:00 CET More speeches Ahead Today also representatives of European banks will take the floor. Andrea Maechler serves as Governing Board Member of the Swiss National Bank (SNB) is set to speak at 14:30 CET. At the same time will be speak Andrea Enria, Chair of Supervisory Board of the European Central Bank. Speech by representatives of the Bank of England is scheduled for 15:00 CET and 15:10 CET. Speakers in turn: David Ramsden, Deputy Governor of the Bank of England and Silvana Tenreyro, a member of the Monetary Policy Committee (MPC). Another Fed speech and one from the Bank of Canada are also planned. Bank of Canada Member Governor Tiff Macklem will speak at 6:50 PM CET. After the published reports, the following will speak: Federal Reserve Bank of Philadelphia President Patrick Harker, Federal Open Market Committee (FOMC) Member Mester and Federal Reserve Bank of Kansas City President Esther George. All speeches can provide valuable information about the future of monetary policy actions of the banks concerned. ECB Economic Bulletin At 11:00 CET the ECB published a Bulletin. The Economic Bulletin provides a comprehensive analysis of economic and monetary developments and interim updates on key indicators. Which can help investors to assess the future development of this region, as well as summarize the effectiveness of ECB's work South Africa Manufacturing Production Today, South Africa will also publish a report on Manufacturing Production. The shift from Y / Y of output produced by manufacturers is forecast to decline from 1.4% to -2.4%. A smaller index in this sector may indicate serious problems which the country's economy is struggling with, which will hinder the growth. Brazil CPI Brazil as well as the United States will publish inflation data. In South America's largest economy, Y/Y inflation is expected to decline from 7.17% to 6.34%. It is very likely as the CPI has been in a downward trend since July. Meanwhile, the CPI m/m is expected to increase from -0.29% to 0.48%. US CPI Expectations for US inflation are positive. Slightly dropping is expected. Read more: Inflation In The USA Has A Chance Of Cooler| FXMAG.COM Initial Jobless Claims The number of individuals who filed for unemployment insurance for the first time during the past week is expected to increase by 3K weekly report. The last reading was at 217K and it was a positive reading as the level persisted for another week and the forecasts will increase to 220K. At 15:30 CET it will turn out if the reading is positive this time. Summary: 2:01 CET RICS House Price Balance 2:45 CET South Africa Assist Gov Bullock Speaks 9:00 CET Fed Waller Speaks 11:00 CET ECB Economic Bulletin 13:00 CET RPA Manufacturing Production 14:00 CET Brazil CPI 14:30 CET SNB Gov Board Member Maechler Speaks 14:30 CET ECB's Enria Speaks 15:00 CET MPC Member Ramsden Speaks 15:10 CET MPC Member Tenreyro Speaks 15:30 CET US CPI 15:30 CET Initial Jobless Claims 16:00 CET FOMC Member Harker Speaks 18:50 CET BoC Gov Macklem Speaks 19:30 CET FOMC Member Mester Speaks 20:30 CET FOMC Member George Speaks Source: https://www.investing.com/economic-calendar/
ECB's Hawkish Hike: Boosting EUR/USD and Shaping Global Monetary Policy

Saxo Bank's Podcast: The Equity Risk Premium, The Meltdown Of Crypto And More

Saxo Bank Saxo Bank 10.11.2022 12:22
Summary:  Today we look at the sudden shift of the plot over the last 24 hours as the crypto contagion effects from the meltdown in that space have reached sufficient magnitude to impact sentiment across markets. We emphasize caution on the network effects among many clusters of assets held by the same hands holding crypto. Also, a look at where we are with the equity risk premium as investors better not hope for "normal" equity valuations. A glance at FX and the USD rising on liquidity concerns and brushing off the drop in US treasury yields, which brings into question the reaction function around today's October US CPI release, which may not have the impact previously anticipated, even on a surprise. Today's pod features Peter Garnry on equities and John J. Hardy hosting an on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: https://www.home.saxo/content/articles/podcast/podcast-nov-10-2022-10112022
Rates and Cycles: Central Banks' Strategies in Focus Amid Steepening Impulses

If US CPI Meets The Expectations, The Us Yields Will Increase

InstaForex Analysis InstaForex Analysis 10.11.2022 12:27
Traders are focused on the upcoming US consumer price data this Thursday, but the inflation data due out a day later could be even more important in determining the short-term outlook for global markets. While the expected fall in the consumer price index is likely to be welcomed by investors, Friday's 5 to 10-year inflation expectations from the University of Michigan will resonate with Fed officials who fear a further increase in prices. The index rebounded to 2.9% in October, so another gain could put pressure on the bank and force it to raise rates even higher than expected. That would reduce risk appetite, from equities to bonds. On Thursday, Richmond Fed President Thomas Barkin vowed that the central bank would not back down from a slow return to normal inflation levels, which could threaten the stability of inflation expectations. US yields could rise if the consumer price index is in line with forecasts. 5-10 year inflation expectations may surge to the highest since 2011, said Prashant Nyunaha, a senior rate strategist at TD Securities. A decline in the expected consumer price index should not provoke a significant market reaction, but retesting the January and June highs, according to the University of Michigan, will confirm that the rate hike to date has not had the expected impact on inflation Relevance up to 10:00 2022-11-11 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/326771
US Inflation Forecasted at 3.3%, UK GDP Projections at 0%, Fed Member Harker's Views on Rates

Today’s US Inflation Report Becomes Even More Important

Craig Erlam Craig Erlam 10.11.2022 12:04
We’re seeing some risk aversion in financial markets on Thursday as we await inflation data from the US later in the week. It probably won’t come as a surprise to many that we’re seeing stock markets in the red considering how well they’ve performed in recent days and weeks. It would appear we’ve seen a lot of buying on the hope of a Fed pivot and some weaker inflation and labour market figures. Well, the Fed kind of pivoted but indicated that the terminal rate may be higher. The labour market is still extremely tight and Friday delivered another hot report. Big tech seems to find itself in the minority in terms of its decision to let go of large numbers of staff, with Twitter and Meta most notably making huge redundancies in recent weeks. With neither the Fed nor the labour market fully delivering – and one could argue they never were likely to – today’s inflation report becomes ever more important. Another hot reading could be the latest in a growing list of setbacks for investors, who have been all too keen to buy at discounted levels in the hope the data rewards them. So far it hasn’t. That will turn at some point of course and this could be that moment. The million-dollar question is how fast will it fall. As this will ultimately determine the Fed’s response. The best thing about a slower pace of tightening is that it allows time for the data to justify smaller rate hikes and an eventual end to the tightening process. Without it, the Fed will be in a very uncomfortable position of blindly weighing up inflation, recession and overtightening risks. Is FTX a one-off? Bitcoin is trading up more than 5% today but that comes following two terrible days for cryptos. Bitcoin fell more than 25% from the start of trade on Monday before finding some support around $15,500 and recovering slightly. The situation at FTX has unravelled at a remarkable pace, culminating on Wednesday evening with Binance bailing on its rescue offer following some due diligence and new allegations. The ripple effects throughout the industry have been severe so far, with the fear not just being which other tokens could be exposed but whether similar vulnerabilities exist elsewhere. As Warren Buffett says, it’s only when the tide goes out that you learn who has been swimming naked. Well, it may well be on its way out and traders are fearing what it will uncover. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
The Downside Of The US Dollar Index Remains Limited

A Stronger Movement Of DXY Upward Can Arrive

InstaForex Analysis InstaForex Analysis 10.11.2022 13:08
Today, the dollar continues to recover after a strong fall the day before, provoked by mixed data from the US labor market, published last week. The dollar index (DXY) is growing today for the second day in a row while market participants are assessing the results of the midterm elections to the US Congress and are preparing for the publication of updated data on inflation in the US today. These can significantly affect the Fed and the dynamics of the dollar. Economists assume that the annual CPI fell in October from 8.2% to 8.0% and the base CPI from 6.6% to 6.5%. If the data really indicate a slowdown in inflation, the Fed may begin to slow down the pace of tightening its policy, raising the interest rate in December by 0.50% and not by 0.75%, as before. It is noteworthy that New York Fed President John Williams recently said that long-term inflation expectations have stabilized at levels close to the target level. At the same time, in monthly terms, CPI values may indicate an increase in inflation. It will probably be difficult to say how the market will react to this, given the annual slowdown in inflation. One way or another, the inflation rate remains four times higher than the Fed's target level, and this forces the heads of the US central bank to still adhere to a strict approach in determining the parameters of monetary policy. Statistics on the number of applications for unemployment benefits will also be published today (at 13:30 GMT). The number of initial claims for benefits may increase slightly to 220,000 from 217,000 a week earlier. Although this is a minor change, it can negatively affect the dollar: the Fed has repeatedly linked monetary policy parameters with the state of the labor market in the country. The pace of monetary tightening may slow down if labor market indicators help. Tomorrow, the US and Canada are celebrating national holidays, American banks and stock exchanges will be closed, and on the eve of the long weekend, strong movements may be observed in the market, provoked by the fixation of some of the trading positions of traders. Considering all these, it is necessary to be prepared for just such a scenario of today's American trading session. Returning to the dynamics of the dollar index (reflected as CFD #USDX in the MT4 trading terminal), as of writing, DXY futures are trading near 110.46, still maintaining negative dynamics and moving in the lower part of the descending channel that was newly formed last month (on the DXY chart). If today's publication of US inflation data disappoints investors, it will provoke a new wave of dollar sales and a drop in DXY towards 109.00. In an alternative scenario, a breakout of the 111.00 round level will trigger a stronger movement of DXY upward.   Relevance up to 11:00 2022-11-11 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/326775
Long-Term Yields Soar Amidst Hawkish Fed: Will They Reach 5%?

The ECB May Need To Hike More Than Markets Expect

ING Economics ING Economics 10.11.2022 13:19
US CPI readings have had a habit of disappointing, and markets' stronger footing into the release and an ongoing preoccupation with a 'pivot'-narrative make it look more susceptible to such an outcome. In any case, Fed officials may see little reason yet to signal less tightening on aggregate given inflation is still wide of the mark In this article One slower inflation print may not yet mean the Fed will want to signal less tightening in sum ECB sticks with hawkish tones Today's events and market view One slower inflation print may not yet mean the Fed will want to signal less tightening in sum The US October CPI will be today’s main flashpoint. The consensus is for headline inflation to slow to 7.9% and the core rate to ease to 6.5%. The main focus should be on the month-on-month core rate, which is seen ticking down to 0.5% from 0.6%. Mind you, readings closer to 0.2% is what would be needed to bring the rate closer to the Fed’s 2% target, so anything we will see today will still signal central bankers that they are wide off the mark. Today will still signal to central bankers that they are wide of the mark     But coming in the wake of the Fed signalling the possibility of decelerating its tightening pace from December onwards, there is a good chance that markets will extrapolate this from today’s data. A reading in line with consensus should further strengthen expectations for a 50bp hike in December, which is what the market is currently leaning towards, with a 57bp increase discounted in the OIS forwards. The cautionary tale is that inflation data has had a habit of surprising with higher readings. Markets have been trading stronger going into today’s reading with 10Y Treasury yields dipping towards 4.05% yesterday, which could increase the impact of a disappointing inflation reading. However, we have the feeling that the market may still be too absorbed with the notion of a potential pivot. There are good reasons to slow the pace of tightening not least given policy lags involved after a phase of catching up. That does not mean that the Fed will want to signal that it is doing less tightening in sum. This should not be the case unless there is more compelling evidence of inflation being on a trajectory to return to target.       US yields off their highs means a high CPI would be most impactful for markets Source:Refinitiv, ING ECB sticks with hawkish tones The European Central Bank has shown its willingness to keep its hawkish stance even in light of growth risks. At the hawkish end, Belgium’s Pierre Wunsch stated the ECB may need to hike more than markets expect if the economic downturn remained mild. Such hawkish signalling might be motivated by real rates having failed to rebound from their late October slump. The ECB’s consumer expectations survey contained little to cheer about for the ECB To be sure, the ECB’s consumer expectations survey contained little to cheer about for the ECB and its efforts to tackle inflation. Near-term price expectations over the 12-month horizon increased a little to 5.1%, while longer run inflation expectations over the 3-year horizon remained unchanged at 3%. Uncertainty over the outlook remained elevated. At the same time expectations of economic growth deteriorated markedly. The fall in real rate is a concern with inflation expectations rising Source: Refinitiv, ING Today's events and market view Rates markets appear to be trading on the front foot going into today's US CPI report. But the backdrop is still one where the appetite to take on duration risk appears to be limited. At least this is what the disappointing metrics of yesterday's 10Y US Treasuty auction suggest and we think the risks are skewed towards a larger move on the back of a disappointing inflation reading. Note that today the US Treasury will also follow up with a 30Y auction, and such long duration supply could well extend a push towards higher yields. A number of Fed officials are scheduled to speak after the CPI release, including the Fed's Daly, Mester and George. Other US data to watch are the initial jobless claims that should still point to a relatively robust labour market. In the eurozone the focus should be on ECB comments with Isabel Schnabel scheduled to speak in the afternoon. TagsRates Daily
S&P 500 ended the session 1.4% higher. This evening Japan's inflation goes public

Fed's Nael Kashkari called the deliberation on a pivot "premature". Eurodollar trading close to 1.00

Conotoxia Comments Conotoxia Comments 10.11.2022 13:58
This year the word inflation may be considered the word of the year. It looks like it might not lose its popularity as the year comes to an end, and still, the phenomenon of rising prices in the economy may arouse great interest. Today we will learn the inflation rate for the United States, on which further decisions of the Federal Reserve on interest rates may depend. The above decisions may in turn affect the behavior of the U.S. dollar, stock market indices or commodities. According to the tradingeconomics website, the annual inflation rate in the US may retreat to 8% in October from the 8.2% recorded the previous month. Core inflation is also possible to fall to 6.5% from a 40-year peak of 6.6%, according to market consensus. At the same time, it seems expected that the monthly inflation rate could accelerate to 0.6% in October from 0.4% in September, as gasoline prices rose for the first time in four months. U.S. inflation was recorded at 8.2% in September, the lowest in seven months, compared to 8.3% in August. What are Fed officials saying? U.S. Federal Reserve Bank of Richmond President Tom Barkin shared on Wednesday that if the central bank decided to retreat due to "fear of a slowdown, inflation would come back even stronger." Barkin stressed that while the Fed's current monetary policy path could lead to a slowdown, as the central bank aims to bring "supply and demand back into balance" and pull inflation down to 2%, BBN reported. Meanwhile, Federal Reserve Bank of Minneapolis President Neel Kashkari said discussion of a pivot in current Fed monetary policy is "completely premature." He said that the central bank's dual mandate of keeping inflation at 2% and maximizing employment will encounter problems "at some point," but that moment is "very far away." Kashkari stressed that wages are not driving inflation, but rather trying to catch up with it. He expressed regret that the Fed did not start raising interest rates earlier, but noted that inflation will continue to be high due to external factors, according to the BBN release. Dollar exchange rate ahead of inflation data Source: Conotoxia MT5, EURUSD, Daily The EUR/USD pair's exchange rate seems to be consolidating at the 1.0000 level ahead of the release of US inflation data. This could be a potential resistance level, the overcoming of which could lead to a possible appreciation of the euro towards 1.0300. However, for this to happen, it is possible that the inflation data would have to be slightly weaker than market expectations. Meanwhile, potential support could be in the region of 0.9750. The inflation data will be published today at 14:30 GMT+1. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75,21% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
FX Daily: Hawkish Powell lends his wings to the dollar

According to FXStreet the December decision of Fed will be affected by the next inflation print which is released on December 13th...

FXStreet News FXStreet News 10.11.2022 16:00
US core inflation has risen by only 0.3% in October, a welcome relief. Markets are set to reprice the Fed peak rate and rally. The bank's next rate decision hinges on another CPI report. Democrats must be frustrated – US inflation has finally dropped significantly, but this report came after the elections. But we are not here to talk about the mid-terms– which had little impact on investors – but about the next moves in markets. In short: the party will likely continue. The US Core Consumer Price Index rose by only 0.3% in October, half of September's rise and below 0.5% expected. The YoY figure advanced by only 6.3% vs. the 6.6% predicted. This is a notable fall. In addition, headline CPI decelerated to 7.7%, which is good news for consumers. However, an equal slowdown in Core CPI was also seen in July. When that figure rose by 0.3%, markets rallied, but then faced two consecutive jumps of 0.6%. In short – this could still be a one-off. Higher rental prices take time to reach official statistics, and demand for other services such as flights remains robust. The unsnarling of supply chains and a cooldown in shopping of goods is behind the recent drop. The current party in stock markets and the decline in the Dollar will likely continue. The data is probably sufficient to cement a 50 bps hike in December, a step down after four consecutive 75 bps hikes. But what's next? It is essential to remember that Fed Chair Jerome Powell stressed that the peak interest rate would be higher than 1) What the bank previously expected 2) What markets expected. Beyond December, the Fed could still raise rates, hit a high peak above 5% and hold it there for a long time. The next CPI report is published on December 13, and the Fed announces its decision on December 14. A swing back to a strong inflation read – October could be a one-off like July – would change matters significantly. A 50 bps hike in December would be accompanied by forecasts for higher rates. Enjoy the party, but remember to lock at the clock.
Central Bank Policies: Hawkish Fed vs. Dovish Others"

Economics indicators of the USA don't let us think it's all over

ING Economics ING Economics 10.11.2022 23:23
US inflation slowed more than expected in October, fuelling hopes that the peak has passed and the Fed can slow the pace of rate hikes and perhaps bring them to an earlier conclusion. However, the jobs market remains tight and month-on-month readings are still tracking far higher than required to get inflation back to 2%. We can't give the all-clear yet This is a rare moment of good news on inflation, however it must slow further in order to reach the 2%YoY target 0.3%MoM Increase in core inflation   A nice surprise on inflation October US consumer price inflation (CPI) has come in at 0.4% month-on-month and 7.7% year-on-year versus the 0.6%MoM and 7.9%YoY consensus. This is down from 8.2%YoY in September with the chart below showing that we have clearly passed the peak for headline inflation. However, the focus should be the core rate given the Federal Reserve can do very little about food and energy prices, and this was even better rising "just" 0.3%MoM and 6.3%YoY versus the 0.5%/6.5% consensus. The YoY rate was 6.6% in September and again we are hopeful that the peak has passed. Contributions to annual US inflation (YoY%) Source: Macrobond, ING   The details show shelter (the largest CPI component) remaining firm at 0.8%MoM, but used cars (4% of the inflation basket) are finally responding to the declines in second-hand car auction prices, posting a 2.4%MoM drop. Airline fares fell 1.1% and apparel was down 0.7%MoM while medical care dropped 0.5% after having posted some big rises this year. We had expected this to be an area of downside risk given the way the Bureau of Labor Statistics calculates the series for out-of-pocket insurance costs, but we hadn't expected it to be as large as it was. It will help depress CPI readings over the coming year. Outside of these areas, things are more mixed with recreation up 0.7%MoM, and other goods and services up 0.5%. Inflation must slow further before the-all clear can be given This is a rare moment of good news on inflation, although we are still well above the 0.17%MoM prints we need to consistently hit over time in order for inflation to reach the 2%YoY target (see chart below). The Federal Reserve will keep hiking given inflation remains well above target amid a growing economy with a tight jobs market, but today's outcome is very supportive for it to "step down" to a 50bp hike at the December meeting. That said we do have more data to come, most notably the November jobs report (2 December) and the November CPI report (13 December) ahead of the 14 December Federal Open Market Committee (FOMC) meeting, and nothing can be taken for granted. Core MoM inflation readings: orange line marks the 0.17% rate required over time to get annual inflation to 2% Source: Macrobond, ING Fed will be wary of any relaxation of financial conditions Indeed, market reaction has been swift and aggressive with sharp falls in Treasury yields as some interpret that one CPI downside surprise means that the Fed’s work is almost done. However, the Fed won't want to signal that yet as it will contribute to a loosening of financial conditions that could undermine all the hard work in trying to constrain inflation. We would expect to see some fairly hawkish rhetoric over the coming days' messaging, that while there likely will be a moderation in the size of rate hikes, inflation is not defeated so the Fed has more work to do with a higher terminal rate than it signalled in September. Read this article on THINK TagsUS Inflation Federal Reserve Cpi Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Crude Oil Ended Higher | Initial Jobless Claims Rose Marginally

Crude Oil Ended Higher | Initial Jobless Claims Rose Marginally

Saxo Bank Saxo Bank 11.11.2022 08:26
Summary:  A softer US CPI print sent the equity markets skyrocketing in an extreme reaction, but there was some pushback against dovish expectations from Fed speakers and WSJ’s Timiraos, highlighting that a 50bps rate hike at the December Fed meeting is still in play. Dollar weakness fueled gains across the metals space, but oil market remained volatile on concerns around China’s covid cases even as the authorities urged targeted measures will remain in place. UK GDP due in the day ahead before focus turns to G20 meetings next week. What’s happening in markets? The S&P 500 (ESZ2) jumped 5.5% and Nasdaq 100 (NQZ2) soared 7.5%, staging the biggest rally in two years US equities surged the most since 2020 on a softer-than-expected CPI report. S&P 500 gained 5.5% and Nasdaq 100 soared 7.5%. The gains were board-based. All 11 sectors of the S&P 500 rose, with the information technology, real estate, and consumer discretionary sectors leading the charge higher. Semiconductor names surge, Marvel Technology (MRVL) up 16.1%, Nvidia (NVDA:xnas) up 14.3%, and Advanced Micro Devices (AMD:xnas) up 14.3%.  Amazon (AMZN:xnas) surged 12%, Meta (META:xnas) gained 10.3% and Apple (AAPL:xnas) climbed 8.9%. The shift of sentiment from risk-off to risk-on saw the crypto stabilize and Bitcoin rally 13%. US treasury (TLT:xnas, IEF:xnas, SHY:xnas) soared, yields tumbling 22 to 30bps across the curve Treasuries jumped in price and yields plunged on slower-than-expected CPI data. Large buying first concentrated on the 2-year and the 5-year notes. The yield curve bull-steepening in initially, with the 2-10 spread narrowed 8bps to minus-41bps at one point. However, the long ends rallied strongly in the afternoon following a strong 30-year bond auction. The curve reversed and became more inverted with 2-10-year finishing the session at minus-52 bps. At the close, 2-year yields fell 25bps to 4.33% and 10-year yields tumbled 28bps to 3.81%. On Fedspeak, Cleveland Fed President Mester said “services inflation, which tends to be sticky, has not yet shown signs of slowing” and she views “the larger risks as coming from tightening too little”. San Francisco Fed President Mary Daly remarked “it was indeed good news that inflation moderated its grip a bit” but “one month of data does not a victory make”. Hong Kong’s Hang Seng (HSIX2) China’s CSI300 (03188:xhkg) retreated on Covid outbreaks Hong Kong and China stocks retreated on Thursday as China’s daily new domestic Covid cases came in above 8,000 second day in a row and Guangzhou extended lockdown in one of its districts. Hang Seng Index dropped 1.7% and CSI 300 lost 0.8%. China Internet and EV stocks underperformed. NIO (0988:xhkg) fell 13.2% on a bigger-than-expected loss in Q3 and a Q4 guidance below analysts’ expectations. Overnight in U.S. hours, Hang Seng Index futures jumped 4.6% after U.S. stocks soared on softer CPI data. ADRs of Alibaba (09988:xhkg), Meituan (03690:xhkg), and Tencent (00700) surged around 7% to 9% in New York hours. FX: Massive dollar selloff in the aftermath of the US CPI release The Dollar Index saw its greatest losses in a single day since 2009, falling to lows of 107.7 after the release of that softer-than-expected US CPI. The biggest gainer on the G10 board was JPY, no surprises there, given its yield-sensitive nature and the plunge in US yields. USDJPY broke below 141 although it has rebounded to 141.68 in the Asian morning. If we do see hawkish Fed comments in the coming days/weeks, some of this rally in the JPY is likely to be unwound but overall the trend in USDJPY remains biased to the downside now with most of the interest rate expectations already in the market. GBPUSD was also a big gainer as it surged to the 1.17 handle, but a test lies ahead with UK GDP release today likely to confirm the onset of a recession (read preview below). Crude oil (CLZ2 & LCOF3) volatile amid dollar weakness and China's Covid concerns Crude oil ended higher in a volatile session as earlier concerns of weak demand were overtaken by the broader market rally in response to lower inflation and the weakness in the US dollar. Concerns however remain on China’s Covid cases with Beijing reporting its highest number of cases in a year, which kept the gains restrained. WTI futures rose above $86/barrel while Brent went above $94 before retreating later. Cooler US inflation prompts gains across metals The weaker USD eased pressure on the base metals complex, with copper rising more than 2%. This was boosted by reports coming out of a Politburo Standing Committee meeting that suggest Beijing would take more targeted measures to avoid damage to the economy. If China’s Zero covid measures remain targeted, this could shift focus back to supply issues and dollar weakness. Copper (HGZ2) broke the September high of $3.6925, and is now testing resistance at $3.78. Gold (XAUUSD) also broke above the double top at 1730, likely suggesting that the bottom is in place. Silver (XAGUSD) rose to $21.83 but has since returned to the resistance turned support at $21.50.   What to consider? Softer US inflation, but what does it mean for the Fed? US CPI was softer than expected across the board, as headline M/M and Y/Y printed 0.4% (exp. 0.6%, unchanged) and 7.7% (exp. 8.0%, prev. 8.2%), respectively, while the core metrics came in at 0.3% M/M (exp. 0.5%, prev. 0.6%) and 6.3% Y/Y (exp. 6.5%, prev. 6.6%) on a Y/Y basis. Shelter prices still remained hot while the used vehicle prices declined by 2.4% M/M. While the inflation still remains high and far from Fed’s 2% target, it can be expected that the trend is lower. Markets cheered the release, expecting a downshift in Fed’s rate hike trajectory which has already been communicated at the last FOMC meeting. December Fed rate hike pricing is still close to 50bps, while the terminal rate projections have slid lower to 4.9% for May 2023. However, it is worth noting that there is one more labor market report and another CPI report due before the FOMC’s Dec 13-14 meeting. Fed speakers pushed back on the market rally The kind of market reaction we have seen to the soft CPI print in the US yesterday confirms that investors still remain on edge expecting a Fed pivot. This can prove to be counterproductive, as easing of financial conditions can derail this downtrend in inflation and reverse the less hawkish path that Fed is expected to take in the coming months. The Cleveland Fed’s Loretta Mester said that, while she was encouraged by October’s data, she sees bigger risks from tightening too little than too much. Kansas City Fed President Esther George said monetary policy “clearly has more work to do”, while the Dallas Fed’s Lorie Logan said earlier that inflation has a long way to go before it reaches the central bank’s target. They also noted it may be time to slow down the pace of hikes, however, but that it shouldn’t be interpreted as easing policy. Equally importantly, WSJ's Timiraos tweeted, "The October inflation report is likely to keep the Fed on track to approve a [50bps rate hike] next month. Officials had already signaled they wanted to slow the pace of rises and were somewhat insensitive to near-term inflation data". Easing financial conditions will likely drive the Fed speakers to a further hawkish tilt in the coming days. US jobless claims still underscore a tight labor market Initial jobless claims rose marginally to 225k from 218k, and above the expected 220k. Meanwhile, continued claims also exceeded consensus to print 1.493mln (exp. 1.475mln) from, the revised higher, 1.487mln. While this still continues to show a tight labor market in the US, it may be worth watching how it moves in the coming months especially after the wave of tech sector layoffs that we have seen in the past few weeks. The latest in the Crypto space Bloomberg reports a balance sheet hole of $8bn for FTX. Likewise, the Wall Street Journal reports that Alameda Research owes FTX about $10bn. Reuters says that the loan to Alameda Research was equal to at least $4bn. Sam Bankman-Fried (SBF), however, went to Twitter to give an explanation. He goes on to talk about two major mistakes that he has made, one being that he underestimated the demand for sudden liquidity by clients withdrawing funds. In terms of liquidity, SBF further says that: “FTX International currently has a total market value of assets/collateral higher than client deposits (moves with prices!). But that's different from liquidity for delivery--as you can tell from the state of withdrawals. The liquidity varies widely, from very to very little.” Remember, that this is contrary to the story by Bloomberg and likely the Wall Street Journal and Reuters story. It now seems plausible that FTX has a serious hole in its balance sheet”, though, hard to judge anything at this stage given the amount of rumors and unconfirmed information floating around. What remains clear is that any liquidity event will unlikely remain isolated as cascading margin calls and contagion effects are likely to be felt beyond the crypto space. UK GDP to confirm the onset of a recession UK’s Q3 GDP is scheduled for release today and the first quarterly negative print of the current cycle is expected to be seen. Consensus forecast is seen at 2.1% YoY, -0.5% QoQ, significantly lower than the second quarter print of 4.4% YoY, 0.2% QoQ. August GDP data had already begun to show a negative print with -0.3% MoM and the trend will only likely get worse in September, exacerbated by a one-off factor relating to Queen Elizabeth II’s funeral in the month, which was a national holiday. The economy is already facing a cost of living crisis, and both fiscal and monetary policy have to remain tight in this very tough operating environment. Technically, a recession may still be avoided as activity levels picked up in October, but still it will remain hard for the UK to dodge a recession going into 2023. This suggests there maybe some downside for the sterling, especially as the market refuses to cater to the Bank of England’s warning that the current expectations of terminal rate may be too steep. Credit growth in China slowed in October China’s new aggregate financing fell to RMB908 billion in October, much lower that the RMB1,600 billion expected in the Bloomberg survey and the RMG3,527 billion in September. The growth of outstanding aggregate financing slowed to 10.3% in October from 10.6% in September. New RMB loans declined to RMB615 billion in October, below the 800 billion consensus estimate and much smaller than the RMB2,470 billion in September. New RMB Medium to long-term loans to corporate fell to RMB462 billion as loan demand was weak. China’s Politburo Standing Committee met to discuss pandemic control policies  On Thursday, President Xi and the rest of the Politburo Standing Committee had a meeting to discuss its policies on pandemic control. While the statement from the meeting reiterated adherence to the dynamic zero-Covid policy, it also highlighted the push for vaccination and treatments and called on government officials to implementation of control measures more scientifically targeted and precise and to avoid doubling down on each layer of execution.   China’s Singles’ Day this Friday, Nov 11 Investors will watch closely Alibaba, JD.com, and other online retailers’ sales on Singles’ Day this Friday to gauge the strength of China’s private consumption. Analysts are expecting slower sales growth as recent data indicated slower user growth across online shopping platforms.   For our look ahead at markets this week - Listen/watch our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: https://www.home.saxo/content/articles/equities/market-insights-today-11-nov-2022-11112022
The Loonie Pair (USD/CAD) Takes Clues From The Downbeat Oil Prices

Loonie (USD/CAD) Bulls Are Supported By A Hawkish Commentary From The Bank Of Canada

TeleTrade Comments TeleTrade Comments 11.11.2022 08:47
USDCAD has witnessed barricades around 1.3350 amid positive market sentiment. Loonie bulls are supported by BOC’s hawkish commentary and a recovery in oil prices. Going forward, US long-term inflation report will be of utmost importance. The USDCAD pair has sensed selling pressure around 1.3350 in the Tokyo session after attempting a pullback move around 1.3300. The asset has turned sideways which indicates further inventory distribution, which will deliver more weakness in the counter. Meanwhile, the risk profile has strengthened further as S&P500 futures are extending their gains post a bumper rally on Thursday. The US dollar index (DXY) has refreshed its day’s low at 108.00 and is expected to display more downside ahead. A sheer decline in US inflation brought a bloodbath in US government bonds. The 10-year US Treasury yields dropped to 3.8% as chances from the CME FedWatch tool claim that 75 basis points (bps) rate hike is losing its stream now. Going forward, investors will focus on long-term US inflation expectations. The US economy is needed to pass this test too as an increment in the longer-term inflation indicator may spoil the party for risk-perceived assets. The Fed has been continuously reiterating that their long-term inflation expectations are well-anchored at around 2%. And, previously the economic data landed at 2.9%. Meanwhile, Loonie bulls are supported by a hawkish commentary from the Bank of Canada (BOC) Governor Tiff Macklem and a decent recovery in the oil prices. BOC Governor cited that “Canadians should expect even more rate hikes to come on top of six that have already happened this year,” during an interview with CBC News in the late New York session. He further added that layoffs will increase, the growth rate may come to zero in the next few quarters, and the central bank is fine with a mild recession as a price to bring down inflation to desired levels. Oil prices have rebounded as a decline in US inflation has trimmed the risk of recession. A slowdown in the rate hike pace by the Fed may bring a recovery in the scale of economic activities, which will eventually accelerate oil demand ahead.
The Commodities Digest: US Crude Oil Inventories Decline Amidst Growing Supply Risks

Inflation Running Well Above The Fed’s Desired Level

ING Economics ING Economics 12.11.2022 08:01
Primed for pivot, the market has rallied on the US CPI surprise. Fed officials have started to push back against the premature easing of financial conditions, but timing is especially inconvenient for the European Central Bank, which is still seeing greater risk of deanchoring inflation expectations  In this article Market runs with the CPI and is tailed by the Fed's hawks Spill-over of easing financial conditions comes at an inconvenient time for the ECB More signs that collateral scarcity is also on the ECB's mind Today’s events and market views We have published our Rates Outlook 2023: Belt up, we are going down: After a horrific 2022, bond markets can look forward to improving returns helped by a higher starting running yield, and subsequent falls in market rates. Brace for a reduction in central bank liquidity, more bonds supply and lingering systemic concerns as key themes, too.   Market runs with the CPI and is tailed by the Fed's hawks For once the US CPI release broke with the bad habit of surprising to the upside. And the market was quick to jump on the ‘pivot’-bandwagon, with a larger Fed hike of 75bp for December now seen off the table, and if anything it now seems that the market is shifting to discussing whether it could be 25bp rather than 50bp next month. The terminal rate that the Fed is seen reaching has slipped to 4.87%. Just after the last Fed meeting this had stood as high as 5.15%. Risk assets rallied on the prospect of slowing inflation and the Fed turning less aggressive.  At first Fed officials were quick to push back against the markets optimism The first Fed officials were quick to push back against the markets optimism. The data was better than expected, yet it is but one reading and the month-on-month core rate of 0.3% is still signaling inflation running well above the Fed’s desired level. While encouraged by the data the Fed’s Mester still saw greater risk in tightening too little than too much, Logan and George reiterated  that the Fed had more work to do. While the Fed may well move on to a slower pace of tightening also to better assess the impact of previous rapid rate increases, it may not want to signal that it is doing less overall. In fact, rallying equity markets and lower market yields easing financial conditions is probably not what it wants to see at this stage already without having more clarity where inflation is actually headed. The lower CPI print was greeted by lower nominal and real yields Source: Refinitiv, ING Spill-over of easing financial conditions comes at an inconvenient time for the ECB The read across from US markets saw the 10Y Bund yield falling to 2%, coincidentally the lowest level since just after the October ECB meeting. Terminal rate pricing for the ECB also slipped to 2.87% from above 3% previously. The ECB, however, does not even have the comfort of having at least one set of encouraging data with regards to inflation that could justify easing financial conditions, which may explain why we have had the ECB hawks becoming more vocal yesterday. We had highlighted the ECB’s consumer survey pointing to elevated if not slightly higher inflation expectations. The ECB’s Schnabel picked up on the higher persistence of inflation in her talk yesterday, while pointing out that the risk of inflation expectations deanchoring remains. There is no time for complacency and rates will likely have to move into restrictive territory to rein in inflation. Neutral won't cut it, even as the probability of a recession in the euro area increases. More signs that collateral scarcity is also on the ECB's mind On a more technical matter concerning collateral scarcity, the ECB announced yesterday that it was raising its limit of lending against cash collateral from €150bn to €250bn. Schnabel commented in a tweet that this was a precautionary measure ahead of year-end. Indeed when looking at the daily data through September, daily lending against cash never exceeded €100bn, which should be testament to the rather expensive conditions of this facility. But markets are also going into the upcoming year-end from an already much more strained starting point, so this increased backstop should be taken as a positive signal and further acknowledgement that the ECB is heeding market concerns. Daily ECB securities lending has not run into its cap Source: ECB, ING Today’s events and market views The post CPI gains in bond markets may persist for a while despite some pushback from Fed officials. The US holidays might induce some calm into overall markets allowing also risk assets to bask in the sentiment lift from improving inflation for a little while. Alongside positive news out of China that could limite the further downside in rates. This is not without risks, though. Today will still see the University of Michigan consumer confidence including its measure of surveyed inflation expectations. Longer run expectations are seen stable, while shorter run 1Y inflation expectations are seen ticking up a tad. In the eurozone we will see another busy slate of ECB speakers, though this time around with representatives from both ends of the dove-hawk spectrum. Among others look out for Holzmann, Lane, Panetta and de Guindos. Also keep an eye on the release of the European Commission economic forecasts. In primary markets Italy will be active auctioning a new 7Y bonds and tapping a 3Y bond as well as a 12Y green bond, in total for up to €8.75bn.      TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Asia Morning Bites: Inflation Data in Focus, FOMC, ECB, and BoJ Meetings Ahead

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

ING Economics ING Economics 12.11.2022 08:15
Next week UK chancellor Jeremy Hunt will deliver his Autumn Statement. Exactly how the fiscal deficit will be closed remains uncertain – we believe there will be more noticeable cuts to investment spending. Data-wise, October's CPI reading will mark the peak in UK inflation, given energy will be fixed over the coming months In this article US: Fed officials will have to tread carefully regarding hiking expectations UK: Autumn Statement in focus amid busy data week Poland: inflation remains broad-based and core inflation momentum is high Source: Shutterstock US: Fed officials will have to tread carefully regarding hiking expectations The low CPI print from the US this week has boosted expectations that the Federal Reserve will raise interest rates by “only” 50bp in December after four consecutive 75bp hikes. However, the Fed will be nervous that Treasury yields fell so far as some market participants interpreted the number as an indication that the Fed’s work is nearly done. However, Fed officials won't want to signal that yet as it will reinforce a loosening of financial conditions that could undermine all the hard work in trying to constrain inflation. We expect to hear some fairly hawkish rhetoric over the coming days, messaging that while there likely will be a moderation in the size of rate hikes, inflation is not defeated and there is likely to be a higher terminal interest rate than the central bank signalled in September. In terms of data, we have retail sales, industrial production, producer price inflation, housing starts and existing home sales. Moderate growth is likely to be the order of the day in the activity reports, while the housing numbers will be soft due to the rapid rises in mortgage borrowing costs that have prompted a collapse in demand. PPI should come in on the softer side of expectations, thanks to falling commodity prices and freight costs plus the strong dollar and easing supply chain pressures. UK: Autumn Statement in focus amid busy data week Markets have generally given new UK prime minister Rishi Sunak and his chancellor Jeremy Hunt the benefit of the doubt when it comes to next week’s Autumn Statement. That’s partly because these announcements will be accompanied by new forecasts from the Office for Budget Responsibility – something that was lacking when the ill-fated mini-budget was announced in September. Investors no doubt expect the Chancellor to do enough to convince the OBR that debt will fall across the medium-term, closing a fiscal deficit that would probably otherwise be £30-40bn/year by 2026-27. Exactly how that will be achieved remains somewhat uncertain, and pretty much every possible lever available to the Chancellor has been touted in the press at some point over the past few weeks. Recent reports suggest the Treasury will rely more on spending than taxes to do the heavy lifting. But given the real-term cuts (in some cases sizable) already facing certain government departments, it may be that this means more noticeable cuts to investment spending. For the economy, much will depend on how much of the burden is placed on consumers via higher taxation, and how immediately those changes come through. But we’ll also be looking out for further detail on how the government intends to re-structure its flagship Energy Price Guarantee. The price cap, which had been due to last for two years, will be scaled back from April. Our working assumption is that most households will be shifted back to the Ofgem regulated price, which we estimate will average £3,300 annually based on current futures prices, up from £2,500 at the current government-guaranteed level. We also have a few key pieces of data: Jobs (Tue): Hiring indicators have begun to turn lower, but so far there’s been little-to-no sign of increased redundancies. Firms continue to face material staff shortages, driven in part by rising rates of long-term sickness in older workers. We expect the unemployment rate to remain low next week, and greater scope for "labour hoarding" compared to previous recessions could feasibly limit how far and fast unemployment rises over the coming month. Inflation (Wed): Famous last words but October’s inflation data is likely to mark the peak in UK CPI – or there or thereabouts. This data will include the latest rise in electricity/gas prices, but given they’re now being fixed by the government until at least April, their contribution has probably peaked. Still, headline inflation is unlikely to slip back into single digits until March/April next year. Retail sales (Fri): We expect a third consecutive month-on-month fall in sales as the cost of living squeeze continues to bite. Poland: inflation remains broad-based and core inflation momentum is high Current account (Sep): €-3025mn The external position remains under pressure and we expect another wide current account deficit for September amid a deep foreign trade imbalance and unfavourable secondary income balance, as September was a month when Poland paid more to the EU budget than received from it. On a 12-month cumulative basis, the current account is projected to have expanded to 4.1% of GDP vs. 3.9% of GDP in August. CPI (Oct): 17.9% YoY We expect the flash estimate of 17.9% year-on-year to be confirmed by the final data. Prices of petrol went up by 4.1% month-on-month and energy for housing by 2.0% MoM, so the energy crisis is not over yet. At the same time, prices of food and non-alcoholic beverages jumped up by 2.7% MoM as farmers, food manufacturers and retailers continue to pass on higher costs of energy and transport onto their final products. Inflation remains broad-based and core inflation momentum is high. We estimate that core inflation excluding food and energy prices went up by 1.2% MoM i.e. 11.2% YoY in October vs. 10.7% YoY in September. GDP (3Q22): +3.5% YoY The recent revision of national accounts point to an even stronger 1H22 and increases the upside risk to our forecast of 2022 GDP at 4.3%. We forecast that in 3Q22, GDP bounced back after declining by 2.1% quarter-on-quarter seasonally-adjusted in 2Q22, but annual growth moderated toward 3.5% YoY. The Polish economy is clearly slowing down and a strong performance in 1H22 has created a high reference base for 2022 so we expect dismal annual GDP figures at the beginning of 2023 and risks to our 1.5% forecast for the next year are increasingly skewed to the downside. Developed Markets Economic Calendar Source: Refinitiv, ING EMEA Economic Calendar Source: Refinitiv, ING This article is part of Our view on next week’s key events   View 2 articles TagsTreasury Federal Reserve EMEA   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Economic Calendar Details and Trading Analysis - August 7 & 8

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

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

The Fed Peaks, The 10yr Yield Will Be 25-50bp Below

ING Economics ING Economics 13.11.2022 09:28
The year ahead will mostly feature falling market rates, as the Fed peaks out and the market anticipates future rate cuts. The curve should dis-invert through the year, and ultimately will steepen out from the front end. The fall in rates will come from the back end first, but should later be dominated by falls in front-end rates in the second half In this article The first quarter will be about identifying peak levels for rates When the funds rate peaks, the 10yr pre-peaks at 25-50bp below it The second quarter leaves a vacuum for market rates to collapse into Dis-inversion and curve steepening on the 2/10yr segment ahead Watch for a steeper 10/30yr spread, and a richer 5yr to the curve The first quarter will be about identifying peak levels for rates The first quarter of 2023 should be quite different to the following three quarters. As we start the new year, the Federal Reserve will still be in hiking mode. The pace of hikes will have slowed and the peak for the funds rate will be edging closer. But that peak will not be in place at least until we get through the 1 February Federal Open Market Committee (FOMC) meeting. After that meeting, the funds rate ceiling should be at 5%, and that should be it for the hikes. Market psychology will rapidly morph towards anticipating future easing moves. However, we won’t know for sure until we get through the 22 March FOMC meeting. A pass here would officially bring the rate-hiking process to an end, and typically once the market senses that the Fed is done, the next job is to start to discount the elevated probability for the next Fed move to be a rate cut. As we progress through the first quarter, the market psychology will rapidly morph towards anticipating future easing moves. Even if the Fed says with a straight face that interest rate cuts are not being contemplated, history shows that as soon as the Fed hits a peak we’re usually less than a half year away from interest rate cuts. The dot com bust provides an example of how market rates can shoot below the funds rate once the peak is in, and for that to be followed by Fed fund rate cuts. Market rates swiftly move lower once the Fed funds rate has actually peaked (dot com bust example) Source: Macrobond, Federal Reserve, ING estimates When the funds rate peaks, the 10yr pre-peaks at 25-50bp below it History shows that the 10yr yield typically trades some 50-75bp below the funds rate before the Fed reacts and begins to cut rates. The most extreme version of that was during the dot com bust when the 10yr traded some 150bp below the funds rate on the eve of the first cut, and was 100bp below the funds rate a full month before the Fed actually delivered a (50bp) cut, as shown in the chart above. Moreover, this is starting from a place where the 10yr tends to peak at the same level as the funds rate, with the 10yr typically getting there first (and the 2yr before that). The only material exception to this was during the tightening cycles of the 1970s and early 1980s when the funds rate was pushed to levels considerably above the 10yr yield. On the downside, the funds rate tends to hit a bottom that is far lower than where the 10yr yield gets to, steepening the curve in the process. That deviation has been in the region of 3-4% during the last few rate-cutting cycles. For example, after the great financial crisis, the Fed got down to 12.5bp with the 10yr Treasury yield at 4%. And in 2004, when the Fed bottomed at 1.25% the 10yr yield was in the region of 4.5%. The second quarter leaves a vacuum for market rates to collapse into So, what about the cycle ahead of us? We see the effective funds rate peaking at 4.83% (within the 4.75-5% range). Given the ongoing shortage of collateral versus liquidity (reflecting past Fed bond buying), the US 10yr Treasury yield could undershoot that peak, we think by some 25bp to 50bp. That suggests a peak in the 4.25-4.5% area (rounded). This may well remain a talking point right up to the early part of 1Q 2023. The Fed then holds at the peak for a few months (three to six perhaps) and then starts to cut by mid-year 2023, to help cushion recessionary forces. We see the Fed getting to a 4% funds rate by the end of 2023, a cumulative 100bp in cuts. And we think they ultimately get down to 2.5% in 2024, giving us an implied effective funds target terminal rate of 2.33%. This is important for mapping out the 10yr yield, where we look at history, and add some modern caveats. First, we are suggesting that when the Fed peaks, the 10yr yield will be 25-50bp below that peak, reflecting a Fed balance sheet still bloated with bonds. Second, once the Fed does peak, the 10yr should shoot lower, and we are anticipating an initial target of 3.5%, which would be 150bp below the funds rate ceiling. That would happen quite quickly, so much so that we could be there by the second quarter. Beyond that, trading between 3-3.5% with a downside bias would be the call for the second half of 2023. Essentially, we’re talking about a structural break back below 4% as being a theme for 2023; and concluding the year much closer to 3%. The 2yr tends to trade 150bp through the funds rate as the cutting cycle begins Source: Macrobond, Federal Reserve, ING estimates Dis-inversion and curve steepening on the 2/10yr segment ahead And what about the curve? The dominant theme is dis-inversion, and ultimately curve steepening. The 50bp inversion currently being seen should initially be unwound from the front end. The 2yr yield should move from the 4.5% area when the Fed peaks at 5%, to quickly discount a lower fed funds rate in the coming couple of years. The 2yr is likely to target an end game in the 2.5-3% area, but the dynamics about getting there will be different compared with the 10yr. The initial move lower in rates will come from the 10yr, as the 2yr is more closely tied to the contemporaneous funds rate. So, when the 10yr potentially trends towards 3.5% in the second quarter, the 2yr is likely to be closer to 4%, or just below. So, the 50bp inversion persists longer than many might expect. But the second quarter into the third quarter is when the curve really dis-inverts and ultimately steepens out, and by the third quarter, the 2yr is heading down to sub 3% while the 10yr remains above 3%. The end game sees the 2yr down at 2.5% while the 10yr settles closer to 3%, marking a 50bp positive difference between the 2yr and the 10yr. This marks a cumulative 100bp swing overall on the 2/10yr segment, from a 50bp inversion to a 50bp positive curve. The 2/10yr curve typically stretches to over 100bp when the Fed is cutting Source: Macrobond, Federal Reserve, ING estimates Watch for a steeper 10/30yr spread, and a richer 5yr to the curve On the 10/30yr segment, the outcome is more straightforward – we expect to see a gradual one-way re-steepening process. As the 10yr falls to 3.5%, the 30yr should fall by less, settling in the 3.75% area. And should the 10yr head to 3%, the 30yr should not get much below 3.5%. That marks a 100bp curve between the 2yr and the 30yr by 2024, compared with a 40bp inversion currently. The other big move in the curve will be in its structure. Currently, the 5yr is trading cheap to the curve. Over the course of the first quarter of 2023, the 5yr should richen, targeting a position where it is traded below the interpolated line between the 2yr and the 10yr yield (to trade rich to the curve). In absolute terms, the 5yr can trade 15bp rich (or 30bp in gross terms) or even deeper versus the 2yr and 10yr interpolation. It should remain there then until the Fed starts to cut, and for most of the rest of 2023 in fact, as the market remains bullish for bonds, and the Fed remains in rate-cutting mode as we slip into 2024.   This article is part of Rates Outlook 2023: Belt up, we’re going down   View 8 articles TagsRates outlook Rates Fed funds rate Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Middle Distillates: Strong Market Support Expected

The Host Of The G20 Meeting (Indonesia) Invited Russia's Putin And Ukraine's Zelenskyy

Marc Chandler Marc Chandler 13.11.2022 09:37
Policymakers have often said that exchange rates should reflect fundamentals. What does that really mean? Can they do anything but that? It begs the question of which fundamental factors they should reflect. Therein lies the rub.  We are still struck by the latest Bank for International Settlements figures. Their survey found that the average daily turnover in the foreign exchange market was $7.5 trillion a day. World trade last year was about $22.5 trillion. The foreign exchange market sees that every three days. Nevertheless, many still see trade as the factor that exchange rates should bring into balance. Many observers are surprised when the Chinese yuan depreciates, as it has this year, despite a huge trade surplus ($730 bln through October, a 43% increase from the first 10 months of 2021). At the same time, most accounts of the dollar's strength since January 6, 2021 (yes, that January 6 when the Dollar Index bottomed and the euro peaked) say little, if anything, about the US trade deficit. Through September this year, the deficit was nearly $746 bln (up from $620 bln in the same period last year). Instead, the dollar's strength seems most often attributed to the aggressive tightening, real and anticipated, by the Federal Reserve. Given the relative size of the market for capital and the market for goods and services, we tend to emphasize drivers of capital to understand and anticipate exchange rate movements. Put this in concrete terms. That $730 bln trade surplus China recorded this year through October is swamped by the Chinese yuan's $500 bln a day turnover. Moreover, Chinese exports are not the same as the demand for the yuan. This is because most of China's trade is not conducted in yuan. From a different but consistent perspective, Antonia Foglia (from Belgrave Capital and Banco del Ceresio) argued in the Financial Times recently that hedging the dollar exposure of the some $14 trillion of US bonds owned by foreign investors, is an important, even if overlooked, driver of the dollar's exchange rate. However, given this year's precipitous decline in US bonds, the dollar hedges need to be reduced, which entails buying the dollar and selling the local currency. He estimates that roughly half of the US Treasuries are in official hands and are not likely hedged, and he conservatively estimates that half are owned by the private sector and half again are hedged. The 20% decline in the value of Treasuries this year translates into around $700 bln of hedge-related dollar buying. We have made a parallel argument regarding the Japanese yen's so-called safe haven status. Observers have often seen that the yen strengthens risk-assets decline. However, it is difficult to know the difference between buying to go long and buying to cover a short. We argue that the yen has often been used as a funding currency. With near-zero interest rates, it is borrowed, and the proceeds are used to buy higher-yielding and/or more volatile assets. When that higher-yielding or volatile asset goes south, the funding currency is bought back, and the position is unwound. This gives the illusion of a safe haven when something entirely different is taking place. II Last week was a watershed. The softer-than-expected US CPI figures and the inversion of the 3-month-18-month bills, a part of the curve that Fed Chair Powell had drawn attention are part of the macro developments that helped mark the end of the dollar's historic rally. We thought it had already topped against sterling when the pound plummeted to record lows at the end of September, and our conviction was growing that the greenback had peaked against the Canadian dollar when CAD1.35 gave way. Position adjustment may trump fundamentals in the near term, but the dollar looks oversold for the first time in months.   While US producer prices may draw some attention, the focus in the week ahead will be on the real sector. Helped by stronger auto sales (14.9 mln, best since January and nearly 15% above Oct 2021), retail sales are expected to rise by around 1% after a flat report in September. The core measure, which excludes autos, gasoline, building materials, and food services, is rising by 0.3%. Retail sales pick up about 40% of consumption, which has been softening. It averaged 1.2% a month in Q1, 0.8% in Q2, and 0.3% in Q3. On the other hand, industrial production is expected to have slowed from 0.4% in September to 0.1% in October. Such a print would bring down the three-month moving average to about 0.14%, its lowest since last September. Yet, industrial capacity utilization remains at elevated levels. In September, it was slightly above the last cyclical high set in August 2018. Indeed, it has not been this high (80.34%) since the Great Financial Crisis, when it peaked a little above 81%. It is the interest-rate-sensitive housing market that the tightening of financial conditions is being felt most acutely. Housing starts look to break the sawtooth pattern of alternating between increases and decreases this year with back-to-back declines. On average, starts have fallen 1.9% a month on average this year through September. In the Jan-Sept period last year, housing starts fell by an average of 0.2%. As a result, existing home sales likely fell for the ninth consecutive month in October. It is the most prolonged slump since the Great Financial Crisis, though inventory levels were around four times higher back then. Limited inventory now compounds the problem of higher mortgage rates.  China reports October, industrial production, retail sales, investment, and surveyed jobless rate on November 14. The economy appears to be stabilizing at what is historically considered soft levels. The median forecast in Bloomberg's survey sees the world's second-largest economy expanding by 1.5% quarter-over-quarter in Q4. It is expected to begin a streak of quarterly increases of 1.0%-1.2%. The market is more interested in modifications of its Covid regime, especially given the flare-up of cases, but also additional efforts to support the economy. If the one-year Medium Term Lending Facility rate (2.75%) is not reduced and/or the volume is not increased (from CNY500 bln), speculation of a cut in reserve requirements will likely be heightened. The fact that the UK economy is set to contract for the next several quarters may remove some of the market sensitivity of the UK's high-frequency data. At the same time, it may heighten the focus on the inflation reports. The BOE expects CPI to peak shortly but is still committed to tightening financial conditions. The central bank meets in the middle of December. The swaps market has a 50 bp hike discounted and a little bit more, perhaps conditional on the fiscal statement due November 17. An austere budget of tax increases and spending cuts is likely, though, at this late date, there still seem to be several unresolved issues. The latest talk suggests that the tax rate of the top bracket may be increased or its threshold lowered. There has also been talk that the National Health Insurance tax on employers may be raised. An increase in the inheritance tax may be under consideration, as well. The eurozone's September trade deficit is a good reminder of the deterioration in its external balance this year. With Q3 GDP already released and set to be updated, the trade balance may be short of practical importance. The eurozone recorded a trade deficit of almost 229 bln euros through August. In the first eight months of 2021, the trade surplus was about 124 bln euros. With the largest economy in the eurozone, Germany, headed for recession, the ZEW survey may not be very interesting. The expectations component fell to its lowest level in August since the Great Financial Crisis, a ticked up slightly in October. The assessment of the current situation has continued to deteriorate. It has risen twice since September 2021. At -72.2 in October, it was the poorest assessment since August 2020. While existing home sales in the US through September have fallen by about 23% this year, existing home sales in Canada have slowed by more than 35%. They have slowed for seven consecutive months. Canadian housing starts have fared considerably better. They rose a modest 2.5% last year and are up by a quarter this year. Housing starts rose by the most this year in September, with a 10.8% surge. Typically, a pullback the following month is recorded after such a significant increase. Yet, the highlight of the week will be Canada's October CPI reading. The headline has slowed since peaking in June at 8.1%. It stood at 6.9% in September. It is likely to have decelerated again last month, helped by a favorable comparison to last October when Canada's CPI rose by 0.7%. Looking forward, the base effect is less friendly in November and December. The underlying core measures have been stickier. The Bank of Canada has three, averaging 5.3% in August and September, which is 0.2% off the peak seen in June and July. In the US, average hourly earnings slipped below 5% year-over-year for the first time since last December, and average pay (permanent workers) in Canada rose 5.5% in October. After the Bank of Canada hiked rates by half a point instead of 75 bp on October 26, the market immediately anticipated a 25 bp hike at the last meeting of the year (December 7). However, the strength of the employment report and wages prodded the market into thinking a 50 bp hike was more likely. A firm CPI report would likely push the market more in that direction. Australia reports its October employment figures. The job market down under was fairly steady until Q3. In Q4 21, and the first two quarters of this year, Australia grew full-time positions by 54.0k to almost 57k a quarter. In Q3, it lost full about 1k full-time jobs. This probably overstates the case and was largely the result of a sharp drop in July, the first loss of full-time positions since last October. Indeed, an average of 34k full-time people were hired in August and September. The Reserve Bank of Australia meets on December 6. The swaps market does not have a quarter-point hike fully discounted. Yet it sees the terminal cash target rate around 4% in a year compared with the 2.85% prevailing now.  Lastly, two international gatherings will attract attention in the coming days. The first is the Asia Pacific Economic Cooperation (APEC) which meets in Bali November 14-15. US President Biden will likely miss it due to a granddaughter's wedding, but the highlight may be a meeting between Japan's Prime Minister Kishida and China's Xi. They have not met since Kishida become prime minister. Former Prime Minister Abe visited Beijing in 2019, and there were plans for Xi to come to Japan in 2020 but were disrupted by Covid. Regional security is a crucial issue for Japan. Its own security is seen at risk if China were to move on Taiwan. Tokyo appears close to a defense agreement with the UK and possibly the Philippines. The G20 meets in Bangkok November 18-19. The host, Indonesia, is neutral and invited Russia's Putin and Ukraine's Zelenskyy. Recall that earlier this year, Biden called for Russia to be removed from the G20. Ukraine is not a member of the G20, and Zelenskyy said he would not attend if Putin did. The latest reports suggest Putin will not attend. Reports suggest Biden intends to meet with Xi at the G20 meeting. Taiwan and trade are obviously the two most salient issues. It would be the first face-to-face meeting since Biden was elected two years ago. Biden may hope to repeat Nixon's tactic of putting more space between Moscow and Beijing, and Putin's invasion of Ukraine has done Xi no favors. NATO is stronger, Europe is tied more tightly to the US via energy and defense,  and Japan and Australia, to name two, are even more wary of China's regional ambitions. Still, given what appears to be a bipartisan consensus in the US of the strategic challenge posed by Beijing, it is not clear what the US can offer China to induce a change in behavior.   The statement issued afterward will likely demonstrate the old adage that a camel is a horse made in committee. With several countries not wanting to take sides on key issues, judging from the voting patterns at the UN, the G20 may be downgraded by the US in favor of the G7 again.  Disclaimer Capital Flows Outstrip Trade Flows and that is Where to Look for Drivers of FX
Assessing 'Significant Upside Risks to Inflation': Insights from FOMC Minutes

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

ING Economics ING Economics 13.11.2022 10:09
Central bank balance sheet reduction started in 2022, but it is in 2023 that its effect will be felt in money markets. Expect a better reflection of credit and term premia, and for repo rates to normalise, with liquidity being swapped for collateral In this article US reverse repo volumes and bank reserves to fall in 2023 Repo could see a material move higher as reverse repo volumes drop The end of abundant liquidity Collateral shortage becoming a monetary policy issue US reverse repo volumes and bank reserves to fall in 2023 The way to think about the Fed’s balance sheet in round numbers is to start with its current size at almost $9trn. Of that, there is $2.25trn showing up at the reverse repo facility, $3trn in bank reserves, and most of the rest is cash in circulation (apart from other bits and pieces). So what comes out of reserves has been going into the reverse repo facility. And as the Fed’s balance sheet falls in size through bonds rolling off the front end (soft quantitative tightening), there must be a corresponding fall in bank reserves and/or in usage of the reverse repo facility. How much balance sheet roll-off is required for better balance? We think US$2trn The question then is how much balance sheet roll-off is required in order to bring about a sense of equilibrium between collateral and liquidity. A measure of this need is the $2trn of liquidity that routinely gets shovelled back to the Fed in its overnight reverse repo facility. The large use of this facility is reflective of an ongoing liquidity overflow that manifests in market repo rates struggling to match the rate being offered by the Fed (at 5bp above the fed funds floor). In fact, at times, the SOFR rate (effectively the general collateral rate) has been trading below the funds rate floor, which is not a great look. To help rectify the situation, more available collateral will help, and the counterpart to this is a better balance versus liquidity. The rise in usage of the reverse repo window has coincided with a fall in bank reserves, which are now running at $3trn. These peaked at $4.25trn in the fourth quarter of 2021. The previous low for bank reserves was $1.4trn in 2019, having come from a prior peak of $2.75trn in 2014. Back then, the Fed’s financial crisis-inspired bond-buying programme came to a conclusion (2014), and a bond roll-off then ran through 2018/19. Part of the fall in reserves reflected an uptick in economic activity and an increase in currency in circulation, and a requirement to build a buffer of high-quality liquid assets, the other part was a reduction in the Fed’s balance sheet as bonds rolled off. Fast forward to today and bank reserves are down from the highs, still at a relatively elevated $3trn, but primed to ease lower through 2023. Reverse repo balances should be the Fed liabilities that shrink the fastest in 2023 Source: Refinitiv, ING Repo could see a material move higher as reverse repo volumes drop For 2023, we can see the bond roll-off continuing throughout the year. If things get really tough macro-wise, there may be an argument for the roll-off to be put on pause. But barring the unexpected, there is ample room for the Fed to maintain the roll-off. That could have the direct effect of reducing the use of the Fed’s reverse repo facility. It does not have to, but this facility can wind all the way down to zero, which would be a desirable outcome as the market should not require recourse to repo away from the market. Should things get tight liquidity-wise, the Fed now has a permanent repo facility, where liquidity can be supplied back to the market (with bonds posted to the Fed). Ideally, the Fed should not be required to do large volumes through either of these windows. But they are there as a buffer - a buffer in both directions. 2023 should see an accelerated reduction in usage of the Fed’s reverse repo facility Overall, 2023 should see an accelerated reduction in usage of the Fed’s reverse repo facility. This should coincide with a rise in general collateral rates to above the reverse repo rate, ideally towards the effective fed funds rate. This is typically 8bp above the fed funds floor, compared with 5bp above for the reverse repo rate. Something like 8-10bp over the fed funds floor would be a good area for SOFR to settle at, correlating with a drying up of the usage of the Fed’s reverse repo facility. 2023 should also see bank reserves falling to US$2.5trn, or lower Beyond that, there could also be pressure for bank reserves to ease lower, but these should ease lower by far less than the contraction in the reverse repo volumes. We think reserves could slip down to the $2.5trn area, and if they go lower, we’d be surprised to see them dip below $2trn. This leaves them likely some $1trn above the lows seen before the pandemic but in any case at least $0.5trn above those lows. Lower eurozone liquidity will make Euribor fixings more sensitive to credit risk Source: Refinitiv, ING The end of abundant liquidity Most of the decisions pertaining to the withdrawal of central bank liquidity were taken in 2022, but the effects should only become evident in 2023. Even with central banks in various stages of the QT process, it is clear that their preference would be for a faster withdrawal of liquidity than that produced by a simple reduction of their bond portfolios. In cases where some of that liquidity stems from other policies than QE, for instance, in the case of the ECB’s Targeted Longer-Term Refinancing Operation loans to banks, faster liquidity withdrawal is simply a matter of creating incentives for early repayments. The ECB has taken steps to that end at its October meeting and we’re expecting around half of the €2.1tn TLTRO balances to be repaid by March 2023. You’d be hard-pressed to show the effect of shrinking liquidity in money markets in 2022. This will change The Bank of England has an arduous task at hand. The basic principle is to introduce new facilities to absorb liquidity from banks. This, in effect, is what the Fed’s reverse repo facility is doing in exchange for collateral. The BoE has taken no such steps yet but the repo rates and short gilt yields' reluctance to fully reflect rate hikes might trigger calls for faster liquidity absorption. Truth be told, you’d be hard-pressed to show the effect of shrinking liquidity in money markets in 2022. This will change in 2023. Regardless of the currency zone, the liquidity situation can still be described as plentiful. This, in turn, has resulted in suppressed money market rates. In the case of government bonds and repo, these have diverged further, to the downside, from policy rates. In the case of supposedly credit-sensitive money market rates, they have failed to reflect growing systemic risk and the looming recessions. UK and German bond scarcity is stretching valuations against swaps Source: Refinitiv, ING Collateral shortage becoming a monetary policy issue The other side of the abundant liquidity problem is the shortage of high-quality collateral evident across developed markets, but most prominently making the headlines in the eurozone and UK due to ever-widening swap spreads. On one level, collateral shortage and abundant liquidity are two sides of the same coin: too much money chasing too few assets. On another, regulations and falling unsecured interbank volumes mean the availability of collateral is becoming a problem of money market functioning, which is likely to persist even after liquidity is withdrawn. Both excess liquidity and collateral shortages can be solved with the same tools The good news is that both excess liquidity and collateral shortages can be solved with the same tools, as the Fed's experience has shown. The BoE and ECB both have securities lending facilities, but their use is more anecdotal, and insufficient to keep repo rates close to the policy rates. There have been calls for more ambitious facilities to be put in place. The BoE can point to the existing standing and special repo facilities although the lending rate would have to be raised and gilts would have to be borrowed from the Asset Purchase Facility (QE) portfolio. As is the case in the UK, the ECB can also point to efforts by some institutions, more notably the German Treasury, to release more bonds on repo. More is likely to come, including to finance energy-related spending. Combined with QT, and TLTRO repayments, they will chip away at the collateral scarcity in the eurozone, but we expect the effect to be backloaded to the second half of 2023.   This article is part of Rates Outlook 2023: Belt up, we’re going down   View 8 articles   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
FX Daily: Upbeat China PMIs lift the mood

Meeting Of U.S. President Biden And China’s President Xi | Chinese Methods To Contain The Pandemic

Saxo Bank Saxo Bank 14.11.2022 08:38
Summary:  China released a set of 20-item guidelines on Friday to fine-tune the country’s pandemic control measures aiming at minimizing disruption to people’s livelihood and the economy. The move added fuel to the post-US CPI risk-on sentiments and saw Hong Kong and China stock soaring with Hang Seng Index up 7.7% and commodities prices higher. S&P 500 rallied another 0.9% on Friday and finished the week nearly 6% higher. Over the weekend, China’s financial regulators rolled out a 16-point plan to boost the property sector. What’s happening in markets? The S&P 500 (ESZ2) and Nasdaq 100 (NQZ2) extended post-CPI gains US stocks rallied for the second day, adding to the dramatic surge after the softer CPI prints on Thursday. S&P 500 gained 0.9% and Nasdaq 100 climbed 1.9%. The energy sector, up 3.1%, was the top performer in the S&P 500 as WTI crude oil price bounced 2.8% on China’s easing of pandemic control measures despite a rise in the number of new Covid cases. Gaming and casino stocks and consumer discretionary names also gained from optimism about China’s fine-tuning of Covid policies. FTX filed for Chapter 11 bankruptcy protection on Friday and its CEO and founder resigned. Coinbase (COIN:xnas), the largest US crypto exchange, bounced 12.8% on Friday after being dragged down by the FTX fiasco earlier in the week. Robinhood (HOOD:xnas), in which FTX’s Sam Bankman-Fried has a 7.5% stake, surged 12.9% after steep declines on Tuesday and Wednesday. Over the week, S&P 500 gained 5.9% higher and NASDAQ 100 surged 8.8%. US  treasury (TLT:xnas, IEF:xnas, SHY:xnas) markets were closed for holiday The US treasury cash markets, after the massive 25bp-30bp  post-CPI drops in yields on Thursday, took a break to observe the Veterans’ Day holiday on Friday. Treasury note and bond futures were little-changed. Hong Kong’s Hang Seng (HSIX2) China’s CSI300 (03188:xhkg) soared on China’s fine-tuning of pandemic control measures Hang Seng Index soared 7.7% on the post-CPI rally in the U.S. stock market and the easing of pandemic control measures in China. Following a meeting of the Chinese Communist Party’s new Politburo Standing Committee on Thursday, China’s health authorities issued 20 new measures on Friday to fine-tune pandemic control policies including relaxing quarantine and PCR testing requirements and prohibiting excessive lockdowns. China Internet stocks soared, with Alibaba (09988:xhkg) up 12.4%, Tencent (00700:xhkg) up 11.7%, Meituan (03690:xhkg) up 12.5%, JD.Com (09618:xhkg) up 16.1%, and Kuaishou (01024:xhkg) up 17.5%. EV maker NIO (09866:xhkg) jumped 20.4% despite missing Q3 earnings. XPeng (09868:xhkg) surged 16%. Macao casino stocks gained 8% to 9%. China consumption names also climbed on China’s easing of pandemic control. Share prices of China property developers were squeezed massively higher, with Country Garden (02007) soaring 35% and Longfor (00960 ) jumping 29%. The debt-laden CIFI (00884:xhkg) soared 72.2%. Subsequently, Bloomberg ran a couple of news reports saying China is rolling out a 16-point rescue plan to boost the ailing property markets and struggling developers. CSI300 gained 2.8%/ Australia’s ASX200 (ASXSP200.1) rises ~4% last week. Stock poised to extend rally on China’s property measures All eyes will be on Australia tech stocks following the stellar run in the US, however Aussie tech stock gains may not shoot the lights be muted today after Australia’s 10-year bond yield rose seven basis points to 3.72%.  However, Commodity stocks will be a focus; on Covid hopes, with the Copper price up 4.1%, while precious metals are higher and aluminum had its best day since 2009. In New York BHP rose 3.6%, gapping up and rising above its 200-day moving average which could be seen as bullish sign, and also means local listed counterpart will likely follow. Lithium stocks will also be in the spotlight, with Australia’s biggest Allkem (AKE) and Pilbara (PLS) a focus with sentiment picking up and the stocks already trading in record-high territory ahead of China reopening. FX: the US Dollar continued to plunge in the aftermath of a softer CPI The US dollar index plunged 1.7% on Friday, bringing the weekly loss to 4%. After falling the post-CPI decline of 3.8% on Thursday, USDJPY fell another 1.5% to 138.81 on Friday. Over the week, USDJPY fell from 1.4662 to 138.81, a 5.3% decline. EURUSD surged 1.4% on Friday, bringing its weekly gain to nearly 4%. The Chinese renminbi strengthened further against the US dollar, benefiting from China’s easing of pandemic control in addition to the impact in the aftermath of the US CPI. USDCNH declined from 7.15 to 7.09 on Friday.The Aussie dollar is gaining on the back of China's property sector rescue package. China introduced 16 property measures to address the developer liquidity crisis; from blanket debt extensions, to loosening down-payment requirements for homebuyers. On top of that that, China’s eased covid restrictions; shortening to five-day quarantines, which is aimed at reducing the economic impact of Covid Zero, rather than relaxing restrictionsThe Australian dollar jumped 1.4% on Friday and 3.7% over the week. While the market still awaits further easing developments, the market is buoyed on forward looking hopes that the AUD will continue to be bid on commodity demand picking up. The iron ore (SCOA) price is back above US$90 after rising 6% last week, the copper price lifted about 5% last week, and the lithium price is also higher, with carbonate prices up 118% year to date.  Crude oil (CLZ2 & LCOF3) WTI crude oil gained 2.8% to finish the week at USD88.96 on China’s easing of pandemic control and a sharply lower dollar but it remained stuck inside its established trading range. In addition, as the fuel product market has been tightening in Europe and the US due to low inventories of diesel and heating oil, the crude oil price is likely to find support here and the tendency is more to the upside. OPEC issues its monthly market report on Monday so all eyes will be on that. Copper (HGZ2) rose nearly 5% on Friday on China easing Covid policies Benefiting from China fine-tuning Covid policies and a sharply lower US dollar, copper rose 4.7% on Friday and nearly 7% for the week to USD3.91. It is poised to challenge a key resistance zone near $4 in the near term. As noted by Ole Hansen, Saxo’s Head of Commodity Strategy, while the prospect of copper mines in Central America, South America, and Africa temporarily increasing production is significant, the outlook for copper prices remains positive since global electrification will continue to drive the demand for copper higher. Globally, especially in Europe, the need to reduce reliance on Russian-produced natural gas, oil, and the use of coal as energy sources will continue to build momentum for accelerated electrification. But enabling the grid to handle the additional baseload will require significant new copper-intensive investment in the coming years. In addition, producers such as Chile, the world's largest copper supplier, are not optimistic about their ability to increase production of copper mines in the medium and long term amid declining ore grades and water shortages. The slowdown of the Chinese economy is temporary, and the Chinese government's economic stimulus measures are focused on infrastructure and electrification, which require a lot of industrial metals, especially copper. Gold (XAUUSD) Gold climbed 0.9% to USD1771 on Friday, with the biggest weekly gain since March. In addition to a softer US CPI on Thursday, according to Ole Hansen, supporting the underlying improvement in sentiment was the recently published Gold Demand Trends Q3 2022 update from the World Gold Council. The update outlines how central bank demand reached a quarterly record of nearly 400 tons, thereby offsetting a 227 tons outflow from bullion-backed ETFs. What to consider? China issued 20 guidelines to fine-tune its dynamic zero-Covid policy measures China’s health authorities released 20 guidelines on Friday to fine-tune the country’s pandemic control measures, a day after the Politburo Standing Committee, led by President Xi, held a meeting to discuss how to best contain the pandemic. The key measures in the guidelines include reducing the number of quarantine days for close contacts from 10 days to 8 days, relaxing some centralized quarantine to home quarantine, limiting PCR testing, prohibiting excessively extending lockdowns, promoting vaccination and treatments, and prohibiting local authorities from shutting down production, schools, and transportation without proper approval. At a press conference on Saturday, the National Health Commission emphasized the fine-tuning was optimization measures based on scientific findings but not representing a shift in the principles of dynamic zero-Covid policy. China’s financial regulators rolled out a 16-point plan to boost the property sector The People’s Bank of China and the Banking and Insurance Regulatory Commission jointly issued a notice to financial institutions with 16 measures to address the liquidity squeeze faced by property developers through measures including the relaxation of previously imposed redlines restricting banks from lending over certain ceilings and calling for financial institutions to treat private enterprise developers equally with state-owned enterprises. A busy week of Fedspeak kicked off by Fed Governor Waller After the sharp easing of financial conditions after the massive asset price movements after the release of the CPI, helped by lower bond yields, higher stock prices, and lower US dollar, the market is eagerly monitoring if Fed officials will push back on pivot speculations in order to bring financial conditions back to tighter levels. Governor Waller previously proposed that the Fed should not pause until the monthly core PCE substantially falls below 3% on an annualized basis. Biden and Xi are set to meet on the sidelines of the G20 summit U.S. President Biden and China’s President Xi will hold a bilateral meeting on the sidelines of the G20 summit in Indonesia on Monday. It will be the first time they meet in person since Biden took the presidential office in January 2021. The White House said the meeting could last a couple of hours. For our look ahead at markets this week - Listen/watch our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: https://www.home.saxo/content/articles/equities/market-insights-today-14-nov-2022-14112022
UK Budget: Short-term positives to be met with medium-term caution

The UK And Its Fiscal Plans | Chinese Industrial Production Is Estimated To Slow

Saxo Bank Saxo Bank 14.11.2022 08:52
Summary:  Equity and commodity markets seem to be on a risk-on frenzy for now, supported by the surprise weaker US CPI print, as well as China introducing 16 property stimulus measures at the weekend, following the easing of some Covid restrictions. However the market doesn’t have too far to look for the next catalysts that could continue the rally, stunt it, or see it take a haircut. Up next we watch US producer prices, and US retail sales, which may give the Fed further ammunition to slow down its pace of tightening if the numbers show the US economy is continuing to crack. UK’s outlook, Japan’s Q3 GDP growth rates, as well as China’s industrial production, retail sales, and fixed investment data are also key to watch. As well as corporate earnings from Nvidia and the Aussie dollar.   US eco data and news on tap; US producer prices, retail sales and big retail earnings Investors will be looking for further signs that point to a slowdown in inflationary pressures. In the October CPI release last week, we saw a fall in health insurance costs due to technical factors, which added to the slowing of the service component of core CPI. This is important to the calculation of core PCE, which the Fed watches most closely. As a result, this week investors will pay more attention to the October producer prices index (PPI) numbers on Tuesday, as they try to gauge if the service component of core inflation is slowing. Bloomberg consensus estimates PPI will rise 8.4% Y/Y and +0.3% M/M for core PPI or +7.2% Y/Y. If the numbers are weaker than this, it could provide further support to the equity market rally, as the Fed would garner more catalysts to slow its pace of hikes. Then on Wednesday, retail sales are on watch and are expected to have rebounded, rising 1% in October after stagnating the month earlier. On top of that, a bevy of large retailers, report earnings including Home Depot, Walmart, and Target, which will help investors gauge the health of the world's largest economy. Elsewhere in America, Canada will release inflation and housing starts data. Look for hints on the Fed’s hiking path in Fed speak this week Investors will get to gauge what the Fed’s latest thinking is, as we hear from a number of Fed officials this week, who will likely focus on the softer CPI print last week and if it’s changed their assessment of inflation and interest rate rates. Remarks from Fed Governor Christopher Waller will likely be a focus as Waller previously proposed not to pause, until core PCE falls below 3% on a monthly annualized basis. On top of that, speeches will be made from Neel Kashkari and Loretta Mester on Thursday G-20 meeting brings focus back on geopolitics and markets G-20 leaders will be meeting Bali, Indonesia this week on Tuesday and Wednesday, and the agenda is likely to be centered around geopolitical tensions and financial market risks. It is interesting to note that China has signaled the easing of its zero covid policy ahead of this event, despite the recent surge in cases. The meeting between Biden and Xi today will be key in the current cold war environment, especially with respect to the US tech controls and the stance on Taiwan. Other key areas of focus will be the Ukraine war, despite Putin’s lack of attendance at the event, as well as the global inflation concerns and what the global tightening wave means for financial markets. Lastly, climate change is likely to remain on the agenda, with progress stalling over the year as the focus shifted to meeting the world’s energy needs. Japan’s Q3 GDP and October CPI to see the drag from a weaker JPY Japan reports preliminary Q3 GDP on Tuesday, followed by the October CPI print on Friday. Growth is likely to weaken in the third quarter, with Bloomberg consensus looking at 1.1% QoQ print from 3.5% previously, mainly driven by a drag from net exports due to the surge in import prices. However, some support may be seen from private consumption with labor cash earnings and retail sales having stayed upbeat in the quarter. Meanwhile, business investment also likely improved, as suggested by large manufacturer’s Tankan report for the third quarter. The outlook also remains supported by the series of fiscal measures announced by the government, along with increased tourism. October CPI is likely to surge to fresh highs of 3.7% from 3.0% previously, with the core measure seen at 3.5% from 3.0% in September, but the outlook is likely improving as the Japanese yen recovers. UK’s medium-term fiscal outlook will be closely watched The UK updates markets on its fiscal plans in a week of reckoning following the collapse of Liz Truss’s administration. Chancellor of the Exchequer Jeremy Hunt on Thursday presents the medium-term outlook accompanied by updated economic forecasts. He’ll try to further restore investor confidence after his predecessor’s announcement of unfunded tax cuts created panic in markets, but spending cuts and tax rises remain on the horizon. While fiscal consolidation is still needed, excessive frontloading will mean more economic pain and backloading could impinge on government credibility. It’s a delicate balance, especially with double-digit inflation and recession concerns also on watch. China’s October activity data are expected to be weak October retail sales in China are expected to decelerate to +0.7% Y/Y according to the Bloomberg survey from +2.5% Y/Y in September as the surge in COVID cases and pandemic control restrictions took their toll on consumption. Industrial production is estimated to slow to +5.3% Y/Y in October from +6.3% Y/Y in September, amid Covid-related restrictions, slower auto production, and weak exports. Nvidia results in focus. Can its outlook and results continue to move its shares off its low? Nvidia (NVDA) is set to release third-quarter earnings on Wednesday, November 16 with analysts expecting revenue of $5.84bn down 18% y/y and EBITDA of $2.1bn down from $3.2bn a year ago and EPS of $0.71 down 30% from a year ago. Nvidia shares appear to be gaining traction of late, so its results will be watched closely, especially its outlook. If they are better than expected, you could see sentiment remain supported and it shares could continue to rebound. NVDA shares have risen about 40% in four weeks, but its shares are still down 52% from its high. Nvidia has been suffering amid restricted chip sales to China and declining PC demand. Pay close attention to if its results meet or exceed expectations, its outlook and what it sees as the potential full effects on the US/China chip restrictions. For detailed analyst, refer to Saxo’s Head of Equity Strategy, Peter Garnry’s note. AUDUSD is now up 9% from its low, gaining extra legs on China’ property rescue package  The Aussie dollar is gaining on the back of China's property sector rescue package. China introduced 16 property measures to address the developer liquidity crisis; from blanket debt extensions, to loosening down-payment requirements for homebuyers. On top of that that, China’s eased covid restrictions; shortening to five-day quarantines, which is aimed at reducing the economic impact of Covid Zero, rather than relaxing restrictions. While the market still awaits further easing developments, the market is buoyed on forward looking hopes that the AUD will continue to be bid on commodity demand picking up. As commodity hope-demand picks up, so have respective commodity prices; the iron ore (SCOA) price is back above US$90 after rising 6% last week, the copper price lifted about 5% last week, and the lithium price is also higher, with carbonate prices up 118% year-to-date. The next key event to watch for the Aussie dollar is the RBA meeting minutes; released Tuesday November 15, which should give more clues on the course of the central bank’s hikes after it made a lower-than-expected 25bps rate hike this months. Major China Internet companies are scheduled to report this week Meituan (03690:xhkg) kicks off the busy earnings calendar of  China Internet companies on Monday, followed by Tencent (00700:xhkg) on Wednesday, Alibaba (09988:xhkg) on Thursday, and JD.COM (09618:xhkg) on Friday. Analysts estimates for top line growth in Q3 are subdue on weak consumption recovery and macro environment. Slow gross merchandize value (GMV) growth during the Singles’ Day festival may point to sluggish Q4 outlook. Alibaba's GMV growth during the Singles' Day festival was flat. JD.COM has not yet announced its numbers except saying GMV had positive growth Y/Y during the period (from Oct 31 evening to Nov 11 end of day). According to estimates, eCommerce platform GMV grew about 14% Y/Y but the large traditional eCommerce platforms were estimated to see GMV growth at just around 3% Y/Y.   Key company earnings releases   Monday: Meituan, Sonova, Tyson Foods, Nu Holdings, Trip.com, DiDi Global Tuesday: Infineon Technologies, Vodafone, Alcon, Walmart, Home Depot, Sea Ltd, Commonwealth Bank Wednesday: Siemens Energy, Tencent, Experian, SSE, Nibe Industrier, Nvidia, Cisco, Lowe’s, TJX, Target Thursday: Siemens, Alibaba, Applied Materials, Palo Alto Networks, NetEase Friday: JD.com   Key economic releases & central bank meetings this week Monday, Nov 14 US:  New York Fed Survey of Consumer Expectations (Oct) Eurozone: Industrial Production (Oct) Tuesday, Nov 15 US: PPI (Oct) US: Empire State Manufacturing Survey (Nov) Eurozone: GDP (Q3) Germany: ZEW survey (Nov) UK: Employment (Oct) Japan: GDP (Q3) China: Retail Sales (Oct) China: Industrial Production (Oct) Wednesday, Nov 16 US: Retail Sales (Oct) US: Industrial Production (Oct) UK: CPI, RPI & PPI (Oct) Thursday, Nov 17 US: Jobless claims (weekly) US: Housing Starts (Oct) Eurozone: HICP (Oct, final) Friday, Nov 18 US: Existing Home Sales (Oct) UK: Retail Sales (Oct) Japan: CPI (Oct) Source: https://www.home.saxo/content/articles/macro/saxo-spotlight-14-nov-2022-14112022
The German Purchasing Managers' Index, ZEW Economic Sentiment And More Ahead

Inflation In The Eurozone Will Affect Risk Appetite

InstaForex Analysis InstaForex Analysis 14.11.2022 09:25
The previous week ended with a noticeable increase in risk appetite and weaker demand for dollar. The main reason was the growing purchases of government bonds in the US, accompanied by a strong drop in yields. The scenario happened because of the latest inflation data in the US, which showed a sharp decrease in the year-on-year ratio and growth in the month-over-month one. Markets have been hoping for this kind of positive news for a long time, believing that the measures taken earlier by the Fed put further pressure on the economy. Now that the figures improved, the US central bank may start easing the pace of rate increases, then take a break. Much will depend on the values of inflation indicators for November, which will be presented in December. If they show, if not a continuation of a strong decline, but at least a stabilization or a slight decrease, then a strong rally may occur in all markets without exception. It could be accompanied by the depreciation of dollar and decrease in Treasury yields. Be that as it may, positive sentiment will continue today. Although stock indices in Europe and the US remain in negative territory this morning, everything may change by the start of the US trading session. In this case, dollar will continue to weaken, then decline further towards the end of the week, especially if the published data on retail sales and their volumes show better values than expected. Data on consumer inflation in the euro area is also important as its figure will affect risk appetite. US statistics will also play an important role since the very position of the ECB on the issue of further aggressive rate hikes remains unclear. Forecasts for today: EUR/USD The pair is trading above 1.0300. If market sentiment worsens, there will be a decline to 1.0235. GBP/USD The pair is trading above 1.1735. If buying pressure remains, it will rise further to 1.1900. But if market sentiment worsens, there will be a decline to 1.1635.   Relevance up to 08:00 2022-11-16 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/327022
In Crypto, You Could Prove You Own A Private Key Without Revealing It

FTX And More Than 100 Affiliates Filed For Bankruptcy | The Aussie Dollar (AUD) Has Gained Ground

Saxo Bank Saxo Bank 14.11.2022 10:03
Summary:  Market sentiment closed last week on a strong note after the wild rally on Thursday in the wake of the softer-than-expected October US CPI data. Sentiment was checked in the Asian session today by rising Covid cases in China, although the Zero Covid policy approach there may be softening. US yields jumped a bit to start this week after a bank holiday on Friday and after Fed Governor Waller was the first significant Fed profile to push back against the market’s lower of forward Fed tightening expectations in the wake of a single data release.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) Last was a spectacular week for equities with the MSCI World Index up 6.7% with our theme baskets e-commerce, cyber security, and semiconductors rallying 19.4%, 13.6%, and 12.8% respectively. High duration equity themes responded the most to broad-based easing of financial conditions last week and the key question is now if the market will extend its momentum. S&P 500 futures closed on Friday at the 4,000 level and have opened a bit lower this morning but are already attempting to climb back to the 4,000 level. If we look at financial conditions and where they mostly went last week there are theoretically room for a rally up 4,100 and even beyond that to the 4,200 level. Hong Kong’s Hang Seng (HSIX2) and China’s CSI300 (03188:xhkg) Hang Seng Index climbed 2.7% and CSI 300 edged up 0.9% on the news that the People’s Bank of China and the Banking and Insurance Regulatory Commission jointly issued a notice to financial institutions with 16 measures to address the liquidity squeeze faced by property developers through measures including the temporary relaxation of previously imposed redlines restricting banks from lending over certain ceilings to developers and calling for financial institutions to treat private enterprise developers equally with state-owned enterprises. Leading China private enterprise property developers listed in Hong Kong soared by 20% to 40% at one point. FX: USD picking up the pieces after massive downdraft on lower October CPI The US dollar lurched into an historic two-day plunge late last week after the release of the softer than expected US October CPI data on Thursday ahead of a three-day weekend for US rates (on Friday’s bank holiday). The move was so sharp that it can’t hope to maintain course, so for the nearest term, the market will try to feel out consolidation levels. EURUSD, for example, finally found resistance just above the key 1.0350 area, which was the major low back in May and June and prior to that, back in early 2017. The first support is the 1.0200 area, the 38.2% retracement of the rally sprint, with the reversal level at 1.0100, the 61.8% retracement and near the prior important resistance. For USDJPY, the market managed to take out the 139.40, the prior major high in July, around where it trades this morning. Amazingly, having fallen from 151.95 to the local low of 138.46, the 200-day moving average is still quite far away, near 133.00. Crude oil (CLZ2 & LCOF3) remains rangebound ... trading softer into the European session in response to a recovering dollar after Fed’s Waller said the FOMC has some way to go before it stops raising interest rates. Earlier in the session commodity prices in general, including oil, were supported by demand optimism after China on top easing Covid restrictions issued a rescue package for its struggling property market. A pickup in Chinese demand, despite the current headwinds from rising virus cases, when EU is preparing sanctions against Russian oil and OPEC+ is cutting production, will likely lead to further tightening of the market. Focus on US economic data given its impact on risk appetite as well as Monthly Oil Market Reports from OPEC today and the IEA tomorrow. Gold trades softer following a two-week jump of almost 8% … after Fed’s Waller cautioned that the FOMC isn’t close to pausing interest rate hikes. The dollar strengthened while Treasury yields moved higher after having been closed on Friday for Veterans Day. Overall, however, the sentiment in the market seems to be changing with a period of consolidation, potentially the next phase. Focus on resistance-turned-support at $1735 and whether we have seen a shift in the trading behaviour among speculators from a sell-into-strength to a buy-on-weakness. ETF investors – net sellers for months - and speculators in the futures market now hold the key that could unlock further gains. Expect some consolidation and potentially a recheck of support at $1735 with resistance at $1789 and $1804. Industrial metals remain focussed on China … and overnight iron ore, the key feedstock for steel production, jumped +3% after the Chinese government released a package of policies to rescue its property sector. The news came on top of last week's easing of some virus restrictions which drove a near 14% rally in the Bloomberg Industrial metals index to a five-month high. Copper, now up 25% from the July low was one of the main beneficiaries of the news, coming at a time when supplies are already showing signs of tightening. Overnight, the property news drove HG copper to a fresh five-month high at $3.96 per pound before some profit taking emerged just ahead of critical and potential sentiment as well as momentum changing resistance in the $4 to $4.05 area.  US treasuries (TLT, IEF) US Treasury yields (10Y) closed Thursday on a weak note after the plunge on the October CPI data ahead of a three day weekend for banks (treasuries not trading, even as equity markets were open). Yields have jumped a bit here at the start of this week after Fed Board of Governors member Waller pushed back against the market’s repricing of Fed tightening intentions since that CPI release (more below) in comments overnight. The low water mark for the 10-year treasury benchmark was just above 3.80%, with a jump back above 4.00% needed to suggest that this drop in yields is temporary. The next level of note to the downside is the 3.50% area, which was the high-water mark back in June that held for about three months before new highs were posted in September. What is going on? AUDUSD is up 9% from its low, gaining some extra ground on China’ property rescue package The Aussie dollar has gained ground on the back of China's introduction of a property sector rescue package. AUDUSD now trades at a two-month high, hitting 0.666 in anticipation that Australia’s trade surplus will be further supported by exports into resurgent Chinese demand after China introduced 16 property measures to address its developer liquidity crisis. On top of that that, China’s eased some covid restrictions; shortening to five-day quarantines, which is aimed at reducing the economic impact of Covid Zero. US Fed’s Waller pushes back against market’s lowering of Fed expectations Federal Reserve Governor (and therefore voter) Christopher Waller has been the first high profile Fed official to emerge and push back against the market’s repricing lower of the Fed’s rate tightening trajectory in comments overnight. Speaking at a Sydney, Australia conference, Waller said that “These rates are going to...stay high for a while until we see this inflation get down closer to our target”. “We’ve still got a ways to go. This isn’t ending in the next meeting or two.” The market is now pricing the Fed to reach a peak policy rate below 5.00%, either at the March or May FOMC meeting next year, with a 50-basis point hike priced for December to take the Fed Funds rate to 4.25-4.50% and slightly more than 50 basis points of further tightening priced beyond that. This is some 25 basis points below the prior peak in expectations. Crypto market fear is spreading On Friday, the CEO of the cryptocurrency exchange FTX stepped down, and FTX and more than 100 affiliates filed for bankruptcy, with the filing revealing that FTX and Alameda Research (related trading firm) have liabilities in the range $10-$50 bn. Contagious effects have already appeared with examples of as Genesis has $175 mn stuck in FTX and the crypto lender BlockFi stating that they would be limiting activities in wake of the FTX collapse. As the confidence in centralized exchanges is shrinking, a record-high amount of Bitcoin was moved out of exchanges and into self-custody wallets due to increased fears of exploitation and mismanaging of user funds. What are we watching next? Fed Vice Chair Lael Brainard to speak today Brainard is thought to be one of the most dovish of prominent Fed figures and possibly behind what was seen as slightly dovish insertion in the November FOMC monetary policy statement before Fed Chair Powell’s press conference. What will Brainard say now that the market seems ready to pounce on a single month’s data to significantly alter its projections of Fed policy? NY Fed President and voter Williams will also speak today, with a rather busy schedule of Fed speakers in the week ahead. Incoming US data Traders will remain nervous around incoming US data after the wild reaction to last week’s Thursday October US CPI release. The US macro calendar highlights this week include Tuesday’s October PPI releases, the Oct. Retail Sales data on Wednesday and November NAHB Housing Market Index release the same day. Finally, the US reports October Housing Starts/Building Permits data on Thursday. Major China Internet companies are scheduled to report this week Meituan (03690:xhkg) kicks off the busy earnings calendar of  China Internet companies on Monday, followed by Tencent (00700:xhkg) on Wednesday, Alibaba (09988:xhkg) on Thursday, and JD.COM (09618:xhkg) on Friday. Analysts’ estimates for top-line growth in Q3 are subdued due to weak consumption recovery and the macro environment. Slow merchandise value (GMV) growth during the Singles’ Day festival may point to a sluggish Q4 outlook. Alibaba's GMV growth during the Singles' Day festival was flat. JD.COM has not yet announced its numbers except saying GMV had positive growth Y/Y during the period (from Oct 31 evening to Nov 11 end of the day). According to estimates, eCommerce platform GMV grew about 14% Y/Y but the large traditional eCommerce platforms were estimated to see GMV growth at just around 3% Y/Y. UK Autumn Statement on 17 November Expect a contractionary 2023 UK Budget. The new Prime minister Rishi Sunak needs to find savings worth about £30-40bn/year to convince the independent Office for Budget Responsibility that debt won’t rise across the medium-term as a percentage of GDP. This is not an easy task. But this is certainly the only way for the United Kingdom to win back investor confidence after the disastrous mini-budget presented in September. All of this will likely increase the depth of the UK recession and poverty across the country. The outlook is really grim. The Bank of England expects the UK to be in recession from mid this year all the way through to mid 20024. Then growth will pick up only very modestly (annualized rate of 0.75 %). Poverty is also increasing. The country’s largest foodbank charity says 11.5 million meals were handed out over six months – more than 63.000 a day on average. This is a record. The 2023 budget will likely make things worse. The UK is facing an emerging market economy dynamic. Earnings to watch The Q3 earnings season is still slowing down but with important earnings releases still coming out this week. Today’s focus is Chinese e-commerce giant Meituan, Brazil-based fintech bank Nu Holdings, and finally DiDi Global which is the Uber equivalent in China. For foreign investors the earnings from Nu Holdings will get the most attention as the bank is purely technology-driven, fast growing (expected to grow net revenue 188% y/y in Q3 to $1.09bn), and has Berkshire Hathaway as one of its biggest shareholders. Monday: Meituan, Sonova, Tyson Foods, Nu Holdings, Trip.com, DiDi Global Tuesday: Infineon Technologies, Vodafone, Alcon, Walmart, Home Depot, Sea Ltd Wednesday: Siemens Energy, Tencent, Experian, SSE, Nibe Industrier, Nvidia, Cisco, Lowe’s, TJX, Target Thursday: Siemens, Alibaba, Applied Materials, Palo Alto Networks, NetEase Friday: JD.com Economic calendar highlights for today (times GMT) 1000 – Eurozone Sep. Industrial Production 1630 – Switzerland SNB President Jordan to speak 1630 – US Fed Vice Chair Brainard to Speak 2030 – Weekly Commitment of Traders Report (delayed from Friday) During the day: OPEC’s Monthly Oil Market Report 0030 – Australia RBA Minutes 0120 – China Rate Decision 0200 – China Oct. Industrial Production / Retail Sales  Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: https://www.home.saxo/content/articles/macro/market-quick-take-nov-14-2022-14112022
Easing In Chinese Covid Measures | Crypto Distress Continues | Markets Trade Joyfully

Easing In Chinese Covid Measures | Crypto Distress Continues | Markets Trade Joyfully

Swissquote Bank Swissquote Bank 14.11.2022 10:25
It has been an ugly weekend for cryptocurrencies, even though the selloff remained relatively contained in the sector giants like Bitcoin, compared to the size of the bad news that flew in last Friday. Market mood Market mood outside crypto is extremely joyful after last week’s inflation data surprised investors to the downside and China announced to relax Covid measures, and boost its shattered property sector. US And China Although the US inflation remains relatively high to contain a perhaps premature bull run on dovish Fed expectations, news from China could help keeping the mood nice and sweet. We will yet discover if the latest news will be enough to get international investors back on board of a Chinese dream that has been shot to the ground by the very Xi Jinping. Joe Biden and Xi Jinping  Joe Biden and Xi Jinping will talk today on the sidelines of the G20 summit in Bali. Talks could go either way; they could either boost, or hit risk appetite in Chinese, and global assets. China retailers & Nvidia earnings Other than that, investors will watch the Q3 earnings from Nvidia, and some US and Chinese retail giants throughout this week! Watch the full episode to find out more! 0:00 Intro 0:32 FTX goes bankrupt, crypto distress continues 4:40 Traditional markets trade joyfully post-US CPI… 6:49 And easing in Chinese Covid measures! 8:26 Investor attention shifts to US, China retailers & Nvidia earnings Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #FTX #bankruptcy #Bitcoin #Ethereum #Solana #crypto #selloff #USD #inflation #data #Fed #expectations #China #Covid #measures #market #rally #retailer #Walmart #Target #Alibaba #JD #earnings #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH      
EUR: German IFO Data and Central Bank Hawkishness Impact Euro/USD Range Trade

The UD Dollar (USD) Is Very Sensitive To The Yield Of US Debt Instruments

InstaForex Analysis InstaForex Analysis 14.11.2022 12:25
Last week, the US dollar experienced its biggest weekly drop in 2022. The weakness of the dollar last week amounted to 78.15%. Why did the US dollar fall so much? The dollar index was created in 1973 to measure the value of the US dollar against other major world currencies. The dollar index is compared to a basket of six foreign currencies, with each currency assigned a different weight. The six foreign currencies used to value the dollar index are the euro 58%, the Japanese yen 14%, the British pound 12%, the Canadian dollar 9%, the Swedish krona 4% and the Swiss franc 4% of the weight. One of the components that affect the change in the value of the US dollar is the income from the purchase of treasury bonds. The dollar is very sensitive to the yield of US debt instruments such as 30-year Treasury bonds or 10-year bills. As U.S. bond yields rise, this attracts foreign investment in favorable-yielding fixed assets that require dollars to purchase, thereby raising the value of the dollar index. In turn, when yields on US bonds and bills fall, this causes a reversal as the dollar loses value as foreign investors reallocate investments in US debt instruments to other fixed assets offering favorable returns. Last week, the Bureau of Labor Statistics reported that the October CPI rose just 7.7% YoY. This was the lowest value of the consumer price index since January of this year, when the CPI was 7.5%. The weakness of the dollar last week amounted to 78.15%. Why did the US dollar fall so much? The dollar index was created in 1973 to measure the value of the US dollar against other major world currencies. The dollar index is compared to a basket of six foreign currencies, with each currency assigned a different weight. The six foreign currencies used to value the dollar index are the euro 58%, the Japanese yen 14%, the British pound 12%, the Canadian dollar 9%, the Swedish krona 4% and the Swiss franc 4% of the weight. One of the components that affect the change in the value of the US dollar is the income from the purchase of treasury bonds. The dollar is very sensitive to the yield of US debt instruments such as 30-year Treasury bonds or 10-year bills. As US bond yields rise, this attracts foreign investment in favorable-yielding fixed assets that require dollars to purchase, thereby raising the value of the dollar index. In turn, when yields on US bonds and bills fall, this causes a reversal as the dollar loses value as foreign investors reallocate investments in US debt instruments to other fixed assets offering favorable returns. Last week, the Bureau of Labor Statistics reported that the October CPI rose just 7.7% YoY. This was the lowest value of the consumer price index since January of this year, when the CPI was 7.5%.   Relevance up to 08:00 2022-11-17 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/327024
Middle Distillates: Strong Market Support Expected

Saxo Podcast: Ahead Of The G20 Meeting, A Shift In China's Covid Policy And More

Saxo Bank Saxo Bank 14.11.2022 12:29
Summary:  Today we continue to find reason to question the quality of this melt-up in equity markets after last Thursday's soft US CPI print, with the first prominent Fed official already out overnight with pushback against this drop in US yields. Still, that's not to say that the move can't extend in the short term, as the market is also hoping that a shift in China's Covid policy is coming. Xi and Biden will meet today ahead of the G20 meeting. We also look at stocks to watch this week, an important week for earnings, the big moves in metals both precious and industrial, the US dollar and much more. Today's pod features Peter Garnry on equities and John J. Hardy hosting an on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: https://www.home.saxo/content/articles/podcast/podcast-nov-14-2022-14112022
From UFOs to Financial Fires: A Week of Bizarre Events Shakes the World

The Soft US Inflation Report Has Raised Expectations About Fed's Decision

Kenny Fisher Kenny Fisher 14.11.2022 12:33
After a huge rally last week, the Japanese yen has reversed directions today. USD/JPY is trading at 140.21, up 0.99%. On the economic calendar, Japan releases GDP for the third quarter. There are no economic events in the US today. A week to remember The US dollar dropped like a stone last week, courtesy of a soft inflation report that saw both the headline and core readings fall in October. Both readings were lower than expected, and investors pounced on the news, as stock markets soared and the US dollar took a tumble. The yen made the most of the dollar’s misery, as USD/JPY slumped by a massive 5.3% last week and dropped to a 10-week low. The market reaction to the inflation data looks a bit extreme, and this explains the dollar’s comeback today. The soft inflation report has raised expectations that the Fed will put the brakes on its tightening, after pushing full speed ahead with four straight jumbo hikes of 0.75%. Fed policy makers aren’t bandying around the magical word “peak” to describe inflation just yet, but we are now seeing a change in terminology, such as “gradual” and “measured”. What is interesting is that the markets have gone giddy over a drop in inflation but appear to be ignoring the Fed’s warning that rates could end up higher for longer than expected. I don’t detect any signs of the Fed going dovish, but the markets are expecting a pivot, as there is already talk in the markets of the Fed cutting rates in H2 of 2023. The dollar is dusting itself off after last week’s disaster, and the yen may have trouble holding onto last week’s impressive gains. The Fed will almost certainly raise rates in December by at least 0.50%, and with the Bank of Japan maintaining a cap on JGB yields, the US/Japan rate differential will continue to widen. That spells trouble for the yen, which has lost about 20% against the dollar this year.   USD/JPY Technical USD/JPY is testing resistance at 139.91 and 141.61 There is support at 137.34 and 135.90 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Bitcoin is trying to resume its upward movement

The Binance Crypto Exchange Announced The Creation Of An Industry Recovery Fund

InstaForex Analysis InstaForex Analysis 14.11.2022 13:37
Over the past week and a half, the situation on the crypto market has deteriorated significantly. The collapse of FTX in terms of its scale and consequences is comparable to the fall of Luna, and therefore carries a loud negative context far beyond the crypto market. Cryptocurrency market capitalization has fallen to $830 billion due to a record outflow of funds from centralized platforms. According to research by Glassnode, more than 106,000 BTC have been withdrawn from crypto exchanges in the last month. Such large outflows of funds have occurred three times in history: in April and November 2020, and also in June/July 2022. Bloomberg claims that the situation with FTX has negatively affected the reputation of the cryptocurrency market. The publication analyzed the balance sheet of the exchange and concluded that customers have little chance of returning their deposits. Analysts also suggest that the collapse of the crypto exchange has undermined the prospects for digital assets to become a mainstay of institutional investors' portfolios. At the same time, CoinShares recorded $46 million inflows to crypto funds last week during the FTX crash. This directly refutes Bloomberg's suggestion and suggests that investors see the price drop as an opportunity. It's not that bad Not everyone panics and falls into total despondency against the background of what has happened over the past few weeks. Glassnode believes that the collapse of FTX was the reason, not the reason for the fall of the crypto market. Experts believe that in a more favorable situation, the collapse of the crypto exchange would attract much less attention. Glassnode noted that the next collapse of the crypto market fully corresponds to the process of market recovery and the flow of capital to long-term owners. Given this, analysts believe that the consequences of the FTX fall will be short-term. JPMorgan experts also assess the situation as stable and see no signs of an industry collapse. At the same time, analysts predict a fall in Bitcoin quotes to the cost of $13,000. Earlier, the bank noted that a fall in the price of BTC to this level could cause a series of margin calls and, as a result, the bankruptcy of a number of companies. In order to prevent the situation from worsening, the Binance crypto exchange announced the creation of an industry recovery fund. The structure will help strong projects solve the liquidity problem and survive a difficult market period. Tron founder Justin Sun also joined the initiative. BTC/USD Analysis After the publication of a tweet by the CEO of Binance, Bitcoin quotes recovered above $16.5k. Despite this, the situation on BTC is developing according to the scenario of the bears. The cryptocurrency has finally consolidated below the level of the previous local bottom and every day of trading costs the market big losses. Over the past five days, the price of Bitcoin has fallen below $16k three times, which may indicate a continuation of the downward trend to the $14k–$15k range. Despite the negative trend, there are signs of a rebound on the daily BTC/USD chart. The RSI and Stochastics rebounded from the lower border of the bullish zone, which indicates the activation of buyers and an attempt to break through the $17.3k–$17.6k zone. Fundamental factors At the same time, fundamental positive signals are visible on the chart of the US dollar index. The asset has reached a cyclical peak, which may indicate the end of the DXY upward trend. For high-risk assets, this can be a catalyst for growth. The current market cycle has presented us with many new patterns that run counter to past cycles. However, the accelerating fall in inflation, the readiness of the Fed to ease monetary policy and the approaching New Year holidays give arguments to believe that the December–February period will be a turning point and the global crisis will subside. Results Most likely, we should expect an update of the local Bitcoin bottom below the $15.5k level. The fall of the main cryptocurrency will provoke a series of bankruptcies and another market collapse. However, in general, the process of forming a local bottom and improving the market is coming to an end, and the macroeconomic situation is stabilizing.   Relevance up to 12:00 2022-11-15 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/327043
The US Dollar Index Price Is Looking Higher From Here Soon

The Pressure On The US Dollar (USD) Has Intensified

Alex Kuptsikevich Alex Kuptsikevich 14.11.2022 13:54
The dollar index lost 4% last week, the most significant drop since March 2020. Such powerful moves against the trend often signal a further trend reversal. However, it will probably be a slower pace of decline and not a one-way street as we see it over the previous ten days. Speculation about Fed decision The pressure on the dollar has intensified over the past two weeks on speculation that the Fed will slow down the pace of policy tightening and that the maximum interest rate in this monetary cycle could be lower than previously feared. Signals from Fed members and slower-than-forecast inflation supported this view, triggering a wave of demand for risky assets. At the same time, monetary regulators in other countries were in no hurry to soften their rhetoric, returning markets to a familiar situation where the Fed acts first and more aggressively than its peers in lowering and raising rates. But overall, it does not stand out for any rigidity. Eurozone The monetary watchdogs in the Eurozone have continued to signal in recent weeks that they are prepared to maintain the high speed of rate hikes, which fed their purchases in the Euro. That pressure could be fuelled by sales of dollar assets from the reserves of the SNB and the BoJ. USD/CHF and USD/JPY USDCHF and USDJPY returned under the emotionally significant levels of 1.0 and 150, attracting market-oriented and trend-following participants' interest. Dollar Index The nearest target for the Dollar Index correction is 105, actively operating as a resistance and support between May and August. This is also where the 61.8% Fibonacci retracement level of 2021-2022 comes in. A decisive failure below would confirm that we see the Dollar moving into a decline and not just a correction in a long-term uptrend. In this scenario, the Dollar Index heads into the 90-100 area, where it has been comfortable since 2015, with a potential pullback to the upper bound of this range in the first quarter of 2023. History History has other examples. In late 2008, two weeks of a significant sell-off in the dollar were followed by three months of gains, and the DXY rewrote local highs, finally reversing only in March 2009. However, it is essential to remember that in both March 2020 and March 2009, the EUR reversal was sustained when supported by the equity market surge we also witnessed last week.
GBP: BoE Stands Firm on Bank Rate and Mortgage Interest Relief, EUR/GBP Drifts Lower

Craig Erlam and Jonny Hart talk Covid, OPEC+ report and more - Oanda's Market Insights Podcast

Craig Erlam Craig Erlam 14.11.2022 22:50
OANDA Senior Market Analyst Craig Erlam reviews the latest market news with Jonny Hart. They discuss the latest surge in Covid cases in China, the modest relaxation of its zero-Covid policy, the OPEC+ report and the week ahead. Subscribe on Android This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Canada's Inflation Expected to Ease in May, Impacting BoC's Rate Decision

Bond yields go up on the back of Waller's (Federal Reserve) comment

Ed Moya Ed Moya 14.11.2022 22:42
Bond yields marched higher after Fed’s Waller said the Fed has ‘a ways to go’ before pausing their rate hiking cycle. ​ US stocks are declining after the latest Fed speak pushes back on the idea that the Fed is almost done hiking and after President Biden and Xi’s first in-person meeting delivered the standard rhetoric about avoiding a cold war. Obviously, this is just the beginning and the restart of talks between the world’s two largest economies, but it seems unlikely that we will see both sides cooperating anytime soon. ​ Whether or not things take a turn for the better or worse will hinge on Secretary of State Blinken’s trip to China. ​ Fed Fed’s Waller did his best to convince markets that rates will ‘keep going up’ despite prices cooling a lot faster than expected. The Fed’s mission is to push back on the market’s expectations that rates will get cut at the end of next year. ​ They want this round of hikes to not lose any effectiveness and we should anticipate that most Fed members will stick to the hawkish script this week. ​ Fed’s Brainard, who is clearly not on the hawkish side, noted that the Fed will probably ‘soon’ slow the pace of rate hikes. â€‹ Brainard noted that the inflation data was reassuring preliminary. â€‹ The Fed can’t afford to deliver any strong dovish hints as that will make their tightening of rates less effective with their battle against inflation. â€‹ Crypto Cryptocurrency traders are still saying What-the-FTX is happening? ​ Bitcoin and ethereum are hanging onto any broader risk appetite for dear life. A decent crypto rebound was forming but the rise in bond yields is seeing that earlier rally fade. ​ Much of the attention remains on FTX and Binance. â€‹ Binance is trying to create some buffers to help the industry in case it gets ugly again. â€‹ Binance CEO Zhao tweeted, “Binance is forming an industry recovery fund, to help projects who are otherwise strong, but in a liquidity crisis.” Cryptos rallied on Zhao’s tweet but it seems like an uphill battle on getting this fund up, especially considering all the scrutiny and eventual regulatory gauntlets that are coming to every major crypto exchange. ​ Fed’s Waller reminded traders that the United States is nowhere near developing an official digital version of the dollar. Waller’s pessimistic outlook for the digital dollar suggests cryptos should still have years before the government can reach agreement on how to turn their fiat digital. The rebound in crypto is looking as strong as the recent push higher with stocks. â€‹ Too much of Wall Street is turning defensive and that might make it difficult for some traders to test the crypto waters just yet. â€‹ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Yields rise on Fed speak, stocks edge lower, what-the-FTX is happening with cryptos? - MarketPulseMarketPulse
The German Purchasing Managers' Index, ZEW Economic Sentiment And More Ahead

The ECB Should Consider The Interests Of All EU Members

InstaForex Analysis InstaForex Analysis 15.11.2022 08:00
The EUR/USD currency pair moved very calmly on Monday. We admit that we expected a noticeable correction on the first trading day of the week and throughout the week, but so far, our calculations have yet to be justified. So far, there is a clear upward trend for the euro/dollar pair, and, from a technical point of view, everything now speaks in favor of further growth of the euro currency. Recall that on the 24-hour TF, the price managed to overcome all the important lines of the Ichimoku indicator, so finally, we can witness a reversal of the long-term downward trend. At the same time, the "foundation" and geopolitics can break the entire "raspberry" of the European currency at any moment. After all, it is not the euro that is growing but the dollar that is falling. Let's read more: the dollar has been growing for almost two years, and traders have been busy buying American currency. And now they are reducing purchases, reducing the demand for the dollar, so the pair is growing, but this does not mean that the demand for the euro currency is growing. COT reports If we talk about the demand for a particular currency, it is best to turn to COT reports. However, they do not give a clear answer to what is happening in the minds of traders and investors. The net position on the euro among professional traders has long been "bullish," and the euro currency began to grow only in the last couple of weeks. Moreover, according to the logic of things, this "bullish" position should increase for the European currency to continue growing. Or it should decline against the US dollar. As we can see, there are certain reasons for the pair's growth in the future, but they still need to look more convincing as the factors for the growth of the US dollar at the beginning or middle of this year. We rely on technical analysis when we make forecasts and recommendations, so now we need to look more toward purchases. But at the same time, we must keep in mind that the current growth of the euro is quite doubtful from a fundamental background point of view. The EU inflation report will be quite formal. Industrial production The current week began with the publication of a report on industrial production in the EU. It turned out to be slightly better than predicted, which could support the euro on Monday. However, this is different from the scale of inflation or central bank meetings, so count on a long and strong market reaction. Let's go through the other events of the week in Europe. GDP The second estimate of the GDP report for the third quarter will be published today. The market is waiting for a slowdown in the growth rate of the European economy to 0.2% q/q. Still, in principle, all indicator estimates do not have much significance for the market. Some reactions may follow this report, but it is too "stretched" in time to "see" a reaction to it. Recall that three estimates are always published for GDP, which rarely differs much from each other. And in any case, the market is more interested in the ECB's monetary policy, which directly impacts GDP. The speech of ECB President  Thus, a much more important event will be the speech of ECB President Christine Lagarde on Wednesday. The ECB seems to have decided to raise the rate "to the bitter end" or at least "significantly" to lower inflation in the Eurozone as much as possible. This is good news for the euro, but the market needs to understand to what level the regulator will be ready to raise the key rate. We have already said earlier that not all member countries of the alliance can bear the high cost of borrowing relatively smoothly for their economies. The ECB should consider the interests of all EU members, so the rate will not rise to 5%, as, for example, in the USA. EUR/USD Christine Lagarde can refute this assumption or confirm it. She may want to do this, but her comments may dissuade traders from continuing to buy the euro currency (if they even have a place to be). So far, the euro is growing more on the fact that the Fed will stop raising its rate in a few months, and since traders had plenty of time to work out all the tightening of monetary policy, now the actions of the ECB, which is behind schedule from the Fed, are more important. The average volatility of the euro/dollar currency pair over the last five trading days as of November 15 is 168 points and is characterized as "high." Thus, we expect the pair to move between 1.0177 and 1.0513 on Tuesday. The reversal of the Heiken Ashi indicator downwards signals a new round of downward correction. Nearest support levels: S1 – 1.0254 S2 – 1.0132 S3 – 1.0010 Nearest resistance levels: R1 – 1.0376 R2 – 1.0498 R3 – 1.0620 Trading Recommendations: The EUR/USD pair continues to move north. Thus, we should stay in long positions with targets of 1.0498 and 1.0513 until the Heiken Ashi indicator turns down. Sales will become relevant again by fixing the price below the moving average line with targets of 1.0010 and 0.9888. Explanations of the illustrations: Linear regression channels – help to determine the current trend. The trend is strong if both are directed in the same direction. The moving average line (settings 20.0, smoothed) – determines the short-term trend and the direction in which trading should be conducted now. Murray levels are target levels for movements and corrections. Volatility levels (red lines) are the likely price channel in which the pair will spend the next day, based on current volatility indicators. The CCI indicator – its entry into the oversold area (below -250) or into the overbought area (above +250) means that a trend reversal in the opposite direction is approaching.       Relevance up to 01:00 2022-11-16 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade Read more: https://www.instaforex.eu/forex_analysis/327095
Bank Of England Will Probably Be Unable To Avoid A Significant Easing Of Policy

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

InstaForex Analysis InstaForex Analysis 15.11.2022 08:03
The GBP/USD currency pair also showed no desire to move volatile on Monday. The price continues to be above the moving average line, and at least one linear regression channel is already directed upwards. As in the case of the euro currency, the pound overcame the important lines of the Ichimoku indicator on the 24-hour TF, so it has technical grounds for continuing growth in the medium term. However, there are a lot of questions about the "foundation" and geopolitics. What will happen if the conflict in Ukraine escalates with renewed vigor? What will happen if the Bank of England stops raising the rate in the near future? Recall that the military conflict between Ukraine and Russia has not been completed or frozen, and peace talks are not even "smelling" now. The APU is gradually moving forward, but this hardly means that the Russian army will turn back, which would end the conflict. New rocket attacks on Ukrainian cities are not excluded, the use of new weapons is not excluded, and the intervention of third countries directly into the conflict is not excluded. I don't even want to talk about sanctions because the parties have already introduced almost everything that could have been introduced. We can assume that the worst is over, but the probability of this is not 100%.  Bank of England The same is true with the Bank of England and its monetary policy. The British regulator has already raised the rate eight times in a row, and inflation has been growing and continues to grow. The key rate at the moment is already 3%; this is the value at which it is possible to expect at least a slight slowdown in price growth. However, this week, the next inflation report will be published and judging by the forecasts, there is no point in expecting something good from it. Currently, inflation in the UK is 10.1%, and forecasts for October indicate a new increase to 10.7–11.0%. Consequently, the Bank of England can be expected to tighten monetary policy by another 0.75% in December, but to what extent can it raise the rate? After all, its economy is also going through hard times. The British government So far, it is unclear how the British government will close the "hole" in the budget by 50 billion pounds. The corresponding financial plan from Jeremy Hunt and Rishi Sunak will be presented only on November 17. Most likely, taxes will be raised, which may cause serious discontent among the British population and significantly lower the ratings of the Conservative Party. Therefore, the BA does not have the opportunity, like the Fed, to raise the rate as much as it wants. British inflation British inflation is the most important report of the week. Unemployment rate In the UK, the unemployment rate, changes in average wages, and retail sales will also be published this week. Of course, these reports do not match the inflation report, so we associate the main market reaction with this report. A new increase in the consumer price index can support the pound, as it will likely mean a new increase in the BA rate in December by another 0.75%. But this is just a theory and an assumption, and the market can react as you like. And also, no one can know if this report has not already been worked out because it is very easy and simple to expect a new acceleration of inflation in Britain now. UK Data In the US, retail sales, industrial production, and data on applications for unemployment benefits will be released this week. Also, quite secondary are the reports. With such a macroeconomic background, it will be difficult for the pair to continue growing, which now largely depends on traders' expectations for the Fed and BA rates. We expect a tangible correction after the "take-off" last week. The pound has recovered from its absolute lows by 1400 points and is regularly adjusted downwards. Therefore, this week is a good time for a rollback. As for the longer-term prospects, the pound may continue to grow, but we do not expect a rapid recovery after losses over the past year and a half. Most likely, periods of growth and rather deep corrections will alternate. The pound still needs to look like a stable and safe currency. GBP/USD The average volatility of the GBP/USD pair over the last five trading days is 222 points. For the pound/dollar pair, this value is "very high." On Tuesday, November 15, thus, we expect movement inside the channel, limited by the levels of 1.1516 and 1.1954. The upward reversal of the Heiken Ashi indicator signals the resumption of the upward movement. Nearest support levels: S1 – 1.1719 S2 – 1.1597 S3 – 1.1475 Nearest resistance levels: R1 – 1.1841 R2 – 1.1963 Trading Recommendations: The GBP/USD pair has started a minimal correction in the 4-hour timeframe. Therefore, at the moment, buy orders with targets of 1.1841 and 1.1960 should be considered in the case of a reversal of the Heiken Ashi indicator upwards. Open sell orders should be fixed below the moving average with targets of 1.1475 and 1.1353. Explanations of the illustrations: Linear regression channels – help to determine the current trend. The trend is strong if both are directed in the same direction. The moving average line (settings 20.0, smoothed) – determines the short-term trend and the direction in which trading should be conducted now. Murray levels are target levels for movements and corrections. Volatility levels (red lines) are the likely price channel in which the pair will spend the next day, based on current volatility indicators. The CCI indicator – its entry into the oversold area (below -250) or into the overbought area (above +250) means that a trend reversal in the opposite direction is approaching.       Relevance up to 01:00 2022-11-16 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/327097
There Are Risks That An Increase In The Price Of Oil May Provoke China To Limit The Export Of Diesel Fuel

Chinese Covid Situation And Economic Activity Are Dragging Brent Down

InstaForex Analysis InstaForex Analysis 15.11.2022 09:26
Expect the best, but prepare for the worst. As much as investors would like the glass to be half full, the pessimistic forecasts of authoritative organizations are forcing oil markets to ignore supply concerns and focus on slowing global demand. How else, if OPEC cut the estimate of the increase in the indicator by 100,000 b/d to +2.5 million b/d in 2022 and to +2.2 million b/d in 2023, coupled with weak statistics from China, this forced Brent collapse to $92.5 per barrel. The whole world knows firsthand how COVID-19 affects the economy. What the global recession 2020 is worth. Now China is following this thorny road, the deterioration of the situation, which is pushing global GDP to a new recession. In October, retail sales in China decreased by 0.5%, industrial production growth slowed, and real estate investment continued to fall. Dynamics of Chinese indicators China is the largest consumer of oil, so it is not surprising that the outbreak of COVID-19, an increase in the number of infections, lockdowns and a reduction in economic activity are dragging Brent down. China is far from the only dark spot on the map of the global economy. According to Bloomberg forecasts, the eurozone's GDP will shrink by 0.1% in 2023. And that is subject to a mild winter and large-scale fiscal incentives to combat the energy crisis. If the governments of the countries of the currency bloc fail and frosts come to the eurozone, the economy may sink by 3.3%. As for the US, the basic scenario here is a 0.7% GDP growth with a recession in the second half of 2023. The housing market crisis and the Fed's overly aggressive monetary restrictions will lead to a deeper and longer recession. Thus, the situation in the key economies of the world leaves much to be desired, while the IMF warns that it may worsen due to inflation and the armed conflict in Ukraine. As a result, global oil demand will suffer, expectations of which rightly lead to a peak in Brent. As for supply issues, investors are ignoring them due to the increase in maritime transport of oil from Russia to the highest levels since 2017. Buyers seek to increase imports ahead of the EU embargo. Dynamics of sea transportation of oil from Russia In my opinion, a significant part of the negative is already embedded in Brent quotes. For a long time, investors have been talking about a recession, the most aggressive federal funds rate hike in decades. If the Fed succeeds in giving the US economy a soft landing, warm weather in Europe keeps the recession short and shallow, and China can weather the COVID-19 pressure as other countries have, demand for oil will be higher than expected. And with it the prices. Technically, on the daily chart, Brent falling below $92.5 per barrel will activate the 1-2-3 pattern and become the basis for short-term sales. Subsequently, we use the rebound from $91 and $89.2 to fix profits and medium-term purchases.       Relevance up to 08:00 2022-11-20 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/327134
US-China Tensions Continue To Ramp Up, Dollar Off Its Highs

The US And Chinese Leaders Criticized Russia For Its Threatening The Use Of Nuclear Weapons

Saxo Bank Saxo Bank 15.11.2022 09:47
Summary:  Equity markets traded largely sideways, as did the US dollar after the wild sell-off late last week in the wake of the soft US CPI data. Markets in Asia traded on a strong note overnight after friendly headlines from the long Biden-Xi talk yesterday. The focus on incoming data in the days ahead will be on US PPI today and Retail Sales tomorrow, with the UK set to announce a much anticipated autumn budget statement on Thursday, likely to include new windfall taxes on power and fossil fuel companies.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) Despite a strong session in China there is little spillover effect into developed market equities with S&P 500 futures still hovering just below the 4,000 level. Today’s key events are earnings from Walmart and Home Depot, or news coming out of the G20 meeting. US equities are tilted short-term in favour of an upside move with the 200-day moving average in the S&P 500 futures at 4,080 being the natural gravitational point for the market. Hong Kong’s Hang Seng (HSIX2) and China’s CSI300 (03188:xhkg) Hong Kong and China’s equity markets surged for the third day in a row, with Hang Seng Index soaring 3.4% and CSI 300 climbing 1.7%, as optimism returned to the markets due to favourable policy shifts in China regarding pandemic control and property developers’ access to funding and goodwill gestures shown by China’s President Xi and the US’ President Biden at their first face-to-face meeting after President Biden took office. China Internet companies were among the top gainers, with Alibaba (09988:xhkg) up 11%, Tencent (00700:xhkg) up 10%, and Meituan (03690:xhkg) up 6%. Investors brushed off the rise of new Covid cases to 17,772 in mainland China as well as weaker-than-expected retail sales (shrinking 0.5%) and industrial production (+5%) in October. FX: USD still on the mat after massive downdraft on lower October CPI After the massive two-day plunge last week on the release of the softer than expected US October CPI data on Thursday, the US dollar largely tread water in yesterday’s session, with traders unwilling to take it lower still after a huge, one-off adjustment to Fed expectations that will require more weak incoming data from the US if investors want to solidy their case for a coming Fed pivot. EURUSD continues to trade near the key 1.0350 area, which was the major low back in May and June and prior to that, back in early 2017. The first support is the 1.0200 area, the 38.2% retracement of the rally sprint, with the reversal level at 1.0100, the 61.8% retracement and near the prior important resistance. For USDJPY, while the market managed to briefly take out the 139.40, the prior major high in July, it has bounced back above 140.00 at times since yesterday. Crude oil (CLZ2 & LCOF3) returned to the lower end of their current ranges ... after OPEC cut its forecasts for global oil demand in the fourth quarter, virus infections continue to climb in China. In addition, a monthly Drilling Productivity Report from the EIA cast doubt on US shale growth and as oil production per drilled well has fallen to the lowest since July 2020. Weaker than expected China data also highlighted the risk to oil demand during the final quarter before an expected tightening driven by OPEC+ production cuts and EU sanctions against Russian oil. Focus on US economic data given its impact on risk appetite as well as IEA’s Oil Market Report for November due later today. Gold (XAUUSD) Gold has so far seen three shallow corrections during the run up from the post-FOMC low at $1620 on November 3, highlighting an emerging “buy-the-dip" mentality as short positions are being reduced while others trade the current positive momentum. An attempt to reverse some of last week's drop in the dollar and yields initially supported a correction but gold did not get close to test key support at $1735 before receiving a bid after Fed Vice Chair Lael Brainard said it would be appropriate for the Fed to slow its monetary-tightening pace soon. Demand from ETF investors – net sellers for months – have yet to show any appetite while speculators cut their net short by 80% to –8k lots in the week to November 8.  Expect some consolidation and potentially a recheck of support at $1735 with resistance at $1789 and $1804. US treasuries (TLT, IEF) US treasuries failed to consolidate much of last Thursday’s enormous slide in yields, with the 4.00-4.10% area the somewhat far away upside swing zone, while the next major focus lower will be on the major pivot high near 3.50% from June. What is going on? Xi-Biden summit sees positive headlines After a three-hour talk between the US and Chinese heads of state, both sides issued statement suggesting a friendly reset of the tone between the two countries. The two sides are set to resume cooperation on climate change and food security and both leaders criticized Russia for its threatening the use of nuclear weapons. The Chinese Foreign Minister Wang Yi said the talks represent a “new starting point” with both sides hoping “to stop the tumbling of bilateral ties and to stabilize the relationship.” Weak incoming data from China overnight Industrial Production rose 5% YoY in October, a slowing of the pace from the month before and below estimates of 5.3%. Retail Sales for the month were down –0.5%, far below expectations of a rise of +0.7%. Infineon Technologies blasts earnings estimates The German semiconductor manufacturer reports strong Q4 results (ending 30 September) with revenue at €4.14bn vs est. €3.93bn and segment profit of €1.06bn vs est. €970mn. For the current fiscal year, the company guides segment profit margin of 24% vs est. 22.2% and revenue of €15.5bn vs est. €15bn. Fed Vice Chair Brainard mentions slowing the pace of Fed rate hikes In an interview yesterday, Lael Brainard, widely considered the chief dove on this FOMC, confirmed forward market expectations for lowering the size of future rate hikes. After last Thursday’s softer US October CPI print, the market had already lowered expectations to a 50-bp move, so there was little market impact despite a flurry of headlines. Brainard said “It will probably be appropriate soon to move to a slower pace of increases...but I think what’s really important to emphasize, we’ve done a lot, but we have additional work to do.” Higher US inflation expectations ... from the New York Fed’s Survey of Consumer Expectations weighed slightly on bond markets. Median one- and three-year-ahead inflation expectations increased to 5.9% and 3.1% from 5.4% and 2.9%, respectively. The median five-year-ahead inflation expectations rose to 2.4% from 2.2%. Also weighing on the markets during the session was about $12 billion corporate bond issuance. What are we watching next? ECB’s TLTRO repayments on Friday This is usually a non-event for traders, only ECB watchers care about that. But this is before the European Central Bank (ECB) decided on 27 October to change the rules retroactively and increase the targeted longer-term refinancing operation (TLTRO) rates from 23 November onwards. The interest rate will be directly indexed on the ECB’s deposit rate (which could peak at 2.50 % next year) instead of being calculated over the entire life of the operation. This creates strong incentives for commercial banks to repay in advance (the bulk of the TLTRO was going to be repaid in June 2023). This is aimed to reduce the eurozone balance sheet and with that to contribute to the overall monetary policy normalisation. At this stage, it is still unclear what will be the exact consequences on the flow of credit in the eurozone. This is something to monitor, however. Incoming US data Traders will remain nervous around incoming US data after the wild reaction to last week’s Thursday October US CPI release. The US macro calendar highlights this week include today’s October PPI releases, the Oct. Retail Sales data on Wednesday and November NAHB Housing Market Index release the same day. Finally, the US reports October Housing Starts/Building Permits data on Thursday. Hints of new taxes for the coming UK Autumn Budget Statement on 17 November The new Prime minister Rishi Sunak needs to find savings worth about £30-40bn/year to convince the independent Office for Budget Responsibility that debt won’t rise across the medium-term as a percentage of GDP.  At the same time, Sunak was out yesterday promising the return of the “triple lock” he suspended for 2022-23 as Chancellor, under which pensions are adjusted higher by the highest of inflation, average earnings, or 2.5%. Current Chancellor Jeremy Hunt is considering a new 40% windfall tax on electricity producers. He may also extend the current windfall tax on oil and gas producers to 2028 and raise it to 35% from 25% in Thursday’s budget statement. Earnings to watch Today’s US earnings focus is Walmart and Home Depot which are both giants in the US consumer sector. Walmart is expected to deliver 5.2% y/y revenue growth and lower EBITDA margin at 5.5% down from 6.3% a year ago. Home Depot is expected to deliver revenue growth of 3% y/y and unchanged EBITDA margin at 17.5% compared to a year ago. Sea Ltd is also reporting today and was at one point the darling of the market delivering high growth rates and strong returns but the last year has been brutal. Analysts expect revenue growth of 12% y/y down from a revenue growth rate of 122% y/y a year ago as e-commerce, gaming and financial services have slowed down in Southeast Asia. Today: Infineon Technologies, Vodafone, Alcon, Walmart, Home Depot, Sea Ltd Wednesday: Siemens Energy, Tencent, Experian, SSE, Nibe Industrier, Nvidia, Cisco, Lowe’s, TJX, Target Thursday: Siemens, Alibaba, Applied Materials, Palo Alto Networks, NetEase Friday: JD.com Economic calendar highlights for today (times GMT) 0900 – IEA’s Oil Market Report for November 1000 – Germany Nov. ZEW Survey 1000 – Eurozone Sep. Trade BAlance 1000 – Eurozone Q3 GDP estimate 1330 – US Oct. PPI 1330 – Canada Sep. Manufacturing Sales 1400 – US Fed’s Harker (voter 2023) to speak 1500 – US Fed’s Barr (Voter) to speak before Senate panel 2130 – API's Weekly Crude and Fuel Stock report 0030 – Australia Q3 Wage Price Index  Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: https://www.home.saxo/content/articles/macro/market-quick-take-nov-15-2022-15112022
Rates Spark: Discussing the Potential of 4.5% and its Impact on Markets

China Could Be The Next Hit To Global Inflation | Donald Trump's Announcement

Swissquote Bank Swissquote Bank 15.11.2022 09:52
Equities saw some profit taking in last week’s post-US inflation rally, as some Federal Reserve (Fed) officials reminded investors that the 7.7% inflation is still high and that the Fed would continue fighting to bring it lower. G20 In geopolitics, yesterday’s meeting between Jow Biden and Xi Jinping went well. US-listed Chinese stocks extended gains. Crude Oil In energy, American crude dived on the news that OPEC cut its oil demand outlook and warned of uncertainties around global growth. Earnings In earnings, big US retailers Walmart and Home Depot are due to release earnings today Donald Trump And in fun news, Donald Trump will make an important announcement! Whoo! Watch the full episode to find out more! 0:00 Intro 0:41 Fed members warn of premature optimism 2:54 US inflation expectations go up 4:31 China could be the next hit to global inflation 5:05 Crude oil down on OPEC demand outlook cut 6:20 Biden, Xi meeting went well! 7.49 Crypto selloff cools 8:53 What to watch today? Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Fed #US #inflation #expectations #G20 #Biden #Xi #meeting #US #China #crude #oil #FTX #bankruptcy #Bitcoin #Ethereum #selloff #Binance #recovery #funds #Walmart #HomeDepot #earnings #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH
Bank of Japan to welcome Kazuo Ueda as its new governor

The Results Of Japanese GDP Is Negative | US PPI Ahead

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

The Re-Tightening Of Credit And Sovereign Spreads Has Failed

ING Economics ING Economics 15.11.2022 12:37
Signs of optimism abound in global markets but caution remains. A Treasury short base explain the strength of the rally, but curve moves show the Fed’s cautious message has landed. Easing collateral scarcity in Europe means swap spreads could tighten alongside riskier bonds In this article A Treasury short base explain the post-CPI rally but markets remain cautious Less collateral stress means swap spreads can join the risk party Today’s events and market views A Treasury short base explain the post-CPI rally but markets remain cautious Even with Thursday’s post US CPI rally partially reversed, we find government bonds are at risk of a near-term retracement if US data continue to show pockets of strength. The most obvious risk is a disappointment in today’s PPI release. Consensus is for a colling down of both the monthly and annual core (ex-food and energy) measures. CFTC data suggested that non-commercial future positions heading into last week’s CPI were net short, and in the case of the 2Y, at a record level. This may account for the strength of the rally but data isn’t timely enough to assess what percentage of these shorts were closed since. Non-commercial future positions heading into last week’s CPI were net short Assuming a short base still exists, the potential for a rally on a soft inflation print remains, although we think most near-term short-covering needs have happened since last week. Another development that is harder to explain with this positioning data alone is the failure of the US curve to re-steepen after the CPI release. Common sense would dictate that the 2Y would rally the most if data points to an early end to the Fed’s cycle but it is the 5Y point that benefitted. This may suggest that the Fed’s cautious message has been heard, and that markets believe it won’t rush into cutting rates, which in turns means the 2Y could prove relatively sticky near-term. 5Y Treasuries dropped on the curve but 2s10s failed to steepen Source:  Refinitiv, ING Less collateral stress means swap spreads can join the risk party So far the strength of risk sentiment has failed to weigh on government bonds, in particular in Europe. The re-tightening of credit and sovereign spreads has failed to add to core yield upside which is characteristic of an environment where inflation remains the principal concern. In theory, this should weigh both on rates and riskier assets but the former is more directly impacted, so it is no surprise to see government bond yields stay range-bound even as stocks rally and spreads tighten. It is no surprise to see government bond yields stay range-bound even as stocks rally and spreads tighten Even the effect on swap spreads, an historical barometer of risk aversion, has been delayed. We’ve written repeatedly about steps taken by both the German federal treasury and the European Central Bank to ease the collateral shortage that has driven a wedge between the yield of German government bonds and swap rates. Large targeted longer-term refinancing operation (TLTRO) early repayments to be announced on Friday would add to this already well established dynamic. What lower collateral shortage would achieve is to make swap spreads more sensitive to other factors, including improving risk appetite, and so add to tightening pressure. This is assuming the reasons for the improvement in risk sentiment holds up, however. Easing collateral scarcity is allowing swap spreads to tighten alongside credit spreads Source: Refinitiv, ING Today’s events and market views Spanish and French CPI, as well as 3Q eurozone GDP will all be final readings. For more forward-looking indicators, look to Germany’s ZEW sentiment index, also released this morning. Frank Elderson, of the ECB, is due to speak today. Euro bond supply will come from Germany (7Y), Finland (5Y/25Y), and from the EU which mandated banks for a dual tranche 10Y green and 30Y deal. The UK will carry out sales in the 10Y and 22Y sectors. Given the magnitude of the post-CPI rally in bonds, today’s PPI will be scrutinised for confirmatory signs that inflation is on the descent. For the same reason, the Fed speakers scheduled for the day will be of particular importance in dictating US rates direction. They include Patrick Harker, Lisa Cook, and Michael Barr. Empire Manufacturing completes the list of US releases. We think the Treasury short base hasn’t entirely disappeared but has shrank enough to reduce the risk of a rally. Meanwhile, supply should weigh on bonds until at least mid-week. TagsRates Daily   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
ECB's Tenth Consecutive Rate Hike: The Final Move in the Current Cycle

Fed's Aggressive Rate Hikes Have Certainly Helped Bring Inflation Down

InstaForex Analysis InstaForex Analysis 15.11.2022 14:14
Federal Reserve Governor Christopher Waller said at a conference in Sydney, "We're not softening...Quit paying attention to the pace and start paying attention to where the endpoint is going to be. Until we get inflation down, that endpoint is still a way out there." On Sunday, speaking at a conference sponsored by UBS, Waller said that while the central bank is considering a slower rate hike, this should not be interpreted as softening its fight for price stability. The table below shows the monthly CPI table from October 2021 to October 2022, published by the US Bureau of Labor Statistics. The CPI report last week showed that inflation eased slightly from 8.2% in September to 7.7% YoY in October. Inflation has been elevated for a long time, given that a year ago (October 2021), headline inflation was over 6%, and now, in 2022, the CPI is not down but rather higher than last Halloween. Now the public is realizing that instead, they were being treated to an ever-increasing cost of living. While the Federal Reserve's aggressive rate hikes have certainly helped bring inflation down, the 1.4% decline that brought the CPI to 7.7% is still at a level not seen before 2021 for more than four decades. The CPI at 7.7% is far from the inflation target set by the Fed. The core CPI, which excludes food and energy costs, is over 6%, still three times the Fed's inflation target of 2%. Dallas Fed President Lorie Logan said last week's report was a welcome relief but would not eliminate the need for further rate hikes, perhaps at a slower pace. Currently, the probability of a 50 basis point rate hike at the December FOMC meeting continues to rise at an 85.4% probability, 5.2% more than the probability recorded by the CME FedWatch tool on Friday.   Relevance up to 09:00 2022-11-16 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/327156
USA: retail sales print may show a noticeable growth

USA: retail sales print may show a noticeable growth

FXStreet News FXStreet News 15.11.2022 15:42
Retail Sales in the US are expected to rise by 1% following a stagnant September. Risk perception is likely to continue to drive the US Dollar's (USD) valuation. Market participants will pay close attention to the Q3 earnings reports of big retailers. Retail Sales in the United States (US) are forecast to rise by 1% in October after staying unchanged at $684 billion in September. The US Dollar (USD) has been struggling to find demand following the softer-than-expected Consumer Price Index (CPI) figures for October and the Retail Sales report is unlikely to impact the USD’s valuation in a meaningful way. According to the CME Group FedWatch Tool, the probability of a smaller, 50 basis points (bps), Federal Reserve rate increase in December stands at 80%, up significantly from 50% before the October inflation report. Although some FOMC policymakers urged markets not to get ahead of themselves by pricing in a less aggressive tightening outlook, the sharp decline witnessed in the US Dollar Index showed that investors had been looking for an opportunity to unwind crowded Dollar longs. Market implications Since the US Census Bureau’s Retail Sales data is not adjusted for price changes, it will not offer an accurate picture of consumer activity. Nevertheless, an unexpected decline in Retail Sales could trigger a “bad news is good news” reaction in financial markets as it would point to a slowdown in consumer demand, which the Fed has been trying hard to achieve by hiking rates. In that scenario, risk flows could continue to dominate the markets and make it difficult for the US Dollar (USD) to hold its ground against its risk-sensitive rivals, such as the Euro (EUR) and the Pound Sterling (GBP). On the other hand, better-than-expected growth in sales could help the USD stage a recovery. However, a USD-positive market reaction should remain short-lived unless there is a noticeable negative shift in risk sentiment. It’s worth noting that several big retailers in the US are scheduled to report third-quarter earnings this week. Investors are likely to pay closer attention to these numbers rather than the Retail Sales report. At the time of press, Walmart's shares were up nearly 5% on the day after the retail giant announced that it expects sales in the US to increase by 5.5% in fiscal 2023, compared to 4.5% in the previous earning report. Lowe’s, Target and TJX Companies will release earnings figures on Wednesday. Macy’s, Kohls, Ross Stores and Gap will report on Thursday before Foot Locker and Buckle Inc. wrap up the week. To summarize, October Retail Sales report should do little to nothing to influence the market pricing of the Fed’s rate. Hence, overall risk perception should continue to drive the US Dollar’s action in the short term. In case Wall Street’s main indexes remain bullish in the second half of the week with big retailers reporting better-than-forecast earnings, the USD could have a hard time staging a rebound. US Dollar Index technical outlook US Dollar Index trades within a touching distance of 106.00. The 200-day Simple Moving Average (SMA) and the Fibonacci 50% retracement of the March-October uptrend reinforce that support. In case the index drops below that level and fails to reclaim it, it could target 105.00 (psychological level) and 104.00 (Fibonacci 61.8% retracement) next. On the upside, interim resistance seems to have formed at 107.00 (static level) ahead of 108.00 (Fibonacci 38.2% retracement). With a daily close above the latter, the index could extend its recovery toward 109.00, where the 100-day SMA is located. In the meantime, the Relative Strength Index (RSI) indicator on the daily chart stays near 30, suggesting that there could be a technical correction before the next leg lower.
Construction Activity in Poland Contracts in May: Focus on Building Decline and Infrastructure Investment

According to ING, US Producer Price Index may mean that inflation could decrease earlier

ING Economics ING Economics 15.11.2022 20:41
Last week’s lower-than-expected core CPI print raised hopes that the Fed’s tightening cycle was entering the end phase. Today’s PPI report has offered further succor to the notion that the Fed will actually be in a position to cut rates if, as we fear, the US enters recession in 2023 The headline producer price index rose 0.2% month-on-month in October, which was lower than expected PPI surprises on the downside With core CPI rising only 0.3% month-on-month last week, rather than the 0.5% expected and the 0.6% MoM prints seen in previous months, the market saw evidence that inflation pressures may finally be abating after the most aggressive Fed tightening cycle since the early 1980s. While it is certainly very helpful to our view that inflation can get back to the Federal Reserve’s 2% inflation target next year, we warned that nothing can be taken for granted and that the 0.3% figure was still nearly double the 0.17% MoM figure we need to average over time to be confident that the 2% year-on-year inflation target will be hit. Today’s PPI report has given us confidence that inflation can fall more quickly than the market had been expecting. In turn this will give the Federal Reserve the flexibility to respond with stimulus should a 2023 recession materialise, as we fear. Annual inflation rates are slowing Source: Macrobond, ING   The headline rate rose 0.2% MoM, lower than the 0.4% expected, while September’s MoM rate was revised down to 0.2% from 0.4%. The details show that food +0.5% MoM and energy +2.7% MoM continue to run hot, but goods ex food and energy fell 0.1% MoM and services fell 0.1%. Consequently, the more important core figure (ex food and energy) was unchanged on the month versus the 0.3% MoM expected, leading the YoY core PPI rate to slow to 6.7% from 7.1%. Lower input costs reduce the pressure for consumer price rises Falling commodity prices and the effects of earlier energy price falls have been very helpful and together with the strong dollar and falling freight costs has meant imported prices are receding quite rapidly now. Indeed, freight costs from China to the US are now pretty much back to pre-Covid levels, suggesting supply chain frictions caused by logistic issues have abated to a large extent. This is all very helpful to reduce corporate input costs, which in turn reduces the pressure for companies to raise prices for consumers. Moreover, in a weakening economic environment it could allow companies greater flexibility on the pricing to respond to weaker demand without such an aggressive squeeze on profit margins. Freight costs for a 40-foot container Source: Macrobond, ING Federal Reserve has greater scope for flexibility Nonetheless, it is far too early for the Fed to signal the all-clear with Federal Reserve officials continuing to signal that while this is encouraging it is only one month. They will need to see consistent readings for core CPI coming in around 0.1% or 0.2% and we are still some way off from that, while we have to remember that the jobs market remains hot and wages continue to rise at a rapid clip. Consequently we continue to have a 50bp rate hike in for the December Federal Open Market Committee meeting and look for a further 50bp hike in the first quarter of 2023, but that should mark the top. Recessionary forces are intensifying and lower inflation will give the Fed the scope to reverse course with rate cuts in the second half of 2023. Read this article on THINK TagsUS PPI Inflation Federal Reserve Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Melbourne Institute Inflation Gauge For Australia Rose More Than Expected

The RBA Downgraded Its Outlook For The Property Market | Walmart Is Increasing Its FY Outlook

Saxo Bank Saxo Bank 16.11.2022 08:53
Summary:  Nasdaq 100 and S&P 500 ended higher, being lifted by softer-than-expected producer inflation. Walmart and Home Depot beat in earnings and topline. Chinese stocks surged on additional financial support to the property sector and a conciliatory tone from the Biden-Xi meeting. Hang Seng Index rose 4% to 18,343, more than 25% higher from its October low. What’s happening in markets? The Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) gained on softer-than-expected US PPI Investors got a lift from the softer-than-expected PPI data which added to the post-CPI optimism that the US inflation may have peaked. S&P 500 gained 0.9% and NASDAQ 100 rose 1.5%. Stocks pared gains in the afternoon when the news of Russian missiles landing in Poland, a NATO member, hit the wires. Stocks nonetheless managed to recover from the missile news and finished the session higher.  Nine out of 11 S&P 500 sectors gained, with communication services, consumer discretionary, information technology and real estate led. On earnings, retail bellwether Walmart (WMT:xnys) surged 6.7% after reporting earnings and revenue beats and raising full-year outlook guidance. Home Depot (HD:xnys) gained 1.7% on earnings beating estimates and reaffirming full-year guidance. US  treasuries (TLT:xnas, IEF:xnas, SHY:xnas) rallied on PPI prints, with the 10-year yield falling 8bps to 3.77% US treasuries rallied, with yields falling 5-9 basis points across the curve. The 10-year yield fell 8bps to 3.77%. The market surged in price after the growth in PPI, both in headlines and core measures, slowed more than expected. A stronger Empire State manufacturing index, returning to the expansionary territory and Fedspeak from Bostic, Barr, and Harker reiterating the slower pace but still additional work to do message, did not tame market sentiment. Adding to the fuel was some safe-haven buying of treasuries after Russian missiles hit Poland and killed two people. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) on fire as risk-on sentiment returned Hong Kong and China’s equity markets surged for the third day in a row, with Hang Seng Index soaring 4.1 % and CSI 300 climbing 1.9%, as optimism returned to the markets due to favourable policy shifts in China regarding pandemic control and property developers’ access to funding and goodwill gestures shown by China’s President Xi and the US’ President Biden at their first face-to-face meeting after President Biden took office. In addition, the Chinese authorities announced that they will allow developers, after meeting some requirements in their financials and supports from their banks, to tap into some of the presale deposits now placed in escrow accounts. China Internet stocks and semi-conductor names were among the top gainers. Commodities lift; Crude oil (CLZ2 & LCOF3) rose more than 1% after Russian rockets hit, iron ore (SCOA,SCOZ2) extended its gain and wheat whipped up 1% Crude oil (CLZ2 & LCOF3) rose more than 1% after the EIA published a report saying inventories in developed nations sunk to an 18-year low of less than 4 billion barrels. The EIA says a potential EU ban on Russian supply will add further pressure, and its output may drop below 10 million b/d next year, from about 10.7 million so far this year. For the next technical indicators and levels to watch in oil, click here. Moving to metals, the Iron ore (SCOA) price rose 1.7%, continuing its rebound and has now risen 25% this month on the back of fresh China stimulus, however the iron ore price is still down 13% from its high. The question is, if China continues to ease restrictions, will the iron ore price continue its rebound, and support affiliated iron ore equities. Meanwhile in crop markets, wheat trades higher on concerns there could be a potential escalation of the war. What to consider Fed collects more evidence inflation is easing; US producer prices cool more than expected, clocking smallest gain in a year Investors got another piece of evidence the inflationary pressures are easing, with US producer price growth rising 8% Y/Y in October (below the 8.3% Bloomberg consensus expected and down from the 8.5% Y/Y in September), with prices rising 0.2% M/M (which was less than the 0.4% expected). Excluding volatile food, energy, and trade services, the core PPI grew 6.7% Y/Y in October- while the market expected the growth remains unchanged from the September level of 7.2%. After peaking in March at 11.7%, producer price growth has moderated from improving supply chains, softer demand, and weakening commodities prices. This means, following the softer-than-expected CPI print last week, the Fed has garnered more catalysts to slow its pace of hikes, which also provides further support to the equity market and bond market rallies. However, the next important data sets the Fed will be watching are due early next month; US jobs, and November CPI, which are ahead of the Fed’s next meeting (in the third week of December). RBA meeting minutes signal food and energy prices to rise, and property prices to fall Australia’s central bank sees food price inflation rising, along with energy prices, while the Unemployment rate is expected to rise as well off its lows. The RBA downgraded its outlook for the property market, expecting property prices to continue to fall, as they have in history when the RBA is in a rising cycle. It also sees housing loan commitments further falling. Yet the RBA affirmed it will keep rising rates till inflation is within its targets as the central bank wants underlying inflation to be within 2-3%. The RBA also hinted it may be close to its target, "in underlying terms, inflation was a little over 6% with most components of the CPI rising at annualized rates of more than 3%”. What are the investor takeaways from the RBA minutes? It could be worth looking for potential opportunities in investing in Food stocks, food ETFs, and the as well as wheat and corn. Secondly, it could be worth looking for potential opportunities in energy, like crude oil, or oil stocks such as Woodside Energy and Occidental Petroleum to name a few. And with property prices falling, along with lending, keep an eye on bank shares. Consider looking at CommBank (CBA) as a proxy. Will CBA continue to rally off its low on the back of the RBA's dovish stance, or will CBA and big banks take a haircut as banks’ profits are shrinking? Walmart and Home Depot earnings beat estimates Peter Garnry, Head of Equity Strategy wrote in his notes that Walmart showed a positive surprise on its operating margin and an upward revision to the FY results and Home Depot is delivering a decent Q3 result,= as well.  Walmart, the largest US retailer reported FY23 Q3 (ending 31 October) revenue of $152.8bn up 9% y/y beating estimates and adj. EPS of $1.50 vs est. $1.32 while announcing a $20bn buyback programme. The third quarter result is so strong that Walmart is increasing its FY outlook on adj. EPS to -6% to -7% y/y from previously -9% to -11%. The 12-month trailing revenue figure eclipsed $600bn for the first time in its history. As we have seen throughout this Q3 earnings season, retailers and consumer industries have been able to either preserve or expand operating margins. Walmart is valued at a 12-month forward EV/EBITDA of 11.6x compared to 12x for the S&P 500 Index.  The largest US home improvement retailer Home Depot reports FY23 Q3 (ending 31 October) revenue of $38.9bn vs est. $37.9bn up 6% y/y and EPS of $4.24 vs est. $4.13 as the US consumer remains in good shape despite inflation and higher cost of living. Home Depot is confirming its fiscal year guidance. Tencent (00700) is scheduled to report earnings on Wednesday Tencent is scheduled to report Q3 results today. Bloomberg survey shows the street is expecting revenues to edge down around 1% Y/Y with both advertisements and gaming down Y/Y. On adjusted EPS, the consensus is calling for an 8% year-on-year decline. For our look ahead at markets this week - Listen/watch our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: https://www.home.saxo/content/articles/equities/market-insights-today-16-nov-2022-16112022
Hungary's Budget Deficit Grows, Raising Concerns Over Fiscal Targets

Apple Shares Rose | As Trump Still Enjoys Personal Popularity

Saxo Bank Saxo Bank 16.11.2022 09:08
Summary:  Equity markets were in for a wild ride yesterday as the melt-up continued in early trading, only to violently reverse on an apparently errant missile killing two in a Polish town bordering Ukraine. The price action has since stabilized, with risk sentiment still strong in Asia on hopes for incoming stimulus from China. Important incoming US data up today includes the October Retail Sales data.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) Big rejection in S&P 500 futures yesterday with the index futures coming off 1.3% from the intraday highs to close below the 4,000 level. Yesterday’s upside driver was a lower than estimated US PPI print and then later the downside move was triggered by news that a rumoured Russian missile had hit Polish territory killing two persons. This morning S&P 500 futures are attempting to push above the 4,000 level again, but we want to emphasize cautiousness here as geopolitical risks remain high and markets that seem fragile and trading on thin liquidity across many markets. Today’s key earnings event in the US is Nvidia reporting after the market close. Hong Kong’s Hang Seng (HSIX2) and China’s CSI300 (03188:xhkg) Hong Kong and China stocks consolidated and took a pause on the strong rally since last Friday, with Hang Seng Index losing 1% and CSI 300 Index sliding 0.7%. Chinese property names retraced. Leading private enterprise developer Country Garden (02007:xhkg) plunged 14% following the placement of new shares. Chinese EV makers underperformed, with leading names dropping by 2% to 6%. New Covid cases in mainland China went above 20,000 for the first time since April. FX: USD volatile on risk sentiment swings yesterday The US dollar was pummelled yesterday as the risk sentiment melt-up initially continued yesterday in early trading in the US before a missile hitting a Polish town (more below) sharply reversed sentiment. The situation has since stabilized, but the reversal of the spike put a considerable dent in tactical USD downside momentum. GBPUSD traded the most wildly ahead of today’s CPI and tomorrow’s Autumn Budget Statement, squeezing from 1.1750 early yesterday to all the way north of 1.2000 briefly before trading back to 1.1800 and closing the day south of 1.1900. The USD volatility was less pronounced elsewhere, particularly against Asian currencies. The incoming US data and risk sentiment swings around that data (or as we saw yesterday from other sources) will likely drive the next USD move. Crude oil (CLZ2 & LCOF3) Crude oil ended lower on Tuesday following a volatile trading session that briefly saw prices spike on news a Polish border town had been hit by a Russian-made but probably Ukrainian fired missile (see below). Overall, the crude oil market remains rangebound with demand worries currently weighing a touch harder than supply concerns driven by OPEC+ production cuts and from next month, EU sanctions against Russian oil, a development that according to the IEA may drive a 15% reduction in Russian output early next year. In China the number of virus cases have surged to near 20,000 thereby testing local authorities' appetite for maintaining the covid-zero restrictions. Focus on EIA’s weekly stock report after the API reported a 5.8m barrel drop in crude and smaller increases in fuel stocks. Gold (XAUUSD) Gold touched resistance at $1788 on Tuesday as the dollar hit a fresh cycle low after US PPI showed the smallest increase since mid-2021. Later in the day, a brief safe haven bid quickly fizzled out after Biden said the rocket that hit Poland was unlikely to have been fired from Russia. Demand from ETF investors – net sellers for months – remain elusive with total holdings falling to a fresh 31-month low and with that in mind expect continued consolidation and potentially a recheck of support at $1735. Resistance at $1788, the 38.2% retracement of the 2022 correction and $1804, the 200-day moving average. US treasuries (TLT, IEF) US treasuries punched to new local lows yesterday, with the 10-year treasury benchmark dipping below 3.80% after a likely errant missile hit a Polish town bordering Ukraine and on slightly softer than expected PPI data. But yields have rebounded today and are back to slightly below the close from last Thursday after that day’s surprisingly soft October US CPI release. Key levels are 3.50% to the downside, the pivot high around the June FOMC meeting when the Fed hiked 75 basis points for the first time for this cycle, while 4.00-4.10% is perhaps the upside swing area. What is going on? UK October CPI was out at 11.1% YoY, a new cycle high This was vs. 10.7% expected and 10.1% in September. Core CPI matched the cycle high from September at 6.5% YoY, versus 6.4% expected. Sterling trades a bit weaker after the initial reaction to the data point, as higher inflation will likely require more fiscal and monetary tightening that will make the coming UK recession deeper, a sterling negative. Missile comes down in Poland town bordering Ukraine, killing two The source of the missiles is a mystery, with US President Biden saying after an emergency meeting with other leaders that the missile was “unlikely” to have been launched in Russia, while Poland claimed that the missile was “Russian made” and convened an emergency security meeting yesterday afternoon. Markets reacted strongly to the development initially, as Poland is a member of NATO. Russian officials said that claims of an intentional missile firing are a “deliberate provocation with the goal of escalating the situation.” Donald Trump declares third bid for the White House in 2024 Trump was widely seen as the chief liability in a very poor Republican showing in the mid-term elections last week, with candidates strongly denying the results of the 2020 election losing badly in almost every case. The Democrats are set to gain a slightly larger majority in the Senate and the Republicans will only eke out the narrowest of majorities in the House of Representatives. As Trump still enjoys an unmatched “base” of personal popularity, it will be difficult for any Republican profile to rise up to challenge Trump, just as it is likely impossible that Trump can win independent voters and those that are not his base. It’s ideal ground for the formation of a new party. Apple set to shift to US-based chip production Apple shares rose over 2.1%, moving to their highest level since early November after the Apple CEO unveiled the company will be using US-made Chips from Arizona in 2024, as part of reducing its reliance on Asian chip manufacturers and shifting to producing its own. CEO Tim Cook also told staff Apple plans to expand its chip supply into European markets. The moves underscore the necessity for technology companies to reshoring semiconductors from Asia to reduce supply chain risks. These types of moves will add to inflationary pressures in the future. US earnings recap: Walmart, Home Depot, and Sea Ltd Yesterday’s earnings releases from these three consumer retailing companies were all better than expected with Walmart lifting guidance and beating on revenue growth. Home Depot had the most downbeat reaction from investors as the home improvement retailer’s revenue growth beat was only due to inflation and not higher volume. The biggest positive reaction was in Sea Ltd shares as the Southeast Asia gaming and e-commerce company posted a narrower operating loss and beat on revenue growth; however, the company took down guidance in its gaming division. Read more details in our earnings review note from yesterday. US producer prices cool more than expected, clocking smallest gain in a year Investors got another piece of evidence inflationary pressures are easing, with US producer price growth rising 8% Y/Y in October (below the 8.3% Bloomberg consensus expected and down from the 8.5% Y/Y in September). Excluding volatile food, energy, core PPI rose 6.7% Y/Y in October- when the market prices to rise 7.2%. After peaking in March at 11.7%, producer price growth has moderated from improving supply chains, softer demand, and weakening commodities prices. The Fed has therefore garnered more catalysts to slow its pace of hikes, which also provides further support to the equity market and bond markets. However, the next important data sets the Fed will be watching are due early next month; US jobs, and November CPI, which are ahead of the Fed’s next meeting (in the third week of December). Arabica coffee (KCc1) dropped 4.4% on Tuesday … thereby extending a rout that has seen the price retrace almost 61.8% of the 2019 to 2022 surge to a multi-year high above $2.50 per pound. Fast forward nine months and the global economic slowdown has led to a reduction in away-from-home consumption at a time where the production outlook from South America has improved. Stocks at ICE monitored warehouses have risen for the past seven days from a 20-year low and could more than double soon with more than half a million bags awaiting assessment. A new LNG exporter is born Mozambique is now officially a new LNG exporter after the first shipment on Monday left the Coral South floating liquefaction unit, which has a 4.4 bcm annual export capacity. This is positive news for Europe who is desperately looking for new energy suppliers since the Ukraine war has started. It was a long-decade process for Mozambique to get its first LNG supply out of the country. Based on official estimates, this is one of the largest LNG offshore fields in Africa. What are we watching next? Fed hawk Christopher Waller to speak on Economic Outlook tonight Waller is an FOMC voter as he sits on the Board of Governors and is widely considered one of the most hawkish Fed members and may unleash a blast of hawkish rhetoric, although it seems the market is more likely to listen only to Fed Chair Powell himself and more importantly, at incoming data. US October Retail Sales data today An interesting data release is up today, the US Retail Sales for October. This data series suggests rather sluggish US growth and is reported in nominal month-on-month terms, not real- or inflation-adjusted terms. The last three months of the headline data have averaged almost exactly 0.0%, while the “ex Food and Energy” series has averaged +0.36%. Today’s headline number is expected at +1.0% MoM and +0.2% for core sales. Earnings to watch Today’s US earnings focus is Nvidia which is expected to deliver a 18% decline in revenue y/y to $5.8bn and EPS of $0.70 down 31% y/y as the market for GPUs is cooling down as crypto mining is becoming less profitable from lower prices on cryptocurrencies. Tencent is expected to report earnings today following a new round of layoffs announced yesterday as revenue growth is expected to be down 1% y/y in Q3. Today: Siemens Energy, Tencent, Experian, SSE, Nibe Industrier, Nvidia, Cisco, Lowe’s, TJX, Target Thursday: Siemens, Alibaba, Applied Materials, Palo Alto Networks, NetEase Friday: JD.com Economic calendar highlights for today (times GMT) 0900 – ECB Financial Stability Review 1300 – Poland Oct. CPI 1315 – Canada Oct. Housing Starts 1330 – US Oct. Retail Sales 1330 – Canada Oct. CPI 1330 – US Oct. Import & Export Prices 1415 – US Oct. Industrial Production 1450 – US Fed’s Williams (Voter) to speak 1500 – US Nov. NAHB Housing Market Index 1500 – US Fed’s Barr (Voter) to testify before House Panel 1530 – EIA's Weekly Crude and Fuel Stock Report 1935 – US Fed’s Waller (Voter) to speak 0030 – Australia Oct. Employment Change / Unemployment Rate Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source:https://www.home.saxo/content/articles/macro/market-quick-take-nov-16-2022-16112022
The Challenge to the Dollar: De-dollarisation and Geopolitical Shifts

Investors Can Start Beliving That The Fed Would Consider A Decrease Of Interest Rate Hikes

InstaForex Analysis InstaForex Analysis 16.11.2022 09:57
Positive sentiment surged on Tuesday, thanks to the latest data in the US, which confirmed the overall inflation dynamics in October both in monthly and yearly terms. According to the report, producer prices rose 0.2% m/m and 8.0% y/y, while the previous value was revised down to 8.4%. This allowed investors to believe again that the Fed would start considering the gradual decrease of interest rate hikes, if not stop it completely. But even though equity markets in both Europe and the US benefited from the news, the reaction in the forex market was rather weak. The reason could be the stabilization of Treasury yields before the release of data on US retail sales. Forecasts say the core retail sales index will show a 0.5% increase in October, while retail sales will rise by 0.9%. If the figures turn out to be no worse than the forecast or exceed it, another growth in stocks will be seen. In this case, Treasury yields may resume their decline, which should also put pressure on dollar. That will push the ICE dollar index down below 106 points, towards 105 points. Forecasts for today: EUR/USD The pair is trading near the strong resistance level of 1.0375. Positive data from the UScould push it towards 1.0500. GBP/USD The pair is below the level of 1.1900. If data from the US does not disappoint or turns out to be higher than expected, pound will resume growth to 1.2000, and then to 1.2020.   Relevance up to 08:00 2022-11-18 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/327256
Hawkish Fed Minutes Spark US Market Decline to One-Month Lows on August 17, 2023

The Fed Is Doing Its Job Well And Can Afford Less Aggression

InstaForex Analysis InstaForex Analysis 16.11.2022 10:05
Dashing trouble began. After Jerome Powell's fiery speech about a higher peak federal funds rate, who would have thought that gold would not just bounce back but return to 3-month highs? In fact, the slowdown in the rate of tightening of the Fed's monetary policy is a bullish driver for XAUUSD. If inflation remains at elevated levels for a long time, and the Central Bank slows monetary restrictions and eventually pauses, real yields on Treasury bonds will fall, allowing the precious metal to rise above $1,800 an ounce. The main catalysts of the 9.5% November gold rally were the releases of data on consumer prices and producer prices. Both indicators slowed down more than Bloomberg experts predicted, which gave rise to talk that the Fed is doing its job well and can afford less aggression. In the end, the tightening of monetary policy affects the economy with a time lag, rates are already at restrictive levels, so you can not go as fast as before. However, in order to defeat inflation, you need to understand its causes well. The Fed and the White House have gone too far with stimulus in response to the pandemic. As a result, domestic demand grew by 21.4% in the three years to the end of the second quarter of 2022, which is equivalent to an annual GDP growth of 6.7%. No wonder inflation is so high and the job market is strong as a bull. Americans sitting on a mountain of dollars are in no hurry to return to work. Dynamics of domestic demand in the US, Britain and the Eurozone Sooner or later, the money runs out, which will lead to a slowdown in consumer prices in the US by itself. The Fed's aggressive monetary restriction can strengthen their decline. There will be a risk of deflation on the horizon, as in Japan. Ark Invest agrees with this scenario. The company sets the example of the beginning of the 20th century, which was overshadowed by the First World War and the Spanish flu epidemic. Inflation in 1920 in the United States exceeded 20%, but thanks to an aggressive increase in the federal funds rate from 4.6% to 7%, it fell to -15% in 2021. Current conditions have much in common with the period of a hundred years ago. The same scenario of the development of events is not excluded, but in my opinion, it is unlikely. Its implementation would be disastrous for gold, returning its quotes to $1,610 per ounce. On the contrary, a scenario where the Fed slows down and eventually pauses while inflation remains at elevated levels creates a tailwind for the precious metal. Simultaneously with the fall in real yields of Treasury bonds, the US dollar is also weakening. Technically, on the daily chart of gold, due to the implementation of the triple bottom pattern the long-term bearish trend was broken. Quotes have gone beyond the descending trading channel and are moving away from the moving averages. I recommend holding the longs formed on the decline to the support at $1,702 and periodically increasing on pullbacks. The targets are $1,790 and $1,815 per ounce.   Relevance up to 08:00 2022-11-21 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/327262
The US Dollar Index Is Expected A Pullback Rally At Least In The Near Term

Long Positions In US Dollar Index (DXY) Will Again Become Preferable

InstaForex Analysis InstaForex Analysis 16.11.2022 10:28
Despite the fact that the dynamics of the dollar did not have a clear direction during today's Asian trading session, and the dollar quotes were in a narrow range, it still remains under pressure. As you know, inflation indicators for the US were published last week, indicating a slowdown in inflation in the country. Consumer price index (CPI) fell in October from 8.2% to 7.7% (year on year), stronger than the forecast of a decline to 8.0%. The core value (Core CPI) corrected from 6.6% to 6.3% against the forecast of 6.5% (also year on year). The data signal that the Fed's efforts to contain inflation in the US are yielding some results and the pace of policy tightening may soon be slowed down. Last Monday, Fed Vice Chair Lael Brainard noted that such changes in the approach to determining the necessary parameters of monetary policy are quite appropriate. At the same time, she noted that inflation is still too high and there is still a lot of work to be done to bring it back to the target level of 2.0%. A little earlier, Fed Governor Christopher Waller expressed similar thoughts, admitting the possibility of slowing the pace of interest rate hikes. Yesterday, producer price indices in the United States for October were published, which also showed a slowdown: on a monthly basis, the indicator remained at the same level of 0.2% instead of the expected growth to 0.4%, and on an annual basis it adjusted from 8.4% to 8.0%. Thus, the probability of a Fed rate hike by 75 basis points in December decreased. On the contrary, now market participants, according to the CME Group, put in prices an 80% probability of an increase in the Fed's interest rate in December by 50 bps. In one of our previous reviews, we assumed that if the publication of US inflation data disappoints investors, it will provoke a new wave of dollar sell-offs and a drop in DXY towards 109.00. At that time, DXY futures were trading near 110.46, maintaining a negative momentum and moving in the lower part of the descending channel that formed last month (on the DXY chart). A break of these levels could trigger deeper DXY, up to key support levels at 107.40, 105.65. As a matter of fact, this happened: the price broke through the lower border of the descending channel on the DXY chart at 109.00 and reached the local low of 105.15 in the next three days, and yet, above the key support level of 105.65 (200 EMA on the daily CFD #USDX chart), the dollar index remains in long-term bull market zone. Long positions in DXY will again become preferable when there are signals to buy. Now the first such signal will be the return of the price to the zone above the resistance level 107.40 (144 EMA on the daily CFD #USDX chart), and the confirming one will be the growth above the levels of 109.00, 110.00. Today, market participants who follow the dynamics of the dollar, will study the report of the US Census Bureau on retail sales. Consumer spending accounts for most of the total economic activity of the population, while domestic trade accounts for the largest part of GDP growth. A relative decrease in the indicator may have a short-term negative impact on the dollar, and an increase in the indicator will have a positive impact on the USD. The indicator is expected to grow (+1.0% in October against the previous monthly values 0%, +0,3%, 0%, +0,8%, -0,1%), which should, theoretically, support the dollar.     Relevance up to 08:00 2022-11-17 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/327264
Saxo Bank Podcast: The Risk Of An Escalation In The US-China Confrontation, The Risk Of An Escalation In The US-China Confrontation And More

Russian Missiles Fell To Poland | China Home Prices Fall

Swissquote Bank Swissquote Bank 16.11.2022 10:36
US stocks extended rally yesterday, as the unexpected easing in producer prices beefed up the optimism that the Federal Reserve (Fed) would soften the monetary tightening and the better-than-expected New York Empire State Manufacturing index hinted that the US economy is holding up well. The geopolitical fears News that Russian missiles fell to Poland somehow killed a part of that falling-inflation, resilient growth optimism. But escalation of the tensions has been avoided so far, with US President Joe Biden saying that the missile was ‘unlikely’ fired from Russia. On the index level, the geopolitical fears remained short-lived, and the S&P500 finally rebounded to close the session a touch below the 4000 psychological mark. Crude Oil On the individual level, TSM jumped on Warren Buffet and Apple news, as Walmart gained on earnings, revenue beat and $20-billion buyback. In energy, US crude gained on the geopolitical concerns after the Poland attack, and on a more-than-5-million-barrel decline in US oil inventories last week. In the FX, the US dollar eased after the mixture of soft PPI and solid Empire Manufacturing revived the dovish Fed expectations. The EURUSD traded briefly above its 200-DMA, and Cable hit the 1.20 for the first time since this summer. UK  On the data front, UK inflation data showed that inflation in the UK hit 11.1% in October vs 10.7% penciled in by analysts, revived the hawkish Bank of England (BoE) expectations but not GBP-appetite. Watch the full episode to find out more! 0:00 Intro 0:24 US stocks extend rally on encouraging data 2:17 Poland hit by missiles, but Biden contains escalation 3:37 Market update 4:13 TSM, Walmart gain 5:51 Latest on US midterms 6:28 Oil recovers 6:50 FX: USD down, UK CPI exceeds 11.1%! 8:49 China home prices fall 9:21 What else you can watch today? Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Poland #attack #crude #oil #Fed #US #inflation #Walmart #earnings #TSM #Apple #USD #EUR #GBP #UK #Bbudget #China #property #rally #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH
The Current War Between China And The United States Over Semiconductor Chips Is Gaining Momentum

Saxo Bank Podcast: Tightness In The Commodity Markets, Apple Plans To Purchase US-Made Chips And Much More

Saxo Bank Saxo Bank 16.11.2022 12:37
Summary:  Today we discuss US markets exploding higher yesterday after a soft PPI release, only to have an apparently Russian missile hitting Poland on the Ukrainian border roiling sentiment. The USD behavior yesterday was inverse to the swings in equities, pointing to more correlation with risk sentiment swings than US yields as we look ahead at today's US Retail Sales data. Crude oil, tightness in the commodity markets, the huge announcement from Apple on plans to purchase US-made chips and much more on today's pod, which features Peter Garnry on equities and John J. Hardy hosting an on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com. Source: https://www.home.saxo/content/articles/podcast/podcast-nov-16-2022-16112022
Indonesia's Inflation Slips, Central Bank Maintains Rates Amidst Stability

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

ING Economics ING Economics 16.11.2022 13:03
FX markets are maintaining very high levels of realised volatility. Driving markets in the very short term is the stand-off between geopolitical risk in Europe and the powerful short squeeze in risk assets on the back of softer US price data. On the calendar today are US retail sales, industrial production, and a host of Fed and ECB speakers In this article USD: Buy-side wants and needs a weaker dollar EUR: Ongoing correction GBP: BoE speakers in focus JPY: Wild ride continues Source: Shutterstock USD: Buy-side wants and needs a weaker dollar Realised levels of FX volatility remain near the highs of the year. For example, one-month EUR/USD realised volatility, at 14%, is back to levels not seen since April 2020. The dominant near-term theme is the aggressive position adjustment in FX, perhaps more so than in other asset classes, on the back of softer US price data. The dollar took another sharp leg lower on yesterday's release of soft October PPI data. Clearly, US price data is the hottest commodity in the macro space right now. Dollar price action does suggest the market is caught long dollars at higher levels and that corrective rallies in the dollar are tending to be relatively shallow. There is also a lot of buy-side interest in expectations (and hopes) that the dollar has peaked. If so, that will release some handsome gains for emerging market local currency bond and equity markets. For example, were it not for the recent dollar correction, returns in the EM local currency bond index would be a lot lower than the current -10% year-to-date figures, and EM hard currency bond indices are down closer to 20% year-to-date.  Given the weight of long dollar positioning after a major 18-month bull trend, it looks too early to expect that this position adjustment has run its course. Yet developments in Poland late yesterday have somewhat clouded the picture. The market will await any announcement from NATO representatives today on the source of the explosion - although President Biden has partially defused the situation by suggesting the missile was not fired from Russia.  Beyond geopolitics today, the focus will be on US retail sales and industrial production data. Both should be reasonably strong, but less market-moving than price data. We will also hear from the Federal Reserve's John Williams and Mary Daly around 16CET. For the DXY today, we did note that the dollar seemed to find a little natural buying interest after the PPI data, but before the Polish news broke. That might tend to favour a 106.00-107.20 DXY trading range today. In terms of the bigger picture, the question is whether 105 is a large enough correction for DXY.   Chris Turner EUR: Ongoing correction EUR/USD turned from a high of 1.0480 yesterday - driven there by the softer US PPI data. By comparison, today's US data is second tier and might prove a weak dollar positive if retail sales and industrial production emerge on the strong side. Attention may also return to the energy markets given events in Poland. And this will also serve as a reminder of the upcoming embargo on Russian oil exports due to start in early December. This potentially is a downside risk to European currencies should energy prices take a leg higher. On the calendar today are plenty of European Central Bank speakers. The ECB will also release its semi-annual financial stability report. Expect plenty of focus on the regulation of the non-bank financial sector after the recent debacle amongst the UK pension fund industry with its LDI hedges in the UK Gilt markets. Remarks earlier this week from the ECB relating to this report drew a conclusion that financial risks had increased. We noted yesterday that EUR/USD seemed to turn naturally from 1.0480, suggesting the corrective rally might have run its course - at least for the very short term. But the bottom of the short-term range has now been defined at 1.0270 - pointing to a 1.0270-1.0500 range over coming sessions. This assumes no major escalation in geopolitics. Bigger picture, we are in the camp that something like 1.05/1.06 may be the best EUR/USD levels between now and year-end. Chris Turner GBP: BoE speakers in focus Bank of England speakers will be in focus today after the release of the October CPI data. This is expected to be peaking around the 11%year-on-year level around now.  BoE Governor Andrew Bailey and colleagues testify to the Treasury Select Committee at 1515CET today. We suspect the message will be very much the same as that given at the policy meeting earlier this month - i.e. do not expect 75bp hikes to become common and that the market pricing of the tightening cycle is too aggressive.  GBP/USD briefly peaked over 1.20 yesterday. We think 1.20 is a good level to hedge GBP receivables. Equally, we have a slight preference for EUR/GBP staying over 0.8700. Tomorrow is the big event risk of the autumn budget - which on paper should be sterling negative. Chris Turner  JPY: Wild ride continues USD/JPY continues to deliver 20% annualised readings in volatility (as do the high beta commodity currencies and those in Scandinavia). We suspect the next five big figures in USD/JPY come to the upside. We see this because the US 10-year Treasury yield typically only trades 50-75bp below the Fed funds rate towards the end of the tightening cycle. And given that our team is looking for the policy rate to still be taken 100bp higher, we think US 10-year Treasury yields will probably return to the 4.25/4.35% area before the end of the year. Equally and once position adjustment has run its course, the yen rather than the dollar should become the preferred funding currency should market conditions begin to settle. Although that does seem an unlikely prospect right now. Chris Turner Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Melbourne Institute Inflation Gauge For Australia Rose More Than Expected

Australian Employment Rose | Microsoft Will Use Nvidia's Graphics Chips

Saxo Bank Saxo Bank 17.11.2022 08:47
Summary:  The hotter-than-expected US retail sales data and hawkish-leaning comments from Fed officials weighed on equities but boosted buying of long-dated bonds as investors focused on the likelihood of Fed overdoing in monetary tightening and triggering a recession. Target disappointed with Q3 miss and weak Q4 sales guidance, highlighting the pain of the US retailers and consumers. Nvidia's results beat expectations, moving its shares up after hours. What’s happening in markets? The Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) retreated on strong retail sales and hawkish Fedspeak The Good news is bad news phenomenon persists. The hotter-than-expected 1.3% rise in October retail sales, followed by several hawkish-leaning comments from Fed officials triggered concerns that the Fed would overdo monetary tightening and bring about a recession. The fall in yields at the long end of the US treasury curve did not lend support to the equity market as in recent months as stock investors took it as a sign of bond market pricing in a higher recession risk. Nasdaq 100 fell 1.5% and S&P500 declined 0.8%, with 68% of S&P 500 companies and 9 out of 11 sectors closing lower. Energy, consumer discretionary, and information technology led the benchmark index lower while the defensive utilities sector and consumer staples sector managed to finish the session with modest gains. Target (TGT:xnys) fell 13% following the retailer reported a large miss on earnings and cut its outlook for the current quarter far below analyst estimates. Lowe’s (LOW:xnys) gained 3% after reporting better-than-expected comparable sales and raising full-year earnings guidance. Micron (MU:xnas) dropped 6.7% as the chipmaker said it was cutting DRAM and NAND wafer production. After the market closed, Nvdia (NVDA:xnas) and Cisco (CSCO:xnas) reported earnings beating analyst estimates. Nvida rose 1.3% and Cisco gained 3.9% in the extended hours trading. US  treasuries (TLT:xnas, IEF:xnas, SHY:xnas) rallied with yields in the long end of the curve falling most on recession concerns The US treasury yield curve bull flattened, with the 2-year yield edging up 2bps to 4.35% while the 10-year yield fell 8bps to 3.69%. The much-watched yield curve inversion between the 2-year and the 10-year widened to 67bps, the most invested since February 1982, and heightened the growth scare among investors. The market has largely priced in a 50bps hike in December but is unwinding some of the post-CPI optimism that the Fed may do less next year, after Fed’s George, Daly, Waller, and Williams pushed back on the notion of pausing. The strong results from the 20-year bond auction on Wednesday helped supported the outperformance of the long ends.  Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) on fire as risk-on sentiment returned Hong Kong and China stocks consolidated and took a pause on the strong rally since last Friday, with Hang Seng Index losing 0.5% and CSI 300 Index sliding 0.8%. Chinese property names retreated, following new home prices in the 70 major cities of China falling 1.6% Y/Y in October, the largest decline in seven years, and Agile (03383) announced that the developer will sell new shares at an 18% discount. Agile tumbled 23%. Country Garden (02007:xhkg), which also announced share placement earlier, plunged 15%. Investors also became increasing concerned about the rising trend in new Covid cases in mainland China, which having gone above 20,000 for the first time since April. In New York hours, the ADRs of Tencent (00700:xhks) rose 3.4% versus their Hong Kong closing level after reporting earnings beating estimates while Meituan (03690:xhkg) dropped 6.7% from Hong Kong closing as Tencent said it would disburse its stake on Meituan to shareholders. What to consider U.S. Retails hotter-than expected U.S. headline retail sales grew by 1.3% M/M in October (consensus:  +1%, Sep: 0%). The control-group retail sales increased by 0.7% M/M (consensus: +0.3%, Sep: +0.4%). U.K. headline CPI jumped to 11.1% in October, the highest in 41 years U.K’s October headline CPI came in at 11.1% Y/Y (vs consensus 10.7%), the highest in 41 years. Core CPI remained at 6.5%. Australia’s unemployment falls, employment rises more than expected in October, following Australian wage growth growing more than expected; AUDUSD trades flat Australia’s jobless rate fell to 3.4%, from 3.5% last month, which supports the RBA continuing to rise rates, and not pause on rate hikes at their next meeting in December. Australian employment rose by 32,200 month-on-month in October, almost double the 15,000 jobs expected to be added to the economy. Job growth is also up markedly from the tiny 900 jobs that were added the month prior. The AUDUSD is staying range bound for now. Target reported Q3 earnings miss and full-year guidance reduction Target’s Q3 adjusted EPS fell to USD1.54, nearly 30% below the median of analyst estimates. The retailer is predicting a drop in comparable sales for the first time in five years and estimating operating margins will shrink to about 3%, which is half of its previous forecast. Target is looking to axe $3 billion in costs, but says there will be no mass layoffs. This highlights the pain of the US retailers and also the consumer – who is reluctant to spend on non-essential items in the face of rising interest rates and inflation. Nvidia earnings beat Software graphics giant Nvidia (NVDA) reported revenue for the third quarter that beat analyst estimates. Revenue fell 17% y/y to $5.93 billion, beating the expected drop of 18% y/y to $5.84 billion. NVIDIA’s outlook for the fourth quarter was a bit vague though, but more or less points to improvements in revenue, citing revenue is expected to hit $6.00 billion, plus or minus 2%. Nvidia said Microsoft will use its graphics chips, networking products, and software in Microsoft’s new AI products. Nickel Miners could be under fire Profit taking in oil equites is likely with the after the oil price fell on reports the Druzhba pipeline carrying Russian oil to Europe had restarted, WTI Crude Oil fell 1.9%. Elsewhere, Nickel miners shares could be under fire today move after Nickel futures fell 9% on Wednesday. LME is said to be stepping up surveillance of sharp swings earlier in the week on supply fears. Keep an eye on Australia’s Nickel Mines (NIC) and IGO, Japan’s Pacific Metals, Sumitomo Metal Mining, and Indonesia’s Vale Indonesia, Aneka Tambang. For our look ahead at markets this week - Listen/watch our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: https://www.home.saxo/content/articles/equities/market-insights-today-17-nov-2022-17112022
Share of Russian metal grows in LME warehouses

Copper And Silver Both Extended Their Declines | The USD Edged Higher

Saxo Bank Saxo Bank 17.11.2022 10:17
Summary:  The strong equity market rally eased yesterday as a very strong US Retail Sales report for October pushes back against the notion that the US economy is rapidly weakening. Today features a pivotal Autumn Budget Statement that will allow the market to make a vote of confidence on sterling on whether the new spending cuts and tax rises will inspire further confidence in sterling after its recent comeback.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures fell yesterday to close at 3,968 as investors are not following through on the momentum around the ‘peak rates’ narrative. This morning the index futures are trading higher with the 3,964 level being the key level to watch on the downside and 4,000 on the upside. Today’s macro events that can impact the equity market are US housing starts and permits, Philly Fed Business Outlook and initial jobless claims with the latter in focus given the latest mass layoffs in the technology sector. Hong Kong’s Hang Seng (HSIX2) and China’s CSI300 (03188:xhkg) Hong Kong and China stocks retreated for the second day in a row, with Hang Seng Index falling around 2% and CSI 300 declining 1%. Tencent (00700:xhkg) fluctuated between small gains and losses after reporting Q3 EPS beating analyst estimates but a 2% Y/Y decline in revenues, being dragged down by online gaming and advertisement. Meituan (03690:xhkg) however fell nearly 8%, following Tencent’s announcement to disburse its 17% stake in Meituan to shareholders. NetEase (0999:xhkg) tumbled 12% after US gaming company Blizzard Entertainment (ATVI:xnas) would not renew its expiring licensing agreement with NetEase. Also weighing on sentiment was the People’s Bank of China’s emphasizes on financial stability and warns against potential inflation risks in the central bank’s Q3 monetary report, as well as news reports about the temporary suspension of redemption in some investment products suffering losses from the recent rise in Chinese bond yields. In addition, new Covid cases surged to 23,132, a new high since April. FX: GBP focus today as USD stabilizes on very strong October US Retail Sales report Strong US data is at odds with the recent drumbeat of softer inflation numbers that have helped inspired the recent steep sell-off in the US dollar, and kept the 2-year yields and Fed rate expectations from falling any further yesterday, even if longer US yields dipped to new local lows yesterday. The USD edged higher, with the recent lows the key support for the greenback and with the currency trading more in line with risk sentiment now. The top-tier incoming data won’t arrive until the early-mid December time frame, save perhaps for the PCE data on November 30. The bigger focus today is on GBP as Chancellor Jeremy Hunt is set to deliver the Autumn Budget Statement and a chance for thje market to judge whether the UK is an attractive place to invest in addition to whether the moves ill stabilize the country’s finances as it also risks worsening the depth of the coming recession. 1.2000 appears a key in GBPUSD, while EURGBP is choppy in the 0.8700-0.8800+ range. Crude oil (CLZ2 & LCOF3) Crude oil remains on the defensive trading near the lowest levels this month on continued concerns about the demand outlook in the world’s two largest consumers. The US yield curve has inverted the most since the early 1980’s underscoring concerns about the risk of recession next year while China continues to battle with rising covid cases, now nearing the all-time high seen earlier this year. Both developments leading to demand growth for next year being downgraded, thereby offsetting some of the tightness the EU embargo on Russian oil will help create into early 2023. WTI will be looking for support ahead of the recent low at $82 with Brent focusing on the $90-area. Gold (XAUUSD) Gold trades lower as the market pauses for breath following a 170-dollar run up in prices from the November 3 low. The metal is currently dealing with mixed signals as elevated recession worries, highlighted by the most inverted yield curve in almost four decades, are being offset by the biggest increase in US retail sales in eight months, indicating Fed tightening has further to run to bring inflation under control. Demand from ETF investors – net sellers for months – picked up a bit on Wednesday, but not enough to signal a change in their behaviour, and with that in mind expect continued consolidation and potentially a recheck of support at $1735. Resistance at $1788, the 38.2% retracement of the 2022 correction and $1804, the 200-day moving average. Copper (HGH3) and silver (XAGUSD) Copper and silver both extended their declines following a recent strong run up in prices. Copper ran out of steam ahead of major resistance in the $4/lb area and after breaking back below $3.78 the next line of support now comes in at $3.68. Industrial metal traders are keeping a watchful eye on covid developments in China, the US yield curve signalling an increased risk of a recession next year, extreme volatility in nickel market and in copper specifically, an emerging contango indicating a market with ample supply.  currently. Silver meanwhile trades back below its 200-day moving average with the first level of support in the $20.95 area. US treasuries (TLT, IEF) US treasuries punched to new local lows again yesterday, supported by a strong 20-year auction result, and despite the strong US Retail Sales news, with the 10-year treasury benchmark dipping below 3.70% and within 20 basis points of the next psychologically important level and pivot high from mid-June near 3.50%, a level that was quickly reached in the context of the market realizing that the FOMC was set for its first 75 basis point rate hike since 1994. The much-watched yield curve inversion between the 2-year and the 10-year widened to 67bps, the most invested since February 1982, and heightened the growth scare among investors. The market has largely priced in a 50bps hike in December and is unwinding some of the post-CPI optimism that the Fed might do less next year, after Fed’s George, Daly, Waller, and Williams pushed back on the notion of pausing. What is going on? Strong October US Retail Sales, weak November housing Market survey After a string of weak reports, the US October Retail Sales report came in far stronger than expected, with a strong +1.3 % MoM rise (vs. +1.0% expected) for the headline and an even more impressive +0.9% MoM rise in the “ex Food and Energy” print, on top of a +0.3% revision to the September data point. Elsewhere, we can see the massive shift higher in US mortgage rates continue to weigh on housing activity, as the November US NAHB Housing Market Index plunged 5 more points to 33, the lowest reading since the very worst month of the pandemic outbreak shock in 2020 and before that since 2012. Siemens Q4 results beat estimates The German industrial giant reports FY22 Q4 (ending 30 September) revenue of €20.6bn vs est. €19.3bn and orders of €21.8bn vs est. €20.4bn. In addition, the company says that it sees higher operating margins in three divisions and that downside risks from Russia are minimal now. Target reports earnings miss and downgrades sales guidance Target’s Q3 adjusted EPS fell to $1.54, nearly 30% below the median of analyst estimates. The retailer is predicting a drop in comparable sales for the first time in five years and estimating operating margins will shrink to about 3%, which is half of its previous forecast. This indicates that the substitution effect is increasing as the consumer is increasingly under more pressure. Target is looking to reduce $3bn in costs but says there will be no mass layoffs. Nvidia earnings beat Software graphics giant Nvidia (NVDA) reported revenue for the third quarter that beat analyst estimates. Revenue fell 17% y/y to $5.9bn, beating the expected drop of 18% y/y to $5.8bn. NVIDIA’s outlook for the fourth quarter was vague citing revenue is expected to hit $6.0bn, plus or minus 2%, which will translate into a 20% drop in revenue in the important holiday quarter. Nvidia also said Microsoft will use its graphics chips, networking products, and software in Microsoft’s new AI products. The slowdown in demand for GPUs is driven by less profitable crypto mining and as a result GPU pricing is plummeting and inventories on the balance sheet rising to $4.45bn up from $2.23bn a year ago. EPS was $0.28 down 73% y/y. Australia’s unemployment falls, employment rises more than expected in October Australia’s jobless rate unexpectedly fell to 3.4%, from 3.5% last month, which now supports the RBA continuing to raise rates, and not pause on hikes at their next meeting in December (market priced at 50-50 odds of a 25-bp hike). Australian employment rose by 32,200 month-on-month in October, almost double the 15,000 jobs expected to be added to the economy. The AUDUSD is staying range bound for now after its recent sharp rally, consolidating a bit on weak risk sentiment in Asia overnight. The RBA has said it expects the jobless rate to rise. US Fed’s Waller, noted Fed hawk, says he is “more comfortable” with smaller hike It appears that Fed consensus is settling on lowering the pace of rate increases at the December FOMC meeting after one of the more hawkish FOMC voters, Governor Christopher Waller said he is “more comfortable” with a smaller hike in December after the Fed’s four 75-basis points moves since the June FOMC meeting, although he still declared the move is data-dependent. What are we watching next? UK Autumn Budget Statement to be announced today Ahead of the speech, the UK’s Office for Budget Responsibility told the treasury that by 2026-27, the budget deficit could grow to £100 billion from earlier projections of £32 billion. Several moves by Chancellor Jeremy Hunt have already been made to reverse the original budget laid out by former Chancellor Kwarteng under PM Truss’ leadership, including a shortening of the energy bill cap scheme to just six months. Corporate taxes are also set to be raised to 25 percent from 19 percent, and windfall taxes on electricity and oil and gas firms, together with more income earners set to pay tax at the top 45% rate and taxes on capitali gains and dividends set to rise. Still, the pension benefit will be set to rise at September’s 10.1% CPI rate in April of next year. Critics might suggest that much of the tax implementation will be “back-loaded” to beyond the 2024 election to avoid a further hit to Tory popularity. This statement will be critical for the direction of sterling from here. Earnings to watch In today’s US earnings focus we expect Applied Materials to report revenue growth of 4% y/y and lower operating margin from a year ago following the signs we observe in the semiconductors industry. In the cyber security industry, Palo Alto Networks is also reporting today with revenue growth expected to 24% y/y and EBITDA of $349mn up from $-8.8mn a year ago. The Chinese technology and consumer sectors have faced a lot of headwinds over the past year and Tencent’s result yesterday was not rosy either, so there might be a downside risk to Alibaba’s result today. Analysts expect Alibaba to report revenue growth of 4% y/y and EPS of CNY 11.21 up 65% y/y. Today: Siemens, Alibaba, Applied Materials, Palo Alto Networks, NetEase Friday: JD.com Economic calendar highlights for today (times GMT) 0955 – UK Chancellor Jeremy Hunt presents Autumn Budget Statement 1000 – Eurozone Oct. Final CPI 1230 – UK Bank of England Chief Economist Pill to speak 1300 – US Fed’s Bullard (voter 2022) to speak 1330 – US Oct. Housing Starts and Building Permits 1330 – US Oct. Philadelphia Fed 1330 – US Weekly Initial Jobless Claims 1440 – US Fed’s Mester (Voter 2022) to speak 1530 – EIA's Weekly Natural Gas Storage Change  1540 – US Fed’s Jefferson and Kashkari (voter 2023) to speak 1600 – US Nov. Kansas City Fed Manufacturing Activity 1845 – US Fed’s Kashkari (voter 2023) to speak 2330 – Japan Oct. National CPI 0001 – UK Nov. GfK Consumer Confidence Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: https://www.home.saxo/content/articles/macro/market-quick-take-nov-17-2022-17112022
Saxo Bank Podcast: Nvidia And Siemens Earnings, The Budget Statement From UK And More

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

Saxo Bank Saxo Bank 17.11.2022 11:01
Summary:  Today we look at risk sentiment taking a breather after a particularly strong US October US Retail Sales report, although long US treasury yields fell on the day and took the yield curve inversion to its most negative in over forty years as markets continue to price a recession ahead. The key incoming data doesn't start rolling in for another couple of weeks, so we wonder if a possible shift in weather into proper winter mode could change the complacent stance in energy markets. Elsewhere, we wonder if the Budget Statement from UK Chancellor Hunt can continue to support sterling, look at the plunge in coffee prices, Nvidia and Siemens earnings, and more. Today's pod features Peter Garnry on equities and John J. Hardy hosting an on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: https://www.home.saxo/content/articles/podcast/podcast-nov-17-2022-17112022
Pound Sterling: Short-Term Repricing Complete, But Further Uncertainty Looms

European CPI Reached 10.6% | UK Budget Ahead

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

Rates: 50bp As Next Likely Move By Central Banks

ING Economics ING Economics 17.11.2022 12:12
Markets outside the US are also increasingly leaning towards 50bp being the next probable moves by central banks. European Central Bank speakers turning less hawkish and the rediscovered UK austerity should validate the rally in rates In this article 50bp is becoming the new norm Gilts benefit from both fiscal tightening and the need for less BoE hikes Today’s events and market view 50bp is becoming the new norm Looking at the Fed, markets have converged on a 50bp hike in December following the US CPI data. Fed officials have attempted – with some success – to push back against the pricing of the terminal rate dropping too much, and it has since hovered just below 5%, but it hasn’t prevented longer rates such as the 10Y UST slipping below 3.7%. Appetite seems to have returned to longer durations with yesterday’s 20Y auction also posting very decent metrics. In the eurozone, ECB officials also appear to have dialed down their hawkishness. When arch-hawk Holzmann of the Austrian central bank is mindful that too strong tightening would not just lead to stagnation but to a recession, then markets should take note. Even with its new ECB reaction function, there appears only so much pain officials are willing to tolerate. Renewed appetite for duration risk is flattening yield curves Source: Refinitiv, ING   The ECB’s hawks might ask for more progress on quantitative tightening The ECB's shift was later corroborated by a Bloomberg story suggesting that momentum for a further 75bp move was lacking. With the market still eyeing a 20% probability of a larger move in December, there is still room to test a little lower. Alongside central bankers seemingly more mindful of the recessionary risks appears to validate the rally in rates that has also pushed the 10Y Bund yield below 2%. But mind you, that the ECB could eventually slow once the key rate approaches a neutral level – seen around 2% – is not news. With a view to the December meeting we caution that the ECB’s hawks might ask for more progress on quantitative tightening in return for less aggressive action on rates. The tightening of monetary policy could thus just rely to a growing degree on the balance sheet. That could eventually test the current  indiscriminate rally across sovereign credit in the eurozone.   Gilts benefit from both fiscal tightening and the need for less BoE hikes When it comes to the Bank of England, the next expected policy moves have become more interlinked with fiscal policies. This puts the attention squarely on today’s Autumn Statement that will outline the government’s fiscal plans. The government’s main task with a view to financial markets will be to rebuild credibility lost in September’s ill-fated mini budget. To that end much is already achieved by having forecasts of the independent Office for Budget Responsibility accompany the new plans. And looking at 10Y gilt yields, they have indeed already slipped back towards levels seen before the September budget just now. The government’s main task will be to rebuild credibility lost in September’s ill-fated mini budget Perhaps the greater risk is that the government decides to push austerity too far under the impression of the rattling experience in the wake of the last budget. That could see markets further pricing out their Bank of England hike expectations. Long-end yields could also decline further, though our expectation would be that of an overall steeper curve. Keep in mind that the effective debt that private investors will have to absorb will see a considerable increase nonetheless. A Reuters survey among gilt dealers sees issuance in the 2022/23 financial year falling to £185bn compared to DMO’s September plans, but issuance in 2023/24 will rise towards £240bn. Crucially, one has to add the Bank of England’s quantitative tightening.      Private investors will be required to increase their gilt holdings by a record amount in FY2023-24 Source: Refinitiv, ING Today’s events and market view Main event on the calendar is the UK government’s Autumn Statement. The FT has reported that up to £60bn of savings may be required, which is higher than had been expected. Reports also suggest the Chancellor will more heavily focus on spending cuts than tax rises. As our economist notes, the impact on the economy will depend on how much of the burden is placed on consumers via higher taxation, and how immediately those changes come through. A fair amount of pain could be delayed until after the 2024 election. Another point to watch are details on how the government intends to restructure its flagship Energy Price Guarantee, which can have more direct bearing on funding needs. Away from the UK the focus remains on central bank speakers and how they bridge the gap between signaling a slower pace and ensuring that financial conditions don’t already ease too much. Scheduled today are the Fed’s Bullard, Mester, Jefferson and Kashkari.   In data the focus is on the US housing market where numbers should be softer due to the rapid rises in mortgage borrowing costs that have prompted a collapse in demand. Also on the calendar are initial jobless claims as well as Philadelphia and Kansas Fed activity indices. The eurozone see the final CPI for October. Today’s supply comes from France in shorter dated bonds as well as inflation linked securities, as well as Spain with taps in 3Y to 20Y bonds. TagsRates Daily   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The South America Are Looking For Alternatives To The US Currency

USA: Housing market data can also affect Greenback

Jing Ren Jing Ren 17.11.2022 15:23
Over the next couple of days, we will be getting a series of monthly data from the US housing market. This data comes back into focus after the latest CPI reading, which is why it could have some influence on the dollar. Remember that the next CPI data release is the day before the FOMC announces its policy decision. That means the markets will have little time to adjust expectations based on the data. So, any components that can give some insight into what will happen with prices could have an outsized impact on the markets. Why it matters now The last CPI figure came in well below expectations, both on the headline and core reading. The latter is the most important for the markets, because that's what's tracked by the Fed. The thing is most of that surprise was due to a drop in cost of shelter, which basically means lower rental prices. Rent costs are part of the core inflation rate; since that only excludes food and energy costs. Apparently, analysts haven't been paying enough attention to what's been going on in the US housing industry to adequately forecast what would happen with CPI. This could be an issue beyond inflation, since housing is the largest single industry in the US, consuming the most raw materials. A slump in the housing industry, and the potential effects on the broader economy are illustrated by the 2008 subprime crisis. What happened and where are we going? As we talked about back in June, rising interest rates make it harder for people to afford to buy a house, which in turn puts downward pressure on house prices. Major housing firms have already reported that completions are down, and they expect to sell less in the coming months. Lower housing costs translates into lower rental prices. This is on top of a loss in disposable income keeping people from moving into higher cost rent, or looking for ways to lower their out of pocket expenses by, for example, sharing an apartment. The latest data on the housing market is expected to show a continuation of the trend. October US housing starts are expected to slip to 1.41M from 1.44M prior. Building permits are expected to fall -6.3% compared to the prior month. What this means is fewer new houses are coming on to the market to replace houses that have gotten too old. In the short term, this is bad for homebuilders; but the growing home deficit could imply a boom for the industry after rates come down in the long term. The more worrying sign More concerning is tomorrow's data of existing home sales, which represents a much larger number of buildings. New home building is more adjustable to market trends, and targets areas of growth. It doesn't necessarily represent trends in rent, for example, which is important for monetary policy projections. Existing home sales are expected to come in negative for the 9th consecutive month, showing a decrease of 8%. That would put home sales at 4.4M last month, compared to 4.7M in August.
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USA: Building permits hit 1.526K, housing starts plunged 4.2%

Alex Kuptsikevich Alex Kuptsikevich 17.11.2022 16:20
The number of building permits in the US fell by 2.4% to 1,526K, the lowest since June 2020, and is almost 20% below the peak a year ago. Housing starts fell by 4.2% to 1,425k. During the pandemic, the housing market first collapsed due to lockdowns but then took flight, inflated by monetary and fiscal stimulus. This year, in addition to the halting of financial support programmes and another budgetary stimulus, Americans are dealing with the fastest rate of monetary tightening in 40 years, returning mortgage rates close to their 2007 peaks. The market is pretty good, considering such meaningful fundamental shifts. But we note that the market is deflating at a pace comparable to the mortgage crisis, which began in 2006 and continued through 2009. Then it took about a year and a half of declines before the banking industry collapsed, and the Fed went from raising rates to lowering them. October's reading looks slightly better than expected and has briefly boosted demand for the dollar and renewed the momentum of the declining stock markets. It slightly increases the chances that the Fed, although slowing the rate hike, is still far from stopping.
Equity Markets Rise, VIX at 12 Handle After ECB Rate Hike and US Economic Resilience

Crucial Economic Indicators In The USA - What Are Non-Farm Payrolls And Initial Jobless Claims?

Kamila Szypuła Kamila Szypuła 30.10.2022 11:41
Each country shares monthly, weekly and quarterly macroeconomic reports. The USA, as the largest economy in the world, also has individual indicators that are monitored by investors around the world. The most popular because it is published every week is Initial Jobless Claims. We can hear that in a given week the rod has been decreasing or, on the contrary - it has increased, but what does it mean?   Non-farm payrolls (NFP) - an important economic health measure The nonfarm payroll, or simply the NFP, is always an important and influential event in the economic calendar.   The nonfarm payroll (NFP) report is a key economic indicator for the United States and represents the total number of paid workers in the U.S. excluding those employed by farms. The NFP data is normally released on the first Friday of every month.   Private and government entities throughout the United States are surveyed about their wages. BLS publishes non-farm payroll data on a monthly basis through a closely tracked employment report.   NFP releases generally cause large movements in the forex market. This is because traders always monitor the indicators to identify trends in economic growth A higher wage rate is generally good for the US economy as it indicates more jobs and faster economic growth. The expected change in wage data causes mixed reaction in the currency markets.When the nonfarm payroll differs significantly from the forecast, there is usually a reaction in the markets. But how does NFP affect the Forex market specifically? The effects of the NFP tend to be limited to currency pairs which involve the US dollar. If the results come in higher than expected, this tends to have a strengthening effect on the USD whereas, if the result comes in lower than expected, the USD will often weaken. Industrial production (IPI) indicator explained Industrial production refers to the output of industrial establishments and covers sectors such as mining, manufacturing, electricity, gas and steam and air-conditioning. It also measures production capacity, an estimate of production levels that can be sustainably maintained.   Industrial production and capacity levels are expressed as an index level compared to the base year. In other words, they do not express an absolute volume or value of production, but a percentage change in production compared to 2021.   Industry-level data is useful for managers and investors in specific industries. Fluctuations in the industrial sector are responsible for most of the change in overall economic growth.   The difference between GDP and IPI in the field that GDP measures the price paid by the end user, and thus includes the added value in the retail sector, which the IPI ignores.   Capacity utilization is a useful indicator of the strength of demand. Low capacity utilization or overcapacity signals weak demand. Politicians could read this as a signal that a fiscal or monetary stimulus is needed. On the other hand, high capacity utilization may act as a warning of an overheating of the economy, suggesting the risk of rising prices and asset bubbles.   Initial Jobless Claims - how investors use it? Jobless claims measure how many people are out of work at a given time. Initial jobless claims represent new claimants for unemployment benefits. The claim requests a determination of basic eligibility for the Unemployment Insurance program. This report is published weekly.   Domestic unemployment claims are an extremely important indicator of macroeconomic analysis. As such, it is a good indicator of the US labor market. For example, when more people apply for unemployment benefits, it generally means that fewer people have jobs, and vice versa.   Investors can use this report to form an opinion on the country's economic performance. But this is often very volatile data as it is reported weekly. Markets can react strongly to the mid-month unemployment benefit report, especially if it shows a difference to the cumulative data of other recent indicators.   During the economic downturn caused by the spread of the COVID-19 virus, the weekly numbers of unemployed in the US rose to historic levels. We could observe that such a situation significantly influenced investors' decisions and market reaction. Source: investopedia.com, investing.com 
GBP: BoE Stands Firm on Bank Rate and Mortgage Interest Relief, EUR/GBP Drifts Lower

Fed's Bullard considers 125bp a remaining portion of hawkish mixture

Ed Moya Ed Moya 17.11.2022 19:47
US stocks are declining as the Fed sticks to the hawkish script that supports the idea that this economy is quickly heading towards a recession. ​ Equities extended declines after the latest round of Fed speak reminded us that policymakers could remain very hawkish, despite a downshift to a half-point pace in December. ​Fed’s Bullard noted that the policy rate is not yet ‘sufficiently restrictive’. ​ He also highlighted a dovish scenario that could take the funds rate to 5% and a hawkish rate at 7%. Bullard said, he’s targeting a minimum of another 125 basis points in rate hikes, which would bring the target range to 5.00-5.25%. ​ Fed’s George said, “I’m looking at a labor market that is so tight, I don’t know how you continue to bring this level of inflation down without having some real slowing, and maybe we even have contraction in the economy to get there.” If we still have millions of job openings and inflation above rates, the Fed may need to continue hiking beyond February. ​ ​ This bear market rally is coming to an end as this economy is about to feel the real impact of restrictive territory. The latest round of economic data complicates the Fed’s tightening path as the labor market is slowly softening and as the housing market is in a recession. ​ US data Weekly jobless claims edged lower despite what feels like a couple of weeks of significant job loss announcements. ​ Initial jobless claims fell from a revised 226,000 to 222,000 in the week ending November 12th. ​ Continuing claims rose to 1.507 million but is still below the pre-pandemic average of 1.7 million. The job market is going to weaken, but the longer it takes, the greater the risks that we might see more Fed tightening. ​ The Philadelphia Fed business outlook crumbled in November. ​ The headline manufacturing activity reading plunged to -19.4, worse than the estimate of a decline of 6. ​ The employment component showed a significant drop from 28.5 to 7.1. ​ This part of the economy is clearly weakening, but firms continue to report overall price increases. ​ ​ The housing market correction continues and is approaching a bottom. ​ Both starts and permits continue to decline as borrowing costs skyrocket, inventory levels are growing, and the typical single-family home purchaser is much weaker as inflation runs wild. ​ Crypto Cryptos are weakening as risk appetite just left the building. ​ Today’s weakness is mainly attributed to exhaustion with the bear market rally that has powered stocks. ​ There is no shortage of news across crypto markets and a lot of it is speculative. We will be talking a lot about FTX for months to come but what will drive the cryptos is if Binance, Coinbase, Lbank, or Consbit have any liquidity crunches. A lot of bad news has been priced in so it might take another downfall of a major crypto company or a de-risking movement on Wall Street to take bitcoin below its recent low. ​ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Fed speak kills risk appetite, stocks decline, US data, cryptos weaken - MarketPulseMarketPulse
Unveiling the Hidden Giant: The Growing Dominance of Non-Bank Financial Institutions

Major Layoff Announcements From The Tech Sector, From The Real Estate

Saxo Bank Saxo Bank 18.11.2022 08:56
Summary:  Our ‘Macro Chartmania’ series collects Macrobond data and focuses on a single chart chosen for its relevance. This week, we focus on the U.S. Employment Cost Index. It shows that inflationary pressures are finally fading on Main Street but not good for reasons. Click to download this week's full edition of Macro Chartmania. The market narrative machine is fascinating. In 2022, the bear market narrative was « inflation shock, rates shock and recession shock ». For 2023, the market narrative is rather bullish. Analysts expect that inflation will move lower but will remain sticky, that a mild recession will affect most of the developed economies and that central banks will hike a little further (probably until the start of the second quarter) before pausing for the rest of the year. It is certainly too early to know the steepness of the recession and whether the United States will manage to avoid it. This is an ongoing debate among economists. But there are early signs inflation is finally receding, at least in the United States. This is not the case in the United Kingdom where the October CPI reached 11.1% year-over-year, for instance. In the United States, higher wages reflecting Covid unbalances, worker shortage and tight labor market partially explained the increase in prices. This is now reversing. In just the last several weeks, we have seen major layoff announcements from the tech sector (Meta, Stripe, Paypal, Microsoft, Amazon etc.). But this is not just a technology story. We have seen layoffs in other sectors of the economy, from the real estate promoter Redfin and the trucking giant C.H. Robinson among many others. To understand why layoffs are starting now, we need to first understand the sequence of the economy. Employment is a well-known lagging indicator. In the past, it has already happened that job losses started only with a lag of several months after the economy entered into a recession (job losses started 8 months after the official start of the 1974 recession, for instance). But some sectors of the economy are more sensitive than others to higher interest rates, which can help predict whether or not we will face massive layoffs. This is the case of the housing market especially (we used to say that the housing market is the business cycle in the United States). With the cooling of the housing market which started in early 2022, the consumption of things associated with home buying are also going down - with a lag. Think home appliances, home-building tools etc. The housing slowdown is spreading into the rest of the economy. This puts pressure on big durable goods and thus on the industry that moves these goods around the world. This explains why C.H. Robinson fired 650 employees one week ago. This is only the beginning, in our view. Mass layoff to come means that the drop in wage increases, which has just started, will continue in the coming months. In the below chart, we have plotted the National Federation of Independent Business (NFIB) compensation plans and the Employment Cost Index. Only a net 23 % of small businesses plan to raise compensation in the next three months. This is much lower than a few months ago (when it was at a cycle peak of 32 %). Compensation practices of small businesses tend to lead to broader wage and salary growth. Therefore, we can expect that the Employment Cost Index, which has started to decelerate recently, will continue moving downwards, likely well below 4% going into 2023. This could ultimately ease inflationary pressures and open the door to a slower pace of Fed rate hikes. This echoes comments from Fed Vice Chair Lael Brainard earlier this week : “It will probably be appropriate soon to move to a slower pace of increases.” Source: https://www.home.saxo/content/articles/macro/chart-of-the-week--us--employment-cost-index-18112022
Assessing 'Significant Upside Risks to Inflation': Insights from FOMC Minutes

The Fed’s Recent Comments Are Not Having That Much Of An Effect On The Market

TeleTrade Comments TeleTrade Comments 18.11.2022 10:31
A number of Fed members made hawkish comments again yesterday. However, USD was unable to benefit properly. In the opinion of economists at Commerzbank, doubts surrounding the future path of the central bank are set to affect positioning. The market does not believe the hawkish Fed comments “The Fed’s recent comments are not having that much of an effect on the market, as it remains to be seen whether the data publications over the coming weeks might provide new insights and to what extent the Fed’s communication might then change.” “It would seem that the Fed’s current comments cannot be taken at face value as they might change going forward. Against this background, market participants are likely to struggle to take a clear position.”
Kuroda Stayed On The Sidelines And The Yen Responded With Losses

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

Swissquote Bank Swissquote Bank 18.11.2022 10:57
Inflation in Japan soared to the highest levels in more than 30 years, to 3.7% in October, up from 3% printed a month earlier. High inflation print sure revived the Bank of Japan (BoJ) hawks, and the calls for a policy rate hike, and kept the dollar-yen below the 140 level, but it’s unsure whether the BoJ will give up on its ultra-soft policy stance. Therefore, if the US dollar picks up momentum, which will certainly be the case, the USDJPY could easily rebound back above its 50-DMA, which stands near 145. US And the reason I think the US dollar will recover is because most Fed members remain relatively hawkish regarding the Fed’s policy tightening. Plus, option traders are building topside structure over the one-month tenor that covers the next US inflation report and the Fed’s next policy meeting in December. Stock market So, the ambiance in the stock markets is not as cheery as it was at the end of last week. UK In the UK, the autumn budget statement went happily eventless. Gilts rallied, pound saw limited sell-off, while energy companies’ reaction to windfall taxes remained muted. Watch the full episode to find out more! 0:00 Intro 0:30 Japan inflation soars, Mr. Kuroda! 1:34 Should you prepare for another USD rally? 3:32 Market mood turns… meh. 4:01 The retail roundup 6:11 The happily eventless UK budget Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020.   #hawkish #Fed #USD #recovery #US #retail #sales #Walmart #Target #Macys #HomeDepot #Lowes #Alibaba #earnings #UK #Budget #GBP #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH
Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

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

ING Economics ING Economics 18.11.2022 13:35
With the UK's Autumn Statement out of the way, attention turns back to the economic data which are deteriorating – UK PMIs are likely to re-emphasise the worsening condition and that a recession is coming. In Sweden, the Riksbank is expected to hike by 75bp next week, raising the policy rate to 2.5% In this article US: Ongoing weakness in housing data UK: Focus switches back to the data and Bank of England Sweden: Riksbank expected to hike by 75bp Source: Shutterstock US: Ongoing weakness in housing data Thanksgiving means a holiday-shortened week in the US with the focus set to remain on the outlook for Federal Reserve policy. Market pricing has switched markedly since the surprisingly soft October CPI print but Federal Reserve officials continue to suggest there is more work to be done to ensure the inflation front is defeated. Indeed, we continue to hear comments suggesting the risk of doing too little outweighs the consequences of doing too much in terms of interest rate increases. Expect more next week. Data-wise we are looking at ongoing weakness in housing data, but durable goods orders should rise given firm Boeing aircraft orders. Nonetheless, it is doubtful this will be market moving in any meaningful way. The November jobs report on 2 December and the November CPI print on 13 December are the big releases to watch. UK: Focus switches back to the data and Bank of England The key takeaway from the UK’s Autumn Statement was that much of the anticipated fiscal pain has been pushed back until after the next election. Chancellor Jeremy Hunt has calculated that calmer financial markets and the announcement of certain tax rises mean he can push back some of the tougher spending decisions, without sparking a fresh crisis of confidence in UK assets. No doubt the Treasury is banking on less aggressive Bank of England rate hikes to lower future debt interest projections, giving scope to water down some of the cuts further down the line. Read more about the Budget announcements here.  With the fiscal event out of the way, attention turns back to the economic data which is clearly deteriorating. Next week’s PMIs are likely to re-emphasise that more companies are seeing conditions worsen than improve right now, the latest sign that a recession is coming. There’s also the question of whether the Bank of England will pivot back to a 50bp rate hike in December, and we think it will, despite some mildly hawkish inflation data in recent days. We’ll hear from a couple of rate-setters next week to help shape expectations ahead of that meeting in a few weeks' time. Sweden: Riksbank expected to hike by 75bp Back in September, the Riksbank hiked the policy rate by a full percentage point but signalled that it expected to pivot back to a 50bp rate hike in November. Since then, core inflation has exceeded the central bank’s forecasts by half a percentage point, while the jobs market has remained relatively tight. Given that the ECB has continued with its 75bp rate hikes – and the Riksbank has been vocal about staying out in front of the eurozone’s interest rate policy – we expect further aggressive tightening by Swedish policymakers next week. Remember this is the Riksbank’s last meeting before February, and we therefore expect a 75bp hike on Thursday. We’d expect the new interest rate projection published alongside the decision to pencil in at least another 25bp worth of tightening early next year, but ultimately there are limits to how far it can go given the fragile housing market. Key events in developed markets next week Refinitiv, ING TagsUS UK fiscal policy Sweden Riksbank Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Saxo Bank Podcast: A Massive Collapse In Yields, Fed's Tightening Cycle And More

Fed Is expected To Hike The Rate Aggressively Again

InstaForex Analysis InstaForex Analysis 18.11.2022 14:14
The US stock market has seen another day of a sell-off following Fed policymakers' hawkish comments. They once again confirmed their pledge to aggressive tightening, dispelling rumors about a possible shirt to a softer stance. San Francisco Fed President Mary Daly said that she expects the central bank to raise interest rates at least another percentage point and possibly more before it takes a breather to evaluate how the inflation fight is going. "Pausing is off the table right now. It's not even part of the discussion," she said. "Right now, the discussion is rightly around slowing the pace and ... focusing our attention really on what is the level of interest rates that will be sufficiently restrictive." Daly noted that her most recent estimate puts the benchmark overnight lending rate around 5%. She added that the correct range is probably 4.75% to 5.25% of the current target range of 3.75%-4%. "I still think of that as a reasonable landing place for us before we hold, and the holding part is really important," she pinpointed. Over the year, the Fed has been raising the interest rate, which spills over into various consumer debt products. In December, the regulator is expected to hike the rate aggressively again. Traders assume that the central bank will raise the rate by 0.50 basis points. Premarket trading Gap stock rose by 5.5% at the end of the session and gained another 6% during the premarket after the company's earnings report topped Wall Street estimates. Gap also gave a rather cautious forecast for the holiday season. Palo Alto Networks shares dropped by 1.5%. Before that, they grew by 6.5% after its revenue report beat analysts' expectations. In today's premarket, its stock advanced by 5.6%. StoneCo stock jumped by 12% after its quarterly report exceeded the consensus forecast. However, its shares eventually declined by 5.0%. The company's earnings report was also slightly above analysts' forecasts. Its stock added 18.2% in the premarket. Applied Materials shares gained 3.4% after the semiconductor maker's third-quarter revenue report exceeded analysts' estimates. The stock climbed by more than 4.0% in the premarket. As for the technical outlook of the S&P 500, after a steep decline yesterday and a sharp rise today, it managed to stabilize. Bulls need to protect the support level of $3,942. As long as trading is carried out above this level, risk appetite will remain high. If so, the index may return to $3,968 and $4,003. A breakout of $4,038 will lead to an upward correction to the resistance level of $4,064. A more distant target will be the $4,091 level. In case of a downward movement, buyers need to protect $3,942. If bears push the index below $3,905, it could reach the support level of $3,861. Relevance up to 12:00 2022-11-19 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/327525
All Eyes On Capitol Hill, Jerome Powell Will Appear Before The Senate Banking Committee

Sharp Statements Of Fed Members Dampened Investors' Enthusiasm

InstaForex Analysis InstaForex Analysis 21.11.2022 09:00
The week ended with mixed dynamics, mainly due to increased volatility and uncertainty of future levels of interest rate hikes. After the US released its latest data on inflation, stocks rallied strongly, while Treasury yields and dollar fell. It seems that the harsh statements of some Fed representatives cooled down the ardor of investors and returned to the markets the increased degrees of uncertainty. St. Louis Fed President James Bullard and San Francisco Fed chief Mary Daly actually made it clear with their statements that the latest inflation data may not be an important factor in the central bank's decision to not only end the cycle of rising rates, but also slow its pace. While Daly noted that she expects the discount rate to rise to 5.25%, Bullard agreed that the overall rate level could be between 5% and 7%. These words show that the stance of some Fed members remain hawkish, indicating that they believe it is too early to see the decline in US inflation as a serious signal for loosening the super-tight monetary course. This raises the possibility that another rate hike of 0.75% may be decided at the December meeting, although markets had hoped that the rate might be raised by as little as 0.50%. This is where the minutes from the bank's last meeting, which will be released this Wednesday, could play the most important role. If it shows that Daly and Bullard's position prevails, markets will see another wave of sell-offs, followed by the increase of Treasury yields and dollar. Market volatility will also be high, stimulated by uncertainty, which will be the reason of sideways trend. All this will take place during low market volumes caused by the release of the lates Fed minutes and Thanksgiving holiday in the US on November 24. Uncertainty will remain high until the Fed's future rate stance is clarified. Forecasts for today: GBP/USD The pair is trading at 1.1740-1.1965. It is likely to stay in this range today. USD/CAD The pair is rising amid falling crude oil prices and traders waiting for the release of the latest Fed minutes. Quotes are a little above 1.3400, and a consolidation will prompt a local growth to 1.3475. Relevance up to 07:00 2022-11-24 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/327618
The China’s Covid Containment Continued To Negatively Impact The Output At The End Of 2022

In China The Outbreak Continues To Get Worse | The ECB Has Given Banks An Incentive To Get Rid Of Those Loans

Saxo Bank Saxo Bank 21.11.2022 09:30
Summary:  Markets remain on edge amid lack of economic data but heavy focus on Fed commentaries which were mixed at best with Collins remaining hawkish but Bostic again signaling a slowdown in the pace of rate hikes. Meanwhile, covid outbreaks in China continue to get worse, keeping expectations of a Xi pivot also restrained. Commodities including oil and gold gave up recent gains on higher USD and China concerns. Weekend elections in Malaysia saw its first ever hung parliament, although not a complete surprise. What’s happening in markets? The Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) traded sideways US equity markets had a lackluster session with modest gains on Friday. Nasdaq 100 was unchanged and the S&P 500 edged up 0.5%. Nine out of the 11 sectors within the S&P 500 gained, with utilities, up 2% being the top performer. Energy was the largest laggard, down 0.9% as WTI crude oil fell to as low as USD77.24 at one point before settling at USD80.08, down 1.9% on Friday and 10% for the week on the concerns of weakening demand. Retailers Foot Locker (FL:xnys), Rose Stores (ROST:xnas), and Gap (GPS:xnys) surged by 7% to 10% on earnings and guidance beating street estimates. US  treasury (TLT:xnas, IEF:xnas, SHY:xnas) yield rose as Fed member Collins keeping 75bps on the table Investors sold the front end of the treasury curve, seeing 2-year yield up 8bps to finish at 4.53% on Friday, following Boston Fed President Susan Collins kept the option of a 75bps hike in December open. Nonetheless, the money market curve continue to assign a higher than 80% chance of a 50bp hike in the next FOMC meeting. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) consolidated on Friday but ended the week higher The risk-on sentiment in Hong Kong and mainland China faded towards the end of last week as investors became cautious about the surge of Covid cases in mainland China that might be testing the resolve of the Chinese authorities, in particular, that of the local governments to implement the 20-item guidelines of relaxing pandemic control measure. Hong Kong stock markets traded higher initially in the morning, led by China Internet stocks, following Alibaba (09988:xhkg) reporting earnings beating expectations and adding to its share repurchase programme and The Chinese authorities’ grant of a new round of 70 online game licences to firms including Tencent (00700:xhkg) and NetEase (0999:xhkg). China property developers declined and dragged the benchmark indices lower, after Moody’s warned that the recent government policy support to the mainland real estate sector was no game changer. Hang Seng Index dropped by 0.3% on Friday and gained 3.9% for the week. In mainland bourses, healthcare shares gained as new Covid cases surged to above 25,000, a new high since April. CSI 300 declined 0.5% on Friday and edged up by 0.3% for the week. Crude oil (CLZ2 & LCOF3) suffering from worsening Covid outbreak in China WTI futures took a look below the key $80/barrel mark on Friday amid the return of demand concerns as the Covid outbreak in China continued to get worse. Further developments over the weekend (read below) suggest further caution on Xi pivot expectations will likely remain. Meanwhile, the winter demand has so far remained restrained but the week ahead may bring further volatility as the deadline for European sanctions on Russia crude looms. NatGas prices were also lower after Freeport LNG announced initial operations are set to resume from their export facility in mid-December, one month later than prior guidance. Gold (XAUUSD) still eying the hawkish Fed Gold stayed short of making an attempt at the key $1800 level last week and was down over 1% as the USD gains returned amid the generally hawkish rhetoric from Fed speakers confirming more rate hikes remain in the pipeline. It is now testing the resistance-turned-support at 1750, and a move higher needs support from further declines in yields and the US dollar or some other catalyst that sees a run to safety. FX: NZD in gains ahead of RBNZ rate decision this week The Reserve Bank of New Zeeland is likely to deliver its sixth consecutive 50bps rate hike this week, or more with consensus tilting towards a larger 75bps move. The calls for a hike come amid hot inflation at 7.2% YoY in Q3 – well above the RBNZ’s 1-3% target – which comes in conjunction with a tight labour market. Most members of the RBNZ shadow board also supported a 75bps rate hike. NZDUSD started the week on a stronger footing, after having touched 0.62 on Friday. AUDNZD remains in a downtrend with China’s Covid outbreak as well as a relatively dovish RBA limiting the prospects for AUD.   What to consider? Fed’s Collins says 75bps still on the table for December, Bostic dovish Fed’s Boston Governor Collins appeared on a CNBC interview on Friday, and said she hasn’t decided on the magnitude of next month’s interest rate hike, but that a 75bps rate hike still remains on the table. She also emphasised that there is no clear and significant evidence that the overall inflation is coming down at this point, and there is also no clear consistent evidence of softening in labor markets. In fact, her comments raised terminal rate expectations as she said that data since September have kind of increased the top of where the Fed may need to go with interest rates. On the economy, she is concerned there could be a self-fulfilling dynamic that could make a more severe downturn more likely. However, Collins is reasonably optimistic a recession can be avoided. On the other hand, we also heard from Atlanta Fed Governor Raphael Bostic who said he favours slowing down the pace of rate hikes and also hinted that terminal rates will be about 1% pt higher from here. Worth noting however that Collins is only a voter this year (and not in 2023) while Bostic is not a voter this year or next. China’s Covid outbreak is getting worse China reported its first Covid-related death in nearly 6 months in Beijing as the outbreak continues to get worse and cast doubts on a Xi pivot. The capital added 516 cases on Sunday, and called the situation "grim." There are some retail and school closures, and the request to stay home was made over the weekend and has been extended. Meanwhile, a district in Guangzhou has imposed a 5-day lockdown to conduct mass coronavirus testing in some areas. ECB balance sheet reduction kicks off Euro zone banks are set to repay 296 billion euros in multi-year loans from the European Central Bank next week, less than the roughly 500 billion euros expected, in its latest step to fight runaway inflation in the Eurozone. The ECB has given banks an incentive to get rid of those loans by taking away a rate subsidy last month. It was its first move to mop up cash from the banking system and the first step towards unwinding its massive bond purchases. While the odds of a 50bos are still in favor for the December 15 meeting, key focus will also be on how fast this move can reverse the ECB's 3.3-trillion-euro Asset Purchase Programme. Christine Lagarde continued to sound the alarm on inflation, saying that even an economic downturn wont be enough to tame soaring prices. However, Knot hinted at slower pace of rate hikes, expecting rates to reach neutral next month. He still reaffirmed that policy needs to be restrictive and QT should be used alongside. UK retail sales signals a temporary recovery in consumer spending A rebound in UK’s retail sales for October signalled that Q4 may see concerns on consumer spending ease slightly. Retail sales grew 0.6% MoM in October after a decline of 1.5% in September. However the outlook remains bleak given the squeeze on incomes amid high inflation and the rise in interest rates. Political gridlock in Malaysia After Saturday’s election, Malaysia saw its first ever hung parliament as none of the three major coalitions won enough seats to form a majority, extending the political crisis in an economy on a fragile rebound. It is unlikely to be a big shock to the markets, as the results were generally as expected. The king has asked the parties to name their PM candidates by Monday afternoon, and while a coalition will likely be formed it is hardly enough to ensure a smooth functioning government. Ex-PM Mahathir lost the election while the ruling coalition was reduced to 30 seats, signalling a complete lack of trust in the political framework.   For a global look at markets – tune into our Podcast. Source: https://www.home.saxo/content/articles/equities/market-insights-today-21-nov-2022-21112022
Equity Markets Rise, VIX at 12 Handle After ECB Rate Hike and US Economic Resilience

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

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

The Reserve Bank Of New Zealand (RBNZ) Is Hiking Harder Than The RBA Can

Saxo Bank Saxo Bank 21.11.2022 09:54
Summary:  With FOMC meeting minutes out and two Fed speakers to stand up, the USD is on watch along with equities that could be at risk of taking a haircut. Any hint of more hawkish comments could spark a knee-jerk reaction to the upside in the USD, which means equities could move into a risk-off mode. Focus is also on NZD with RBNZ poised to hike by 0.75%. The NZDAUD is worth watching given the RBNZ is hiking harder than the RBA can, which theoretically supports NZDAUD. In China, attention will be on how local authorities respond to outbreaks and how commodities respond. Companies that make most of their revenue from China are also in focus like Fortescue Metals (FMG). Plus why buy now pay later equities are again on notice. And the Saxo Strats 2022 World Cup Predictions are here. FOMC minutes and more Fed speakers to be key for terminal rate pricing The FOMC minutes from the November 2 meeting are scheduled to be released on Wednesday, just ahead of the Thanksgiving holiday. The key message delivered by Powell at this meeting was that the pace of rate hikes will slow down as needed, and that will likely remain the highlight of the minutes as well. However, Powell managed to deliver this message hawkishly at the press conference, but the risk from the minutes remains tilted to the dovish side. There is likely to be little consensus about whether the rates are in restrictive territory or there’s still room for that, and the divide within the committee remains key to watch as investors remain on the edge to expect a Fed pivot sometime in 2023. We have heard multiple Fed speakers over the past week, after a significant downside surprise in US CPI prompted a move lower in Fed’s terminal rate projections and fuelled significant easing of financial conditions as equity and bond markets rallied and the US dollar weakened. Waller and Bullard have tilted on the hawkish side, while the usual-dove Brainard remained more balanced as she repeated the message on cumulative tightening and being data-dependent. Daly, Mester, George and Bullard will be on the wires this week. In China, attention will be on how local authorities respond to outbreaks and implement pandemic control measures. Watch how commodities respond The economic calendar in China is light this week. However authorities may respond to China’s first Covid-related death in almost six months and the surge in new cases, which have hit their highest levels since April last year. There is concern there could be tighter restrictions, while China implements its new 20-point tweaking covid restriction plan, aimed at minimising disruptions to people’s daily lives and the economy, while adhering to zero-Covid. Officials will find it difficult to balance this, as well as the surge in cases. As such, commodities pegged to Chinese demand are front and centre again this week. The iron ore price is lower on Monday down 4% on fears China could increase restrictions, but the key steel ingredient holds onto a gain of 23% this month. This means stocks that make most of their revenue from China are also in focus like Fortescue Metals (FMG) which is up 30% this month, after China announced a somewhat property rescue package. Oil prices will continue to remain volatile as well as global growth and China lockdowns remain on watch, and the deadline for European sanctions on Russia crude also looms. Flash PMIs on the radar for US, UK and EU The S&P flash PMIs for the US, EU and UK will be released in the week, and will likely test the soft landing rhetoric that has been gaining traction. We will likely see further broad-based easing in the metrics from the October prints, as consumer spending remains constrained amid high inflation and a rise in interest rates. While expectations for December remain tilted towards a downshift in rate hikes for the Fed, ECB and the BOE, the upcoming data point will be more key in determining the terminal rate pricing. Markets are now back at pricing 5% levels for the Fed, but the ECB’s pricing for the terminal rate is still sub-3% while UK’s is 4.7% with fiscal austerity being delayed. RBNZ’s hawkishness to continue to outperform while Riksbank to play catchup The monetary policy decision from the Reserve Bank of New Zealand (RBNZ) will be key on Wednesday to determine the direction of NZD, which has seen strong gains over the past month from higher hawkishness. After a series of 50bps rate hikes, there are some expectations that RBNZ could deliver a 75bps rate hike this week, as inflation and labour market conditions support the case for further front-loading. Inflation has reached 7.2% YoY in Q3 – well above the RBNZ’s 1-3% target. Most members of the RBNZ shadow board also supported a 75bps rate hike. Meanwhile, the Riksbank has been lagging other G10 central banks in tightening policy and is now playing catch up after delivering a 100bp hike in September. The Riksbank is expected to deliver a 75bps hike on Thursday while another 100bps hike can’t be ruled out. Key earnings to watch this week; from Virgin, to Dell to two Chinese companies  Virgin Money, which is one of the UK’s biggest banks reports earnings this week, as well as the agricultural giant Deere & Co and the PC juggernaut, Dell. Separately, as discussed in Peter Garnry’s note, the highlight may be from Kuaishou Technology and Xioami, as Chinese equities have recently rallied amid the country’s fine-tune pandemic control measures. Nonetheless, increasing regulation in the private and technology sectors have still caused headwinds. The two Chinese earnings results are not expected to be blockbusters, but their outlooks may give investors a glimpse through the curtain. Buy now pay later equities again on notice Buy now pay later (BNPL) companies could be further bruised this week, with the Australian government considering policies that could see BNPL firms subject to the same rules as credit card providers. This could not only affect Australian firms but global companies which operate in Australia, such as Block (SQ, SQ2) - which owns Afterpay and Affirm (AFRM). The Australian government is weighing up options to strengthen the BNPL Industry Code, and perhaps introduce an affordability test or put the BNPL companies under the Credit Act. Such a move would ensure BNPL companies that operate in Australia, would work within the guardrails as other credit providers. Companies to watch include Zip, Block and Affirm. Sentiment could also flow to other BNPL companies including Japan’s GMO Payment Gateway and India’s Paytm. Saxo Strats 2022 World Cup Predictions: the Netherlands has the highest probability of being the champion In this article, Peter Garnry, Saxo’s Head of Equity Strategy shows how Saxo Strats used quantitative analysis to predict the winner of the 2022 World Cup and came up with a non-consensus result: expecting the Netherlands to win.   Key economic releases & central bank meetings this week Monday, Nov 21 Germany Producer Prices (Oct) Taiwan Export Orders (Oct) Tuesday, Nov 22 New Zealand Trade (Oct) Eurozone Consumer Confidence (Nov, flash) Wednesday, Nov 23 Japan Market Holiday Australia S&P Global Flash PMI, Manufacturing & Services UK S&P Global/CIPS Flash PMI, Manufacturing & Services Germany S&P Global Flash PMI, Manufacturing & Services France S&P Global Flash PMI, Manufacturing & Services Eurozone S&P Global Flash PMI, Manufacturing & Services US S&P Global Flash PMI, Manufacturing & Services New Zealand Cash Rate (23 Nov) Singapore Consumer Price Index (Oct) United States Durable Goods (Oct) United States Initial Jobless Claims United States UoM Sentiment (Nov, final) United States New Home Sales (Oct) US Fed FOMC Meeting Minutes (Nov) Thursday, Nov 24 US Market Holiday Japan au Jibun Bank Flash Manufacturing PMI South Korea Bank of Korea Base Rate (Nov) Japan Leading Indicator (Sep) Germany Ifo Business Climate (Nov) Friday, Nov 25 US Market Holiday (Partial) New Zealand Retail Sales (Q3) Singapore GDP (Q3, final) United Kingdom GfK Consumer Confidence (Nov) Germany GDP (Q3) Germany GfK Consumer Sentiment (Dec)   Key earnings releases this week Monday: Virgin, Compass, Agilent Technologies, Zoom Video, Dell Technologies Tuesday: Kuaishou Technology, Medtronic, Analog Devices, VMware, Autodesk, Dollar Tree, Baidu, HP, Best Buy Wednesday: Xioami, Prosus, Deere Friday: Meituan, Pinduoduo Source: https://www.home.saxo/content/articles/macro/saxo-spotlight--21-nov-2022-no-video-21112022
ECB's Tenth Consecutive Rate Hike: The Final Move in the Current Cycle

Opposition Of Fed Members On Market Reaction To Weaker US CPI Reading

Saxo Bank Saxo Bank 21.11.2022 10:00
Summary:  The holiday-shortened week is likely to see a continuation of Fed speakers pushing back on expectations of a Fed pivot. There is some risk that the message from the FOMC minutes, due on Wednesday, on the downshift in the rate hike trajectory could be interpreted in a dovish manner. But Fed members will likely continue to bring the focus on strength of the labor market and terminal rate pricing. Last week, we saw the Fed members pushing back generally against the oversized reaction of the markets to the softer US CPI print and the resulting lower pricing of the terminal rate. This helped the US dollar to make a mild recovery, and the trend could likely continue as easing of financial conditions over the last two weeks makes Fed members more alert. We have updated our Fedspeak Monitor with the latest commentaries from the key Fed members, as these remain key to monitor before we start to expect a Fed pivot. While the usual hawk Bullard continued to bring the focus on higher terminal rate pricing, Collins also added to the hawkish rhetoric by keeping a 75bps rate hike on the table for December. Waller, however, started the week on a hawkish note but was later quoted saying he is “more comfortable” with a 50bps rate hike this month. The uber-dovish Brainard however was more balanced as she took comfort from the recent inflation data, but still hinted that duration of peak hold would depend on flow of data. This week brings the FOMC minutes from the November 2 meeting, which may be at a risk of being interpreted dovish as the message on downshifting to a smaller pace of rate hikes will likely be key. Chair Powell managed to deliver that with a hawkish press conference, but just a read of the minutes may not be sufficient for that tone to strike again. We have more Fed speakers coming on the wires as well this week, including Daly, Mester, George and then Bullard again just before the week is shortened by the Thanksgiving holiday. Source: https://www.home.saxo/content/articles/macro/fedspeak-monitor-21-nov-2022-21112022
ECB's Tenth Consecutive Rate Hike: The Final Move in the Current Cycle

The Fed Needs A Significant Change In Inflation To Change Its Monetary Policy

Craig Erlam Craig Erlam 21.11.2022 11:45
The week is off to a relatively slow start, with Asia trading mostly in the red and Europe and the US poised to do the same. We don’t get many quiet weeks these days but this may turn out to be one of the few, with the US Thanksgiving bank holiday cutting the week short for many traders and the Fed minutes on Wednesday potentially weighing on activity beforehand. The recovery rally has stalled over the last week or so as Fed commentary has remained more hawkish than investors wanted. The rebound was also much stronger than is arguably warranted, with the Dow up almost 20% from its October lows. Policymakers appear keen to stress that one inflation number doesn’t make a trend and further evidence will be needed to justify a slower pace of tightening. While they will probably be quietly satisfied that inflation has turned a corner, there may also be a determination not to accept that publicly at the risk of undermining its tightening efforts until now. Another good report next month and the tone will almost certainly notably change. China stocks tumble as Covid cases rise The recent news has been less good from China, where surging Covid cases have wobbled markets just as we were seeing an improvement in sentiment. A slight relaxation of Covid restrictions and the prospect of more early next year, alongside a 16-point plan to boost the property market, had triggered a strong rebound in stocks in China and Hong Kong but that has been undermined by the recent surge and restrictions. Not only would fresh lockdowns in major cities take a sledgehammer to growth into year-end, but it could also complicate any plans that are being put in place to soften the zero-Covid policy next year. We’re back into uncertain territory which could slow the recovery in stock markets. Darker days ahead for crypto? The landscape is not getting any better for cryptos as we continue to learn more about the fallout from the FTX collapse. Bitcoin is off around 4% this morning, trading below $16,000 and looking very vulnerable. Another sharp drop looks very possible as sentiment in the space has been shredded. It could take some time for that to be repaired and the uncertainty that the FTX scandal has created is an enormous headwind for cryptos in the near term. At this point, I wouldn’t be surprised to see $10,000 tested again in the not-too-distant future. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
The US PCE Data Is Expected To Confirm Another Modest Slowdown

Saxo Bank Podcast: Correlation Between Risk Sentiment And The US Dollar (USD), The Outlook Of Gold, Copper And Crude Oil

Saxo Bank Saxo Bank 21.11.2022 11:54
Summary:  Today we look at downbeat sentiment on the latest concern that the reopening trade in China isn't going to happen any time soon with the first official deaths from Covid there in months reported. Elsewhere, we look at tight inverse correlation between risk sentiment and the US dollar and positioning in the US FX futures market, the holiday-shortened week in the US, gold, copper & crude oil, incoming earnings including Dell and Zoom Video, the macro calendar for this week (including the US Thanksgiving holiday) and much more. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: https://www.home.saxo/content/articles/podcast/podcast-nov-21-2022-21112022
Warsaw Stock Exchange SA Approves Dividend Payout: Neutral Impact Expected

The US Dollar (USD) Bears May Take Profits

Alex Kuptsikevich Alex Kuptsikevich 21.11.2022 13:03
The Dollar Index has risen since last Tuesday, adding 2.5% to lows at 105.16. Speculators paused selling off the US currency in response to data and comments from Fed officials implying a higher interest rate target. The outlook The dollar's pullback could also be described as a market breather, implying a pause after a rather aggressive decline of almost 7% from November 4th to 15th. Despite this rebound, major investment houses call the dollar generally overvalued and point out that now could be a good time for a trend reversal. We have discussed this before, noting both fundamental shifts (other central banks have caught up with the Fed in rate hikes, and the latter is signalling a rate cut) and historical patterns (the dollar's response to global reversals cycles in monetary policy last about a year). Short-term perspective Nevertheless, from a short-term perspective, traders are better to be prepared that the DXY could rise to 108 or even 109 from the current 107.7 before we see the start of a new leg down. The dollar has been selling off at an elevated pace since November 4th. A consolidation below the 50-day MA is considered an essential first signal for breaking the trend. Interestingly, this line has quickly reversed from an uptrend to a downtrend, indicating that the overall tendency has changed. Analysis The next and more reliable signal on the technical analysis side should be an anchoring below the 200-day MA, which the USD bulls effectively defended last week. Apart from that crucial curve, which the big market-makers use for trend-following purposes, the 61.8% retracement level of the DXY from the lows of January 2021 to the highs of late September passes around 105. The FX dynamics The most conservative technical approach suggests that the current DXY drawdown is a correction after the 20-month rise, followed by a new wave of growth. Nevertheless, the FX dynamics of DM currencies are just an example where we can say that trees don't grow to the sky. The rule of mean reversal works here unless something breaks globally in the economy. The only such global breakdown would be the insolvency of Japan or another major country or the eurozone’s breakup. So far, while there is no such threat on the horizon, the end of the dollar 20-month uptrend is the main scenario. What to expect? If we are right, the dollar bears are taking profits and gaining liquidity before a new wave of a sell-off in the DXY, which might start this week or next week from levels between 108 and 109 and push it back below 100 before the end of the year.
Investments In Specific Football Clubs Do Not Appear To Be Profitable

World Cup Begins! |The Euro (EUR) Decline | Equity Rally Wanes

Swissquote Bank Swissquote Bank 21.11.2022 10:54
Stocks in Asia fell this Monday on news that China reported its first death in six months from Covid on Sunday, and two other deaths followed. The news spurred fear that the government could make a U-turn on its decision of easing the strict Covid zero rules, and wreak havoc in Chinese markets, yet again. US Elsewhere, the US-inflation-data boosted rally faded last week, on the back of a too-strong-to-be-happy retail sales print, and a couple of hawkish comments from Federal Reserve (Fed) Presidents, including a chart from Mr. Bullard where the Fed’s terminal rate stretched up to 7%!This week, investors will focus on interest rate hikes and the US Black Friday sales. Commodities In commodities, the barrel of US crude slipped below the $80 psychological level last week, below the post-pandemic ascending trend base. Forex In the FX, the US dollar kicks off the week on a positive footage, on the back of a retreat in dovish Fed expectations. Crypto In cryptocurrencies, contagion news from the FTX collapse continues making the headlines in cryptocurrencies. According to the latest news, FTX owes more than $3 billion to its unsecured creditors, and crypto.com, Binance and OKX suspended deposits of dollar-backed stablecoins, USDC and Tether before last weekend. World Cup In sports, the world’s most expensive World Cup kicked off this weekend in the middle of the Qatari desert, with a lot of unusual news, speculation and backlash about the CO2 emissions and limited sales of alcohol, among other criticism. Investors hope sports betting and beverage companies would see a boost from the event… Watch the full episode to find out more! 0:00 Intro 0:40 China Covid worries resurface 1:57 Equity rally wanes, as attention shifts to rate talks & Black Friday 4:19 Oil dips below $80pb 5:27 USD gains, as XAU, EUR decline 6:52 FTX contagion continues, Solana further pressured 8:20 World Cup begins! Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #China #Covid #World #Cup #hawkish #Fed #USD #EUR #XAU #crude #oil #US #retail #sales #Thanksgiving #BlackFriday #FTX #contagion #Bitcoin #Solana #Tether #USDC #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH
Oanda Podcast: US Jobs Report, SVB Financial Fallout And More

Rising Interest Rates Push The US Economy Into Recession

InstaForex Analysis InstaForex Analysis 21.11.2022 13:12
The gold market ended last week, retaining most of this month's gains. But prices may decline in the short term. According to the latest weekly gold survey, sentiment among Wall Street analysts and retail investors have only a slight bullish bias. However, some analysts say that after gold's nearly 11% rise in the past three weeks, with prices approaching the $1,800 mark, some consolidation would be healthy. Sean Lusk, co-director of commercial hedging at Walsh Trading, said that gold prices could decline this week as he expects the Federal Reserve to continue aggressively raising interest rates. "At the end of the day, inflation remains high, so the Federal Reserve is not done raising interest rates," he said. Lusk also added that investors should continue to pay attention to the long-term outlook. According to him, gold and silver will look attractive as rising interest rates push the US economy into recession. "I would look to buy the dips on this correction, but not aggressively, because we just don't know what the Fed will do," he said. "Investors have to ask themselves, with a recession coming, do you want to hold equities or a safe haven asset like gold." Phillip Streible, chief market strategist at Blue Line Futures, had the same opinion as Sean Lusk. He is also bearish and looks to buy gold at lower prices. "I think you just need to be patient," he said. "The Fed's job is not done yet." Streible noted that the inverted yield curve between two-year and 10-year bonds continues to widen, suggesting that the US economy is potentially heading into a severe and prolonged recession. Last week, 20 Wall Street analysts took part in a gold price survey. Among the participants, eight analysts, or 40%, called for higher prices this week. At the same time, seven analysts, or 35%, were bearish in the short term, while five analysts, or 25%, were neutral. Meanwhile, 495 votes were cast in online Main Street polls. Of these, 221 respondents, or 45%, expect gold to rise this week. Another 177 voters, or 36%, said the price would go down, while 97 voters, or 20%, were neutral. The sentiment of retail investors has declined sharply since last week, while interest in the precious metal has also declined looking at the low participation rate in the online surveys. The change in sentiment is due to the fact that gold prices fell by almost 1% at the end of the week. However, after falling to a two-year low in early November, gold prices rose by more than 8%. Some analysts say a renewed rise in the U.S. dollar, backed by hawkish comments from Federal Reserve members, could put pressure on prices.     Relevance up to 09:00 2022-11-24 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/327648
At The Close On The New York Stock Exchange Indices Closed Mixed

The Minutes Of Fed May Help Shape The Upcoming Week On Wall Street

InstaForex Analysis InstaForex Analysis 21.11.2022 13:21
The minutes of the November meeting of the Federal Reserve are expected to help shape the upcoming week on Wall Street, which is shortened due to the holidays. U.S. stock and bond markets will be closed Thursday, Nov. 24, due to the Thanksgiving holiday. Also, on Black Friday, trading will close early. The report on the discussions at the U.S. central bank meeting earlier this month, due out Wednesday, will be the highlight of the economic calendar in the coming days. The earnings calendar will also be relatively sparse as the third quarter reports come to a close. Stocks posted a loss last week despite a modest gain on Friday after hawkish statements from the Federal Reserve dampened optimism. The S&P 500 fell 0.7% last week: Nasdaq Composite lost about 1.6% as central bank members said they intend to continue aggressive policy tightening. The Dow Jones Industrial Average remained virtually unchanged over the week: Minutes from the latest meeting of the Federal Open Market Committee (FOMC) show that officials are planning a half-point rate hike at their December meeting. Fed Chairman Jerome Powell said at a press conference that he and his colleagues have some avenues to mitigate rising prices, acknowledging that the inflation picture has become more complex. An aggressive increase in interest rates could lead to a recession in the U.S. economy, and Fed officials have recently become more open about this risk. Goldman Sachs raised its Fed rate forecast to a range of 5% to 5.25%, adding another 25 basis point hike in May, noting that the investment bank's exposure to its Fed outlook has turned up. "Inflation is likely to remain uncomfortably high for a while, and this could put pressure on the FOMC to deliver a longer string of small hikes next year," economists led by Jan Hatzius said. Wall Street is nearing the end of its reporting season, but the results from Dell (DELL), J.M. Smucker (SJM), Zoom Video (ZM) and Dollar Tree (DLTR) will be some of the key corporate updates in the report. According to FactSet Research, fewer companies are expressing recession fears in the third quarter compared to the second quarter. Of the S&P 500 companies that reported earnings between Sept. 15 and Nov. 16, 26% fewer companies mentioned the term "recession," with 179 mentioning the word, compared with 242 in the reporting period for the most recent quarter. Still, according to FactSet, this quarter still ranks third among companies stressing fears of a potential economic downturn, at least since 2010.     Relevance up to 10:00 2022-11-26 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/327652
Fed is expected to hike the rate by 50bp, but weaker greenback and Treasury yields don't play in favour of the bank

Signs of tightening slowdown seems to be here, but US stocks aren't benefitting much from them yet...

InstaForex Analysis InstaForex Analysis 21.11.2022 16:16
Over the weekend, Federal Reserve officials made statements that might imply a slowdown in aggressive rate hikes. However, these statements could hardly support the US stock market yet. Investors are likely to scrutinize the November meeting minutes to confirm Fed's policy reversal. The minutes will be released later this week. President and CEO of the Federal Reserve Bank of Boston Susan Collins recently expressed confidence that policymakers could curb inflation without doing too much damage to employment. "By raising rates, we are aiming to slow the economy and bring labor demand into better balance with supply," Collins said in prepared remarks for a Boston Fed conference on the labor market. "The intent is not a significant downturn. But restoring price stability remains the current imperative and it is clear that there is more work to do."     Meanwhile, as a result of a recent series of rate hikes, the central bank's overnight borrowing rate was increased to 3.75-4%. In addition, virtually all Fed officials have said they expect more increases to come. Collins also noted that it was important to bring inflation down and acknowledged that the Fed's moves could be costly. "I remain optimistic that there is a pathway to re-establishing labor market balance with only a modest rise in the unemployment rate – while remaining realistic about the risks of a larger downturn," Collins said. Premarket Carvana fell by 3.2% after an internal announcement that the company planned to lay off about 1,500 employees or 8% of its workforce. Carvana lost another 4.6% during premarket trading today. Rent the Runway fell by 12% after Morgan Stanley downgraded the online clothing reseller's stock to "neutral" from "buy." Rent the Runway said the situation with their business was more volatile now than it was expected, indicating difficulties to receive profits. Farfetch declined by 17% after the company failed to meet economists' top-line and bottom-line growth expectations for Q3 this year. Shares of cryptocurrency exchange Coinbase dropped by more than 8.0% but then managed to recover slightly after Bank of America downgraded the company to "neutral" from "buy," saying that the FTX collapse increases the risk of contagion for other platforms and companies in the industry. The stock is currently down by more than 6.0% during premarket trading.     As for the S&P 500 index, after Friday's surge, the pressure on the index has returned. Currently, bulls need to protect the support level of $3,942. As long as the index is trading above this level, the demand for risky assets may remain. This is likely to strengthen the trading instrument and return the levels of $3,968 and $4,003 under control. If the level of $4,038 is broken through, the price may continue the upward correction and reach the resistance level of $4,064. The next target is located in the area of $4,091. If the S&P 500 index declines, bulls should prevent the price from falling below $3,942. If this level is pierced from above, the trading instrument may be pushed down to $3,905, opening the way to a new support level of $3,861. Relevance up to 13:00 2022-11-22 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/327690
FX Daily: Hawkish Powell lends his wings to the dollar

USA: A 50bp rate hike in December is highly expected, disappointing inflation print may lead to a dollar sell-off

InstaForex Analysis InstaForex Analysis 21.11.2022 16:24
Today's trading day began with the dollar on the offensive. The dollar index (DXY) futures also opened today's trading day with a small gap up after a lackluster gain in the previous three trading days. As of writing, DXY futures were trading at 107.74, 79 points above today's opening price and 88 points above last Friday's closing price. The dollar index ended last week with a small token gain of 17 points. Investors are still under the impression of disappointing consumer inflation data, which showed its slowdown. For instance, the Consumer Price Index (CPI) fell in October from 8.2% to 7.7% year-on-year, stronger than the estimate of an 8.0% decline. Core CPI adjusted to 6.3% versus a forecast of 6.5% year-on-year and 6.6% last month. The Fed's efforts to rein in U.S. inflation are definitely paying off. This raises the possibility that the pace of monetary tightening may soon slow down. Prior to the release of these inflation indicators, it was widely expected that interest rates would be raised again by 0.75% (to 4.75%) at the December meeting (December 13 and 14). However, some Fed officials have already made cautious statements to the effect that a slowdown in monetary policy tightening is possible in the near term, although inflation remains too high, according to them, and much work remains to be done to bring it back to the 2.0% target level. Thus, the likelihood of a 75 basis point Fed rate hike in December has declined. On the contrary, market participants are now pricing in an 80% chance of a 50 bps Fed interest rate hike in December, according to the CME Group. If the released U.S. inflation numbers disappoint investors, it will trigger a new wave of dollar selling and bring the DXY down to 109.00.     As of writing, DXY futures were trading near 110.46, staying negative and moving to the bottom of last month's new downward channel (on the DXY chart). A break of these levels may trigger a deeper drop in DXY, down to the key support levels of 107.40, 105.65. And that's exactly what happened: the price broke through the lower border of the descending channel on the DXY chart at 109.00 and reached a local low of 105.15 in the next three days. However, near this local low, the dollar sellers' strength ran out, and by now, as we noted above, the DXY dollar index is up to 107.74. If you look at the daily chart of the USD index (shown as CFD #USDX in the MT4 trading platform), you can clearly see that the price failed to break through the key support level 105.65 (200 EMA). And in the next four days, the price rebounded from that level and rose, making an attempt to break above the long-term level 107.40 (144 EMA in the daily chart of CFD #USDX) at the moment. In our previous review of DXY, we wrote that above the key support level of 105.65, the dollar index remains in the zone of a long-term bull market. With the appearance of signals to buy, long positions in DXY will again become preferable. Now the first such signal will be the return of the price to the zone above the resistance level of 107.40, and the confirming one will be the growth to the zone above the levels of 109.00, 110.00.     As you can see, the price, so far, is moving as we suggested earlier. But, as always, we must also consider an alternative scenario. Today's economic calendar is not rich in the publication of important macro statistics for the U.S., and this entire trading week in the US will be shorter than usual: on Thursday, November 24, banks and stock exchanges in this country will be closed on the occasion of Thanksgiving Day. This day marks the start of the holiday season. It includes Christmas and continues until the New Year. November 25 is a shortened working day in the United States as part of the continuation of Thanksgiving Day celebrations. In early December, major financial market players will gradually begin to sum up the results of the outgoing year, which turned out to be generally successful for the dollar and, on the contrary, disappointing for buyers of the American stock market, although they will probably still be able to please the traditional New Year's Eve rally. But it is not a fact that it will take place this year. Nevertheless, one should not discount the intention of the Fed leaders to continue tightening monetary conditions for the time being, and this is not good for American private business. Relevance up to 12:00 2022-11-26 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/327672
WTI Oil Shows Signs of Short-Term Uptrend Amid Medium-Term Uptrend Phase

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

InstaForex Analysis InstaForex Analysis 22.11.2022 08:10
The foreign exchange market may currently be undergoing significant structural changes. Recall that the market has been busy creating a downward trend section for the past two years. This section ended up being very lengthy and complex. Since in this section, we have yet to see any classical structures (5 waves down - 3 up) or at least structures resembling them, some waves still need to be identified. The geopolitical situation in Ukraine and rising Fed rates were the main drivers of the increase in demand for US currency in 2022. Regarding geopolitics, nothing changes, but things start to go the other way when it comes to Fed interest rates. If the market responds favorably to the FOMC's rate hike, then the ECB and the Bank of England will likely raise interest rates more quickly in the coming months than the FOMC. As a result, the gap, which widened in favor of the dollar, will now close and no longer favor the dollar. This reasoning leads to the conclusion that the new environment will favor the euro and the pound in the next three to six months. Of course, geopolitics will also play a significant role, but making predictions in this area is much more challenging. The only way to prevent a protracted decline in the US dollar is for the ECB and the Bank of England to eventually raise their rates less than the Fed. The ECB rate, for instance, will be 4%, while the Fed rate will be 5%. The US dollar would then be able to avoid a sharp decline. The Bank of England operates similarly. The dollar will only fall in value if the rates eventually equalize, but it won't have a significant advantage either. Since the Fed rate is no longer rising faster than the ECB or the Bank of England rate, the market is pulling both instruments away from the lows reached a few months ago. However, we need more than this element to detect a long-term upward trend section. Additionally, the upward trend that is currently in place is not an impulse. It is five waves long and corrective at the same time. Even now, the EU and UK's currencies do not significantly outperform the dollar, preventing them from smiling as they look to the future. Based on everything stated above, I do not anticipate both instruments to experience significant growth over the next six months. The likelihood is that descending structures will be constructed after the current corrective ascending structures are finished. The news background is unlikely to be appropriate for impulsive downward trends, so the instruments can alternate the trend's correction sections one after the other. All of this implies that the euro and the pound can live comfortably for a long time in an area that is 700–800 base points wide. Based on the analysis, the upward trend section's construction has been complicated into five waves. However, because the wave markup does not suggest a further increase, I cannot advise purchasing euros. If there is a successful attempt to break through the 1.0359 level with targets near the estimated 0.9994 level, which corresponds to the 323.6% Fibonacci, I advise selling.   Relevance up to 06:00 2022-11-23 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/327742
Swiss Inflation Falls Below Expectations; US Markets Closed, Fed Minutes Awaited

RBNZ Could Deliver A 75bps Rate Hike This Week | A Big Beat For Dell

Saxo Bank Saxo Bank 22.11.2022 08:40
Summary:  Risk off tone in the markets spilled over to the US session on Monday after a fresh surge in Covid cases in China. Fed speakers tilted neutral-to-dovish, but the USD has turned more risk-sensitive rather than being yield-sensitive and ended the day stronger, especially against the Japanese yen. Oil prices whipsawed, falling 6% on OPEC output boost speculation which was later denied by Saudi Arabia, and Gold tested key support as well. Earnings from Zoom and Dell beat consensus, but a consistent message on a tough Q4 continued to dampen sentiment. What’s happening in markets? The Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) closed in the red Nasdaq 100 dropped by 1.1% and S&P500 slid 0.4% in a relatively quiet session. The sentiment was dampened slightly by concerns of potential China backtracking in easing Covid control measures as new cases surged. On the other hand, dovish-leaning comments from the Fed’s Bostic and Daly boosted the sentiment somewhat. Among the sectors of the S&P 500, consumer discretionary, energy, and communication services declined the most. Tesla (TSLA:xnas) plunged 6.8% on a recall of over 300,000 cares for tail-lamp issues and the Covid outbreak in China. Walt Disney (DIS:xnys) surged 6.3% after Robert Iger, the entertainment giant’s former chairman and CEO to return as CEO, replacing Bob Chapek. US treasuries (TLT:xnas, IEF:xnas, SHY:xnas) finished a choppy session little changed The dovish comments from Atlanta President Bostic and San Francisco Fed President about the slowing the pace in December and a terminal rate potentially of around 5% did not have much market impact. The 2-year yield edged up 2bps to 4.55%. The long end however caught a bid in early New York trading, with the 10-year yield falling as much as 7bps to 3.76% at one point when the crude oil price fell over 6% to as low as USD75.08 intraday. The 10-year pared gains and finished the day unchanged at 3.83%.  The Australian share market opens 0.6% higher on Tuesday Bright sparks are in lithium, fertilizers, coal and banking. Lithium company Pilbara Minerals trades 4% higher and Allkem (AKE) ais also up about 3% with sentiment in the lithium sector buoyed after lithium giant SQM shares rose almost 10% in NY on announcing a US$3.08 dividend per share following their optimistic update last week. SQM also operates in fertizliers as well, so ASX fertilizers companies are seeing a sentiment uptick with Incitec Pivot (IPL) are trading higher. Coal companies such as Whitehaven (WHC) and New Hope (NHC) also are trading sharply higher with large block trades coming through with traders expecting higher prices for coal in January. Also in commodities, it’s worth watching copper company Oz Minerals (OZL) as options trading volume increased dramatically after BHP increased their takeover offer for company. Yesterday OZL options volume was almost 7 times the 20-day average, with 5,000 calls and zero puts, meaning the market expects a higher price for OZL. In banking Virgin Money (VUK), trades up 13% today after the London listed stock rose 15%. Virgin reported stronger than expected profits for the year to Sept. 30 and upgraded its outlook on Monday, saying it expects its net interest margin to expand in the medium term. Virgin Money’s Slyce, a buy-now-pay-later product that launched earlier this year, had a waitlist of about 40,000. So many are thinking the business could be potentially turning around.  Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) declined as Covid cases surged Investors turned their focus on how the Chinese authorities would be handling the surge in Covid cases towards the April high and whether China would backtrack the 20 fine-tuning pandemic control measures. Hang Seng Index fell by 1.9% and Hang Seng TECH Index plunged by 3%, with China Internet, consumer, Macau gaming, and EV stocks leading the decline. JD.com (09618:xhkg), Alibaba (09988:xhkg), and Meituan (03690:xhkg) dropped by around 5% each. In mainland bourses, CSI 300 slid 0.9%. Food and beverage, beauty care, services, and media stocks were the major laggards. Kweichow Moutai (600519:xssc), and Wuliangye Yibin (000858:xsec) fell by around 3% each.  FX: Dollar strength returns, mainly on the back of Japanese yen Risk off tone from the fresh surge in cases in China prompted a bid tone in the US dollar on Monday. Fed speakers were neutral-to-dovish, lacking the hawkish push seen from Collins and Bullard last week, but as we have written before, dollar is turning to be less yield-sensitive now, but more risk-sensitive as it draws safe haven flows. USDJPY rose above 142 with US 2-year yields inching above 4.55% and 10-year also somewhat higher. Even as the pace of Fed rate hikes slows down, most members have called for over 5% terminal rate, suggesting downside for the Japanese yen may be close but pressure isn’t completely off yet. Disappointing German PPI and dollar strength pushed EURUSD lower to 1.0222 lows.  Crude oil (CLZ2 & LCOF3) whipsaws on OPEC+ reports A volatile day for crude oil amid reports that OPEC was planning to lift production. Oil prices fell sharply with WTI touching $75/barrel and Brent below $84after the Wall Street Journal reported that OPEC+ alliance was considering an output increase of 500kb/d in light of the looming EU ban on Russian oil imports. Oil pared these losses after Saudi Arabia denied the report; instead insisting that the current cut of 2mb/d was in place until the end of 2023. Demand concerns broadly remained with rising virus cases in China and slowing global consumption as central banks around the world continue to tighten policy. A stronger dollar also weighed on oil prices.  Gold (XAUUSD) tested the key 1735 support A stronger dollar continued to push Gold lower on Monday, and it tested the key support at $1735. With FOMC minutes due this week, and more Fed speakers on the horizon, there may be more talk about a higher terminal rate pricing even as the pace of rate hike slows from December. This, together with the risk of repeat lockdowns in China, could continue to weigh on the precious metal. An extension of the recent rally likely requires further declines in yields and the US dollar driving fresh demand for ETFs or some other catalyst that sees a run to safety. What to consider Development in China’s handling of the Covid outbreak across large cities to watch Daily new cases in mainland China surged to 26,824, a new high since April. Beijing reported three Covid deaths, the first time in more than half a year. Part of the population in Guangzhou, Beijing, Chengdu, Zhengzhou, and Shizjiazhung are urged to stay home or under some sort of movement restrictions. It is a testing time for the local authorities of how to control the outbreak and implement the recently released fine-tuning measures to minimize disruption to daily lives and economic activities. The People’s Daily published an article to call for handling pandemic control scientifically and with precision in the spirit of the 20 fine-turning measures. The National Health Commission released four documents to provide further guidelines on how to do PCR testing, management of high-risk districts, quarantine at home, and health surveillance. As Hong Kong’s Chief Executive John Lee was tested positive and he sat near President Xi in some meetings during the APEC Summit last week, investors are also closing watch if President will meet Cuban President Miguel Diaz-Canel when the latter visit China on Nov 24.  Fed’s Daly tilted dovish, while Mester was more neutral Mary Daly (2024 voter) called on the Fed to be mindful of the lagging impact hikes have on the economy.She suggested financial conditions are tighter than what is suggested by Fed rates, saying financial markets are priced like the FFR is at 6%, not 3.75-4.00%.She also said the Fed must be mindful of overdoing rate hikes but there is still more work to be done but inflation is moving in the right direction. She noted policy is in modestly restrictive territory but she sees it peaking at around 5%, saying 4.725-5.25% is reasonable. Meanwhile, 2022 voter Mester said it makes sense to slow down the pace of rate hikes and believes they can slow down from 75bps in December.Mester is beginning to see the Fed's actions work but they need more, sustained good news. She thinks the Fed is just barely there in regards to restrictive territory, adding they need to get there. Disappointing guidance from Zoom (ZM) Zoom reported Q3 EPS of $1.07, $0.24 better than the analyst estimate of $0.83. Revenue for the quarter came in at $1.1 billion versus the consensus estimate of $1.09B. But guidance disappointed as with expectations penned lower than consensus as Q4 2023 EPS of $0.75-$0.78 was seen, vs. the consensus of $0.80. Zoom sees Q4 2023 revenue of $1.095-1.105B, versus the consensus of $1.12B.  Dell Technologies (DELL) beats consensus A big beat for Dell as it reported third-quarter adjusted EPS of $2.30 on revenue of $24.7 billion, compared with estimates for $1.61 per share and $24.4B, respectively. However, PC demand remained weak and weighed on demand outlook, while Q3 were boosted by favorable corporate-PC positioning and robust operational execution to drive the margin and EPS beat.  RBNZ’s hawkishness to continue to outperform while Riksbank to play catchup The monetary policy decision from the Reserve Bank of New Zealand (RBNZ) will be key on Wednesday to determine the direction of NZD, which has seen strong gains over the past month from higher hawkishness. After a series of 50bps rate hikes, there are some expectations that RBNZ could deliver a 75bps rate hike this week, as inflation and labour market conditions support the case for further front-loading. Inflation has reached 7.2% YoY in Q3 – well above the RBNZ’s 1-3% target. Most members of the RBNZ shadow board also supported a 75bps rate hike. Meanwhile, the Riksbank has been lagging other G10 central banks in tightening policy and is now playing catch up after delivering a 100bp hike in September. The Riksbank is expected to deliver a 75bps hike on Thursday while another 100bps hike can’t be ruled out.     For our look ahead at markets this week - Listen/watch our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: https://www.home.saxo/content/articles/equities/market-insights-today-22-nov-2022-22112022
Gold's Hedge Appeal Shines Amid Economic Uncertainty and Fed's Soft-Landing Challenge

The China’s Central Bank (PBoC) Is Going To Provide Interest-Free Matching Loans To Commercial Bank Lending

ING Economics ING Economics 22.11.2022 08:49
China boosts lending to the property sector as rising Covid cases take their toll on the CNY  In this article Macro outlook What to look out for: Fed speakers   Source: shutterstock   Macro outlook Global Markets: After treading water on Friday last week, US stocks resumed their decline on Monday. In terms of catalysts for the down move – possibly Dell’s projections of weak earnings in the current quarter may have played a part. The S&P500 drifted 0.39% lower, while the NASDAQ fell 1.09%. Recent increases in bond yields may also be beginning to take their toll, though Monday saw only a further small rise in the 2Y US Treasury (+1.9bp) and the 10Y yield was virtually unchanged (-0.2bp) at 3.827%. EURUSD has dropped to 1.0241 from about 1.0330 yesterday, which you could put down to a slight increase in benchmark natural gas prices in Europe, though it was also spread widely across the G-10 FX space, so more likely just reflects a swing back behind the USD. The AUD has dropped back to just over 66 cents, Cable is back down to the low 1.18s and the JPY has increased to over 142.  Asian FX has tumbled across the board, led as usual by the region’s high-beta currencies, the THB and KRW. The CNY has moved back up to 7.1653 up from 7.12. Fed comments remained in line with the recent slant of rhetoric, with Mary Daly’s the most notable, talking about being mindful of the lags of policy, the possibility of a slowdown in the pace of tightening, and 5% as a good place to start thinking about peak Fed funds, though with upside risk.    G-7 Macro: Yesterday was slim pickings in terms of G-7 Macro releases. The US Chicago Fed national activity index recorded a figure consistent with slightly sub-trend US growth, though to be fair, the index was weaker in May and June of this year. The OECD Economic Outlook is published today, which will probably get some headlines for their latest, and presumably downgraded growth forecasts. The US releases the November Richmond Fed manufacturing survey. Nothing to get excited about. A good day to update charts and finish off reports.   China: Mainland China’s Central Bank, the PBoC, is going to provide interest-free matching loans to commercial bank lending for the purpose of finishing uncompleted residential property projects. The amount could be around CNY200 billion. The main point is that this is a matching loan for a specific purpose. This is a follow-up policy after PBoC allowed banks to lend to "good quality" property developers recently, and should provide funding for construction activity on uncompleted residential property projects. Another similar policy is that on 8th Nov, the government allowed credit-enhancing tools (standby letter of credit is one of the tools) for privately owned property developers to raise funds in the bond market. The market expects that this policy will help property developers to raise CNY250bn.  The sum of both policies is small relative to the remaining construction of the uncompleted projects. The main purpose of these policies is to stabilize confidence by finishing some key projects. Then credit risk should fall, and the industry could begin to operate without depending on such supportive measures. Nevertheless, we expect that the turnaround of credit risks in the industry will only happen around 2H23 to 1H24.   China: Beijing’s Covid cases have climbed, although the government still labels Chaoyang district, the business centre, a low-risk area. Most Beijing residents have apparently still been staying at home. The central government will be closely monitoring how much pressure the relaxed Covid measures are putting on the healthcare system before responding. The mortality figures are another indicator that the central government is concerned about. We expect that the economic impact of the current situation will still reflect the higher Covid cases even under the new “relaxed” Covid measures. What to look out for: Fed speakers South Korea consumer confidence (22 November) Taiwan unemployment (22 November) US Richmond Fed manufacturing index (22 November) Fed’s Mester, George and Bullard speak (23 November) RBNZ cash rate (23 November) Singapore 3Q GDP final and core inflation (23 November) Thailand trade balance (23 November) US durables goods orders, new home sales, University of Michigan sentiment and initial jobless claims (23 November) Fed meeting minutes (24 November) Japan PMI (24 November) Korea BoK policy meeting (24 November) Japan Tokyo CPI inflation (25 November) Malaysia CPI inflation (25 November) TagsEmerging Markets Asia Pacific Asia Markets Asia Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  
The USD/JPY Price Reversed From The Lower Limit

The Yen (JPY) Will Be Sensitive To Changes In Monetary Policy Rates

TeleTrade Comments TeleTrade Comments 22.11.2022 09:43
Economists at Wells Fargo see the Japanese currency strengthening over the medium term, targeting a USD/JPY exchange rate of 135.00 by Q1-2024. Fed to stop raising rates by early 2023 “Although we anticipate US Dollar strength to continue into early 2023, we see the Japanese currency strengthening over the medium term, and believe the USD/JPY exchange rate could reach 135.00 by Q1-2024.”  “Changes in economic fundamentals should be a more influential currency driver than recent foreign exchange interventions, and we believe the Yen will be especially sensitive to changes in monetary policy rates. Given we expect the Federal Reserve to stop raising rates by early 2023, we see solid prospects for a stronger Yen past that point.”  
Analysis Of Tesla: A Temporary Corrective Rally Should Not Come As A Surprise

Negative Sentiment Over Massive Recalls Of Tesla Cars In The US

Saxo Bank Saxo Bank 22.11.2022 10:23
Summary:  Markets started the week in a downbeat mood with a weak session in the US yesterday. China posted another weak session as the rise in China Covid cases there has dogged sentiment since the weekend. Crude oil was slammed with a huge sell-off on a report from WSJ that key swing producer Saudi is considering a production boost, but the sell-off was entirely erased yesterday by the end of the day on official Saudi sources denying the story.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures are in a slow grinding downward trend from the recent peak over a week ago trading around the 3,955 level this morning with the 3,920 level being the first support level to watch and then the big 3,900 level. Key risk sources to monitor are the USD, falling Tesla share price which could spill over into other pockets of the market, and the potential bankruptcy of the crypto company Genesis. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) Daily new cases in mainland China continued to surge. Hang Seng Index fell 0.8% while CSI 300 managed to edge up 0.5%. China internet shares slid. On the other hand, SOE telecommunication and infrastructure stocks surged as the Chairman of China Securities Regulatory Commission said listed state-owned enterprises are undervalued by stock investors. China Unicom (00762:xhkg) jumped nearly 10% and China Communications Construction (01800:xhkg) surged 9%. FX: Dollar strength returns, mainly against the Japanese yen Risk off tone from the fresh surge in Covid cases in China prompted a bid tone in the US dollar yesterday. Fed speakers were neutral-to-dovish, lacking the hawkish push seen from Collins and Bullard last week, but as we have written before, the dollar seems to be less yield-sensitive now, but more risk-sensitive as it draws safe haven flows. USDJPY rose above 142 with US 2-year yields inching above 4.55% and 10-year also somewhat higher near 3.80%. USDJPY is unlikely to mount a full bullish reversal above the key 145.000 area unless US 10-year yields threaten back above 4.00% (and hit sentiment once again). Elsewhere, EURUSD bottomed out at 1.0222 yesterday, still well above meaningful downside pivot levels, the first being the 1.0100 area. Crude oil (CLZ2 & LCOF3) Crude oil prices whipsawed on Monday in response to a later denied report from the Wall Street Journal that the Saudis together with OPEC+ was considering hiking production by 500,000 barrels a day ahead of the EU embargo on Russian oil. The price quickly dropped $5 to a ten-month low before rallying to end the day close to unchanged. A move that left both buyers and sellers hurting, potentially worsening an already troubled market that is suffering from falling volumes and lower open interest given the current lack of clarity regarding demand and supply, and the potential impact of a G7-planned price-cap-plan on Russian seaborne flows. Russia may retaliate against the plan by refusing to supply crude oil to those involved. Demand concerns, however, broadly remain with rising virus cases in China (see below), slowing global consumption as central banks around the world continue to tighten policy and the stronger dollar weigh on prices Gold (XAUUSD) testing support at $1735 A stronger dollar continued to push Gold lower on Monday, and it tested the key support at $1735. In the short-term the direction will be determined by fund activity and whether they need to make further reductions in recently established, and now under water, long positions. With FOMC minutes due this week, and more Fed speakers on the horizon, there may be more talk about a higher terminal rate pricing even as the pace of rate hike slows from December. This, together with the risk of repeat lockdowns in China, could continue to weigh on the precious metal. An extension of the recent rally likely requires further declines in yields and the US dollar driving fresh demand for ETFs or some other catalyst that sees a run to safety. Silver (XAGUSD) meanwhile trades higher for the first time in six days after retracing 50% of the recent rally. US treasuries (TLT, IEF) US treasury yields are a bit adrift here, awaiting the next incoming data for next steps, with tomorrow’s batch of US data unlikely to move the needle as we await next Wednesday’s PCE inflation data and next Friday’s November US jobs report. The key upside swing area for the 10-year yields is near 4.00%, while the major downside focus beyond the 3.67% pivot low is the 3.50% cycle high from June. The 2-10 yield curve inversion remains near its lows for the cycle, at –70 basis points this morning. What is going on? Development in China’s handling of the Covid outbreak across large cities to watch The number of new Covid-19 cases hit 27,307 and reportedly more than 40 cities across the country are under some sort of lockdown or movement. Guangzhou, the provincial capital of Guangdong reported over 8,000 new cases and Chongqing seconded with over 6,000 new cases. So far, the municipal government of Guangzhou avoids adopting stringent lockdowns. However, Chongqing the manufacturing hub of Western China has rolled out more stringent lockdown. Chinese local governments are struggling to strike the right balance between adhering to zero-Covid policy and minimising disruption to daily lives and economic activities. The swing from abandoning PCR testing a week ago but only to reinstate mandatory testing days later in the city of Shijiazhuang was an example of such dilemma. On a positive note, the People's Daily published an article to call for handling pandemic control scientifically and with precision in the spirit of the 20 fine-tuning measures. The National Health Commission released four documents to provide further guidelines on how to do PCR testing, management of high-risk districts, quarantine at home, and health surveillance. Tesla decline could ignite risk-off Shares were down 7% yesterday following negative sentiment over massive recalls of Tesla cars in the US and renewed uncertainty as China is battling with reopening its society. Investors are also increasingly worried that CEO Elon Musk is spending too much time on his Twitter acquisition and that his recent behaviour around Twitter is damaging his brand and ultimately Tesla’s brand. We know from surveys that there is a large overlap in investors owning cryptocurrencies, Tesla, and Ark Innovation ETF. UK retail sales signals a temporary recovery in consumer spending A rebound in UK’s retail sales (the release is a volume-based measure) for October signalled that Q4 may see concerns on consumer spending ease slightly. Retail sales grew 0.6% MoM in October after a decline of 1.5% in September. The outlook, however, remains bleak given the squeeze on incomes amid high inflation and the rise in interest rates. Disappointing guidance from Zoom (ZM) Zoom reported Q3 EPS of $1.07, $0.24 better than the analyst estimates of $0.83. Revenue for the quarter came in at $1.1 billion versus the consensus estimate of $1.09B. But guidance disappointed as with expectations penned lower than consensus as Q4 2023 EPS of $0.75-$0.78 was seen, vs. the consensus of $0.80. Zoom sees Q4 2023 revenue of $1.095-1.105B, versus the consensus of $1.12B. Dell Technologies (DELL) beats consensus A big beat for Dell as it reported third quarter adjusted EPS of $2.30 on revenue of $24.7 billion, compared with estimates for $1.61 per share and $24.4B, respectively. However, PC demand remained weak and weighed on demand outlook, while Q3 were boosted by favourable corporate-PC positioning and robust operational execution to drive the margin and EPS beat. What are we watching next? RBNZ up tonight with market uncertain of size of hike. Sweden’s Riksbank up tomorrow The monetary policy decision from the Reserve Bank of New Zealand (RBNZ) will be key on Wednesday to drive the direction of NZD, which has seen strong gains over the past month from anticipation that the RBNZ may stay on a determined tightening path. After a series of 50bps rate hikes, there are some expectations that RBNZ could deliver a 75-bp rate hike tonight to take the rate to 4.25%, as inflation and labour market conditions support the case for further front-loading. Inflation reached 7.2% YoY in Q3 – well above the RBNZ’s 1-3% target. Most members of the RBNZ shadow board also supported a 75-bp rate hike. Meanwhile, the Riksbank has been lagging other G10 central banks in tightening policy and is now playing catch up after delivering a 100-bp hike in September. The Riksbank is expected to deliver a 75-bp hike on Thursday, with some looking for another 100-bp move. Crypto lender Genesis in the spotlight on bankruptcy risk Genesis, a large crypto lender and creditor to the FTX fraud operation that recently blew up, is looking for up to $1 billion in funding and has warned that it may have to file for bankruptcy if it is unable to find funding, also claiming that the risk of bankruptcy is not imminent. Bitcoin trades today near the cycle lows below 16,000 as the market cap of the entire crypto space has dipped below $800 billion. Earnings to watch Today’s US earnings focus is technology earnings from VMware, Autodesk, and HP. On the consumer sector, investors will be watching earnings from Dollar Tree and Best Buy. Analysts expect HP revenue growth to be down 12% y/y in FY22 Q4 (ending 31 October) as PC sales and enterprise technology spending are down from the high levels during the pandemic. Today: Kuaishou Technology, Medtronic, Analog Devices, VMware, Autodesk, Dollar Tree, Baidu, HP, Best Buy Wednesday: Xiaomi, Prosus, Deere Friday: Meituan, Pinduoduo Economic calendar highlights for today (times GMT) 0830 – Australia RBA’s Lowe to speak 1300 – Hungary Central Bank Rate Decision 1330 – Canada Sep. Retail Sales 1415 – UK Office for Budget Responsibility testifies to Parliament 1500 – Eurozone Nov. Preliminary Consumer Confidence 1500 – US Nov. Richmond Fed Manufacturing Index 1600 – US Fed’s Mester (Voter 2022) to speak 1645 – Canada Bank of Canada’s Rogers to speak 1915 – US Fed’s George (Voter 2022) to speak 1945 – US Fed’s Bullard (Voter 2022) to speak 2130 – API's Weekly Report on US Oil Inventories 0100 – New Zealand RBNA Official Cash Rate  Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: https://www.home.saxo/content/articles/macro/market-quick-take-nov-22-2022-22112022
Indonesia's Inflation Slips, Central Bank Maintains Rates Amidst Stability

Decline In Market Volumes Will Lead To A Strong Increase In Volatility

InstaForex Analysis InstaForex Analysis 22.11.2022 11:06
Trading volumes were quite low early this week because of the upcoming holiday in the US and increased expectations that the Fed will continue aggressively raising rates, at least until the end of this year. Even so, optimism prevailed in markets because the latest inflation data in the US noticeably decreased. The worsening situation in China, where the coronavirus infection continues to run rampant, has also prompted authorities to suspend school and business activities in Covid-infected areas. This points to a likely decline in the country's economic growth, which in turn is bound to have an impact on exports and imports to the US and other economically advanced countries. Market volumes will continue to decline, which will lead to a strong increase in volatility. However, it is unlikely to lead to any noticeable changes in the forex market because the sideways trend will continue, with some local rises or falls in the pairs where the dollar is present. A similar scenario could be seen in the stock markets, connected firstly with the above-mentioned factors, and secondly with extremely high uncertainty about the Fed's decision on rates and the bank's plans and forecasts for next year. Most likely, the decline will continue even amid positive news or data on the US economy. The focus will remain on the October Fed minutes, which might be the reason for noticeable movements. Forecasts for today: USD/JPY The pair is trading below the strong resistance level of 142.25. A break above it might push the quote to 143.30. AUD/USD The pair might resume the decline amid negative news from China and gloomy sentiment in the markets. A decline below 0.6585 might push the quote down to 0.6500.   Relevance up to 08:00 2022-11-24 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/327774
BSP Maintains Rates Amid Moderate Inflation; Eyes Further Tightening if Needed

FieryTrading comments on US dollar index (DXY) - November 21st, 2022

Fierytrading Analysis Fierytrading Analysis 22.11.2022 21:54
// 🔥 DXY Strongest Decline Since 2020: Market Bottom Is In? by FieryTrading on TradingView.com Trend Analysis Technical Indicators Chart Patterns    Around two months ago I made an analysis on the DXY ( dollar index ) and the fact that it was trading on a massive 14-year resistance. I argued that a top was possible, but still too early to tell. After looking at the chart, I think we can definitely argue that a potential top for the dollar is in. Consequently, this would be bullish for both the crypto and stock markets.Not sure if we're going to the bottom support area directly, I see it more plausible that the DXY will trade sideways for a couple of weeks/months.Be aware that a falling DXY is bullish for crypto, but that doesn't mean it will go up. The market is still licking its wounds from the FTX fiasco, and more insolvencies are on the horizon. Be wary. 💰Lower Your Trading Fees: https://taplink.cc/fierytrading📈Try my Premium Signals for 🚨FREE🚨: https://t.me/FT_Futures_free🔥Premium channel & 💎Contact: http://www.fierytrading.com🎯Crypto Signals & EXCLUSIVE analyses: https://t.me/FieryTradingChannel Website Source: Trader FieryTrading — Trading Ideas & Charts — TradingView
Asia Market: Optimistic Headlines From Regional Leaders China And Japan

Singapore October Inflation Data And The RBNZ's Decision Will Arrive Today

ING Economics ING Economics 23.11.2022 08:41
Korean business sentiment slides further, Singapore 3Q22 GDP revised lower, Taiwan exports likely to contract  In this article Macro outlook What to look out for: Fed minutes and US data dump Source: shutterstock   Macro outlook Global Markets: Despite yet another barrage of Fed comments that fit into the “higher-for-longer” category, equity markets re-found their mojo on Tuesday. Both Esther George and Loretta Mester gave fairly mainstream speeches highlighting the Fed’s commitment to curbing inflation, with George noting that the relatively high level of US household savings meant that the Fed may have to raise rates more than otherwise. That didn’t stop the S&P500 and NASDAQ both gaining 1.36% on the day, though equity futures are suggesting that this might be enough for now, with small losses indicated at the opening. Some small declines in bond yields won’t have hurt risk-market sentiment. 2Y US Treasury yields edged down 1.7bp while the 10Y dropped 7.1bp taking it back down to 3.756%. Nor at all surprisingly given all the above, the USD has lost ground to the G-10 currencies. EURUSD is back above 1.03, the AUD is up to 0.6645, Cable is higher at 1.1884, and the JPY has pulled back to 141.22. Asian FX has mostly followed suit, led by the THB (36.1145) and CNY (back down to 7.1399). Catch-up for some of the laggards is probable this morning. G-7 Macro: Today we get a slew of purchasing manager data from Eurozone countries as well as the US, and also the University of Michigan consumer sentiment survey for November, complete with inflation expectations and then new home sales.  In the early hours of tomorrow morning Asia time, we get the minutes of the November FOMC meeting. Taiwan: Industrial production for October will probably contract on a year-on-year basis. This is due to weak demand for semiconductors, which these days are an early indicator of demand for goods in general. Our estimate is -8.5%YoY, vs the consensus of -2.75%YoY. Export orders have been in contraction for two consecutive months. Industrial production in the coming months should remain in contraction as we expect the US and Europe to slow further, while the Chinese economy still needs time to recover. South Korea: Business sentiment for manufacturers hit a two-year low in December, with the Bank of Korea’s (BoK) survey index falling to 69 (vs 73 for November), while sentiment for services also declined slightly, down by 1pt to 77 (vs 78 for November).  Small/medium-sized companies and exporters have a darker business outlook compared to large companies and domestic demand-focused companies. Recently-released data taken together (weak early November export data, weak consumer and business sentiment and slowing inflation expectations) support our call for only a 25bp hike by the BoK tomorrow and a contraction in GDP this quarter. Singapore:  October inflation data is set for release today.  The market consensus points to core inflation staying flat at 5.3%YoY although the headline number could soften to 7%YoY (from 7.5%) as base effects kick in.  Despite the dip in the year-over-year number, prices may have picked up by 0.2% from the previous month suggesting that price pressures remain persistent.  Elevated core inflation should keep the Monetary Authority of Singapore (MAS) hawkish while the MAS monitors the impact of its recent string of tightening.  Meanwhile, 3Q GDP was revised down to 4.1% from the initial estimate of 4.4%YoY.  The downward revision reflects softer global trade activity and the negative impact of high inflation. Australia: The Preliminary November PMI indices have all weakened. The manufacturing index is down from 52.7 to 51.5, but more importantly, the service sector PMI, which had just drifted below the threshold 50 mark to register 49.8 in October, has fallen further to a weak-looking 47.2. This results in a composite PMI for November of 47.7. It looks as if the Australian economy is finally slowing in response to the Reserve Bank of Australia’s (RBA) tightening.    New Zealand: The Reserve Bank of New Zealand (RBNZ) meeting due at 0900 SGT/HKT is widely expected to deliver a 75bp increase to the cash rate, taking the target rate to 4.25%. CPI inflation is currently 7.2%YoY (3Q22). What to look out for: Fed minutes and US data dump RBNZ cash rate (23 November) Singapore 3Q GDP final and core inflation (23 November) Thailand trade balance (23 November) US durables goods orders, new home sales, University of Michigan sentiment and initial jobless claims (23 November) Fed meeting minutes (24 November) Japan PMI (24 November) Korea BoK policy meeting (24 November) Japan Tokyo CPI inflation (25 November) Malaysia CPI inflation (25 November) TagsEmerging Markets Asia Pacific Asia Markets Asia Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Commodities Feed: OPEC+ meeting ahead

Western Countries Are Set To Agree On Russian Oil Price Cap

Saxo Bank Saxo Bank 23.11.2022 09:06
Summary:  U.S. equity benchmark indices gained over 1%, with energy being the best-performing sector as WTI crude bounced 1.5% on a larger-than-expected draw in private US crude inventory data and continued denials from OPEC+ about any production increases. Deliberations on caps on Russian energy remain on watch. Fed speakers continued to steadily pushback against pivot expectations, and FOMC minutes will be key today. Lower yields and a weaker dollar saw gold steady ahead of key support. Investors are also watching closely the development of the Covid-19 outbreak in China. What’s happening in markets? The Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) Nasdaq 100 gained 1.5% and S&P 500 rose by 1.4%. All 11 sectors within the S&P 500 gained, led by energy, materials, and information technology. Trading was thin ahead of Thanksgiving. Investors were not overly troubled by yet another round of hawkish-leaning remarks from Fed officials on Tuesday. Best Buy (BBY:xnys), surging 12.7%, was the best performer in the S&P 500. The consumer electronic retailer reported better-than-expected earnings driven by smaller-than-feared declines in revenues and margins. On the other hand, Dollar Tree Store (DLTR:xnas), a discount store chain, tumbled 7.8%, after reporting earnings beat but downbeat Q4 guidance on margin pressure. US treasuries (TLT:xnas, IEF:xnas, SHY:xnas) In spite of a weak 7-year auction, treasuries were well bid over the day on Tuesday, in particular for the long end. The 2-year yield fell 4bps to 4.51% and the 10-year yield closed 7bps richer at 3.76%. Following a series of remarks from Fed officials since last week to push back to the market speculation of an early pause at a lower terminal rate next year, investors are adding onto their bets for a recession in the U.S. in 2023. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) Daily new cases in mainland China continued to surge and approach the April high. Hang Seng Index fell 1.3% while CSI 300 managed to finish the session flat. Southbound investments registered an HKD5.8 billion net outflow, the largest outflow since August 2021. Southbound investors sold a net HKD3.5 billion of Tracker Fund (02800;xhkg) and HKD1.7 billion of Meituan (03690:xhkg). Meituan tumbled 8.3% and was the worst performer among stocks in the Hang Seng Index on Tuesday. On the other hand, SOE telecommunication and infrastructure stocks surged as the Chairman of the China Securities Regulatory Commission said listed state-owned enterprises were undervalued by stock investors. China Unicom (00762:xhkg) gained 6.8% and China Communications Construction (01800:xhkg) rose by 8.4%. China Aluminum (02068) surged 25.5% after jumping as much as 42.8% at one point. FX: Dollar weakens as risk sentiment stabilizes Data and news flow was thin on Tuesday before it picks up today with FOMC minutes and PMIs due ahead of the US Thanksgiving holiday. Fed speakers Mester and George added little new information, continuing to reaffirm that the fight against inflation had further room to run. US Richmond Fed marginally improved, albeit still negative with mixed details. Philly Fed non-manufacturing survey improved slightly, but firm-level business activity dropped into negative territory alongside full-time employment falling. Dollar slid to lows of 107.11, with gains led by NOK and NZD (ahead of RBNZ meeting where expectations are for a 75bps rate hike). EURUSD is poking at 1.032 while USDJPY is attempting a move below 141. Crude oil (CLZ2 & LCOF3) Crude oil prices were bid on broader risk appetite and continued OPEC+ denials of any production increases. Meanwhile, there was also a larger-than-expected draw of crude inventories while deliberations around Russian energy price caps were held ahead of the planned December 5th implementation. However, there were also reports that China has paused some purchases of Russian oil ahead of the price cap implementation. Supply worries however remained with API reporting that US crude inventories fell by 4.8 million barrels for the week ended November 18, higher than the expected draw of 2.2 million barrels. API data also showed that gasoline inventories declined by about 400,000 barrels last week, and distillate stocks increased by 1.1M barrels. The official government inventory report due Wednesday is expected to show weekly U.S. crude supplies fell by about 1.1M barrels last week. WTI futures traded firm above the $80 mark while Brent futures were near the $88 mark. Natural gas prices also rose as much as 5.2% after Gazprom threatened to cut its gas flows sent via Ukraine — the last remaining route to western Europe — next week.   What to consider The increase in the ECB’s TLTRO funding costs for European banks came into effect Until today, European banks’ outstanding borrowings from the ECB’s Targeted Long-term Refinancing Operations III (TLTRO III). LTRO III has been funded at as low as 50bps below the average of the ECB’s Depository Facility Rate (DFR) over the entire life of those borrowings. The DFR, which is currently 1.5%, has been kept at minus 50bps from Sept 2019 to July 2022. It has been a large subsidy from the ECB in the form of below-market funding costs to European banks. Some banks are depositing these monies back into the ECB and arbitraging the interest rate differential. Last month, the ECB announced to change the calculation of the applicable DFR index with effect from Nov 23 to over the current period as opposed to the whole life of the borrowings.  The move will reduce European banks’ net interest income and withdraw liquidity from the banking system. Currently, the TLTRO III balance is EUR 2.1 trillion.     A testing time for the implementation of the fine-tuning measures for controlling Covid-19 outbreak in China The number of new Covid-19 cases hit 27,307 and reportedly as many as 48 cities across the countries are under some sort of lockdown or movement. Guangzhou, the provincial capital of Guangdong reported over 8,000 new cases and Chongqing seconded with over 6,000 new cases. So far the municipal government of Guangzhou avoids adopting stringent. However, Chongqing the manufacturing hub of Western China has rolled out more stringent lockdown. Chinese local governments are struggling to strike a right balance about adhering to zero-Covid policy and minimising disruption to daily lives and economic activities. The swing from abandoning PCR testing a week ago but only to reinstate mandatory testing days later was an example of such dilemma. In a press conference on Tuesday, health officials from the State Council reiterated the importance of implementing the 20 recently released fine-turning measures. Fed’s Mester and George keep the focus on inflation As investors continue to try and gauge the path of Federal Reserve rate hikes, Cleveland Fed President Loretta Mester reiterated on Tuesday that lowering inflation remains critical for the central bank, a day after supporting a smaller rate hike in December. Kansas City President Esther George said the central bank may need to boost interest rates to a higher level and hold them there for longer in order to temper consumer demand and cool inflation. Russian oil price cap in the works The Wall Street Journal is reporting that Western countries are set to agree on Russian oil price cap around $60 per barrel. However, it could be as high as $7 per barrel ahead of the December 5 start date. The sanctions that the G7, EU and Australia will set, will ban the provisions of maritime services for shipments of Russian oil unless the oil sells below the cap price. The aim is to reduce petroleum revenues for Russia's war machine while maintaining flows of its oil to global markets and preventing price spikes. EU’s new proposed cap on gas prices The EU proposed a cap of €275 per megawatt-hour on natural gas prices to defend consumers against a steep rise in energy costs. The level is well above the current price of about €120, but below last summer's highs when Dutch TTF gas prices went as high as €300+. The tool will only be used if futures on the Dutch Title Transfer facility exceed €275 for two weeks and the gap between TTF and liquefied natural gas prices is greater than €58 for 10 trading days. Even at the height of the crisis in the summer, the price didn’t stay above that level for two weeks, suggesting the tool would not have been activated had it been in place then. That led several market watchers to question how powerful can will actually be. If approved by EU countries, the cap would be available for one year from January 1. Ant Group could be fined more than USD1 billion, setting the stage for concluding regulatory overhaul over the company According to Reuters, the Chinese regulators may be close to a decision to impose a fine of over USD1 billion on the Ant Group. Since being called to stop its IPO in 2020, the group has been under regulatory overhaul. While the amount of the fine is substantial, initial reactions from the investment community to the news are positive as the fine could set the stage for the conclusion of the regulatory overhaul. JD.COM (09618:xhkg) cut senior management pays while increasing benefits for all employees JD.Com announced that the company is slashing the pay for about 2,000 managers by 10-20% and using some of the savings from the move to fund planned increases in staff benefits, including health and housing benefits, for all employees including hundreds of thousands of delivery staff. Founder Richard Liu will also donate 100 million yuan towards staff benefits. The OECD revised downward its 2023 growth forecasts Yesterday, the OECD published its latest Economic Outlook. There is not much surprise. Global growth is expected to slow down significantly in 2023 to 2.2% and to rebound modestly in 2024 at 2.7%. This will be a long and painful economic crisis. Asia will remain the main engine of growth in the short-term. But the zero Covid policy in China will likely limit the country’s contribution to global GDP growth. Before Covid, China represented about 30% of global growth impulse. It is now down to roughly 10%. The OECD warns that the fight against inflation will take time. But several countries are successful. For example, in Brazil, the central bank moved swiftly, and inflation has started to come down in recent months. In the United States, the latest data also seem to suggest some progress in the fight against inflation. Nevertheless, a pause in monetary policy is unlikely in most countries in the short-term. Get access to the full report here. FOMC minutes to be key for terminal rate pricing The FOMC minutes from the November 2 meeting are scheduled to be released on Wednesday, just ahead of the Thanksgiving holiday. The key message delivered by Powell at this meeting was that the pace of rate hikes will slow down as needed, and that will likely remain the highlight of the minutes as well. However, Powell managed to deliver this message hawkishly at the press conference, but the risk from the minutes remains tilted to the dovish side. There is likely to be little consensus about whether the rates are in restrictive territory or there’s still room for that, and the divide within the committee remains key to watch as investors remain on the edge to expect a Fed pivot sometime in 2023. Flash PMIs on the radar for US, UK and EU The S&P flash PMIs for the US, EU and UK will be released in the week, and will likely test the soft-landing rhetoric that has been gaining traction. We will likely see further broad-based easing in the metrics from the October prints, as consumer spending remains constrained amid high inflation and a rise in interest rates. While expectations for December remain tilted towards a downshift in rate hikes for the Fed, ECB and the BOE, the upcoming data point will be more key in determining the terminal rate pricing. Markets are now back at pricing 5% levels for the Fed, but the ECB’s pricing for the terminal rate is still sub-3% while UK’s is 4.7% with fiscal austerity being delayed. Singapore’s Q3 GDP revised lower The final print of Singapore’s Q3 GDP was revised lower to 4.1% YoY, 1.1% QoQ from 4.4% YoY, 1.5% QoQ in the preliminary estimate. This came primarily on the back of weaker-than-expected manufacturing sector growth amid global demand weakness, which resulted in the first decline in non-oil exports for October. Meanwhile, covid curbs in China also continue to weigh on Singapore’s growth trajectory. The 2022 growth forecast was also trimmed to around 3.5% from a range of 3%-4% seen previously, a reflection of an increasingly challenging global macro environment, while 2023 growth forecast was set at 0.5-2.5%.   For our look ahead at markets this week - Read our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: https://www.home.saxo/content/articles/equities/market-insights-today-23-nov-2022-23112022
EUR/USD Faces Pressure Amid PMI Releases: Is More Downside Ahead?

The OECD Warns That The Fight Against Inflation Will Take Time | Credit Suisse May Lose $1.6bn In Q4

Saxo Bank Saxo Bank 23.11.2022 09:12
Summary:  Market sentiment bounced yesterday on little news, with sentiment steady in Asia overnight. Long US treasury yields dipped, and short yields were steady ahead of today's FOMC minutes release from the November 2 meeting, taking the US yield curve inversion to a multi-decade low of -75 basis points. The focus in Europe today will be on preliminary November PMI for a sense of how badly the EU is tilting into recession.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures rallied 1.3% yesterday closing at the 4,010 level, the highest close since 9 September, suggesting bulls are in control as bears are already sitting on strong profits for the year and therefore has little incentive to take bigger positions before yearend. The next big level on the upside is the 200-day moving average at around the 4,060 level. Today’s key events are preliminary US PMI figures for November and later this evening the FOMC Minutes which could provide more clues into the thinking of policymakers. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) According to Reuters, the Chinese regulators may be close to a decision to impose a fine of over $1 billion on Jack Ma’s Ant Group. Since its IPO was halted by the Chinese authorities in 2020, the group has been under regulatory overhaul. While the amount of the fine is substantial, initial reactions from the investment community to the news were positive as the fine could set the stage for the conclusion of the regulatory overhaul. Alibaba (09988:xhkg) jumped more than 4% on the news. China internet stocks gained, led by Kuaishou Technology (01024:xhkg) as the social media platform company surged 6.2% on better-than-expected Q3 results. After rising 25.5% yesterday, China Aluminum (02068:xhkg) continued its advance, rising 18% on Wednesday. Overall market sentiment remains cautious as the number of new cases reached 28,883 on Tuesday, just a touch below the April high of 29,317 cases. Hang Seng Index gained 1.2% and CSI 300 climbed 0.5%. In mainland A shares, infrastructure names surged while pharmaceutical and biotech stocks retreated. FX: Dollar drops as risk sentiment rebounds Softer long US treasury yields also pushed the US dollar lower as the US yield curve inverted to a new cycle low. Still, the big dollar has done very little after the huge, but brief sell-off move on the October CPI release nearly two full weeks ago, with today’s large data dump and FOMC minutes the last hope this week for providing a spark of volatility in either direction ahead of the long holiday weekend (tomorrow, US markets are closed, with most workers also out Friday). The FOMC minutes late today are not highly anticipated, but could surprise if there is more consensus on a hawkish stance than anticipated. EURUSD has carved out a 1.0222-1.0479 range now. Crude oil (CLF3 & LCOF3) Crude oil closed higher on Tuesday supported by a general recovery in risk appetite as the dollar softened and recent short sales in response to false production hike rumor were paired back. Crude oil prices have traded lower this month in response to a drop in demand from China as Covid cases surge to near a record with restrictions of movements currently impacting 48 cities. Ahead of today’s weekly EIA report, the API reported a 4.8 million barrel drop in US crude stocks. The data also showed that gasoline inventories declined by about 0.4m barrels last week, and distillate stocks increased by 1.1M barrels. EU diplomats will discuss and potentially approve a price cap on Russian seaborne oil sales today (see below), and if implemented Russia may retaliate by refusing to sell its crude to nations that adopt the cap. WTI resistance at $82.25 followed by $84.50 Gold (XAUUSD) Gold trades nervously around the $1735 support level for a second day as the market awaits the release of FOMC minutes. The yellow metal managed a small bounce on Tuesday as the dollar softened after Fed officials indicated they were open to implementing less aggressive hikes going forward. In the short-term the direction will be determined by fund activity and whether they need to make further reductions in recently established, and now under water, long positions. An extension of the recent rally likely requires further declines in yields and the US dollar driving fresh demand for ETFs or some other catalyst that sees a run to safety. US treasuries (TLT, IEF) US treasury yields were steady at the short end and dipped at the long end yesterday, driving a new extreme in the 2-10 yield curve inversion of –75 basis points. Traders are awaiting incoming US data today and the FOMC minutes for next steps, although more heavy hitting data awaits next week with Wednesday’s November PCE inflation data and next Friday’s November US jobs report. The key upside swing area for the 10-year treasury yield is near 4.00%, while the major downside focus beyond the 3.67% pivot low is the 3.50% cycle high from June. What is going on? New Zealand’s RBNZ hikes 75 basis points to 4.25% The market was divided on whether the bank would go with the larger rate hike after a string of 50 basis points moves prior to the meeting overnight. NZ two-year yields jumped back toward the cycle highs overnight as the market participants raised the anticipated peak in the policy rate by mid-year next year to almost 5.50%, up about 30 basis points after the decision. Fed’s Mester and George keep the focus on inflation As investors continue to try and gauge the path of Federal Reserve rate hikes, Cleveland Fed President Loretta Mester reiterated on Tuesday that lowering inflation remains critical for the central bank, a day after supporting a smaller rate hike in December. Kansas City President Esther George said the central bank may need to boost interest rates to a higher level and hold them there for longer in order to temper consumer demand and cool inflation. Russian oil price cap in the works The Wall Street Journal is reporting that Western countries are set to agree on Russian oil price cap around $60 per barrel. However, it could be as high as $70 per barrel on oil loaded after the December 5 start date. The sanctions that the G7, EU and Australia will set, will ban the provisions of maritime services for shipments of Russian oil unless the oil sells below the cap price. The aim is to reduce petroleum revenues for Russia's war machine while maintaining flows of its oil to global markets and preventing price spikes. Russian Urals crude oil already trades at around a 25-dollar discount to Brent, so the impact on Russia’s revenues at current international prices would be limited. Credit Suisse warns of big loss in Q4 The Swiss bank is stating in a press release this morning that it could lose $1.6bn in Q4 driven by losses in its investment banks. In addition, the bank says that it has seen net outflows of 6% relative to AUM in Q3. To improve profitability the bank is one-third of all investment banking employees in its Chinese subsidiary following a recent staff expansion in the country. HP cuts 6,000 employees as PC demand weakens The technology company reported Q4 results yesterday in line with estimates but its FY2023 (ending 31 October 2023) outlook was below estimates with adj. EPS guidance of $3.20-3.60 vs est. $3.61. Over the next two years the company expects to reduce staff level by 6,000 to improve profitability. The OECD revised downward its 2023 growth forecasts Yesterday, the OECD published its latest Economic Outlook. There is not much surprise. Global growth is expected to slow down significantly in 2023 to 2.2 % and to rebound modestly in 2024 at 2.7 %. This will be a long and painful economic crisis. Asia will remain the main engine of growth in the short-term. But the zero Covid policy in China will likely limit the country’s contribution to global GDP growth. Before Covid, China represented about 30 % of global growth impulse. It is now down to roughly 10 %. The OECD warns that the fight against inflation will take time. But several countries are successful. For example, in Brazil, the central bank moved swiftly, and inflation has started to come down in recent months. In the United States, the latest data also seem to suggest some progress in the fight against inflation. Nevertheless, a pause in monetary policy is unlikely in most countries in the short-term. Read the full report here. The increase in the ECB’s TLTRO funding costs for European banks came into effect Until today, European banks’ outstanding borrowings from the ECB’s Targeted Long-term Refinancing Operations III (TLTRO III). LTRO III has been funded at as low as 50bps below the average of the ECB’s Depository Facility Rate (DFR) over the entire life of those borrowings. The DFR, which is currently 1.5%, has been kept at minus 50bps from Sept 2019 to July 2022. It has been a large subsidy from the ECB in the form of below-market funding costs to European banks. Some banks are depositing these monies back into the ECB and arbitraging the interest rate differential. Last month, the ECB announced to change the calculation of the applicable DFR index with effect from Nov 23 to over the current period as opposed to the whole life of the borrowings. The move will reduce European banks’ net interest income and withdraw liquidity from the banking system. Currently, the TLTRO III balance is EUR 2.1 trillion.     JD.COM cut senior management pays while increasing benefits for all employees JD.Com announced that the company is slashing the pay for about 2,000 managers by 10-20% and using some of the savings from the move to fund planned increases in staff benefits, including health and housing benefits, for all employees including hundreds of thousands of delivery staff. Founder Richard Liu will also donate 100 million yuan of his own money towards staff benefits. Under the quest for “common prosperity” of the top government leadership, Chinese tycoons are mindful of doing their share in redistributing income. What are we watching next? Flash PMIs on the radar for US, UK and EU The S&P flash PMIs for the US, EU and UK will be released in the week, and will likely test the soft-landing rhetoric that has been gaining traction. We will likely see further broad-based easing in the metrics from the October prints, as consumer spending remains constrained amid high inflation and a rise in interest rates. While expectations for December remain tilted towards a downshift in rate hikes for the Fed, ECB and the BOE, the upcoming data point will be more key in determining the terminal rate pricing. Markets are now back at pricing 5% levels for the Fed, but the ECB’s pricing for the terminal rate is still sub-3% while UK’s is 4.7% with fiscal austerity being delayed. Copper demand growth shifting from China to Europe and the US At the FT Commodities Asia Summit in Singapore, Jeremy Weir, the CEO of Trafigura said demand for copper is shifting away from cooling building activities in China to energy transition demand, especially in Europe and the US. Weir said demand for copper has remained strong despite recent global headwinds. “We’re seeing for example very strong copper demand in Europe through electrification and even through the pandemic,” he said. “Even the current crisis and conflict in Ukraine is not reducing the demand for copper.” Following a recent rally, that got rejected ahead of key resistance at $4 per pound, HG copper has dropped back and currently trades near the middle of its established range around $3.55 FOMC minutes to be key for terminal rate pricing The FOMC minutes from the November 2 meeting are scheduled to be released on Wednesday, just ahead of the Thanksgiving holiday. The key message delivered by Powell at this meeting was that the pace of rate hikes will slow down as needed, and that will likely remain the highlight of the minutes as well. However, Powell managed to deliver this hawkish message at the press conference, but the risk from the minutes remains tilted to the dovish side. There is likely to be little consensus about whether the rates are in restrictive territory or there’s still room for that, and the divide within the committee remains key to watch as investors remain on the edge to expect a Fed pivot sometime in 2023. Earnings to watch Today’s US earnings focus is Deere, the US manufacturer of agricultural and forestry equipment, with analysts expecting FY22 Q4 (ending 31 October) revenue growth of 18% y/y and EPS of $7.09 up 72% as momentum and pricing power remain strong due to high commodity prices on agricultural products. Today: Xiaomi, Prosus, Deere Friday: Meituan, Pinduoduo Economic calendar highlights for today (times GMT) 0815-0900 – Eurozone Nov. Preliminary Manufacturing and Services PMI 0930 – UK Nov. Preliminary Manufacturing and Services PMI 1330 – US Oct. Preliminary Durable Goods Orders 1330 – US Weekly Initial Jobless Claims 1445 – US Nov. Preliminary Manufacturing and Services PMI 1500 – US Nov. Final University of Michigan Sentiment 1500 – US Oct. New Home Sales 1530 – EIA's Weekly Crude and Fuel Stocks Report 1700 – US Weekly Natural Gas Storage change 1905 – US FOMC Meeting Minutes 1905 – New Zealand RBNZ Governor at Parliament committee 2130 – Canada Bank of Canada Governor Macklem to testify to parliament committee Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: https://www.home.saxo/content/articles/macro/market-quick-take-nov-23-2022-23112022
The AUD/USD Pair’s Downside Remains Off The Table

The AUD/USD Pair Remains Well Supported By Modest US Dollar Weakness

TeleTrade Comments TeleTrade Comments 23.11.2022 09:25
AUD/USD gains some follow-through traction on Wednesday amid the prevalent USD selling bias. Bets for less aggressive Fed rate hikes and stability in the equity markets weigh on the greenback. Investors now look to the US macro data for some impetus ahead of the FOMC meeting minutes. The AUD/USD pair attracts some buying near the 0.6630 area on Wednesday and climbs to a two-day high during the early European session, albeit lacks follow-through. The pair is currently placed just above the 0.6650 level and remains well supported by modest US Dollar weakness. In fact, the USD Index, which measures the greenback's performance against a basket of currencies, is seen extending its pullback from over a one-week high and losing ground for the second straight day. Growing acceptance that the Federal Reserve will slow the pace of its policy-tightening cycle turns out to be a key factor that continues to weigh on the greenback. Apart from this, stability in the equity markets further undermines the safe-haven buck and benefits the risk-sensitive Aussie. That said, concerns about the potential economic headwinds stemming from a spike in new COVID-19 cases in China and the imposition of fresh lockdowns keep a lid on the optimism. Furthermore, the recent hawkish remarks by several Fed officials suggest that the US central bank might continue to raise borrowing costs to tame inflation. This, in turn, should limit any deeper losses for the buck and cap the upside for the AUD/USD pair. Traders might also refrain from placing aggressive bets and prefer to wait for a fresh catalyst from the release of the November FOMC meeting minutes. Hence, it will be prudent to wait for strong follow-through buying before confirming that the pullback from over a two-month high touched last week has run its course and positioning for any further gains. Heading into the key event risk, traders on Wednesday might take cues from the US macro data - Durable Goods Orders and the usual Weekly Initial Jobless Claims. This, along with the broader risk sentiment, will influence the USD demand and provide some impetus to the AUD/USD pair.  
ECB's Tenth Consecutive Rate Hike: The Final Move in the Current Cycle

President Of The Atlanta Fed Would Be Willing To Support Weaker Interest Rate Hikes

InstaForex Analysis InstaForex Analysis 23.11.2022 09:35
There is nothing to talk about since there was no news background in the first two days of the week. But today we will receive the first data that could have a chance of affecting the market. The business activity data are relatively important reports. Usually we can expect traders to react to them when results are either significantly higher or lower, which the market does not expect at all. But that happens very rarely. Thus, I do not expect any unexpected values or strong reactions from today's business activity reports. The Federal Reserve's minutes are just a normal economic report on the U.S. regions. It does not contain any information that might not be known to the market. It does not contain any important information at all. That leaves only a few reports like the durable goods orders, traders could react to it, but I don't think it will be significant. The same applies to the speeches of the Federal Open Market Committee and the European Central Bank members. In recent months, the most popular topic on the foreign exchange market has been the interest rates of a particular central bank. So much has been said and written about it... The market clearly understands that the Fed will slow down the pace of tightening of the monetary policy, while the ECB is not planning such a step yet. The demand for the euro and the pound could increase in recent weeks due to this factor, which made it possible to complete the e waves. Now the new speeches of the FOMC members, who will repeat the rhetoric of their colleagues, no longer have an impact on the market. For instance, Rafael Bostic, president of the Atlanta Fed said that he personally would be willing to support weaker interest rate hikes at the next meetings. He also said that in order to effectively fight inflation, the rate needs to be raised by a maximum of 100 basis points more. "I believe this level of the policy rate will be sufficient to rein in inflation over a reasonable time horizon", Bostic said. He, like Mary Daly, thinks the rate could end up rising a little higher than expected now, but based on current inflation data and GDP forecasts, no one is going to raise the rate above 5%. But at some point, he said, the Fed would need to pause and "let the economic dynamics play out," given that it may take what he estimated as anywhere from 12 to 24 months for the impact of Fed rate increases to be "fully realized." In my opinion, all this has long been known to the market, and each new speech by a member of the FOMC does not differ in content from the previous one. Even James Bullard, who is the brightest hawk and who could have said that the rate should be raised above 5%, keeps silent and does not argue with his colleagues. Based on all of the above, all I can say is this: there is no new data and it is not expected this week. The wave markup should and will remain in the first place during the analysis. Based on the analysis, I conclude that the construction of the uptrend section has become more complicated to five waves and is completed. Thus, I advise you to sell with targets located near the estimated mark of 0.9994, which corresponds to 323.6% Fibonacci. There is a probability of a complication with the upward section and taking a more extended form, but so far it is not more than 10%. The wave pattern of GBP/USD assumes the construction of a new downtrend section. I do not advise buying the pound right now because the wave pattern allows the construction of the downtrend section. It would be better to sell with the targets located near the 200.0% Fibonacci level.     Relevance up to 05:00 2022-11-24 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/327876
Hawkish Fed Minutes Spark US Market Decline to One-Month Lows on August 17, 2023

The Upcoming Fed Minutes Could Be A Strong Trigger For Market Movements

InstaForex Analysis InstaForex Analysis 23.11.2022 09:46
Until now, there is no definite trend in markets, partly due to the upcoming Fed minutes and holiday in the US. But stock markets did close higher on Tuesday because of the uncertainty over future rate hikes and strong rebound in oil prices. The latter not only supported energy and oil production stocks, but also the overall equity markets in both Europe and the US. This clearly shows that investors are carefully waiting for events that would drive the markets. Resultantly, it led to a decrease in market volumes The upcoming Fed minutes could be a strong trigger for market movements, where a prevailing hawkish sentiment will prompt a new wave of sell-offs. Meanwhile, a softer tone will lead to a rally, mainly because the market has already taken into account the likely 75 basis point rate hike in December. On the forex market, there are insignificant movements in the pairs where dollar is present. This is also due to the highly-anticipated Fed minutes and long weekend in the US. Most likely, quotes will move depending on the contents of the protocol, and it will be the same as that of the stock markets. The dynamics of government bonds will also play an important role, in which a noticeable decline in yields would put pressure on USD, while an increase would support it. Forecasts for today: GBP/USD The pair is trading within the range of 1.1740-1.1965. It will break out depending on the contents of the Fed minutes. A rise above 1.1965 might take the pair to 1.2060, while a decline below 1.1740 might push it to 1.1630. EUR/USD The pair is rising amid expectations of continued aggressive rate hikes from the ECB. A rise above 1.0350 could it to 1.0435.     Relevance up to 08:00 2022-11-26 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/327900
Assessing the 50-50 Risk: USD's Outlook and Market Expectations for a June Fed Hike

New-home sales are likely to continue to fall - and there is no game changer here for the Fed

Alex Kuptsikevich Alex Kuptsikevich 23.11.2022 10:16
Recently, we've asked Alex Kuptsikevich about current situtation on markets. Cryptocurrency market remains in an unstable situation so do indices. What's more we're on the verge of release of crucial macro data from the USA such as core durable good orders and building permits which go public later today. Indices - are we past dips yet? Despite some slippage in the indices over the last two weeks, it is more likely that the bottom has already been passed. Our expectations have quite a few "buts" and "ifs". Nevertheless, the working scenario assumes that the peak of fear by the markets has already passed. The Fed is preparing the markets for further rate hikes but is prepared to slow down. Inflation data and lower commodity prices and freight costs play into this scenario. In the current environment, the different indices are moving up at different speeds, and some points are not making new highs as dramatically. Still, nevertheless, their move up has probably already begun. In the indices, we see the Dow Jones outperforming the Nasdaq, as the latter is and will remain under pressure from interest. The indices also behaved the same way, starting their recovery in 2002, when they had to rise at non-zero interest rates. Read next: NFT Tokens, the phenomenon & the concept - take a deeper look into the world of NFTs| FXMAG.COM Crypto crash...? The latest cryptocurrency crash promises to repeat the history of the previous crypto-winter when a year-long decline was followed by a 16-week sideways slump from November 2018 to March 2019. But in this case, it is worth looking for analogies not with the duration but with the fragility of the recovery that will follow even after the market has settled down. Core Durable Goods Orders and Building Permits are released this week - how crucial are these prints ahead of the December Fed meeting? The Fed is likely to focus now on inflation and employment, which have already thundered away, and a new batch (NFP) is not expected until late next week. Durable goods orders - as an indicator of business sentiment - could worry the markets if they diverge significantly from expectations. It would be especially unpleasant for the markets if they see firm orders growth - it would be seen as a signal for the Fed to continue raising rates as fast as possible. New-home sales are likely to continue to fall - and there is no game changer here for the Fed: this market was bloated, is now deflating, and there is still a long way to go before a depression. The biggest attention of market participants is expected to be on the Fed minutes, also coming out on Wednesday evening.
Key Economic Events and Earnings Reports to Watch in US, Eurozone, and UK Next Week

OECD: The Global economy Will Not Stop Into Recession This Year

Swissquote Bank Swissquote Bank 23.11.2022 10:27
The OECD said the global economy will avoid a recession this year, and next year, and that unemployment rates won’t skyrocket. That was the good news. But growth will be low and slow, and inflation will remain high, keeping central bank policies tight. That was the bad news. Stocks The S&P500 gained, as strong earnings from retailers improved sentiment before Thanksgiving. Energy stocks performed well on the back of a sustained recovery in crude oil. Shell rallied 5% on announcement that the company will be reviewing its investment in the UK to avoid paying windfall taxes to the British government. BP rallied 6.52%. Central Banks In central bank news, the Reserve Bank of New Zealand (RBNZ) raised its rates by 75bp as expected today. The US dollar softened, and the EURUSD rebounded past 1.0320 in the middle of mixed comments about what the European Central Bank (ECB) should do at its next meeting. Gold In precious metals, gold slid yesterday despite a softer US dollar, and softer yields. China In China, stocks were not looking good as Beijing and Shanghai put stricter rules to slow the Covid contagion, again! But Alibaba rebounded almost 4% in HK today, on news that Ant Group would pay a fine over a billion USD. Crypto In cryptocurrencies, traders remain on the edge, on news that a ‘substantial amount’ of FTX assets have either been stolen or are missing. Bitcoin however resists. The price of a coin recovered above $16K yesterday, but risks remain tilted to the downside. Watch the full episode to find out more! 0:00 Intro 0:30 OECD says no recession, slow growth but not for UK! 1:45 Market update 2:52 Oil, natural gas up 4:41 Goodbye Shell! 6:15 EUR traders expect softer Dec rate hike 8:00 Gold under pressure 8:22 Alibaba jumps on $1 billion fine 9:08 Bitcoin resists Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #OECD #growth #forecast #Gazprom #natgas #crudeoil #recovery #EU #Russia #price #cap #EUR #USD #ECB #Fed #FTX #contagion #Bitcoin #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

Saxo Bank Podcast: The FOMC Minutes, The RBNZ Rate Hike And More

Saxo Bank Saxo Bank 23.11.2022 10:35
Summary:  Today we look at the market bouncing back strongly yesterday as we await a data dump from the US today ahead of the long Thanksgiving weekend there. While the focus from the Fed is on how the FOMC delivers its "deceleration of tightening" message, it is worth noting that financial conditions are close to their easiest since the Fed began hiking in 75 basis point increments back in June. Will this receive any comments in the FOMC minutes release tonight? We also look at leading indicators pointing to an incoming recession, talk crude oil, copper and wheat, the RBNZ hiking 75 basis points overnight, stocks to watch and much more. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: https://www.home.saxo/content/articles/podcast/podcast-nov-23-2022-23112022
Analysis Of The CAD/JPY Commodity Currency Pair - 06.02.2023

The Slowing Canadian Economy And Rruling Out Of The Bank Of Japan Of Rate Cuts

InstaForex Analysis InstaForex Analysis 23.11.2022 10:41
Although markets are sluggish ahead of the upcoming holiday and long weekend in the US, stock indices are rising, while Treasury yields and dollar are falling. This is mainly due to the slightly less hawkish comments from Fed speakers this week, which is in contrast with the statement of St. Louis Fed President James Bullard last week that stressed that interest rates should reach at least 5-5.25%. San Francisco Fed chief Mary Daly also pointed out the need to be mindful of delays in the transmission of policy changes, and Atlanta Fed President Raphael Bostic stated that an additional tightening of 75-100p would be justified. So far, the rate forecast is stable. There is a 75% chance of a 50p increase, another 50p in February, and a peak to 5.06% by June. This is the benchmark that is currently guiding the markets. Today is packed with important statistics from the US. The first one will be the report on orders for durable goods, which will reflect the state of the industrial sector and consumer demand. Next is the consumer confidence indices from the University of Michigan, followed by the Fed minutes, where players will be looking for signals of a dovish reversal by the Fed. There are no signs that the dollar will resume rising. USD/CAD The slowing Canadian economy has not yet led to any noticeable deflationary pressure. The labor market is strong, with employment and wage growth being higher than that of the US. Retail sales also rose 1.5% m/m in October, which means that the Bank of Canada has more room to maneuver than the Fed and so far can implement a policy of containing inflation without looking at the rate of economic growth. Bank of Canada Governor Tiff Macklem will be giving a speech today, where markets expect to see a similar position to that of the Fed. However, this is likely to rule out strong moves. Regarding the loonie, the latest CFTC report showed that cumulative short positions declined by 402 million to -973 million, which means that there is a slow shift in sentiment. But overall the loonie remains bearish, with the settlement price pointing downwards and below the long-term average. It has a chance to strengthen. The possible rise of USD/CAD will end in the resistance area of 1.3500/30, followed by an attempt to test the local low of 1.3224. Chances for a deeper decline have become higher, with the target being the technical support at 1.30. USD/JPY Core CPI rose 3.6% y/y in October, 0.6% higher than that of September's. The data has risen for the 14th consecutive month, and the rate of growth is already higher than in 2014, when the sales tax was introduced to break out of the deflationary squeeze. By all indications, the time for deciding whether to end the stimulus programs is approaching. Last November 10, Prime Minister Fumio Kishida met with Bank of Japan Governor Haruhiko Kuroda, which resulted in new signals. Kuroda expressed the BoJ's position that a unilateral sharp depreciation of the yen is not welcome. This means that raising the yield ceiling for 10-year bonds from the current 0.25% is rejected, as is the ending of QQE. The rising inflation and ruling out of the BOJ of rate cuts for the time being sends a clear signal to investors who are selling the yen. As a result, the net short positions continued to decline, falling by 548 million to -5.909 billion during the reporting period. The settlement price is also reversed downward. For now, there is less reason for USD/JPY to resume its record rise as trading is highly likely to be sideways. There is also little chance that it will move beyond the technical resistance at 143.12, unless there are clearer signals from the Bank of Japan.     Relevance up to 07:00 2022-11-28 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/327882
The Reserve Bank Of New Zeeland Is Likely To Deliver 50bps Rate Hike

RBNZ Interest Rate Reached 4.25% | Singapore CPI Drop | US Reports Ahead

Kamila Szypuła Kamila Szypuła 23.11.2022 11:39
Today is full of important statistics from the USA. The first will be a report on durable goods orders, which will reflect the state of the industrial sector and consumer demand. In addition, there will be PMI reports from the European Union and the UK. RBNZ Interest Rate Decision Undoubtedly, Wednesday is a very busy day. The first important information came from Noerj Zealand. As expected, Reserved Bank Of New Zealand raised rates by 75bp. Thus, interest rates are the highest since 2008. RBNZ Interest Rate reached 4.25%. CPI data Singapore At the beginning of the day, information about the level of inflation in Singapore also appeared. CPI and Core CPI reached lower than expected levels. CPI for October will amount to 6.7% against the last reading of 7.5%. Core CPI decreased by 0.2% and reached 5.1%. This may mean that inflation is heading to decline and reach a stable 2% level. South Africa The opposite movement of inflation took place in South Africa. CPI Y/Y increased to 7.6% and Core CPI Y/Y reached 5.0% PMI data French Manufacturing PMI (Nov) rose from 47.2 to 49.1. Services PMI (Nov) fell to 49.4. German A similar situation took place in Germany. The Manufacturing PMI (Nov) rose to 46.7 and the Services PMI (Nov) fell 0.1 to 46.4. Both readings were greater than expected. EU PMI In the European Union, PMIs were higher than expected. The Services PMI (Nov) held its previous level of 48.6 against expectations of a decline to 48.0, and the Manufacturing PMI rose from 47.3. In Europe, the manufacturing PMI improved while services declined or remained flat. UK PMI In the UK, declines were expected, but the Manufacturing PMI And Services PMI remained at its previous level. The Manufacturing PMI remained at 46.2 and the Services PMI at 48.8. US PMI In the US, PMI reports will appear at 16:45 CET. The manufacturing PMI is expected to decline while the services PMI is expected to increase slightly. US Reports Ahead of Thanksgiving, the US will release a broad package of reports. Weekly reports as well as reports from the real estate sector may have an impact on the situation in this and other economies. Read more: Important US Reports Ahead, The Services And Manufacturing Projected Under 50| FXMAG.COM Speeches There will also be a lot of speeches today, especially from the Bank of England. At 11:45 CET, David Ramsden, Deputy Governor of the Bank of England took the floor. His public engagements are often used to drop subtle clues regarding future monetary policy. At 12:30 the Bank of England Monetary Policy Committee (MPC) Member Pill took the floor. Dr Catherine L Mann serves as a member of the Monetary Policy Committee (MPC) of the Bank of England to speak at 15:45 CET. The last speeches from the islands will be at 5:30 pm CET and Huw Pill will speak again. Representatives of the German bank will also take the floor. Two speeches are scheduled for 14:30 CET, Prof. Dr. Johannes Beermann and Professor Joachim Wuermeling are set to speak. At 16:00 CET Prof. Dr. Johannes Beermann will be speak again. FOMC Meeting Minutes The minutes are arrived today. The minutes offer detailed insights regarding the FOMC's stance on monetary policy, so currency traders carefully examine them for clues regarding the outcome of future interest rate decisions. Summary: 3:00 CET RBNZ Interest Rate Decision 7:00 CET Singapore CPI (YoY) 10:00 CET South Africa CPI (MoM) (Oct) 10:15 CET French PMI (Nov) 10:30 CET German PMI 11:00 CET EU PMI 11:30 CET UK PMI 11:45 CET MPC Member Ramsden Speaks 12:30 CET BoE MPC Member Pill Speaks 14:30 CET German Buba Beermann Speaks 14:30 CET German Buba Wuermeling Speaks 15:00 CET US Building Permits 15:30 CET US Core Durable Goods Orders 15:30 CET US Initial Jobless Claims 15:45 CET BoE MPC Member Mann 16:00 CET German Buba Beermann Speaks 16:45 CET US PMI 17:00 CET US New Home Sales 17:00 CET US Crude Oil Inventories 21:00 CET BoE MPC Member Pill Speaks 21:00 CET FOMC Meeting Minutes Source: https://www.investing.com/economic-calendar/
Swiss Inflation Falls Below Expectations; US Markets Closed, Fed Minutes Awaited

The RBNZ Accelerated Its Pace Of Tightening This Morning

Craig Erlam Craig Erlam 23.11.2022 12:09
Equity markets appear to be treading water on Wednesday as we await the latest batch of FOMC minutes later in the day. Asia played a bit of catchup overnight after Europe and the US posted decent gains on Tuesday that built throughout the session. But futures on both sides of the pond are barely changed from yesterday’s close which may change as the day progresses, of course. I’m not sure whether it’s the FOMC minutes release, the Thanksgiving bank holiday, or just the lack of major catalysts that are driving the inactivity in futures markets. There’s also a huge amount of data on the calendar today which could get things moving including flash PMIs, as well as US durable goods, home sales, consumer sentiment, and jobless claims. That should keep us entertained throughout the day. The minutes are obviously the standout here, although as always I do wonder what exactly we’re going to learn from them that isn’t already evident from the decision, statement, press conference, and flurry of central bank commentary since the event took place. Often it’s not the substance of the minutes but the subtle changes that investors get carried away with. The dovish pivot that may or may not have actually been has been the focus in recent weeks, with Fed commentary since not exactly clearing anything up. Investors may be on the hunt for clues that they’ve acted prematurely, or that there’s actually more support for such a slowdown in tightening and less for a higher terminal rate than they previously thought. Either way, the potential for a big response may be what’s creating this paralysis in the markets this morning. And as can often be the case, it may all be for nothing if the minutes do in fact tell us nothing we already don’t know, leaving us none-the-wiser about the terminal rate but perhaps more assured that 0.5% is more likely in December than not. Of course, the inflation data shortly before the meeting could change that. RBNZ accelerates its tightening The RBNZ accelerated its pace of tightening this morning with a record 75-basis point hike which was in line with expectations. There was plenty of volatility in the New Zealand dollar around the release though as the central bank set a much higher terminal rate and forecast a recession starting next year. A more aggressive approach, in its view, is needed to get inflation back to the target range of 1-3% as the labour market is too tight and inflation is at risk of becoming increasingly embedded. Is the case for $10,000 greater than that for $20,000? Bitcoin is in the green for a second day, up more than 2% in early trade and desperately trying to establish a bottom in the market. That may be easier said than done at a time when the headlines are far from favourable due to the fallout from the FTX collapse. Everyone is wondering who the next victim will be and whether this debacle will uncover similar practices in other areas of the market. Against that backdrop, it’s hard to imagine bitcoin managing any kind of significant, sustainable recovery. The next area of resistance falls around $17,500, a break of which could make things more interesting. But that could be very difficult to overcome. There’s arguably a greater case for the price to fall to $10,000 at the moment, than rising to $20,000. ​ For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Oanda Podcast: US Jobs Report, SVB Financial Fallout And More

The US Wants To Maintain Dollar's Dominance In Order To Control World Trade

InstaForex Analysis InstaForex Analysis 23.11.2022 12:23
The US economy has to remain strong in order for dollar to maintain its dominance in markets. Although the USD index gained over 12% in a year, thanks to high US interest rates and being a safe haven asset, they are not enough to maintain hegemony. Most of the effort should be allotted to making the US economy even more vital because benefits, such as dollar becoming the world's reserve currency, will follow naturally. This is actually why some analysts believe that the US seeks to suppress alternative currencies, including Bitcoin. They believe that the US wants to maintain dollar's dominance in order to control world trade. However, the US should consider using multiple currencies rather than keeping dollar as the unit of account and means of savings because there is a high chance that many alternative currencies will emerge, which could challenge dollar's traditional role as a medium of exchange, unit of account and means of saving. Of course, it is not certain that central bank digital currencies (CBDC) could monopolize the monetary system, but Blockchain technology will play a prominent role in the definition of money in the future. It could lead to greater decentralization and individual control over money. CBDC will have to compete on its own merits with other alternative currencies.   Relevance up to 10:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/327914
BSP Maintains Rates Amid Moderate Inflation; Eyes Further Tightening if Needed

USA: weekly jobless claims reach 240K, more than than expected

Alex Kuptsikevich Alex Kuptsikevich 23.11.2022 19:59
Weekly jobless claims in the USA rose to 240,000 last week, maintaining the upward trend since the end of September. The initial claims were the highest since August and exceeded expectations of 225k. The number of repeat claims was the highest since March at 1551k against 1503k a week earlier and expected 1517k. Both indicators are at low absolute levels by historical standards, but we note a trend. This indicator suggests that the US economy is shifting from a slowdown to a contraction. The last time such a reversal occurred was at the end of 2019. However, the lockdowns severely disrupted (accelerated) the natural course of events. Even earlier, these indicators reversed in 2000 and early 2007, months before the start of the market downturn and quarters before the official recession. A weakening labour market is just as important a signal for the Fed as slowing inflation. Both signs favour the US central bank reducing the rate hike. Even if a pause in the hikes is taken, the economy will digest the policy tightening already made for many months, nibbling at the nose in the coming months. More signs of a reversal in the labour market and a less drastic slowdown in Europe than previously feared work in favour of EURUSD rising and are generally against the dollar index and in favour of the stock market, as it suggests a softer tone from the Fed in the coming weeks and months than previously expected.
Fed is expected to hike the rate by 50bp, but weaker greenback and Treasury yields don't play in favour of the bank

Fed is expected to hike the rate by 50bp, but weaker greenback and Treasury yields don't play in favour of the bank

ING Economics ING Economics 23.11.2022 23:21
The market is firmly backing a 50bp hike from the Federal Reserve in December, but the 7% drop in the dollar against major currencies and the plunge in Treasury yields is the exact opposite of what the Fed wants to see as it battles inflation. With US data proving to be pretty resilient the Fed's rhetoric may need to toughen even more Investment holding up better than expected This morning's US data is a little mixed. The good news is that the durable goods report is solid and points to business capex holding up well in the fourth quarter. We always ignore the headline number, which rose 1% month-on-month versus the 0.4% consensus expectation as it gets buffeted around by Boeing aircraft orders, which were decent at 122 planes versus 96 in September. The Fed tends to look more at the non-defense capital goods orders ex aircraft as a cleaner measure of what is happening in the corporate sector. It rose 0.7% MoM versus expectations of 0.0%. Admittedly the September number was revised a little lower to -0.8% from -0.4% and, as the chart below shows, it is trending towards slower growth, but it is not suggesting companies are looking to retrench imminently. US core durable goods orders and business investment Source: Macrobond, ING Jobs story looking potentially troubling As for mortgage applications, they rose given the typical 30Y mortgage rate has followed Treasury yields lower to 6.67% as of last week versus 7.16% four weeks ago. The result is that mortgage applications for home purchases rose for the third consecutive week. The not-so-good story was the rise in initial jobless claims to 240k from 223k (consensus 225k) while continuing claims rose from 1503k to 1551k, suggesting that there is evidence of a cooling in the US labour market. This has certainly been the case in the tech sector, but more broadly the job openings data suggests there are still 1.9 job vacancies to every single unemployed American, i.e. demand is vastly outstripping supply of workers. The consensus for next Friday’s payrolls number is for a 200k jobs gain and we doubt expectations will shift much for that, but the rising lay-off story is something we will be closely following and could hint of early signs that the jobs numbers in early 2023 being softer. Fed may need to toughen its stance All in this week’s data probably doesn't mean much for the Federal Reserve policy meeting on December 14th. Instead, all eyes will be on next Friday's jobs report and the December 13th release of November CPI. The market is firmly behind a 50bp hike call given Fed speakers have indicated the likelihood of less aggressive step increases in interest rates after four consecutive 75bp hikes. However, we are a little nervous that the 7% fall in the dollar against the currencies of its main trading partners and the 45bp drop in the 10Y Treasury yield is leading to a significant loosening of financial conditions – the exact opposite of what the Fed wants to see as it battles inflation. Consequently, we wouldn't be surprised to see the Fed language become even more aggressive over the coming week, talking about a higher terminal interest rates – with some of the more hawkish members perhaps even opening the door to a potential fifth consecutive 75bp hike in December to ensure the market gets the message. Read this article on THINK TagsUS Investment Interest rates Federal Reserve Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The German Purchasing Managers' Index, ZEW Economic Sentiment And More Ahead

Rates: In 2023 Smaller Hikes Are Very Likely In Eurozone

ING Economics ING Economics 24.11.2022 08:53
The Fed minutes have allowed rates markets to rally further, ahead of the US holiday. The focus now shifts to the European Central Bank minutes, which could also deliver dovish headlines   In this article Dovish Fed minutes extend market rally, likely to the dismay of officials More dovish headline risks from the ECB minutes Today's events and market views We think EUR rates hold the most upside in the near term Dovish Fed minutes extend market rally, likely to the dismay of officials Markets got the dovish headlines out of the Federal Open Market Committee minutes they needed to rally further –  a “substantial majority” judged that slowing the pace of hikes “would soon be appropriate”. Together with the dismal PMI readings earlier in the session this has helped put a brake to the curve flattening, though, as the front to intermediate maturities caught up. The overall takeaway looks more nuanced, and not too different than what could be gleaned from recent official statements about the general rate trajectory – “various” Fed officials did see rates peaking at a higher level than previously thought. In their discussion officials also noted that the full effect of tightening financial conditions would take longer to feed through to inflation, though there was great uncertainty about the lags. That itself could well be seen as justifying a slowing pace of further policy tightening after what has been delivered already.  Financial conditions have already started to loosen again However to the degree that markets are running ahead of themselves and financial conditions have already started to loosen again, it is unlikely this is the broader message the Fed wants to send just yet. While the meeting pre-dates the latest positive surprise in the inflation data, officials since then were quick to note that one CPI reading alone is not yet a trend. Yes the PMIs were bad, but other data is showing more resilience with a clear focus near term on next week's job market data. Fed hike discount for 2022 and 2023 has remained stable but more 2024 cuts are now anticipated Refinitiv, ING More dovish headline risks from the ECB minutes The ECB minutes of the October meeting follow hot on the heels of last night's Fed minutes. Here as well the market's main focus is on the pace of rate hikes going forward. The ECB still hiked rates by 75bp last month, but subtle tweaks to the wording of the press statement were already interpreted as a dovish sign. Later background reporting confirmed that the Council was not unanimous on the size of its last hike with three members calling for a smaller hike.  While it was also reported that the Council did not intend to send any specific signal for the size of future rate hikes back then, we could still see some dovish headlines out of the minutes with regards to differing views on the appropriate size of the rate hike. There should also be a more thorough discussion of recessionary risks, even if they should also be balanced by inflationary risks “clearly” on the upside, as Lagarde put it in October’s press briefing. The lack of QT discussion at the October ECB meeting helped to set off a fixed income rally Refinitiv, ING   Market OIS forwards are pricing c.60bp higher rates for December. This suggests expectations leaning towards a smaller 50bp hike, but the signal is less clear than only a couple of days ago, helped also by less gloomy PMIs just yesterday. Some ECB officials have since suggested there was scope for less aggressive action, such as Italy’s Visco, who is known to lean more dovish. Even some of the better known ECB’s hawks have been less clear on their preference, and their choice between a 50bp or 75bp hike is apparently dependent on the upcoming inflation data, at least Austria’s Holzmann has suggested as much. Only Slovenia’s Vasle was still explicit in saying that the current pace was adequate and would be maintained in December. Smaller hikes are very likely, but the question is for how long However, it remains clear that the ECB is not done hiking. It is this also important to consider what happens beyond December. Smaller hikes are very likely, but the question is for how long. We make out some effort by Chief Economist Lane to direct the discussion away from potentially peaking headline inflation to the more persistent elevation of core inflation. He later also stressed that one should not interconnect quantitative tightening and rate hikes too much, though other officials have strengthened the market’s notion that there could very well be a bargain to be made between the ECB’s hawks and doves, for instance an earlier start to quantitative tightening in return for slower hikes. Going back to the issue at hand – today’s ECB minutes – recall that the clearest dovish signal out of October ECB meeting was actually the absence of a further discussion on QT. Today's events and market views Markets will be more eurocentric with US markets heading into today's Thanksgiving holiday and followed by a shortened trading day on Friday. It also means that market liquidity is about to become even thinner than already is. In any case, today's ECB accounts of the October meeting could add to the dovish central bank headlines that have extended the rally in rates yesterday, though less likely the curve flattening we have witnessed until now. In data the German Ifo index follows on the not-as-gloomy-as-expected flash PMI's released yesterday. If one looks for hawkish risks, then the focus should be on today's ECB speakers, who may well use the opportunity to clarify the message coming out of the ECB accounts. With the ECB's Schnabel we have one of the more influential ECB officials delivering a keynote speech at the Bank of England's watchers conference. That same event has of course also prominent BoE speakers lined up with Ramsden, Hill and Mann.   In secondary markets Italy will reopen two shorter dated bonds for up to €2.75bn. TagsRates Daily   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
US CPI Surprises on the Upside, but Fed Expectations Unchanged Amid Rising Recession Risks

HP Expects To Reduce Staff In Coming Years | Xiaomi Reported Revenue In The Q3

Saxo Bank Saxo Bank 24.11.2022 09:00
Summary:  U.S. equities and bonds rallied on the November FOMC minutes which has a dovish cast stating “a substantial majority of participants judged that a slowing in the pace of increase would soon be appropriate”. The 10-year treasury yield fell to 3.69%. Oil prices slid sharply on Wednesday with WTI futures dipping to sub-$77 lows as the EU proposed a higher-than-expected price cap on Russian crude - between $65-70/barrel. EURUSD rallied above 1.04 and USDJPY fell below 140 amid broad-based dollar weakness. What’s happening in markets? The Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) finished higher on dovish signals from the Nov FOMC minutes U.S. equities found support and bounced after the release of the Nov 1-2 FOMC minutes in an otherwise thin trading session ahead of the Thanksgiving holiday. As bond yields fell, Nasdaq 100 rallied 1%, and the S&P 500 gained 0.6%. All sectors in the S&P 500 advanced except energy, which was dragged by a 4.3% decline in the price of the WTI crude. Consumer discretionary was the top gaining sector, led by Tesla (TSLA:xnas) that surged 7.8% after a leading US investment bank called the shares of Tesla “a bargain”. Deere (DE:xnys), the largest supplier of farm tractors and crop harvesters in the world, gained 5.1% after reporting an earnings beat and upbeat guidance citing strong demand. Manchester United (MANU:xnys) surged 26.1% after the club’s owner announced that they were exploring a sale. Coupa Software (COUP:xnas) jumped nearly 29% on a report that Vista Equity Partners is exploring an acquisition. Nordstrom (JWN:xnys) dropped by 4.2% after reporting a decline in sales and excessive inventory. US treasuries (TLT:xnas, IEF:xnas, SHY:xnas) yields fell after the Fed minutes The minutes for the Nov 1-2 FOMC meeting have a dovish cast, saying “a substantial majority of participants judged that a slowing in the pace of increase would soon be appropriate” and some FOMC members had a concern about rate hikes might ultimately “exceed what was required to bring inflation back”. Yields declined across the curve with buying particularly strong on the long end. The 2-year yield dropped by 4bps to 4.48% and the 10-year yield finished the session 6bps richer at 3.69%. The 2-10-year part of the curve became yet more inverted at minus 79. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) China internet stocks gained, led by Kuaishou Technology (01024:xhkg) up 5.7%, Baidu (09888:xhkg) up 3.4%, JD.COM (09618:xhkg) up 3.3%, and Alibaba (09988:xhkg). Kuaishou and Baidu reported better-than-expected Q3 results. Alibaba shares were boosted by the prospect of coming out of the 2-year-long regulatory overhaul with a fine of over USD 1 billion. Meituan (03690:xhgx) underperformed with a loss of 1.1% following a statement from Prosus, shareholder of Tencent, saying that the Company was planning to unload the Meituan’s shares it received from Tencent. China Aluminum (02068:xhkg) continued its advance, rising 25.3% on Wednesday. Hang Seng Index gained 0.6% and CSI 300 climbed 0.1%. In mainland A shares, infrastructure names surged while pharmaceutical and biotech stocks retreated. Overall market sentiment remains cautious as the number of new cases reached 28,883 on Tuesday, just a touch below the April high of 29,317 cases. Large cities, including Beijing, Chongqing, Chengdu, Guangzhou, Zhengzhou, as well as Shanghai have further tightened pandemic control measures. FX: EURUSD above 1.04 and USDJPY falls below 140 amid broad-based dollar weakness The dovish read of the FOMC minutes from the November 2 meeting is hardly a surprise, given the key message has been around a downshift in the pace of rate hikes as expected. But together with weaker than expected flash PMIs for November (read below) suggesting demand slowdown concerns are starting to pick up pace, and a higher-than-expected jobless claims prints sending some early warning signals on the labor market, the focus has completely shifted away from inflation concerns. Market pricing of the Fed December meeting tilted further towards 50bps, and that resulted in a broad-based dollar sell-off. EURUSD surged above 1.04 while USDJPY slid below 139.50. Crude oil (CLZ2 & LCOF3) Oil prices slid sharply on Wednesday with WTI futures dipping to sub-$77 lows and Brent futures touching $84/barrel as the EU proposed a higher-than-expected price cap on Russian crude - between $65-70/barrel after a $60 level was touted yesterday. This higher price cap means that Russian oil can continue to flow into the international markets as it is above Russia’s production costs. Meanwhile, EIA data showed US crude inventories fell a more-than-expected 3.69 million barrels last week, but US gasoline stockpiles rose by 3 million barrels, the largest buildup since July, suggesting a weaker demand heading into Thanksgiving.   What to consider FOMC Minutes signal a smaller pace of rate hikes The FOMC minutes from the November 2 meeting were released on Wednesday, and the general tone of the members confirmed that the committee was leaning towards moving away from jumbo (75bps) rate hikes to a smaller pace. At the same time, "various" officials noted that the peak rate will be "somewhat higher" than previously expected. The minutes saw participants agree there were very few signs of inflation pressures abating (minutes were pre-October CPI) and they generally noted inflation outlook risks remain tilted to the upside. There were also some concerns about the strength of the labour market, where a few participants said ongoing tightness in the labour market could lead to an emergence of a wage-price spiral, even though one had not yet developed. The message remained less hawkish than what the Fed potentially needs to deliver at this point given the considerable easing in financial conditions. US PMIs disappointed, jobless claims rose US S&P flash PMIs for November disappointed, as manufacturing printed 47.6 (exp. 50.0, prev. 50.4) and services fell to 46.1 (exp. 47.9, exp. 47.8), while the composite dropped to 46.3 (prev. 48.2). New orders fell to 46.4, the lowest since May 2020, while employment saw a slight uptick to 50.8 from 50.4. The only good news is that both input and output prices dipped further, offering further positive signals on inflation. The PMIs indicated how concerns are shifting from the supply side to the demand side, with better news on supply chains but demand concerns from weakening new orders. Initial Jobless claims rose more than expected to 240k from 223k and above expectations of 225k, the highest print since August, suggesting that we continue to watch for further signals on whether the tight labor market may be starting to weaken. Better eurozone flash Composite PMI for November This was unexpected. The consensus forecasted that the EZ flash Composite PMI would fall to 47.0 in November from 47.3 in October. It actually improved a bit at 47.8. The increase mostly results from a better-than-expected Manufacturing PMI (out at 47.3 versus prior 46.4 and forecast at 46.0) while the services sector remains stable. There is another positive news. Price pressures are easing quite fast. The PMI price gauge fell to its lowest levels in two years due to a collapse in input prices. On a flip note, the flash Composite PMI Output Index for the United Kingdom (UK) ticked up to 48.3 in November. Surprisingly, the UK seems to hold up better than the eurozone and especially Germany. The jump in the PMI is still consistent with a recession in the eurozone and in the UK but it may be shallow and its steepness will mostly depend from country to country on the impact of the energy shock and fiscal measures taken to mitigate it. China’s State Council is calling on the PBOC to cut the RRR After a meeting on Wednesday, China’s State Council issued a memo calling on the People’s Bank of China (PBOC) to use monetary tools including a cut in the reserve requirement ratio (RRR) at an appropriate time to support the real economy. According to historical observations, the PBOC will do what the State Council says and cut the RRR in the coming days or weeks. Violent protests at Foxconn’s iPhone factory in Zhengzhou Video clips showed violent protests broke out at Foxconn’s iPhone production plant in Zhengzhou. What exactly caused the protests were unclear but speculation was about retention allowance to workers who are willing to stay at the factory until February 15, 2023, and work conditions. New Zealand’s RBNZ hikes 75 basis points to 4.25% The market was divided on whether the bank would go with the larger rate hike after a string of 50 basis points moves prior to the meeting overnight. NZ two-year yields jumped back toward the cycle highs overnight as the market participants raised the anticipated peak in the policy rate by mid-year next year to almost 5.50%, up about 30 basis points after the decision. Xiaomi reported inline revenue and better-than-feared adjusted net profit Xiaomi reported Q3 revenue of RMB70.47 billion, shrinking 10% Y/Y and flat Q/Q. Adjusted net profit came in at RMB2.1 billion, 6% above the Bloomberg consensus, and -59% Y/Y and +1% Q/Q. Excluding new initiative investment, core net profit increased 9% Q/Q to RMB2.9 billion. Blended ASP declined 4% Y/Y.  Gross margin was 16.6% in Q3, falling from 16.8% in Q2 and 18.3% a year ago. Q3 non-IFRS operating margin was 3.0%, down from Q2’s 3.1% and Q3 last year’s 6.7%. Credit Suisse warns of big loss in Q4 The Swiss bank is stating in a press release this morning that it could lose $1.6bn in Q4 driven by losses in its investment banks. In addition, the bank says that it has seen net outflows of 6% relative to AUM in Q3. To improve profitability the bank is one-third of all investment banking employees in its Chinese subsidiary following a recent staff expansion in the country. HP cuts 6,000 employees as PC demand weakens The technology company reported Q4 results yesterday in line with estimates but its FY2023 (ending 31 October 2023) outlook was below estimates with adj. EPS guidance of $3.20-3.60 vs est. $3.61. Over the next two years the company expects to reduce staff level by 6,000 to improve profitability. The Glazer family is exploring the sale of Manchester United The owner of Manchester United said that they are exploring the sale of the English Premier League football club and will consider “all strategic alternatives”. In May this year, Chelsea, another English Premier League club, was sold for around USD5.3 billion. Deere sees strong demand for farm, forestry, and construction machinery Deere said they are expecting high demand for equipment from farmers on elevated prices for agricultural commodities. In addition, the company expects increases in demand for its construction machinery from the oil and gas industry and construction equipment rental businesses. Strong progress in precision agriculture adoption is expected to help boost margins and aftermarket technology product sales. For our look ahead at markets this week - Read our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: https://www.home.saxo/content/articles/equities/market-insights-today-24-nov-2022-24112022
Britain's Rishi Sunak And EU's Ursula Von Der Leyen Will Meet Today To Finalize The Northern Ireland Drama

The Jump In The PMI Is Still Consistent With A Recession In The Eurozone And In The UK

Saxo Bank Saxo Bank 24.11.2022 09:05
Summary:  US stocks and bonds ended higher on Wednesday while the dollar closed at it weakest level since August after the Federal Reserve’s latest meeting minutes showed most officials backing slowing the pace of interest-rate hike soon, a prospect that was given some support following the release of weaker than expected economic data. Crude oil lost ground on growth concerns while the weaker dollar supported a rebound in gold, silver and copper. Today the US markets are closed for Thanksgiving holiday.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) Bad news is good news in the US with lower than estimated PMI figures for November suggesting the US economy continues to slow down bolstering bets that US interest rates have peaked, and the Fed pivot is alive. The FOMC Minutes also suggested that the pace of interest rate hikes will be lowered going forward.  P 500 futures rallied 0.5% to close at 4,030 getting closer to the falling 200-day moving average at 4,058. In addition to yesterday’s US news, China’s State Council (see below) issued a memo advising the PBOC to use monetary instruments to safeguard and kickstart the Chinese economy. In a time with falling economic growth in the US and Europe, an accelerating Chinese economy would balance the global economy and soften the recessionary dynamics. It is Thanksgiving in the US today so cash equity markets will close at 1300 ET today. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) After a meeting on Wednesday, China’s State Council issued a memo calling on the People’s Bank of China (PBOC) to use monetary tools including a cut in the reserve requirement ratio (RRR) at an appropriate time to support the real economy. According to historical observations, the PBOC will do what the State Council says and cut the RRR in the coming days or weeks. The news helped lift market sentiment which was however tempered by the rise of daily Covid cases to an all-time high of 31,444 in mainland China. Hang Seng Index edged up 0.3% while CSI 300 declined 0.5%. Shares of leading Chinese developers surged by 5% to 12% after several large Chinese banks agreed to provide more than RMB 200bn in total in credit facilities to a number of private enterprise developers. EURUSD above 1.04 and USDJPY falls below 140 amid broad-based dollar weakness The dovish read of the FOMC minutes from the November 2 meeting is hardly a surprise, given the key message has been around a downshift in the pace of rate hikes as expected. But together with weaker than expected flash PMIs for November (read below) suggesting demand slowdown concerns are starting to pick up pace, and a higher-than-expected jobless claims print sending some early warning signals on the labor market, the focus has somewhat shifted away from inflation concerns which remain persistent. Market pricing of the Fed December meeting tilted further towards 50bps, and that resulted in a broad-based dollar sell-off which extended in the Asian session. EURUSD is now attempting a break above 1.0450 while USDJPY slid below 139.00. Japan’s Tokyo CPI for October is due tomorrow and may inch higher again, further fuelling pressure for BOJ to tweak its zero-rate policy and supporting a recovery in the yen even as global yields start to get capped. Crude oil (CLF3 & LCOF3) Crude oil fell again on Wednesday thereby extending what has already been a very volatile week. The FOMC minutes driving a weaker dollar did not add much support with the market instead focusing on a challenged demand outlook in China as Covid cases continue to spread, and a 50% risk of a recession in the US next year. In addition, a price cap on Russian oil in the $65-$70 area currently being discussed by EU officials is far higher than expected and would probably not have a major impact on supply given that Russia is already selling its Urals crude at a 25-dollar discount to Brent. The negative sentiment was also reflected by the markets negative response to an otherwise price-supportive EIA stock report. Gold (XAUUSD) and silver (XAGUSD) Gold and silver both rose in response to weaker US economic data (see below) and after the FOMC minutes talked about moderating the pace of interest rate hike soon. The Bloomberg dollar index dropped to the lowest level since August while US government bonds rallied to send yields lower. Gold was already encouraged by the speed with which it recovered after briefly breaking below support in the $1735 area reached $1756 overnight with silver trading at $21.60 after showing some renewed relative strength against gold this week. With no signs yet of a pick up in demand for ETFs from longer-term focused investors, a further extension will likely require further declines in yields and the US dollar or some other catalyst that sees a run to safety. Resistance at $1757 and $1765. EU gas (TTFMZ2) EU gas jumped 8.3% on Wednesday to close near a one-month high at €130 with weather forecasts pointing to a cold beginning to December and Gazprom threatening to reduced supplies through Ukraine, one of just two remaining pipelines in operation. The Sudzha line is currently sending 42 million cubic meters per day to Europe and while the dispute only relates to part of the 5 mcm/day that goes to Moldova, the market clearly worry that this could lead to a complete closure of the line. However, with Russia’s pipeline flow to Europe already down 79% YoY, the ability to shock the system has been much reduced, hence the limited reaction in the peak winter contract of February which only trades €7/MWh above December US treasuries (TLT:xnas, IEF:xnas, SHY:xnas) yields fell after the Fed minutes The minutes for the Nov 1-2 FOMC meeting have a dovish cast, saying “a substantial majority of participants judged that a slowing in the pace of increase would soon be appropriate” and some FOMC members had a concern about rate hikes might ultimately “exceed what was required to bring inflation back”. Yields declined across the curve with buying particularly strong on the long end. The 2-year yield dropped by 4bps to 4.48% and the 10-year yield finished the session 6bps richer at 3.69%. The 2-10-year part of the curve became yet more inverted at minus 79, thereby strengthening the prospects for a recession sometime next year. What is going on? FOMC Minutes signal a smaller pace of rate hikes The FOMC minutes from the November 2 meeting were released on Wednesday, and the general tone of the members confirmed that the committee was leaning towards moving away from jumbo (75bps) rate hikes to a smaller pace. At the same time, "various" officials noted that the peak rate will be "somewhat higher" than previously expected. The minutes saw participants agree there were very few signs of inflation pressures abating (minutes were pre-October CPI) and they generally noted inflation outlook risks remain tilted to the upside. There were also some concerns about the strength of the labour market, where a few participants said ongoing tightness in the labour market could lead to an emergence of a wage-price spiral, even though one had not yet developed. The message remained less hawkish than what the Fed potentially needs to deliver at this point given the considerable easing in financial conditions. US PMIs disappointed, jobless claims rose US S&P flash PMIs for November disappointed, as manufacturing printed 47.6 (exp. 50.0, prev. 50.4) and services fell to 46.1 (exp. 47.9, exp. 47.8), while the composite dropped to 46.3 (prev. 48.2). New orders fell to 46.4, the lowest since May 2020, while employment saw a slight uptick to 50.8 from 50.4. The only good news is that both input and output prices dipped further, offering further positive signals on inflation. The PMIs indicated how concerns are shifting from the supply side to the demand side, with better news on supply chains but demand concerns from weakening new orders. Initial Jobless claims rose more than expected to 240k from 223k and above expectations of 225k, the highest print since August, suggesting that we continue to watch for further signals on whether the tight labor market may be starting to weaken. Deere shares up 5% on strong results The US agricultural equipment maker delivered better than expected revenue and net income in its Q4 fiscal quarter (ending 31 October) and issued a FY23 net income guidance of $8-8.5bn vs est. $7.8bn. Order books are full into fiscal Q3 next year (ending 31 July) and the company sees an extended replacement cycle indicating that the best years are still ahead of the company. Better eurozone flash Composite PMI for November This was unexpected. The consensus forecasted that the EZ flash Composite PMI would fall to 47.0 in November from 47.3 in October, it actually improved a bit to 47.8. The increase mostly results from a better-than-expected Manufacturing PMI (out at 47.3 versus prior 46.4 and forecast at 46.0) while the services sector remains stable. There is another positive news. Price pressures are easing quite fast. The PMI price gauge fell to its lowest levels in two years due to a collapse in input prices. On a flip note, the flash Composite PMI Output Index for the United Kingdom (UK) ticked up to 48.3 in November. Surprisingly, the UK seems to hold up better than the eurozone and especially Germany. The jump in the PMI is still consistent with a recession in the eurozone and in the UK but it may be shallow, and its steepness will mostly depend from country to country on the impact of the energy shock and fiscal measures taken to mitigate it. What are we watching next? Earnings to watch Today’s earnings focus is Meituan and Pinduoduo. Chinese earnings in Q3 have been mixed and the technology sector continues to experience headwinds from both the economy and regulation. Analysts expect Pinduoduo, which has so far navigated the environment flawlessly, to deliver revenue growth of 44% y/y and EPS of CNY 4.75 up 288% y/y. Friday: Meituan, Pinduoduo Economic calendar highlights for today (times GMT) US cash markets closed for Thanksgiving. Early closes in some futures markets. 0900 – German IFO for November Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: https://www.home.saxo/content/articles/macro/market-quick-take-nov-24-2022-24112022
At The Close On The New York Stock Exchange Indices Closed Mixed

American Stocks Rallied, USD Drop | Tesla Rallies On Citi

Swissquote Bank Swissquote Bank 24.11.2022 09:40
US stocks spent most of yesterday’s session hesitating between slight gains and slight losses, then the release of the latest Federal Reserve (Fed) minutes helped the bulls take the upper hand, as the minutes confirmed that a ‘substantial majority’ of Fed members thought it was a good idea to slow down the pace of the rate hikes. Stocks The S&P500 gained around 0.60% while Nasdaq jumped around 1%. The US 10-year yield eased, as the US dollar sold off quite aggressively across the board. Economy We saw a decent price action yesterday was oil, and that was well before the Fed minutes. The barrel of American crude dropped up to 5% yesterday on news that the Europeans would set the price cap for Russian oil to around $65 to $70 per barrel, levels at which Russian oil is already exchanged. Tesla and Morgan Stanley On individual stocks, Tesla was one of the biggest gainers of yesterday’s session as Citi and Morgan Stanley revised their views higher, but that rally was maybe… exaggerated. Watch the full episode to find out more! 0:00 Intro 0:21 Fed minutes send stocks higher, USD lower 4:11 Crude oil tanks on EU’s new Russian oil price cap 5:55 Foxconn living a nightmare in China, but Apple holds on 6:32 Tesla rallies on Citi, Morgan Stanley upgrades Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Fed #FOMC #minutes #USD #crudeoil #EU #Russia #price #cap #EUR #GBP #ECB #minutes #Thanksgiving #holiday #Tesla #rally #Apple #Foxconn #China #Covid #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
EU Gloomy Picture Pointing To A Gradual Approach To Recession

EU Gloomy Picture Pointing To A Gradual Approach To Recession

InstaForex Analysis InstaForex Analysis 24.11.2022 09:54
US stocks fluctuated strongly ahead of the Fed minutes as investors anticipate signals of slower rate hikes in the future. Data showed that the S&P 500 and Nasdaq 100 trudged between modest gains and declines. But for today, trading volumes are expected to be lower because of the Thanksgiving holiday in the US. In the EU, investors are more focused on the data showing that private sector activity in Germany and France declined in November. This painted a gloomy picture, pointing to a gradual approach to recession. Similarly, the UK economy is also in recession, and the downturn is expected to worsen in 2023. The USD index fell after data showed US jobless claims rose more than expected. Meanwhile, oil prices fell after the EU discussed higher price caps of about $65 to $70 a barrel. The Fed minutes will indicate whether the central bank succeeded in curbing inflation. Many already think that it has eased, reducing worries for the economy. Key events for this week: - ECB policy meeting report - early closing of US stock and bond markets due to the holiday Relevance up to 19:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.   Read more: https://www.instaforex.eu/forex_analysis/327971
Nasdaq 100 Underperforms and Faces Key Resistance - Technical Analysis and Market Outlook

Due To Situation Of USD And Oil, Markets Believe Peak Inflation To Be Over

InstaForex Analysis InstaForex Analysis 24.11.2022 10:04
Dollar fell, while stocks rose after investors examined the latest Fed minutes, which showed that most officials support slowing the pace of interest rate hikes in the near future. The S&P 500 saw gains, as did 10-year bond yields, which hit 3.70%. But trading volumes are expected to become lower given today's holiday in the US. The latest Fed minutes assessed whether the central bank succeeded in curbing inflation. Several officials supported the need to slow the rate hike, and few even stressed the need for a final rate hike. After the meeting, investors analyzed a lot of economic data, which somewhat eased concerns about inflation. And given that dollar weakened after the minutes, gold and EUR/USD rose sharply. The correction in dollar, oil and Treasury yields seems to suggest that markets believe peak inflation to be over.   Relevance up to 21:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/327973
Saxo Bank Podcast: Riksbank's Expected 75 Basis Point Hike Today

Saxo Bank Podcast: Riksbank's Expected 75 Basis Point Hike Today

Saxo Bank Saxo Bank 24.11.2022 10:18
Summary:  Today we look at the market continuing to rally despite US Services PMI figures for November missed estimates suggesting the US economy continues to slow down. This means that equities right now interpret bad news as good news because it will force the Fed to pivot on the policy rate which will be net positive for equities. We also discuss expected PBOC easing, Riksbank's expected 75 basis point hike today, and the weakening USD helping financial conditions to ease globally. In commodities, our focus today is the energy market with Europe's gas market holding up well despite low volumes coming from Russia. Finally, we talk Deere earnings as the US agricultural equipment maker is delivering strong results as pricing power remain high on the back of high commodity prices on agricultural products. Today's pod features Peter Garnry on equities, Ole Hansen on commodities. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: https://www.home.saxo/content/articles/podcast/podcast-nov-24-2022-24112022
Behind Closed Doors: The Multibillion-Dollar Deals Shaping Global Markets

Equity Markets Still Need To Price In A Recession Risk

Saxo Bank Saxo Bank 24.11.2022 10:24
Summary:  The ‘recession’ chatter is buzzing high these days, and a host of indicators have started to point towards an economic slowdown. Global credit impulse, US leading economic indicator, slowing new orders are some of the warning signs, but consumer and corporate balance sheets are still strong. While it remains hard to define a recession, there are some reasons to believe that economic slowdown will take the limelight away from ‘inflation’ next year. Equity markets, however, do not price in this demand slowdown risk yet, and investors are rather chasing the income opportunities offered by bonds. It was exactly one year back when the Fed accepted that inflation is more than ‘transitory’. And we have seen the effects of that shift reverberate through the markets all this year. However, even with indicators pointing towards some signs of cooling in price pressures, it will be premature to take comfort. The Fed especially understands that, having learnt from the 1970s experience when inflation came roaring back as monetary policy was eased prematurely. The focus, however, is now shifting towards recession concerns with several indicators pointing to weakening in demand conditions going into 2023. Let’s take stock: Global credit impulse, which represents the flow of new credit issued from the private sector as a percentage of GDP, is usually a good leading indicator for S&P earnings growth and has started to show a decline. See page 30 of our Macro Strategist Chris Dembik’s Macro Chartmania. The Conference Board leading indicator has dipped to -2.7, down 0.8% m/m as noted by our Equity Strategist Peter Garnry here. New orders are dropping, whether you look at Empire State manufacturing survey, or Philly Fed survey, or yesterday’s flash S&P manufacturing PMIs for the US. US banks are tightening lending conditions on loans for medium and large businesses and for commercial real estate. Lending standards for credit cards and other consumer loans also became more restrictive. Housing market has been flashing a warning sign for some time, and risk of job losses remains high. Given that this will be a high % of GDP and employment, it could be well reflected in headline figures unlike the tech sector layoffs which are a small % of total US employment. However, there are also reasons to believe that any recession, if one was to happen, will be in nominal and not in real terms. Real growth will remain supported by falling inflation levels. The other key counter-argument usually is that US households and corporations still look fairly flush with cash following the pandemic-era savings and stimulus. Whether we enter an official recession as defined by NBER remains tough to argue, but indicators suggest we have a case of demand slowdown building up. Two key things are important to monitor: The pace of slowdown in earnings growth The pace of deterioration in the US jobs market This suggests calling an end to the bear markets may still be premature, as equity markets still need to price in a recession risk. The S&P500 is still trading at a P/E of 18.2x, higher than the average of 17.4x since 2000. It is probably best to play defensive and get exposure to value still rather than growth sectors which can have a lot more downside still. Meanwhile, investors have started to chase the high yields and income opportunity offered by fixed income after a massive jump in interest rates seen this year. Shorter dated and higher quality investment grade fixed income offers attractive income and capital gain opportunities.   Source: https://www.home.saxo/content/articles/macro/macro-insights-weighing-the-odds-of-a-recession-24112022
Tokyo Raises Concerns Over Yen's Depreciation, Considers Intervention

The US Dollar Seems To Have Lost To All Major World Currencies

Conotoxia Comments Conotoxia Comments 24.11.2022 10:28
Americans celebrate Thanksgiving today, which may translate into less activity for investors overseas. However, before that happens, the market seems to be still alive with yesterday's "minutes" from the latest FOMC meeting. The minutes are a record of events and statements at the meeting of the Federal Open Market Committee, which makes decisions on interest rates in the United States. They show that the vast majority of Fed officials felt that a slowdown in the rate of increase in the federal funds rate would probably be appropriate soon, as this would allow the Committee to better assess progress toward achieving its goals of maximum employment and price stability. Policymakers also noted that with inflation showing no signs of abating and the economy's supply-demand imbalance persisting, the ultimate level of the federal funds rate that would be needed to achieve the Committee's goals is somewhat higher than they had previously expected. The Federal Reserve raised the target range for the federal funds rate by 75 basis points to 3.75%-4% at its November 2022 meeting, marking the sixth consecutive rate hike and the fourth consecutive 75bp increase. As a result, the cost of dollar funding has risen to its highest level since 2008, Tradingecnomics calculated. Slower hikes - how are the dollar exchange rate and indexes reacting? The dollar index fell below 106 points on Thursday morning, slipping for the third day in a row toward the lowest levels since mid-August. For the week as a whole, the dollar seems to have lost to all major world currencies. Meanwhile, the British pound was able to record the biggest strengthening, gaining more than 1.7 percent, followed by the New Zealand dollar, which saw a historic interest rate hike yesterday. In third place on a weekly basis is the Swiss franc, with a strengthening of about 1.5 percent. Thus, it seems that the dollar's rally after the US interest rate hike may have slowed or come to an end, and now the market could at least move to a larger correction in price and time after the USD's one-year appreciation. Source: Conotoxia MT5, USDIndex, Daily The chances of a slower pace of interest rate hikes may have appealed to investors on Wall Street, where the green has taken hold. Particular attention may be paid to the Dow Jones index, which is now just a few percent short of reaching new highs. Yesterday, the Dow closed more than 100 points higher, while the S&P 500 and Nasdaq rose 0.6% and 1%, respectively. For the month as a whole, Caterpillar posted the biggest gains in the 30-company index, rising more than 23 percent, while the shares of aircraft manufacturer Boeing achieved a similar result. Meanwhile, only three companies in the entire index recorded a decline. They were UnitedHealth Group, The Walt Disney Co and Salesforce.com Inc. In their case, the declines were in the range of -2.2 to -5.2%, according to data from the BBN service. Source: Conotoxia MT5, Caterpillar, Weekly Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75.21% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.    
I expect consumer spending to remain strong for most of 2023 with savings not running out until near the end of the year says Ivan Cummins, Chief Equity Analyst at FXStreet

For this Black Friday it seems retailers is more in need of "moving products" than securing price says Saxo's Steen Jakobsen

Saxo Bank Saxo Bank 24.11.2022 09:56
Black Friday is almost here, so salers are getting ready for customers looking for real bargains. However, it's still not the end of hard-knock time for consumers as high interest rates and inflation worry buyers, investors and companies. We asked Saxo's Steen Jakobsen for a few words on the ongoing events.       To what extent could high rates and inflation impair Black Friday effect?   It's a two-way street, clearly consumers have shown they still have excess saving from the Pandemic, but also recently that inflation/high rates will in the future slow spending down, however for this Black Friday it seems retailers is more in need of "moving products" than securing price, which may mean good volume sales but less revenue.   Core Durable Goods Orders and Building Permits are released this week - how crucial are these prints ahead of the December Fed meeting?   All data is important as Fed has moved to "observing the impact of recent hikes", but overall the two data points which constitute 90% of the FED "data dependency" is employment and inflation measures.   Read next: Fed interest rate hikes predicted to slow down, Bob Iger takes over Disney for the second time, US mortgage payments soaring| FXMAG.COM
The Bank Of England Has Warned That Negative Growth Will Extend All The Way

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

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

FX: The Fed Minutes Surprised On The Dovish Side

ING Economics ING Economics 24.11.2022 11:55
The Fed minutes surprised on the dovish side, signalling strong support for slower rate hikes and weaker support for Powell's higher-for-longer rhetoric. The dollar could stay pressured for a bit longer, but it's probably embedding a good deal of Fed-related negatives now. US markets are closed for Thanksgiving. Elsewhere, expect a 75bp hike in Sweden In this article USD: Dovish feeling EUR: Enjoying an ideal mix for now SEK: Riksbank to hike by 75bp CEE: Consumer confidence at freezing point   USD: Dovish feeling If the November FOMC event failed to convincingly signal a dovish shift, the minutes of that meeting – released yesterday – were surely more effective in that direction. There are two key points in the minutes that markets are interpreting as dovish statements: 1. “A substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate”. 2. “Various participants noted that […] their assessment of the ultimate level of the federal funds rate that would be necessary to achieve the Committee's goals was somewhat higher than they had previously expected”. Point one simply indicates that there is a larger-than-expected (“substantial”) majority of the Committee that is backing a slower pace of tightening. When adding the lower-than-expected October CPI reading to the equation, expecting more than 50bp in December would look quite counterintuitive now, and a switch to 25bp increases from the January meeting appears increasingly likely. In point two, markets may have focused on the term “various”, which indicates a rather vague consensus backing Chair Jerome Powell’s post-meeting “higher-for-longer” statement. This is very relevant, as Powell pushing longer-term rate expectations higher in the November press conference was the main counterargument to the “dovish pivot” narrative: now, it looks like his approach might not have had much backing from other FOMC members. The market reaction has been quite straightforward: risk-on, dollar-off. As we had signalled in recent commentaries, the minutes were set to be a key risk event for the dollar, and we are not surprised to see another leg lower in the greenback in an environment where markets are already shifting away from a longer-term structural long-dollar positioning. Fed funds futures are currently embedding a peak rate at 5.0%, but it might prove harder to see further re-pricing higher in rate expectations after the dovish minutes. At the same time, the degree of cautiousness manifested by Fed officials after the softer CPI figures means that markets may be reluctant to further revise their peak rate bets lower in the near term. This means that one-way traffic in FX, with the dollar staying on a downtrend for longer, still appears unlikely. The greenback has now absorbed a good deal of negatives when it comes to the Fed story, and in our view can still benefit from the deteriorating outlook outside of the US (especially in Europe and China) in the coming months. While we don’t exclude the dollar contraction to take DXY below 105.00, we struggle to see sub-105 levels holding for very long. US markets are closed for Thanksgiving today, and will be open for only half a day tomorrow. There are no data releases or Fed speakers until Monday. Expect a significant drop in liquidity into the weekend. Francesco Pesole EUR: Enjoying an ideal mix for now European currencies are enjoying a strong rally, as lower energy prices (crude was hit by the EU oil price cap proposal) and higher-than-expected PMIs yesterday had already offered some support to European sentiment before the Fed delivered some dovish minutes. We remain doubtful that it will be a smooth ride to recovery for European currencies, and our commodities team continues to see upside risks for energy prices into the new year despite recent developments. EUR/USD has broken above 1.0400 and may extend its rally to 1.0500/1.0550 in the near term, but we suspect the bullish trend may start to run out of steam as we approach year-end. A return towards parity remains our base case for December. Today, the Ifo numbers will be watched in the eurozone, as investors will scan for further evidence of slight improvements in the business outlook. European Central Bank member Isabel Schnabel will speak at a Bank of England event today, where the BoE’s Dave Ramsden, Huw Pill and Catherine Mann will also deliver remarks. Francesco Pesole SEK: Riksbank to hike by 75bp Scandinavian currencies have been the best G10 performers since yesterday, due to the Swedish krona's high sensitivity to EU sentiment and the Norwegian krone's high sensitivity to global liquidity conditions.   SEK is facing an important risk event today, as the Riksbank is set to deliver another rate hike at 0830 GMT. As per our meeting preview, we expect a 75bp hike, which appears to be very much a consensus call. We did see the RB surprise with a 100bp move earlier this year, but that would likely be a risky move given the strains in the Swedish housing market. From an FX perspective, we don’t expect major and long-lasting implications from today’s policy decision for the krona, which is currently enjoying a rather unique combination of positive factors (on the European and global risk sentiment side). We could see a further leg higher in SEK in the coming days, but our longer-term view remains that the krona will underperform as the eurozone enters a prolonged recession in 2023. We forecast a sustained return to levels below 10.50 in EUR/SEK only in the second half of next year. Francesco Pesole CEE: Consumer confidence at freezing point On the calendar today, we have a series of second-tier data prints from the region. Consumer confidence will be published in the Czech Republic and Poland. In both cases, the indicators are currently at record low levels, well below the pandemic years. However, no significant improvement can be expected for November either, given persistent inflation and energy prices. In Hungary, labour market data for September will be published. We expect wage growth of 16.7% YoY, basically the same pace as in August, slightly above market expectations. On the political front, the main focus remains on Hungary. Yesterday, we heard unofficial reports from journalists that the European Commission will recommend freezing part of the cohesion funds with the condition of further reforms, but will also recommend adopting the Hungarian RRF plan. In the end, this gives more flexibility in further negotiations, but the key will be the Ecofin meeting in two weeks' time. Today the saga will continue in the European Parliament, which has on its agenda a vote on Hungary's rule-of-law progress, which, although non-binding, could make a lot of noise in the markets. There is also a V4 meeting scheduled in Slovakia, which the Hungarian PM is expected to attend. The forint jumped up to 410 EUR/HUF after yesterday's news, which the market initially assessed as negative. But in our view, it mitigates the risk that Hungary could lose some money and opens up room for longer negotiations. Hence, we expect the forint to correct down again today closer to 400 EUR/HUF. The potential headlines from the EP meeting, which already caused considerable pain in the FX market last week, are a risk. Frantisek Taborsky Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
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The Us Dollar's (USD) Decline Will Not Be More Prolonged

InstaForex Analysis InstaForex Analysis 24.11.2022 14:42
The dollar remained under pressure on Thursday after the release of the US PMI business activity index on Wenesday, which showed a slowdown in November. According to the S&P Global Market Intelligence report, the US manufacturing activity index fell to 47.6 in November from 50.4 in October, which was also worse than the forecast of 50. "Contributing to the decrease in the headline figure was a renewed fall in output and a sharper decline in new orders," S&P Global commented. They said "inflationary pressures should continue to cool in the months ahead, potentially markedly, but the economy meanwhile continues to head deeper into a likely recession." "According to preliminary PMI survey data, the rate of decline in manufacturing and demand has increased, corresponding to a 1 percent year-over-year contraction in the economy," S&P Global also noted. Business activity in the US services sector also continued to decline at an accelerating pace in early November, with the S&P Global Services PMI falling to 46.1 from 47.8 in October, worse than expected at 47.9. According to S&P Global Market Intelligence, new orders fell at a significant pace in November. The second consecutive monthly decline in new orders was the sharpest since May 2020. Wednesday's negative investor sentiment was also exacerbated by the weekly report from the US Department of Labor: initial jobless claims came in at 240,000, worse than market expectations of 225,000 and 223,000 a week earlier. This block of negative macro statistics affected market participants more than the positive report of the US Census Bureau, also published on Wednesday, which showed orders for durable goods in the US increased by 1% in October, against a September growth of 0.3% and market expectations of a 0.4% increase. "Excluding transport, new orders increased by 0.5%. Excluding the defense industry, new orders rose 0.8%," the US Census Bureau reported. On Thursday, additional pressure on the dollar came from the release (at 19:00 GMT) of minutes from the Federal Reserve's November meeting, which showed that most of the US central bank's leadership supports the idea of slowing the pace of rate hikes in the near future. At the same time, inflation expectations in the US are declining. Market participants now expect the Fed rate hike in December by 50 basis points. According to the CME Group, that probability is currently 76%. Thus, the dollar is likely to remain under pressure on Thursday and in the coming days, especially given the Thanksgiving holiday period (today and tomorrow) in the US and the low activity of traders in that regard. Today and tomorrow's economic calendar is also not rich with important macro statistics. In the meantime, market participants who follow the euro today will pay attention to the publication (12:30 GMT) of the minutes from the November ECB meeting. This document contains an overview of the current policy of the ECB with planned changes in the financial and monetary areas. The publication of this document may cause a surge in volatility in trading in the euro and on the European stock market, and investors will carefully study the text of the protocols in order to catch additional signals regarding the prospects for the ECB's monetary policy. As noted in our recent review, if the publication of US inflation data disappoints investors, it will provoke a new wave of dollar sell-offs and a drop in DXY towards 109.00. At that time, DXY futures were trading near 110.46, maintaining a negative momentum and moving in the lower part of the descending channel that formed last month (on the DXY chart). A break of these levels could trigger a deeper drop in DXY, down to the key support levels of 107.40, 105.65, we assumed. Actually, this happened: the price broke through the lower border of the descending channel on the DXY chart at 109.00 and reached a local low of 105.15 in the next three days. But this does not mean the dollar's decline will be more prolonged. At the very least, the 105.00 level should keep the DXY index from falling deeper, economists say, especially given growing concerns about new outbreaks of coronavirus, the ongoing geopolitical crisis in Europe and the risks of a recession in the largest economies of the world. In this situation, economists assume that the dollar should again win as a popular defensive asset.     Relevance up to 12:00 2022-11-26 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/328041
SEK: Riksbank's Impact on the Krona

Craig Erlam and Jonny Hart talk Fed minutes, Bank of Korea decision and more - Oanda Market Insights Podcast

Craig Erlam Craig Erlam 24.11.2022 22:09
OANDA Senior Market Analyst Craig Erlam reviews the latest market news with Jonny Hart. They discussed the Fed minutes, BoK rate hike, Chinese lockdowns, and oil as the G7 finalise the Russian price cap. http://www.subscribeonandroid.com/audioboom.com/channels/4947364.rss This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Market Insights Podcast (Episode 402) - MarketPulseMarketPulse
Saxo Bank Podcast: A Massive Collapse In Yields, Fed's Tightening Cycle And More

Fed May Choose To Slow Down The Tightening Of Monetary Policy

InstaForex Analysis InstaForex Analysis 25.11.2022 08:20
The week's most intriguing day was Wednesday. We also learned about the Fed protocol in addition to receiving fairly sizable packages of statistical data from the UK, the USA, and the European Union. The majority of analysts believe that the minutes of the November meeting were much more significant than the minutes of earlier meetings because the Fed is now at the point where it must choose whether to keep raising rates at their maximum or to begin slowing them down. The FOMC members' recent speeches supported the idea that the rate would increase gradually. Additionally, Jerome Powell alerted the market that rate increases may eventually be greater than anticipated. The most crucial query to which the protocol was required to respond was, "To what level will the rate rise?" The protocol did not respond to this query. Furthermore, it was unable to respond to it. The time lag, which is several months, between the rate hike and the economy's response is a crucial point. In other words, if the Fed increases the rate by 75 basis points today, the impact will be felt over the next two to three months, if not longer. As a result, the rate increase to 4% has yet to cause inflation to respond fully. If this is the case, inflation may begin to decline in March 2023, even without a subsequent increase in interest rates. But since it is unlikely to decrease from 7.7% to 2% in 4 months, as the Fed wants, it makes sense to continue raising it, but more slowly, since the economy should also be remembered: a strong rate increase will slow its growth. This data was presented in the protocol that was made public last night. Most FOMC members agreed that the pace of monetary policy tightening needed to be slowed down, but it was unclear how much longer the rate would increase. Currently, the market anticipates it to grow to 5%, but a gradual decrease in inflation may prompt the FOMC to improve it more significantly. The "insignificant but obvious progress" on inflation, according to FOMC members, indicates that rates still need to be raised. The Fed will thus accomplish two objectives by choosing to slow down the tightening of monetary policy. It will first keep up the difficult fight against inflation. Second, it won't put as much of a strain on the US economy. Generally speaking, a pause is taken for a few months to evaluate the effects of those four rate increases of 75 basis points that occurred in the year's second half on inflation. In the interim, the impact on inflation will be assessed, rates will increase to 5%, and it will be possible to predict how many additional increases will be necessary for March of the following year. Based on the analysis, the upward trend section's construction is finished and has evolved into a five-wave structure. As a result, I suggest making sales with targets close to the estimated 0.9994 level, or 323.6% Fibonacci. Although there is a chance that the upward portion of the trend will become more complicated and take on an extended form, this possibility is currently at most 10%. The construction of a new downward trend segment is predicated on the wave pattern of the pound/dollar instrument. I cannot suggest purchasing the instrument immediately because the wave marking already permits the development of a downward trend section. Sales are more accurate now that the targets are close to the 200.0% Fibonacci level.     Relevance up to 05:00 2022-11-26 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/328100
Hong Kong’s Hang Seng Had Its Best Month | EU Inflation Slowed

The Pressure On Bank Of Japan To Tighten Policy | China’s Zero Covid Still In Focus

Saxo Bank Saxo Bank 25.11.2022 08:49
Summary:  A quiet overnight session with the Thanksgiving holiday, and most assets remained in consolidation after the FOMC minutes-driven move the day before. China’s zero Covid still in focus as reports suggest that Beijing may go in a lockdown. The US dollar held on to its recent losses, and bets for the December Fed rate hike in favour of a 50bps move. Sweden’s Riksbank hiked 75bps and the pressure on Bank of Japan to tighten policy also remains with Tokyo CPI touching a new 40-year high. Crude oil still below key levels, while Gold and Silver are testing key resistances. What’s happening in markets? The Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) Closed for the Thanksgiving holiday. US treasuries (TLT:xnas, IEF:xnas, SHY:xnas) Closed for the Thanksgiving holiday. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) Hang Seng Index gained 0.8% on Thursday following China’s State Council’s call on the People’s Bank of China (PBOC) to cut the reserve requirement ratio (RRR). In addition, leading Chinese banks offered more than RMB 270 billion in credit facilities to support private enterprise developers. Chinese developers were top performers in the benchmark index, with Country Garden (02007:xhkg) jumping 20%, Longfor (00960:xhkg) up 12%, and Country Garden Services (06098) up 11%. Hang Seng TECH Index climbed 0.8%. Xiaomi was the laggard among tech peers, falling 3.6% after reporting Q3 results. Market sentiment was tempered by the rise of daily Covid cases to an all-time high of 31,444 in mainland China. CSI 300 edged down by 0.4%, driven by large state-owned enterprise names that consolidated recent strong gains. FX: Dollar held on to its losses in a thin trading day The dollar index traded steady below 106 on Thursday amid thin trading markets with US closed for Thanksgiving. The reaction to a dovish read of the FOMC minutes has been a significant slide in USD, which along with higher equities and lower bond yields, suggest financial conditions continue to ease since that softer CPI release. This is sending warning signals on inflation and Fed members may need to be more hawkish to prevent that. Lower US yields, and still-steady expectations of a BOJ pivot, have meant a stronger Japanese yen, with USDJPY now below 139. GBPUSD touched 1.2150, the highest levels since early August. Crude oil (CLZ2 & LCOF3)   Demand concerns, especially from China’s zero covid, continued to underpin the oil markets. A record high in the number of cases and reports that Beijing may go back in a lockdown show the difficulty of opening up the economy. US gasoline demand is also weakening as the travel season ends, and there are signals of overall demand weakness globally after massive tightening this year. This saw oil prices remain below key levels, with WTI still around $78/barrel and Brent around $85. Meanwhile, the proposed price caps on Russian oil continues to cause concern. EU diplomats are locked in negotiations over how strict the mechanism should be. Poland rejected USD65/bbl, while shipping giant Greece said it doesn’t want it below USD70/bbl. Gold (XAUUSD) and Silver (XAGUSD) testing key resistances A dovish FOMC read, along with softer US economic data from the flash PMIs, have returned the focus again on precious metals. Gold tested $1735 support again this week but is now back at over $1750-levels and testing the resistance at $1757. Break above will bring $1765 in focus, but lack of ETF buying still makes it hard to confirm the reversal of the short-term downtrend. Silver is also at key resistance level of $21.50.   What to consider? Sweden’s Riksbank hiked 75bps, more in the pipeline The Riksbank’s 75bps rate hike was larger than the 50bps signalled at the September meeting, and brings its policy rate to 2.5%, the highest since the GFC. Worsening inflation outlook, with October’s inflation at 9.3% and suggesting wage pressures as well, more rate hikes potentially remain in the pipeline. Peak rate is closer to 3% for now, but the bank showed an alternate scenario where persistent inflation above 3.5% could prompt the peak rate move higher from 2.84% to 4.65%. Japan’s Tokyo CPI above expectations again, more pressures to come Japan’s Tokyo inflation for November rose to its highest level in 40 years, suggesting that price pressures have not peaked yet. Tokyo CPI came in at 3.8% YoY from 3.5% previously, while the ex-food was at 3.6% YoY (prev 3.4%) and ex-food and energy was at 2.5% YoY (prev 2.2%). Meanwhile, Asia LNG prices are rising again, as colder temperatures in Europe heat up the competition to secure LNG cargoes again. This suggests price pressures will likely continue, and Bank of Japan could still likely consider tweaking its yield curve control policy. Anwar Ibrahim sworn in as Malaysia’s PM, political chaos to stay Malaysia’s new PM Anwar Ibrahim plans to test lawmakers' support for his leadership with a confidence vote on Dec 19, as he seeks to prove he commands a majority. His party, Pakatan Harapan, got the most but only 82 seats in the 220-seat parliament and lacks a majority. The political divide in the country is getting worse, suggesting policy paralysis that can likely drive foreign investors away. Local governments across China resorted to lockdowns as Covid cases surged to record highs As new Covid cases hit new highs day after day, local governments are torn between the urge to avoid full lockdowns and the instruction to adhere to the zero-Covid policy. Over 40 cities across China, including Guangzhou, Zhengzhou, Chongqing, Shanghai, and Beijing have to resort to some sort of movement restrictions or lockdown.   For our look ahead at markets this week - Read our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: https://www.home.saxo/content/articles/equities/apac-market-insights-25-nov-2022-25112022
RBA Governor Announces Major Changes at RBA Board as US Inflation Expected to Decline

In Zhengzhou Manufacturing Plant Could Cut Production Of iPhones | The Bloomberg Commodity Index Is Showing A Small Gain

Saxo Bank Saxo Bank 25.11.2022 09:05
Summary:  Yesterday was rather quiet as the US was out for the Thanksgiving holiday, with only a half-session of thin trading on tap for today. Overnight, Asian sentiment was somewhat downbeat as Covid concerns continue to weigh in China. In Japan, Tokyo November inflation was reported at new multi-decade highs. In FX, the US dollar is eyeing the key 200-day moving average for the first time since slicing above that indicator all the way back in June of 2021.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) The US 10-year yield has opened today’s trading session at a new low for the month trading around the 3.65% level. This is naturally adding tailwind for US equities with S&P 500 futures likely attempting today to break above the 200-day moving average around the 4,058 level. The index futures flirted with the moving average back in August when equities rallied on Fed pivot talk and easing inflation. There are no major earnings or macro releases scheduled for today so we expect a quiet session going into the weekend. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) Daily new Covid cases surged to yet another record high at 32,695, including 1,444 cases in Beijing. Beijing imposed district-level lockdowns and suspended food delivery. Alibaba (09988:xhkg), Tencent (00700:xhkg), and Meituan (03690:xhkg) lost 2% - 3%. China developers, Chinese banks, Chinese telco giants, and China Aluminum (02068:xhkg) gained. Hang Seng Index declined by 0.8% while CSI 300 climbed 0.5%. USD hits new lows even with US markets closed for holiday yesterday The US dollar’s losses extended on Thursday after the FOMC minutes reported late Wednesday encouraged the view that the Fed is on course to decelerate its tightening regime starting with the December meeting (and further forward, the late 2024 and beyond projections of Fed policy suggest the market believes a recession will trigger a sharp Fed easing of policy beyond the end of next year. The US dollar index is flirting with the 200-day moving average for the first time since crossing above the indicator since June of 2021, while EURUSD has made a feint at the cycle highs above 1.0450, easing back a bit overnight. Hotter than expected November Tokyo CPI data reported overnight (more below) saw USDJPY heavy overnight, trading near 138.00 before bouncing slightly. Next week looks important for incoming US data, with the October PCE inflation data up on Thursday and the November jobs report next Friday. Crude oil (CLF3 & LCOF3) Crude oil trades lower for a third consecutive week as demand fears, especially from an increasingly locked down China, weigh on sentiment. A G7-sponsored price-cap plan on Russian oil looks dead in the water with EU countries struggling to agree on a level, the result being either no cap or a level so high that it will not have any meaningful impact on supply. The 12-month futures spread in WTI and Brent have both weakened to the lowest backwardation since last December, reflecting a market concerned about recession and a seasonal slowdown in demand hurting the front month contracts. Gold (XAUUSD) Gold trades small up on the week in response to weaker US economic data and after the FOMC minutes talked about moderating the pace of interest rate hike soon. Having found support in the $1735 area a further extension will likely require further declines in the yields and the dollar or some other catalyst that sees a run to safety. A break above $1765 may signal a return to key resistance at $1788, but lack of ETF buying still makes it hard to confirm a major change in direction. US treasuries (TLT:xnas, IEF:xnas, SHY:xnas) yields fell after the Fed minutes The FOMC minutes late Wednesday confirmed the deceleration in the Fed’s tightening path and the market has become increasingly confident that, while the Fed may hold rates quite high next year, the path of easing policy will eventually prove quite steep, presumably on the combination of lower inflation and a recession. US 10-year yields eased to new lows below the recent low of 3.67% overnight ahead of an important period of incoming data before the December 14 FOMC meeting, with 3.50% the next technical level of note (psychological as well as a major pivot high from June). What is going on? Not many insights in the ECB minutes Yesterday, the minutes of the ECB’s October meeting were released. On the key point of the monetary policy pivot, there was nothing new. According to the minutes, there had been no discussion on a potential slowdown in the pace of rate hike. This is certainly a bit too early. But many participants pointed out risks related to the recession, especially in the housing market and in the labour market. On fiscal policy, the ECB has basically reiterated its long-term view: there is a « risk that fiscal compensation packages would turn out to be bigger than warranted ». Finally, a large majority of participants considered that the best option, in the short-term, is to implement a new 75 basis point interest rate increase at the next meeting scheduled for 15 December. Only a majority expressed a different position (in favor of a 50-basis point hike). This was not a market mover, obviously. Apple’s iPhone output at jeopardy in China The worker unrest at Foxconn’s (Apple’s manufacturing supplier in China) Zhengzhou manufacturing plant could cut production of iPhones of up to 30% according to Reuters. This is a growing risk for Apple’s stock price as the company is moving into its best-selling month during the year. Sweden’s Riksbank hiked 75bps, more in the pipeline The Riksbank’s 75-bp rate hike took the policy rate to 2.50% and was larger than the 50-bp signalled at the September meeting, although markets were priced for a move of at least that magnitude. EURSEK fell after a kneejerk rally and trades this morning in the middle of the range since September. The worsening inflation outlook in Sweden, with October’s inflation at 9.3% amidst signs of wage pressures as well, suggests more rate hikes potentially remain in the pipeline. The anticipated peak rate is closer to 3% now, but the bank showed an alternate scenario where persistent inflation above 3.5% could prompt the peak rate move higher from 2.84% to 4.65%. Japan’s Tokyo CPI above expectations again, more pressures to come Japan’s Tokyo inflation for November rose to its highest level in 40 years, suggesting that price pressures have not peaked yet. Tokyo CPI came in at 3.8% YoY from 3.5% previously, while the ex-food was at 3.6% YoY (prev 3.4%) and ex-food and energy was at 2.5% YoY (prev 2.2%). Meanwhile, Asia LNG prices are rising again, as colder temperatures in Europe heat up the competition to secure LNG cargoes again. This suggests price pressures will likely continue, and Bank of Japan could still likely consider tweaking its yield curve control policy. Mixed week for commodities The Bloomberg Commodity Index is showing a small gain of 1.3% with overall support being provided by the softer dollar and lower bond yields. This despite a darkening, but temporary, Covid cloud hanging over the Chinese economy and the bond market increasingly pricing in the risk of a recession hitting some of the major economies next year. Gas prices in Europe and the US leading the gains on cold weather demand followed by coffee on short covering and silver supported by a bouncing gold price. At the bottom we find wheat, US diesel, sugar and crude oil. What are we watching next? An important week ahead for incoming US data Markets have generally celebrated the downward shift in Fed tightening expectations and hopes for an eventual opening up of China’s economy, notwithstanding the ramping of the case count there. Next week will offer an interesting test for markets, including the US dollar, which trades at pivotal levels, as we have a look at the next important data macro data points out of the US, especially the Friday November jobs report. As well, we’ll have a look at the ISM Manufacturing survey for the month on Thursday. The question for the run-up into the December 14 FOMC meeting and in the month or so beyond is how long the market can continue to celebrate the Fed easing off the accelerator, when the reason it is doing so is that economic slowing and an eventual recession threaten. Normally, a recession is associated with poor market performance as profits fall and credit risks mount. Earnings to watch Today’s earnings focus is Meituan and Pinduoduo. Chinese earnings in Q3 have been mixed and the technology sector continues to experience headwinds from both the economy and regulation. Analysts expect Pinduoduo, which has so far navigated the environment flawlessly, to deliver revenue growth of 44% y/y and EPS of CNY 4.75 up 288% y/y. Today: Meituan, Pinduoduo Economic calendar highlights for today (times GMT) US equity markets close three hours early at 1300 local time in NY.  Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: https://www.home.saxo/content/articles/macro/market-quick-take-nov-25-2022-25112022
Supply Trends Resurface: Analyzing the Impact on Market Dynamics

AUD/USD: Volatility In The Currency Market Has Been Squeezed Dramatically Due To Thanksgiving Day

TeleTrade Comments TeleTrade Comments 25.11.2022 09:10
AUD/USD is aiming to stabilize above the 0.6760 hurdle for further gains. The US Dollar is displaying a subdued performance as the overall market mood is extremely bullish. Australian Retail Sales data is expected to decline to 0.3% vs. the former release of 0.6%. The AUD/USD pair is displaying a lackluster performance in the Asian session amid a quiet market mood. The Aussie asset has managed to reclaim the 0.6760 hurdle after a minor sell-off in early Tokyo. Volatility in the currency market has been squeezed dramatically as trading activity is low in the United States due to Thanksgiving Day. Meanwhile, the US Dollar is displaying a subdued performance in the Tokyo session after a wild move in early trade. The US dollar has turned sideways as the economic calendar has nothing much to offer. As odds for a slower rate hike by the Federal Reserve (Fed) have strengthened, the alpha generated by US Treasury bonds is under investors selling list. The 10-year US Treasury yields have extended their losses to near 3.66%. Investors are pouring funds into the US Treasury bonds and risk-sensitive assets on the expectation that a shift to lower rate hike measures by the Fed in its December monetary policy meeting will accelerate economic projections. The dictations from the Federal Open Market Committee (FOMC) have already cleared that deceleration in the rate hike pace is necessary to reduce financial risks. On the Australian dollar front, investors are shifting their focus toward the release of Retail Sales data. The economic data is expected to decline to 0.3% vs. the prior release of 0.6% on a monthly basis. A decline in consumer demand would delight the Reserve Bank of Australia (RBA) as lower retail sales will force the producers to lower their prices to accelerate demand. This might result in a decline in inflation ahead.  
Central Bank Policies: Hawkish Fed vs. Dovish Others"

A Decline In US Treasury Yields Will Be The Determining Factor

InstaForex Analysis InstaForex Analysis 25.11.2022 09:49
Although market activity dropped because of the holiday in the US, European stocks still grew, thanks to the contents of the latest FOMC minutes. Officials said in the protocol that they are considering a gradual reduction of interest rate hikes, which returned risk appetite. Looking ahead, it is likely that the rally will extend today despite the early closure of markets. If the rally does not start today, it is likely to happen early next week. The renewed decline in Treasury yields, which will not only keep dollar down but also put considerable pressure on it, could provide good support. And even though European and US stock indices are slightly down after yesterday's positive dynamics, the picture could change dramatically during today's European or US session. If that happens, increased demand for risky assets will affect dollar, prompting a continued decline. There is also a high chance that the positive dynamics will carry on next week, with stocks rising further and dollar continuing its collapse. A decline in US Treasury yields will be the determining factor. Forecasts for today: EUR/USD If traders manage to push euro above 1.0450, quotes could climb to 1.0580. USD/JPY If traders manage to push the pair below 138.45, quotes will drop down to 136.50.     Relevance up to 07:00 2022-11-28 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/328128
Long-Term Yields Soar Amidst Hawkish Fed: Will They Reach 5%?

The ECB Has Started To Shift The Focus Of The Discourse To Underlying Inflation Pressures

ING Economics ING Economics 25.11.2022 10:29
The loosening in financial conditions is not going unnoticed with central banks. Their pushback is becoming more vocal. Next week's events will be a crucial test for the sustainability of the rally in rates, which looks to have its roots not just in markets' fundamental reassements but is also seeing technical factors at play    In this article Explicit pushback against the market rally from ECB's Schnabel The interdependence between TLTROs, QT and rate hikes Next week's events provide a crucial test to the market rally Today’s events and market view Shutterstock   Explicit pushback against the market rally from ECB's Schnabel ECB’s Schnabel remained true to her role as prominent hawk. Her speech was a clear pushback against any notion of the ECB materially slowing its tightening process. She could hardly have become more explicit in her disapproval of current market developments, saying “market expectations of a pivot have worked against [the ECB’s] efforts to withdraw policy accommodation.” She highlighted that policy is likely too accommodative, with real rates still in negative territory for most tenors. That said, she is but one voice on the ECB, even if an important one. Policy is likely too accommodative, with real rates still in negative territory for most tenors The market’s pricing of the December ECB meeting remains little changed at close to 60bp and also the terminal rate continues to hover just below 3%. The ECB minutes of the October meeting itself did not bring about anything surprisingly new, but served as a confirmation of media reports that already suggested the momentum for another 75bp hike in December was lower. Next week will see the release of the November inflation data, which in the end could tip the balance in the ECB’s decision. However, the ECB has started to shift the focus of the discourse to underlying inflation pressures. This included Schnabel yesterday - stressing that these showed little sign of subsiding just yet.   Negative real rates on much of the EUR curve show policy is still accomodative Refinitiv, ING The interdependence between TLTROs, QT and rate hikes The ECB minutes provided some insight into the ECB’s thinking on how the TLTRO changes fit into the broader balance sheet strategy. Reducing the TLTROs was seen as a necessary first step before considering the reduction of bond holdings. An assessment of the repayments after the adjustments of the TLTROs and impact of financing conditions would also inform the discussion to be had on reducing the reinvestments of the bond portfolio in December. Reducing the TLTROs was seen as a necessary first step before considering the reduction of bond holdings Clearly there is some interdependence between the TLTROs, QT and even rate hikes in the minds of the ECB. According to the minutes the Council deemed the TLTRO recalibration “more efficient” than trying  to achieve the same objective through an earlier start of QT or more aggressive interest rate hikes. Clearly, the first voluntary repayment in November of €296bn was on the low end of expectations and had also limited market impact. Ahead of the December meeting there will be one more repayment opportunity to consider. That amount will be closely watched as it could also be part of the bargaining process between hawks and doves when they decide on the pace of further hikes.     Curve flattening is not a typical reaction to more dovish central bank expectations Refinitiv, ING Next week's events provide a crucial test to the market rally Global rates have seen a significant rally over the past weeks, EUR 10y swap rates alone have pulled back 75bp from their peak in early October. The extent of the long-end rally seems to be more than just hopes for a pivot, noting also that front end rates have proven more stable, helping the strong curve flattening. A more technical component, where extensive short positioning has been reduced amid thin liquidity going into the Thanksgiving holidays and year-end, appears to be at play as well. The extent of the long-end rally seems to be more than just hopes for a pivot The events lined up for next week will this provide a crucial test for the sustainability of the rally lower in rates. In the US all eyes will turn to Fed Chair Powell’s speech on Wednesday. Of late he has taken a more hawkish line than the majority of the FOMC, as evidenced by his last press conference when compared to the subsequent FOMC minutes. On Friday the job market data will speak to the resilience of the economy, with expectations for a 200k increase in payrolls. In the euro area ECB president Lagarde will be speaking to parliament on Monday. More important will the release of the preliminary inflation data, starting with first country readings on Tuesday and the Eurozone-wide measure in Wednesday. Today’s events and market view Market liquidity should remain subdued, with the US only returning for a shortened session in between yesterday's holiday and the weekend. There is little in terms of data to change the course of markets today, with only public appearances of the ECB’s Muller and Visco being of note. But looking ahead that will change - with the crucial events lined up for next week. We have seen a remarkable rally in rates, which has likely been underpinned by market conditions surrounding the Thanksgiving holiday and the nearing year-end. Given the technical facors at play we have already earlier expressed our doubts about the sustainability of this rally and believe that it could be put to the test next week by the Fed's Powell and in the eurozone by the release of the inflation data for November. TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Turkish Central Bank Cut Its Policy Rate by150bp | Credit Suisse Outflows Benefit UBS

The Turkish Central Bank Cut Its Policy Rate by150bp | Credit Suisse Outflows Benefit UBS

Swissquote Bank Swissquote Bank 25.11.2022 10:49
Markets were quiet yesterday, as the US was closed for Thanksgiving. European markets mostly surfed on the positive reaction from the US equities to the Federal Reserve (Fed) minutes released a day earlier. EU Stocks The German DAX advanced to a fresh 5-month high, as the French CAC40 hit a fresh 7-month high, thanks to the euro’s appreciation against the greenback, which somehow eases the inflationary pressures for the European companies, along with the falling energy prices. Central Banks Elsewhere, the latest minutes from the European Central Bank (ECB) released yesterday revealed that ‘a few’ officials favored a smaller rate increase, than the 75bp that the bank delivered last month, citing the other monetary tightening measures that would help restricting the monetary conditions. The Swedish Riksbank raised its interest rates by 75bp yesterday and said that the monetary tightening will continue to tame inflation in Sweden. The Korean Central Bank raised its interest rates by another 25bp to the highest levels since 2012 and the won gained, whereas the Turkish Central Bank CUT its policy rate by another 150bp points, but said that the easing is perhaps enough at 9%, and that risks on inflation – which stands around 85% officially, and 185% unofficially – increase from here. China In China, the central bank signals lower reserve ratios for banks, and conducts reverse repo operations to boost liquidity in the system, as news of fresh Covid restriction measures creep in. The Chinese news certainly prevent oil bulls from jumping in the market right now, and the American crude consolidates below $80pb this morning, with solid offers seen at $82/85 range. Credit Suisse In Switzerland, Credit Suisse continues making the headlines. The stock price flirts with all-time-lows, as UBS sees its share price extend gains as outflows from CS reportedly benefit UBS. Watch the full episode to find out more! 0:00 Intro 0:32 Soft USD boosts European stocks 4:02 Will the USD further soften? 5:40 Central bank roundup 7:44 China re-closing weighs on oil 8:11 Credit Suisse outflows benefit UBS Ipek Ozkardeskaya  Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #DAX #CAC #FTSE #EUR #GBP #USD #FOMC #ECB #minutes #Riksbank #CBT #SEK #TRY #China #Covid #crudeoil #CreditSuisse #UBS #Thanksgiving #BlackFriday #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
Asia Morning Bites: Focus on Regional PMI Figures, China's Caixin Manufacturing Report, and Upcoming FOMC Minutes and US Non-Farm Payrolls"

Saxo Bank Podcast: The US Equity Market Is Working Into A Critical Resistance Zone

Saxo Bank Saxo Bank 25.11.2022 10:56
Summary:  Today we look at the market still in complacent mode as it continues to celebrate easing US yields and the FOMC minutes Wednesday confirming the view that the Fed is set to slow its pace of tightening. We note that the US equity market is working into a critical resistance zone, just as the US dollar eyes important support, with the overriding question of when the market will begin to fret the impact of an oncoming recession rather than maintaining the one-dimensional focus on yields. Thoughts on Apple, commodity performance, platinum vs palladium, Natgas in Europe and more. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: https://www.home.saxo/content/articles/podcast/podcast-nov-25-2022-25112022
The EUR/USD Pair Is Still In A High Position On The 1H Chart

Energy Markets In Europe Are Not Fretting Development

Saxo Bank Saxo Bank 25.11.2022 14:40
Summary:  The US dollar has worked its way into a huge support zone ahead of the next batch of incoming data. The big test ahead across markets is perhaps when we move away from a one-dimensional obsession with US yields and begin to look at how markets start to price an incoming recession. That could complicate the turnaround process from a USD bull to a USD bear market. FX Trading focus: USD eyes huge support ahead of next important incoming data next week. Time for a shift in focus for the greenback? The FOMC minutes Wednesday confirmed the market’s well-established expectation that the Fed is set to downshift to a 50-bp hike in December, with a bit more tightening thereafter and a hold for most of next year. The action in the curve has been farther out, where the market is getting more aggressive in expressing the view that the Fed will be cutting rates quite aggressively in 2024, with the December 24 EuroDollar STIR future pricing some 170 basis points of easing from the mid-2023 peak – that is up from around 100 basis points just a month ago. It is a strong indication that the market is pricing for an oncoming recession, unless inflationary pressures can somehow normalize in a very soft landing scenario. For now, the markets are celebrating US yields falling (from 3-years and further out, at least), but at some point will have to consider what a recession normally entails in terms of impacts on corporate profits, the credit cycle, asset prices etc. – in other words, a more widespread deleveraging. At this point in the cycle, we have mostly only neutralized many of the excesses inspired by the pandemic, not priced a significant recession. As well, we are in a novel environment relative to every cycle since at least 1982. Especially the 2007-09 global financial crisis is not seen as a good model for what comes next and partially for good reason: the Fed and other central banks have thoroughly learned the lesson that raging contagion in the financial system is unacceptable, and they are so used to extreme intervention to prevent disorder, with further lessons learned in the pandemic response. So markets feel comfortable in taking the financial chaos option off the table. Nonetheless, once we do cross into a recession in the US as well as Europe and elsewhere, the central banks, and more importantly governments in this age of rising fiscal dominance, will have to be far more wary of triggering an inflationary rebound when considering new easing/stimulus. In that light, there are perhaps three paths from here. More of the same (another month max): we continue to see softer, but relatively benign data that allows the market to continue to celebrate an easing of Fed tightening and the anticipation that no new inflationary shock awaits. Max USD bearish scenario. Recession fears rising with yields falling: This is the most interesting test of the USD and its correlations across assets. Would the greenback continue lower as yields fall on the anticipation that the Fed is set to eventually ease, or would weak risk appetite and increasingly poor liquidity and the fear that the Fed will prove too slow to pivot toward easing cause more significant deleveraging across markets that keeps the USD well supported? I think the US dollar’s safe haven status will still be around if we do see a new cycle of widespread risk aversion. Inconveniently sticky inflation with or without rising recession fears: Evidence continues to point to an oncoming recession, but that path could take considerable time to materialize and, in the meantime, any sign that the inflation is failing to maintain a steady downward path won’t be welcome. This could be aggravated by a situation in which China eases up on its restrictive Covid policies and is stimulating and driving commodity prices higher just as Europe and the US tilt into a recession? This scenario would be more likely to see USD sensitive to risk sentiment, as yields would have a hard time falling further in this scenario. Chart: EURUSDEURUSD has been interacting with its 200-day moving average again while not quite able to mount an attack on the recent pivot highs near 1.0480. Given our scenarios above, the two+ week into the December 14 FOMC meeting offer an interesting test of the current market backdrop – is data particularly strong and spoils the decelerating inflation narrative, or is it far weaker than expected, raising recession fears? And if the data is indifferent to stronger than expected, how unhappy is the Fed that financial conditions are at their easiest since May, before the Fed even began hiking rates in 75-bp increments? On a somewhat different note, long range weather forecasts are beginning to see very cold weather across Europe starting in about 10 days. Energy markets in Europe are not fretting this development, but if they do, it will remind euro and sterling traders that external deficits remain a risk for the single currency and sterling. Technically speaking, the first sign of weakness would be a run below the 1.0223 pivot low from the start of this week, but the bigger break-down area looks like 1.0100. Source: Saxo Group Yesterday, the Riksbank hiked the policy rate 75 basis points as a strong majority expected, taking the rate to 2.50%. Interestingly, to buy itself some optionality, the bank issued a baseline forecast for its policy rate in which inflation dropped to sub-2% by early-mid 2024, which would mean the policy rate peaks below 3%, while an “alternative scenario” of inflation failing to fall much below 4% would mean that policy rate would have to rise north of 4.50%. It was an interesting sign of central bank insecurity on the path from here, although Swedish rates hardly moving in the wake of this meeting and the alternative scenario discussion. SEK got a solid boost by the end of the day yesterday and it is now well embedded back in the range since September after the recent upside threat. It is hard to see EURSEK threatening 11.00+ again unless we are about to tilt into a severe bout of risk aversion. Table: FX Board of G10 and CNH trend evolution and strength.CNH curiously weak – doesn’t fit with where the also weak USD is trading elsewhere. Sterling strength is getting a bit out of hand here, but could yet continue if the complacent backdrop continues. Still have to believe that nearly all of the short speculation in sterling has been squeezed out. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs.Note USDCNH close to flipping positive – needs a solid surge above 7.200 for a stronger indication. Source: Bloomberg and Saxo Group Source: https://www.home.saxo/content/articles/forex/fx-update-usd-running-out-of-room-to-fall-on-current-drivers-25112022
The Japanese Yen Retreats as USD/JPY Gains Momentum

Zoom Video EPS beat market expectations. Next week's Eurozone CPI and the US GDP releases are going to attract investors' attention

Conotoxia Comments Conotoxia Comments 25.11.2022 16:16
Sunday marked the start of the World Cup in Qatar. It seems that it could not have taken place without controversy over the preparations for the event. After yesterday's Thanksgiving holiday in the United States, today we may see increased shopping traffic in celebration of Black Friday. A weakening dollar and falling bond yields may have driven the broad market this week.  Macroeconomic data On Wednesday, we learnt about the PMI reading on managerial sentiment in German industry. The reading of 46.7 points surpassed the expected 45 points and came as a positive surprise over the previous reading of 45.1 points. We could also see values for the same indicator from the UK, with a reading of 46.2 points (45.7 had been expected), against the previous reading of 46.2. From this we could see a warming of the market climate, which appears to have caused a 1% rise on the main German DAX index (DE40) since the start of the week.  Source: Conotoxia MT5, DE40, Weekly On the same day, we learned about the number of building permits issued in the United States. Here, the data turned out to be more modest than expected, amounting to 1.512 million (1.526 million was expected). There was also news from the US economy on crude oil inventories, which fell by 3.69 million barrels (a drop of 1 million barrels was expected).  On Thursday, Americans celebrated the Thanksgiving holiday. In Europe, on the other hand, data from the Ifo index measuring expectations for the next six months among German entrepreneurs may have come as a positive surprise. The index came in at 86.3 points, while 85 points were expected, which, like the PMI index, may have comforted markets in their expectations for the future. The stock market Analysts may have been positively surprised by Q3 earnings this week. Among others, we saw better-than-expected earnings per share from technology, software and laboratory equipment maker Agilent Technologies (Agilient), whose EPS came in at 1.53 (expected 1.38). Zoom Video (Zoom), a popular company during the pandemic, also surprised positively, with EPS of 1.07 (expected 0.83).  On Tuesday, US semiconductor company Analog Devices (AnalogDev) showed EPS of 2.73 (2.58 expected), and the maker of software for industries including architecture, engineering and construction showed earnings per share in line with EPS guidance of 1.7.  Of the 11 sectors of the US economy, consumer goods sales grew strongest. The Consumer Staples Select Sector SPDR Fund (XLP) index has gained more than 3% since the start of the week, which may have been influenced by Friday's Black Friday. Source: Conotoxia MT5, XLP, Weekly Currency and cryptocurrency market For another week in a row, we could see a weakening of the US dollar. The valuation of the EUR/USD pair has risen by 0.7% since the beginning of the week and currently stands at 1.04. The weakening of this largest reserve currency was also evident on the GBP/USD pair, which rose by 2% to around 1.21. The other currencies do not seem to show increased volatility. Source: Conotoxia MT5, EURUSD, Weekly There could still be a gloomy mood in the cryptocurrency market. Not even the reports that the largest exchange Binance has set up and contributed USD 1 billion to a fund to support crypto projects are helping. The price of bitcoin is hovering around US$16500 and ethereum around US$1190. Source: Conotoxia MT5, BTCUSD, Daily What could we expect next week? Next week's key macroeconomic data will start with Tuesday's German CPI inflation reading. On the same day, we will learn the previously discussed Chinese manufacturing PMI. On Wednesday, the Eurozone CPI inflation readings appear to be particularly important. On this day, we will also learn the quarterly change in GDP for the United States. On Thursday, we will learn the PMI values for Germany, the United Kingdom and the United States. At the end of the week, we will find out the unemployment rate in the USA. Tuesday will see Q3 financial results from business software developer Intuit (Intuit). Wednesday will bring a report from cloud software company Salesforce (Salesforce). We will end the week with a report from semiconductor company Marvell (MarvelTech). Grzegorz Dróżdż, Junior Market Analyst of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75,21% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Read the article on Conotoxia.com
The Outlook Of EUR/USD Pair For Long And Short Position

The Recession In The Eurozone Will Be Short-Lived

InstaForex Analysis InstaForex Analysis 26.11.2022 15:55
Thanksgiving day, the closing of the U.S. stock markets and the outflow of liquidity caused the EUR/USD pair to get bored at the end of the last full week of fall. Not surprising, given the tumultuous moves before that. The dollar started the week in good condition and ended it in grief, completely giving up the initiative to the euro. Thanks to the strong data and hawkish speeches of the European Central Bank officials, the euro reclaimed its spot by hitting its 5-month highs and looks forward to important data on eurozone inflation and the US labor market. Strong German GDP statistics for the third quarter also boosted the morale of the euro fans. Positive consumer sentiment, business activity and the business climate were followed by encouraging news from the German economy. It expanded not by 0.3%, but by 0.4%, i.e. it was more resilient to numerous troubles, including the energy crisis, than previously thought. The main driver of growth was the consumers, whose activity increased by 1%. German GDP dynamics The latest data suggest that the recession in the eurozone will be shallow and short-lived, which supports the single currency. The market is optimistic, however the Institute of International Finance decided to add a minor hitch. According to the trade association, which was one of the first to predict the parity in EURUSD, the armed conflict in Ukraine will develop into an eternal war. It will not end in 2023, and the countries that are close to it will suffer first. In particular, the eurozone, whose GDP will shrink 2% next year due to a sharp decline in consumer and business confidence. The U.S. economy will expand by a modest 1% as the Federal Reserve's tightening of monetary policy will have a noticeable effect. The main driver of global GDP will be China, which will defeat COVID-19 and finally open its economy. However, China's efforts will not be enough. The world gross domestic product in 2023 will increase by 1.2%, which will be its worst performance since 2009. It looks like the glass is half empty for the Institute of International Finance, which provides hope to the EUR/USD bears. If the world economy feels as bad next year as it has this year, or maybe even worse, then getting rid of the U.S. dollar is not a good idea. The greenback is the currency of the pessimists. In the short-term, the dynamics of the main currency pair will be determined by releases of data on European inflation and U.S. labor market. Slowing consumer prices in the eurozone and U.S. employment are the keys to reduce the speed of monetary easing by the ECB and the Fed, so EURUSD risks showing mixed dynamics. Technically, the pair has an opportunity to continue the rally towards the 161.8% target on the Crab pattern and to win back the 1-2-3 Reversal pattern. In this regard, let's sell the euro on a breakout of support at 1.038 and 1.033 and buy it in case it grows above 1.044.     search   g_translate     Relevance up to 13:00 2022-11-28 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/328180
Equity Markets Rise, VIX at 12 Handle After ECB Rate Hike and US Economic Resilience

There’s A Whole Host Of Lot Of Data Next Week

Craig Erlam Craig Erlam 26.11.2022 16:09
US Wall Street returns after the Thanksgiving holiday and what a week we have in store. The jobs report on Friday is the obvious highlight, with Fed policymakers keen to see further signs of inflationary pressures easing and less tightness in the labour market. There’s a whole host of other data due next week as well including the core PCE price index – the Fed’s preferred inflation measure – GDP, income, spending, jobless claims, and more. We’ll also hear from Fed policymakers throughout the week including Chair Jerome Powell on Wednesday. EU An action-packed week for Europe, with a plethora of key economic data and ECB policymaker appearances. In the run-up to the ECB rate decision on 15 December, that commentary is going to provide crucial insight into which way the committee is leaning, with another 75 basis points currently heavily priced in. With that in mind, the flash CPI release stands out as the one to watch on Wednesday. UK The UK has repaired some of its tarnished reputation in recent weeks but the economy is still likely in recession and it won’t be an easy road back. There isn’t much data next week to support or refute that but there are appearances from various BoE policymakers that will be of interest. Russia A few economic numbers of note next week include GDP, retail sales, unemployment, real wages, and the manufacturing PMI. Unemployment is expected to tick higher again to 4.1% from its September low of 3.8%. South Africa The SARB continued its aggressive tightening cycle in November with another 75 basis point hike, taking the repo rate to 7%. The central bank expects inflation to remain above its 3-6% target range until the second quarter of next year and only return to the mid-point in the second quarter of 2024. Next week brings the release of unemployment data on Tuesday. Turkey As expected, the CBRT cut rates by 1.5% in November and ended its easing cycle, leaving the policy rate at 9%. Next week its quarterly GDP and the manufacturing PMI on offer as traders look for clues as to the cost of the monetary policy experiment on the economy. Switzerland A data-heavy week that includes the PMI survey and inflation on Thursday – which the SNB has repeatedly stressed is too high – GDP on Tuesday, and KOF and ZEW surveys on Wednesday.  China Official Chinese manufacturing and non-manufacturing PMIs for November will be released on Wednesday as well as the Caixin Manufacturing PMI.  As these figures have been fluctuating above and below the 50-the threshold separating contraction from expansion for the past few months, they suggest that the Chinese economy is still hovering between contraction and expansion. However, the long-term positive fundamentals of the Chinese economy remain unchanged. Industrial profits figures are also released over the weekend. India A number of interesting economic releases next week including GDP on Wednesday and the manufacturing PMI on Thursday. Australia & New Zealand Inflation in Australia and New Zealand remains high, and the new Governor of the Reserve Bank of Australia, Philip Lowe, has said in a speech that he is determined to ensure that the current high inflation is temporary, while the RBA is expected to raise interest rates further in the future.  The RBNZ’s 23 November central bank rate meeting hawkishly raised rates by 75 basis points to 4.25% to continue the fight against inflation, and the market now expects the RBNZ’s terminal rate may rise to 4.75%.    Next week, the focus will be on Australian retail sales and CPI for October on Monday and the speech by the new RBA Governor Philip Lowe on Wednesday. Other data released throughout the week will also be of interest. Japan Coming up next week is data on unemployment, retail sales, and industrial production for October as well as the latest manufacturing PMI for November.  Singapore At the 29th APEC Economic Leaders’ Meeting on 17 November, President Xi Jinping met with Singaporean Prime Minister Lee Hsien Loong in Bangkok. The China-Singapore relationship is forward-looking, strategic, and exemplary, Xi said. Lee Hsien Loong said Singapore sees China’s development as positive, wishes the GDI well, and will explore ways to participate. Both countries expressed their willingness to continue to deepen their cooperative relationship and work together to promote new progress in the all-around partnership between the two countries as they move with the times. According to Caixin Global, on 22 November, Singapore police said it was investigating Binance. This comes after the Monetary Authority of Singapore noted that Binance was being investigated as it may have violated the Payment Services Act. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
A Better-Than-Expected US GDP Read, Nvidia Extends Rally

The Outlook For The US Economy | US GDP Ahead

Kamila Szypuła Kamila Szypuła 26.11.2022 18:26
Internationally, governments face a difficult challenge: supporting their citizens at a time when prices are rising dramatically, especially for necessities such as food and fuel, which have been deeply affected by the war in Ukraine. The Outlook The outlook for the global economy heading into 2023 has worsened, according to multiple recent analyses, as the ongoing war in Ukraine continues to hamper trade, especially in Europe, and as markets await a more complete reopening of the Chinese economy after months of destructive COVID-19 lockdowns. In the United States, signs of a tightening labor market and a slowdown in economic activity fueled fears of a recession. Globally, inflation picked up and business activity, particularly in the euro area and the UK, continued to decline. In June, inflation rose to a 40-year high of 9.1% and remained at 7.7% in October, well above the Fed's target of 2% a year. Fed Chairman Jerome Powell and his associates responded by raising interest rates from near zero in March to a range of 3.75% to 4%, with signaling indicators likely to exceed 5% for the first time since 2007. 2.6% in Q3 Gross domestic product in the US in the third quarter of 2022 increased by 2.6 percent. quarter-on-quarter (annualized), according to preliminary data from the Department of Commerce. This reading is higher than market expectations, as an increase of 2.4% was expected. This result was presented at the end of October (27.10.22) and this gave the Federal Reserve room to raise interest rates further. Forecast Expectations for the next reading are even more positive. GDP is expected to reach 2.7%. Source: investing.com How it is calcuated? The US uses a different way than European countries to compare GDP. They annualize their data, i.e. they convert short-term data as if they were to apply to the whole year, e.g. the monthly value is multiplied 12 times, and the quarterly value 4 times. For example, if GDP growth in a given quarter was 1%. compared to the previous quarter, the annualized growth rate was - to put it simply - slightly more than 4%. This means that we cannot directly compare data on GDP dynamics in the US to that recorded in European countries that publish data on economic growth dynamics without annualization. Recession? There is currently no recession in the US as it was not declared by the NBER, although the country entered a technical recession in the second quarter of 2022 with a second consistent quarter of negative GDP growth. However, there are several factors pointing to a growing likelihood of a recession in the coming months. Painful inflation can often persist without pushing the economy into recession. On the other hand, the actions of the US Federal Reserve (Fed), which sticks to a 2% price increase target, are increasingly likely to push the US into recession. Fed economists said it was a virtual coin toss as to whether the economy would grow or plunge into recession in 2023. Central bank staff cited rising pressure on consumer spending, trouble abroad and higher borrowing costs as short-term headwinds. Among the forecasts of a recession in the United States, there seems to be a growing consensus on its occurrence. However, there are some discrepancies as to how deep and how long it will be. Source: investing.com
Pound Sterling: Short-Term Repricing Complete, But Further Uncertainty Looms

For Europe, The Outlook Is Even Bleaker – EU CPI Can Reach 10.7%

Kamila Szypuła Kamila Szypuła 27.11.2022 14:20
Inflation in the eurozone is expected to have reached a new record high of 10.7% in October. The outlook In September inflation amounted to 9.9%. The Baltic countries remain the hardest hit, with annual inflation above 20%. Estonia leads in comparison with estimates of 22.4%. This is mainly because they are particularly vulnerable to fluctuations in the energy markets. According to Eurostat, the price of natural gas for households increased by 154% and 110% respectively in Estonia and Lithuania between the first half of 2021 and the first half of this year. Meanwhile, France maintained its position as the country least affected by the crisis, although annual inflation in October was 7.1%. Forecast Euro inflation is expected to increase to 10.8% y/y from 10.6% y/y, but core inflation will remain stable at 5.0% y/y. These relative price shocks reflect the scale and extent of the energy, pandemic and war shocks. In such circumstances, standard measures of core inflation at the time may not accurately reflect the persistent component of inflation, while forward-looking wage growth rates may play a useful additional role in determining the medium-term inflation dynamics.Long-term inflation expectations now seem well anchored at the 2% target. Inflation and interest rates The European Central Bank, tasked with keeping eurozone inflation close to 2%, broke with more than a decade of negative interest rates this summer in an effort to contain price increases. Central banks use their interest rates to make money more expensive or cheaper to increase or reduce spending as they directly affect the interest rates offered to households and businesses by commercial banks. Central banks, having more and more signs of easing price pressure in the medium term, are increasingly considering slowing down the pace of rate hikes. Minutes from the last Fed meeting and Fed speeches suggest that the majority in the Fed is in favor of lowering the scale of interest rate hikes to 50 bp from 75 bp. However, before the meeting on December 14, we have yet another report on employment and inflation, which will be crucial for the scale of the rate hike. The ECB may also move to 50 bp, but much depends on how next week's November inflation will turn out. Another high printout would probably trigger a 75 bp hike at the meeting on December 15, but the specialists' baseline scenario assumes a 50 bp hike. Economic growth The eurozone economy is believed to have grown in the third quarter, but only by 0.2% from the previous quarter, according to Eurostat's preliminary data, also released on Monday. In the second quarter, the area of 19 countries increased by 0.8%. At least three countries are projected to contract quarterly. Growth in Latvia contracted by 1.7%, while Belgium and Austria grew by 0.1%. According to forecast of the head of the International Monetary Fund (IMF) offered her own grim prediction that half of the countries in the eurozone could enter into recession in the months to come. Europe's economy is projected to be badly hit by the energy crisis triggered by Russia's war in Ukraine. The IMF estimated the eurozone to expand by 3.1% in 2022 but just by a meagre 0.5% in 2023. Next year, Germany and Italy are projected to post -0.3% and -0.2% rates, respectively. Source: IMF, investing.com
India’s Investing In Program For The Green Hydrogen Industry | Covid Situation In China Is Getting Serious

The "Zero Tolerance" Policy Is Costly Not Only To The Chinese Economy

InstaForex Analysis InstaForex Analysis 27.11.2022 16:29
The U.S. dollar index paused its "downward trek" on Thursday after traders played back the release of what they considered the dovish minutes of the Federal Reserve's November meeting. However, it's impossible to be objective about the dollar's behavior right now. Thanksgiving Day, which was celebrated in the USA, distorted the whole picture. U.S. trading floors were closed on Thursday and Wednesday was a short work day, much like Friday. On top of that, there was the "Friday factor" and low liquidity. But even in such conditions, the EUR/USD bulls still failed to settle within the 4th figure. Traders finished the trading week at 1.0398. Actually, at the limit of the fourth price level, however, this is exactly the case when "a little bit doesn't count". The bulls' failure to settle above the 1.0400 mark suggests that the price's growth was passive, after the release of the Fed's minutes. Low liquidity helped the bulls reach the limit of the 4th figure, however, it needed more growth factors in order to climb further. Whereas the current fundamental picture is rather in favor of the greenback. In my opinion, the vector of the EUR/USD movement will be set next week by the level of interest in risk and the dynamics of the main macroeconomic indicators. A decline in anti-risk sentiment can significantly weigh on the greenback - and vice versa, an increase in panic will allow the dollar bulls to open a second wind. China may play a key role here as we continue to receive alarming news. The coronavirus factor has emerged once again: China reported its third straight daily record of new COVID-19 infections. For example, 39,791 new cases of coronavirus have been identified on November 26. Around 32,943 cases were reported on Thursday. And that's a new all-time high since the pandemic began. In other words, there is serious cause for concern. China is the second largest economy in the world, but has a "zero tolerance" policy for COVID. Despite significant negative consequences (including for the global economy), Beijing is adamant on this issue. Only two years after the start of the pandemic, the PRC authorities made minor concessions - the mandatory quarantine for people in contact with COVID patients (as well as for foreign travelers) was reduced from 7 to 5 days. However, even this "light" easing of coronavirus restrictions was received with enthusiasm by many market participants. Interest in risk increased noticeably and the dollar came under pressure. By the way, during this period, in early November, the pair showed a large-scale corrective growth, approaching the limits of the 5th figure. Now, apparently, China is back to tightening the screws. For example, the city of Guangzhou (the largest port city with a population of 17 million) has been undergoing a partial lockdown, affecting about 6 million people. In the largest district of Beijing - Chaoyang - most companies have closed. In addition, authorities also shut down cultural and entertainment venues in Shanghai. Local authorities also urged people to work from home if possible. The "zero tolerance" policy is costly not only to the Chinese economy, but also hits the world economy. Supply chains are collapsing, shortages of some goods are growing, and the inflation flywheel is starting to unwind again. Next week, the situation in China could worsen. In particular, Shanghai authorities have now imposed compulsory testing for all those entering from other regions, as well as a three-day quarantine in isolation. If a strict lockdown is imposed in this metropolis in the coming days (as it was this spring), anti-risk sentiment in the markets will increase significantly. Shanghai, with a population of 25 million, is considered the financial capital of China, and it will not take long for such a move to have an impact. By the way, the spring lockdown in China contributed to the development of the downward trend of EUR/USD - in a few weeks the pair decreased by almost 500 points. Thus, alarming news from China may strengthen the position of dollar bulls next week. The minutes of the Fed, which was interpreted against the U.S. currency, has already exhausted itself. In general, the market played back the possible slowdown in the rate hike even before the release of the minutes of the November meeting. Therefore, we can assume that this topic will fade in the near future. The next focus is another question - how high the Fed's final rate can climb. After all, the fact that the Fed will slow down the rate hike does not indicate that the upper limit of the current cycle will be lowered. If members of the U.S. central bank sound hawkish signals in this context (essentially repeating Powell's rhetoric), the dollar will receive substantial support throughout the market. A new outbreak of Covid in China will only spur traders' interest in the safe-haven greenback. In this case, the pair could fall to the support level of 1.0210 (the lower limit of the Kumo cloud on the four-hour timeframe) in the medium term.     search   g_translate     Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/328225
Hong Kong’s Hang Seng Had Its Best Month | EU Inflation Slowed

The Weighted Average Of RRR Across All Banks In China Falls

Saxo Bank Saxo Bank 28.11.2022 08:52
Summary:  The risk-off mood at the onset of the new week is mostly driven by protests in China over the zero covid policy. This comes after China’s announcement to cut the reserve requirement ratio by 25bps on Friday, which is unlikely to be enough to offset demand weakness. US equity futures gapped lower, and the US dollar got a safe-haven bid as well. Commodity markets are likely vulnerable to this risk aversion and dollar gains, with crude oil prices testing lows as Russian oil price cap discussions resume today. The key week ahead for US data and Fed as Powell takes the stage on Wednesday, but the focus today will be on China and a likely hawkish tilt in the comments from Fed’s Bullard. What’s happening in markets? The Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) finished the holiday-shortened week with modest weekly gains In a shortened session with thin trading, the S&P 500 Index finished flat and the Nasdaq 100 Index slid by 0.7%. Over the week, S&P 500 gained 1.6% and Nasdaq 100 was up 0.7%. Among the S&P 500 sectors, real estate, utilities, and healthcare gained while communication services, and information technology were the laggards. Activision Blizzard (ATVI:xnas) dropped 4.1% on reports that the U.S. antitrust regulator might file a lawsuit to bar Microsoft (MSFT: xnas) from acquiring the video games developer. Manchester United (MANU:xnys) surged for the third day in a row, up 13% on Friday or 65% for the week, as the controlling shareholder is exploring a sale. US treasuries (TLT:xnas, IEF:xnas, SHY:xnas) advanced with yields falling during the week on the dovish-leaning FOMC minutes U.S. treasuries gained in price and lower in yields last week. The 10-year yield dropped 15bps to 3.68%. The market is increasingly pricing in a recession as the 3-month treasury bills vs 10-year treasury notes spread went to minus-64bps, a level usually seen within 12 months preceding the onset of a recession. For a detailed discussion of our take on the outlook of bonds, please refer to this note we published last Friday. We are having a busy and important calendar this coming week with several potentially market-moving data and events. The JOLT report on Wednesday and the jobs report on Friday will tell us about the state of the U.S. job market. The PCE scheduled to release on Thursday is the Fed’s key inflation gauge. Fed Chair Powell will speak at the Brookings Institute about the economic outlook and the labor market. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) Investors were weighing new government measures to support the property sector against the alarmingly explosive uptrend in daily new Covid cases and the reports that megacities returning to the practice of movement restrictions and lockdowns. On Friday, Hang Seng Index declined 0.5% while CSI 300 climbed 0.5%. Over the week, Hang Sang Index fell 2.3% and CSI 300 edged down 0.7%. Chow Tai Fook Jewellery Group (01929:xhkg), tumbling 15.5%, was the biggest loser in the Hang Seng Index on Friday. The jeweller lowered mainland China same-store-sales growth (SSSG) to a high-single-digit year-over-year decline over the half-year from Oct 2022 to Mar 2023. The Australian share market is just 5% off its all-time high; but seems vulnerable The Aussie share market has gained 12% from its October low, after rising 1.5% last week; with Virgin Money up the most, about 23%, on upgrading its outlook, while gold company Ramelius Resources rose 15% on maintaining its production outlook. This week stocks exposed to China are vulnerable of a pullback given forward earnings are likely to be downgraded following further China lockdowns and protests. It also means commodities, oil – iron ore, copper, lithium may see demand slow down and their prices fall – that’s important as its underpin some of our largest’ s companies profits. Fresh data on Friday showed the major iron ore companies, BHP, Rio, Fortescue, will be shipping almost 6% less than last year in the final quarter of this year. So the risk is the situation in China worsens, and iron ore shipments could continue to fall and hurt Fortescue, BHP and Rio. Early Monday AM, iron ore trades 0.6% lower. Be mindful investors could be looking to take profits or write options for downside protection in case markets fall on China concerns. Inversely; stocks not exposed to China could likely continue to rally given its first Christmas with no global lockdowns (excluding China). Consider looking at retailers doing well following Black Friday sales and ahead of the likely Santa rally; Shares in JB Hi Fi, Harvey Norman, Premier Investments (owner of Jay Jays and Peter Alexander) are all trading up 20% from June. FX: Dollar getting a safe-haven bid In the previous weeks, we have often argued that the USD is turning more risk-sensitive rather than being yield-sensitive with most of the interest rate story being priced in by the markets now. A confirmation of that trend was seen this morning when US 10-year yields stayed below 3.7% at the Asia open, while the USD rose higher amid a safe haven bid due to the protests in China. Biggest losers on the G10 board were the AUD and NZD, both down 0.5% with the risk-off move. The Japanese yen was more stable, depicting a risk-sensitivity as well, and USDJPY stayed range-bound around 139.30. EURUSD Crude oil (CLZ2 & LCOF3)to be weighed by China turmoil and high Russia cap As hopes of a China reopening retreated last week with a fresh surge in cases, crude oil prices fell sharply with WTI down ~5%. Meanwhile, EU talks on a cap on Russian oil have hinted at a higher price of $65-70/barrel, which suggests Russia’s supply to international markets could continue. Talks are likely to continue this week, and the protests in China mean more short-term headwinds to oil demand outlook are on the horizon. China’s central bank announced a cut in RRR, but that is unlikely to fully offset the demand weakness concerns. WTI future traded around $76/barrel in the Asian morning while Brent was below $84, and focus is likely to shift to the OPEC meeting on December 4 after we get past the cap negotiations. There were also reports that Iraq could increase oil export capacity, to add 1mn to 1.5mn barrels/day by 2025   What to consider Protests against Covid lockdowns sprang up in several Chinese cities as local governments tightened restrictions Anger over suspected delays to rescue from a deadly fire burst into anti-lockdown protests in Xinjiang. After a fire at a locked-down apartment killed 10 people, hundreds of angry residents in Urumqi, Xinjiang took to the street to protest against the Covid lockdown imposed more than three months ago. Meanwhile, daily new cases shot up to a record high of 39,506, with Beijing, Guangzhou, Chongqing, and Shanghai significantly tightening movement restrictions. Video footage and photos on social media showed that protests against Covid restrictions sprang up in several other cities over the weekend, including Wuhan, Nanjing, Beijing and Shanghai. China’s PBOC cut the reserve requirement ratio (RRR) by 25bps The People’s Bank of China (PBOC) announced a reduction of 25bps for all banks except for some small which had already had their RRR cut to 5% earlier. The weighted average of RRR across all banks falls to 7.8% from 8.1% after the latest move. The PBOC projects that the reduction in RRR will make available to banks an additional RMB400 billion. The 25bps cut this time, the same as the cut in April this year, was small by historical standards when 50bp or 100bp cuts seemed to be the norm. It helps improve banks’ funding costs but it may do little to boost the economy as the demand for loans is subdued. RBA’s Lowe still sees a strong demand; but retail sales turned negative The Reserve Bank of Australia Governor Lowe appeared before the Australian parliament's Senate Economics Legislation Committee and said that demand is still too strong relative to supply. He said he is unsure about labor market, and wage growth is consistent with inflation returning to target. He was worried about housing supply and expects to see rental pressure over the next year. Australia’s October retail sales, however, dipped into negative territory for the first time this year, coming in at -0.2% MoM vs. expectations of +0.5%.  The U.S. bans telecommunications equipment from China’s Huawei, ZTE and more The U.S. Federal Communications Commission said on Friday that the U.S. had decided to ban the import and sale of telecommunication equipment from China’s Huawei Technologies, ZTE, Hytera Communications, and surveillance equipment makers Dahua Technology and Hangzhou Hikvision Digital Technology. The U.S. regulator said these Chinese telecommunication equipment makers pose “an unacceptable risk” to U.S. communication networks and national security. Chevron gets US license to pump in Venezuela Chevron had been banned from pumping due to US sanctions against the government of Venezuelan President Nicolás Maduro. But WSJ reported that on Saturday, the US said it will allow Chevron to resume pumping oil from its Venezuelan oil fields. The shift may open the door to other oil companies that had operated previously in Venezuela, despite the near-term headwinds and the massive investments that may be needed.  Pinduoduo (PDD:xnas) is scheduled to report Q3 results on Monday After a strong beat for Q2, analysts are expecting Pinduoduo’s Q3 results to remain solid with Q3 revenue growth to come at 44% y/y and the EBITDA margin to stay at healthy levels around 21.2%. Was Q3 margin pressure the canary in the coal mine? According to the analysis done by Peter Garnry, with 97% of the companies having reported, S&P 500 earnings were down 2.5% q/q making Q3 the worst earnings season since the market bounced back from the abyss during the early days of the pandemic. European and Chinese earnings have been even worse declining around 9% q/q driven by more intense margin pressures than observed in the US. On revenue European companies did the best with revenue up 6.7% q/q compared to only 3.9%b q/q for S&P 500. The average q/q revenue growth rate in the past two years was 5.3% in Europe and 3.5% in the US. Part of the difference can be explained by the stronger USD. The key dynamic for equities next year is the evolution of operating margins and if they go down to average levels in the past then headwinds will be too much for companies, and lower earnings next year will likely follow.   For a global look at markets – tune into our Podcast.   Source: https://www.home.saxo/content/articles/equities/apac-market-insights-28-nov-2022-28112022
RBA Governor Announces Major Changes at RBA Board as US Inflation Expected to Decline

Elon Musk Introduces Verified Accounts On Twitter

Saxo Bank Saxo Bank 28.11.2022 08:57
Summary:  A pivotal post-holiday week ahead kicked off with risk-off due to protests in China over the Zero covid policy, and China PMIs due this week could potentially signal demand weakness as well. The week is also key for US data and Fed as financial conditions are the easiest since May and more pushback may be on the cards with the most hawkish members of the Fed board, Powell and Bullard, on the wires this week before the FOMC quiet period kicks in. We also get ISM manufacturing, PCE inflation and jobs data that will be key for the dollar. Eurozone inflation may soften, but that won’t be enough for the ECB to take the foot off the pedal, while Australian CPI will pressure the RBA to continue with its steady rate hikes. An important week ahead for incoming US data: ISM manufacturing, PCE inflation and jobs data to be key for the dollar This week will offer an interesting test for markets, including the US dollar, which trades at pivotal levels, as we have a look at the next important data macro data points out of the US, especially the PCE inflation data and the Friday November jobs report. Core PCE is forecast to rise 0.3% MoM in October from 0.5% previously. In addition, we’ll have a look at the ISM manufacturing survey for the month on Thursday, which is also expected to slip into contraction after the decline in S&P flash PMIs last week resulted in further easing of Fed tightening expectations. The question for the run-up into the December 14 FOMC meeting and in the month or so beyond is how long the market can continue to celebrate the Fed easing off the accelerator, when the reason it is doing so is that economic slowing and an eventual recession threaten. Normally, a recession is associated with poor market performance as profits fall and credit risks mount. Bullard and Powell speak – pushback against easing financial conditions? While the economic data continues to slow, and markets continue to cheer on that, it will key for Fed members to bring the focus back to easing of financial conditions and consider what that means for inflation. Chicago Fed national financial conditions index eased further in the week of November 18, bringing financial conditions to their easiest levels since May. Most of the Fed members that have spoken since that soft CPI release for October have pushed back against pivot expectations, but it hasn’t been enough. Further pushback is still needed if the Fed is serious about bringing inflation under control, and only the most hawkish members of the committee Bullard and Powell may be able to deliver that. Both will be on the wires this week. Bullard speaks on Monday while Powell discusses the economic outlook and labor market on Wednesday. Other Fed members like Williams, Bowman, Cook, Logan and Evans will also be on the wires. China PMIs likely to show demand weakness, Asia PMIs also due China’s NBS manufacturing PMI is expected to decline to 49.0 in November, further into the contractionary territory, from 49.2 October, according to the survey of economists conducted by Bloomberg. The imposition of movement restrictions in many large cities has incurred disruption to economic activities. High-frequency data such as steel rebar output, cement plants’ capacity utilization rates, and container throughputs have weakened in November versus October. Likewise, the Caixin manufacturing PMI is expected to drop to 49.0 (Bloomberg survey) in November from 49.2 in October. Economists surveyed by Bloomberg expect the NBS Non-manufacturing to slow to 48.0. in November from 48.7 in October, on the enlargement of pandemic containment measures. PMIs for other Asian countries are also due to be reported this week, and the divergence between the tech-dependent North Asian countries like Taiwan and South Korea vs. more domestic-oriented South Asian countries like India and Indonesia will likely continue, with the latter outperforming. EUR may be watching the flash Eurozone CPI release Eurozone inflation touched double digits for October, and the flash release for November is due this week. The headline rate of the harmonized index of consumer prices (HICP) is expected to ease slightly to 10.4% YoY from 10.7% YoY last month. The core rate that excludes food and energy prices is forecast to however remain unchanged at 5% YoY. This print will be key for markets as the magnitude of the ECB’s next rate hike at the December meeting is still uncertain, and about 60bps is priced in for now. But even with a slight cooling in inflation, which will most likely be driven by lower energy costs, there is a possibility that inflation will likely remain high in the coming months as winter months progress and cost of living gets worse. Australia’s economy continues to weaken. Retail slides. CPI data is the next catalyst Australia has continued to receive mostly weaker than expected economic data, that support the RBA’s dovish tone. Today Australian retail trade data unexpected fell, showing sales dropped 0.2% from the prior month. This reflects that consumers are feeling the strain of inflation and rising interest rates. As a house, Saxo thinks further weakness in spending is likely ahead in 4Q and into 2023, with the full impact of rate hikes passing through households, and increasing amount of Australian in financial duress. This view is somewhat supported by the RBA’s thinking. The data the RBA will be watching next is ; Australian inflation data for October, released Wednesday 30 November. Inflation is likely to have fallen over the month, however consensus expects inflation to have increase year on year, up 7.6% year on year. If the market thinking comes to fruition, this would show Australian inflation rose from the prior reading (whereby CPI rose 7.3% yoy). Regardless, if inflation does rise, we think the RBA will likely save face, and keep hiking rates by 0.25%, with its next hike due December 6. Twitter to launch its ‘Verified’ service After Musk acquired Twitter last month for $44 billion, he plans to "tentatively" roll out its verified service on December 2, with multiple colours for different types of users. Blue checks will be allotted to people, while verified company accounts will get gold checks and grey marks will be given to governments. Musk said all verified accounts will be manually authenticated, before the check activates, which will be cumbersome. Twitter recently halted the launch of its $8 verified service, as it failed to cease impersonation issues the company has been having. Key earnings to watch this week Peter Garnry highlights earnings results to watch in his note. Pinduoduo on Monday is the key earnings focus in China with analysts expecting Q3 revenue growth of 44% y/y and the EBITDA margin staying at healthy levels around 21.2%. The main menu next week is on Wednesday with earnings from US technology companies Salesforce and Snowflake. Analysts expect Salesforce FY23 Q3 (ending 31 October) revenue growth to decline to 14% y/y down from 27% y/y a year ago and analysts expect Snowflake to report FY23 Q3 (ending 31 October) revenue growth of 61% y/y down from 110% y/y a year ago. Expectations for both companies highlight the slowdown in technology enterprise spending that we have seen from other technology companies including Intel, HP etc. Key economic releases & central bank meetings this week Monday, Nov 28 Eurozone M3 (Oct)UK CBI Retail Sales (Nov)U.S. Fed Bullard at MarketWatch Live Event Tuesday, Nov 29 U.S.  Conference Board Consumer Confidence (Nov)U.S. St. Louis Fed President Bullard speechJapan Unemployment Rate (Oct)Japan Retail Sales (Oct) Wednesday, Nov 30 U.S. ADP Private Employment (Nov)U.S. JOLTS Job Openings (Oct)U.S.  Fed Chair Powell speechEurozone HICP (Nov, flash)Germany Unemployment Rate (Nov)Japan Industrial Production (Oct)Japan Housing Starts (Oct)China NBS Manufacturing PMI (Nov)China NBS Non-manufacturing PMI (Nov)India Real GDP (Q3)Thailand Bank of Thailand policy meeting Thursday, Dec 1 U.S. PCE (Oct)U.S. ISM Manufacturing (Nov)U.S. Initial Jobless Claims (weekly)Eurozone Unemployment Rate (Oct)Japan Capital Spending (Q3)Japan Consumer Confidence (Nov)China Caixin China PMI Manufacturing (Nov) Friday, Dec 2 U.S. Nonfarm Payrolls (Nov)U.S. Unemployment Rate (Nov)Eurozone PPI (Oct)   Key earnings releases this week Monday: Pinduoduo, Capitaland, H World Group Tuesday: Li Auto, DiDi Global, Bank of Nova Scotia, Intuit, Workday, Crowdstrike, HP Enterprise, NetApp, Shaw Communication Wednesday: Royal Bank of Canada, National Bank of Canada, Salesforce, Synopsys, Snowflake, Splunk, Hormel Foods, KE Holdings Thursday: Canadian Imperial Bank of Commerce, Bank of Montreal, Toronto-Dominion Bank, Marvell Technology, Veeva Systems, Ulta Beauty, Zscaler, Dollar General, Kroger     Source: https://www.home.saxo/content/articles/macro/saxo-spotlight-28-nov-2022-28112022
Commodities Outlook 2023: Stainless Steel Is Still Key For Nickel Semand

Iron Ore Shipments Could Continue To Fall And Hurt Earnings And Shares

Saxo Bank Saxo Bank 28.11.2022 09:06
Summary:  Dramatic scenes of widespread protests in China against Covid policies there have pulled sentiment lower, with US yields dipping to new local lows and crude oil prices pushing on cycle lows even after Friday’s drop. The USD has firmed against most currencies, but the Japanese yen is stronger still as the fall in yields and energy prices support the currency. This is a sudden powerful new distraction for markets when this week was supposed to be about incoming US data.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures failed to touch the 200-day moving average in Friday’s trading retreating slightly into the weekend. This morning the index futures are continuing lower bouncing around just above the 4,000 level. The US 10-year yield declining to 3.65% with the 3.5% level being the likely downside level the market is eyeing is naturally offering some tailwind for equities in the short-term. However, the key dynamic to get right now in the medium term is the potential earnings recession caused by margin compression as the economy slows down and wage pressures remain high. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) Mainland China and Hong Kong stock markets retreated as investors were wary about the surge in daily new Covid cases across China and the outburst of anti-strict-control protests in several mega cities, including Beijing and Shanghai. The cut in reserve requirement ratio by the central bank on Friday evening did not give the market much of a boost. Hang Seng Index and CSI 300 plunged more than 2% each. The China internet space fell 2%-5%. Macao casino stocks bucked the trend and rallied following the Macao SAR Government’s announcement to renew casino licenses with all incumbent operators. Wynn Macau (01128:xhkg) jumped nearly 16%. The three leading Chinese catering chains listed in Hong Kong gained 4% to 6%. USD and JPY firm overnight as Chinese Covid protests drag on risk sentiment The US dollar was higher overnight against most currencies even as US treasury yields hit new cycle lows as widespread protests in China against the Covid policies there are weighing heavily on risk sentiment. Hardest hit among G10 currencies has been the Aussie, with AUDUSD trading back below 0.6700 after pulling above 0.6780 at one point on Friday. USDCNH jumped above the important 7.200 level. The hit to yields and perhaps lower crude oil prices are driving a strong revival in the Japanese yen, which traded higher even against the US dollar overnight, taking USDJPY back toward the recent lows overnight. This is a sudden new distraction for FX traders, when this week was supposed to be all about the incoming US economic data, including the October PCE inflation data up on Thursday and the November jobs data on Friday. Crude oil plunges as China unrest rattles markets A weak sentiment spread across commodities as markets opened in Asia with crude oil, copper and iron ore all trading sharply lower following a weekend that saw waves of unrest in China, the world's biggest consumer of raw materials. Protest and boiled up frustration against President Xi’s increasingly unpopular anti-virus curbs erupted over the weekend, raising the threat of a government crackdown. While the short-term demand outlook may take a hit and add further downside pressure to prices, the eventual reopening is likely to be supported by massive amounts of stimulus. The market is also watching ongoing EU price cap discussions, next week’s OPEC+ meeting and rollout of an embargo on seaborne Russian crude and Chevron receiving a license to resume oil production in Venezuela. Gold (XAUUSD) Gold trades unchanged with safe haven bids in bonds and the dollar offsetting each other, while silver (XAGUSD), due to its industrial metal link, trades down more than 2% following a weekend of covid restriction protests across China. After finding support in the $1735 area last week, a break above $1765 may signal a return to key resistance at $1788, but lack of ETF buying still makes it hard to confirm a major change in direction. Aside from China, the market will be watching incoming US data for any signs of a slowdown in the pace of future rate hikes (see below) US treasuries find safe haven appeal, driving new local lows in yields. (TLT:xnas, IEF:xnas, SHY:xnas) The risk-off mood overnight is driving strong safe haven flows into US treasuries, as the 10-year benchmark traded to new local lows below 3.65%, with little room left to the pivotal 3.50% level. The 2-10 yield slope hit a new cycle extreme of –80 basis points overnight, a deepening indication of an oncoming recession. The 3-month treasury bills vs 10-year treasury notes spread went to minus-64bps, a level usually seen within 12 months preceding the onset of a recession. For a detailed discussion of our take on the outlook of bonds, please refer to this note we published last Friday. This week, interesting to see how the market balances the implications of what is unfolding in China versus incoming data in the US, especially the November jobs report on Friday. What is going on? Protests against Covid lockdowns in several Chinese cities Anger over suspected delays to rescue from a deadly fire burst into anti-lockdown protests in Xinjiang. After a fire at a locked-down apartment killed 10 people, hundreds of angry residents in Urumqi, Xinjiang took to the street to protest against the Covid lockdown imposed more than three months ago. Meanwhile, daily new cases shot up to a record high of 40,052, with Beijing, Guangzhou, Chongqing, and Shanghai significantly tightening movement restrictions. Video footage and photos on social media showed that protests against Covid restrictions sprang up in several other cities over the weekend, including Wuhan, Nanjing, Beijing, and Shanghai. China’s PBOC cut the reserve requirement ratio (RRR) by 25bps The People’s Bank of China (PBOC) announced a reduction of 25bps for all banks except for some small which had already had their RRR cut to 5% earlier. The weighted average of RRR across all banks falls to 7.8% from 8.1% after the latest move. The PBOC projects that the reduction in RRR will make available to banks an additional RMB400 billion. The 25bps cut this time, the same as the cut in April this year, was small by historical standards when 50bp or 100bp cuts seemed to be the norm. It helps improve banks’ funding costs, but it may do little to boost the economy as the demand for loans is subdued. The U.S. bans telecommunications equipment from China’s Huawei, ZTE and more The U.S. Federal Communications Commission said on Friday that the U.S. had decided to ban the import and sale of telecommunication equipment from China’s Huawei Technologies, ZTE, Hytera Communications, and surveillance equipment makers Dahua Technology and Hangzhou Hikvision Digital Technology. The U.S. regulator said these Chinese telecommunication equipment makers pose “an unacceptable risk” to U.S. communication networks and national security. RBA’s Lowe still sees a strong demand; but retail sales turned negative The Reserve Bank of Australia Governor Lowe appeared before the Australian parliament's Senate Economics Legislation Committee and said that demand is still too strong relative to supply. He said he is unsure about labor market, and wage growth is consistent with inflation returning to target. He was worried about housing supply and expects to see rental pressure over the next year. Australia’s October retail sales, however, dipped into negative territory for the first time this year, coming in at -0.2% MoM vs. expectations of +0.5%. Chevron gets US license to pump in Venezuela Chevron had been banned from pumping due to US sanctions against the government of Venezuelan President Nicolás Maduro. But WSJ reported that on Saturday, the US said it will allow Chevron to resume pumping oil from its Venezuelan oil fields. The shift may open the door to other oil companies that had operated previously in Venezuela, despite the near-term headwinds and the massive investments that may be needed. Bullard and Powell speak – pushback against easing financial conditions? While the economic data continues to slow, and markets continue to cheer on that, it will key for Fed members to bring the focus back to easing of financial conditions and consider what that means for inflation. Chicago Fed national financial conditions index eased further in the week of November 18, bringing financial conditions to their easiest levels since May. Most of the Fed members that have spoken since that soft CPI release for October have pushed back against pivot expectations, but it hasn’t been enough. Further pushback is still needed if the Fed is serious about bringing inflation under control, and only the most hawkish members of the committee Bullard and Powell may be able to deliver that. Both will be on the wires this week. Bullard speaks on Monday while Powell discusses the economic outlook and labor market on Wednesday. Other Fed members like Williams, Bowman, Cook, Logan and Evans will also be on the wires. Commodity companies exposed to China are vulnerable for further pull backs This week focus is on companies exposed to China, given forward earnings are likely to be downgraded following further China lockdowns and protests. Be cautious that investors could be looking to take profits or write options for downside protection in commodity exposed equites. Also note, on Friday fresh data showed that the major iron ore companies, BHP, Rio, Fortescue, are likely to be shipping almost 6% less than last year, in the final quarter of this year, and if lockdowns worsen, iron ore shipments could continue to fall and hurt iron ore majors' forward earnings and shares. On Monday in Asia, the iron ore (SCOA) fell 1.6% dragging down shares of ASX listed BHP, and Rio Tinto, who both lost about 1%+. What are we watching next? Weighing the sudden new intrusion of the Chinese protests story versus incoming US data The recent narrative has been that markets have room to celebrate the downward shift in Fed tightening expectations and hopes that an eventual opening up of China’s economy will help boost global growth. The widespread protests at the weekend have changed the plot, driving new uncertainty on how things will develop and possibly outweighing a considerable portion of the implications of the next important data macro data points out of the US, especially the Friday November jobs report. As well, we’ll have a look at the ISM Manufacturing survey for the month on Thursday. The situation in China aside (which it won’t be), the question for the run-up into the December 14 FOMC meeting and in the month or so beyond is how long the market can continue to celebrate the Fed easing off the accelerator, when the reason it is doing so is that economic slowing and an eventual recession threaten. Normally, a recession is associated with poor market performance as profits fall and credit risks mount. Apple production risk is on the rise. The protests in China and the unrest around Apple’s largest manufacturing hub for its iPhone could lead to a production shortfall of close to 6mn iPhone Pro which was a Morgan Stanley estimate and was published before the intensified issues at the Apple manufacturing site. Earnings to watch 98% of the S&P 500 companies have reported Q3 earnings reducing the earnings release impact from US equities. But European and Chinese companies are still reporting although the volume of earnings releases is also getting lower. Key earnings release to watch today is Pinduoduo which is expected to grow revenue by 44% y/y with EBITDA margin expanding to 21.2% as their online marketing revenue and uptake remain strong despite the slowing Chinese economy. Monday: Pinduoduo, Capitaland, H World Group Tuesday: Li Auto, DiDi Global, Bank of Nova Scotia, Intuit, Workday, Crowdstrike, HP Enterprise, NetApp, Shaw Communication Wednesday: Royal Bank of Canada, National Bank of Canada, Salesforce, Synopsys, Snowflake, Splunk, Hormel Foods, KE Holdings Thursday: Canadian Imperial Bank of Commerce, Bank of Montreal, Toronto-Dominion Bank, Marvell Technology, Veeva Systems, Ulta Beauty, Zscaler, Dollar General, Kroger Economic calendar highlights for today (times GMT) 1400 – ECB President Lagarde to speak 1530 – US Nov. Dallas Fed Manufacturing 1700 – US Fed’s Williams (voter) to speak 1700 – Us Fed’s Bullard (voter 2022) to speak 2330 – Japan Oct. Jobless Rate/Retail Sales Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: https://www.home.saxo/content/articles/macro/market-quick-take-nov-28-2022-28112022
FX Daily: Asymmetrical upside risks for the dollar today

FX: Data In The US This Week May Deliver A Little Support To The US Dollar (USD)

ING Economics ING Economics 28.11.2022 09:09
A very inverted US yield curve and Brent crude trading down near $80/bbl tell us that markets are growing more concerned about global demand trends. And uncertainty in China does not help either. We feel scheduled events and data in the US this week may also deliver a little support to the dollar. In general, we favour defensive positions in FX this week In this article USD: Fed-speak, prices and employment to dominate EUR: Waiting for the next inflation print GBP: Settling down CEE: Hungary remains topic number one     USD: Fed-speak, prices and employment to dominate The week starts with a focus on events in China as local authorities struggle to battle rising daily case numbers and enforce lockdowns. While a disorderly exit from China's Covid Zero policy could ultimately prove a positive for global demand, getting to that point will be an exceptionally bumpy ride for the world's financial markets. As it stands currently, events in China are being read negatively for demand trends, where for example Brent crude and industrial metal prices are under pressure. Brent at $80/bbl is a little surprising given what should be the 2mn barrel per day production cut undertaken by OPEC+ this month.  Another big read for global demand trends is the shape of the US Treasury yield curve. The current 2-10 year inversion of the curve to -80bp is exceptional and aptly reflects investors' views that recession is coming but the Fed will not be cutting rates anytime soon. On the subject of the Fed, the week ahead sees Federal Reserve Chair Jerome Powell speaking on Wednesday evening (hawks James Bullard and John Williams speak tonight also). Currently, we would pin Chair Powell to the hawkish end of the Fed spectrum and our colleague, James Knightley, thinks Chair Powell this week could push back against the recent (and perhaps premature in the Fed's mind) easing of financial conditions.  In addition to Fed-speak, the US data calendar picks up again this week, with readings on house prices, confidence, PCE inflation and Friday's release of the November jobs report. The more important data releases come on Thursday and Friday, where any uptick in the core PCE price data or strong job numbers could support potentially hawkish rhetoric from Chair Powell and send US yields and the dollar higher again. As we outlined in our 2023 FX Outlook, we just do not see conditions in place for a benign dollar bear trend - even though the buy-side is desperate to put money to work away from the dollar. Seasonally, the dollar is weak in December, but our call is that this year, the dollar can strengthen into year-end. We continue with the view that any weakness in DXY towards the 105.00 area this week (DXY now 106.18) will prove short-lived and favour a return to 108-110 into year-end. Chris Turner EUR: Waiting for the next inflation print The highlight of the eurozone data calendar this week will be November price data - released for Germany tomorrow and for the eurozone on Wednesday. The question is whether inflation will fall back from the highs (not far from 11% year-on-year) and allow the European Central Bank to potentially soften its hawkish rhetoric a little. Currently, the market prices a 62bp rate hike on 15 December.  EUR/USD is consolidating at higher levels - having been buoyed by the 20% recovery in European equity markets amidst declining energy prices. Equally, business confidence has been holding up a little better than expected. We cannot rule out EUR/USD trading back up to the 1.0480/1.0500 area again (though the reasons for that are far from obvious) but reiterate that the second half of the week could potentially push EUR/USD back to the 1.02 area. Chris Turner GBP: Settling down Three-month GBP/USD traded volatility prices are now under 12% having been near 19% in late September. Clearly, sterling trading conditions have settled down even as recession expectations solidify. Our view is that these GBP/USD gains will not last and we would not be surprised to see fresh selling interest emerging near the 200-day moving average at 1.2177 or at best the 50% retracement of the 2021-22 drop - at 1.2300.  The current inversion in yield curves around the world does, for a change, look to be a likely harbinger of recession. And with its large current account deficit, sterling should be expected to remain vulnerable. The UK data calendar is light this week, but there are a few Bank of England (BoE) speakers who may reiterate hawkish leanings. The market currently prices a 52bp BoE rate hike on 15 December. Chris Turner CEE: Hungary remains topic number one The Central and Eastern Europe (CEE) region will become more interesting in the second half of the week, while today and tomorrow will be more about global numbers. On Wednesday, Poland will see the release of inflation for November and a detailed breakdown of 3Q GDP, which positively surprised a couple of weeks ago in the flash estimate (0.9% quarter-on-quarter). Of course, given the pause in the central bank hiking cycle, the CPI print will get a lot of market attention. We expect an unchanged 17.9% YoY reading, more or less in line with market estimates. On Wednesday, we could hear something new from the European Commission (EC) on Hungary, progress with the rule-of-law and access to EU funds. Thursday will see the release of PMI indicators across the region. While we expect a rebound from the lows in Poland and the Czech Republic, we forecast a drop below the 50-point level in Hungary. Also on Thursday, the 3Q GDP breakdown will be published in Hungary, which was the only country in the region to surprise negatively in the flash reading (-0.4% QoQ). On Friday, the Czech Republic will also release the detail of 3Q GDP, which was -0.4% QoQ in the first estimate as the market expected.  In the FX market, conditions for the CEE region improved again last week. The dollar index touched new lows and sentiment improved again in Europe. On the other hand, local conditions remain negative. Interest rate differentials across the region have reached new lows again in recent days. This week, we see a chance for a reversal in the US dollar and a reality check inflation story at the global and regional level, resulting in negative pressure on the region. The European Commission decision will be a key market mover for the Hungarian forint. Although last week's news was mixed, we see it as rather positive. Thus, confirmation that Hungary no longer faces a permanent loss of EU funds should help the forint move back closer to 405 EUR/HUF. Inflation in Poland will be key for the zloty and the possibility for the market to reassess the priced-in cuts next year, which could add short-term support for the zloty. However, we see the zloty as the most vulnerable to the global story at the moment, so we remain bearish. Frantisek Taborsky Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Crude Oil Sees Its Biggest Weekly Pull Back Since April

Chinese Protests Send Crude Oil Lower | Bitcoin Under Pressure

Swissquote Bank Swissquote Bank 28.11.2022 10:05
Massive anti-Covid protests in the biggest Chinese cities marked the weekend. So, the week kicked off on a bad mood in the Asian markets. Australian and Chinese stock markets were painted in red. The Hang Seng index dived more than 2% in Hong Kong, and crude oil has already lost more than 3% at the time of shooting. Black Firday In the US, the record Black Day sales could hammer the joy around a potential Federal Reserve (Fed) pivot on softening US economy. The US shoppers spent more than $9 billion in online sales on Friday, and Cyber Monday is also expected to be a record-breaking one, with more than $11 billion to be spent. This is not exactly what you expect to hear when you think that the US will enter a consumer-led recession in couple of weeks from now… FX And S&P 500 The US dollar kicked off the week on a bullish note. The EURUSD slipped below the 200-DMA, near 1.0380. The S&P500 index closed last week at the highest levels since mid-September, and stands a couple of points from the year-to-date descending channel top, which could bring topsellers in, especially if strong data revives the idea that the Fed has no reason to stop hiking its interest rates. Watch the full episode to find out more! 0:00 Intro 0:38 China doesn’t want Covid zero, but it’s not simple… 2:55 Chinese protests send crude oil lower 4:09 Dear Mr. Powell, Black Friday sales hit record this year… 6:32 … what should we expect? 7:03 Watch China EV deliveries, Tesla, Apple on China unrest 8:26 Bitcoin under pressure, again Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #China #Covid #protests #US #Black #Friday #Cyber #Monday #Fed #expectations #USD #EUR #crudeoil #Bitcoin #Tesla #Apple #Xpeng #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
Swiss Pension Fund Publica Will Increase Its Share Of Gold To 1%

Retail Investors Are Extremely Bullish On Gold

InstaForex Analysis InstaForex Analysis 28.11.2022 13:34
With the Federal Reserve hoping to slow the pace of rate hikes next month and into 2023, retail investors have become increasingly interested in gold. However, Wall Street analysts are not convinced that gold is ready for a breakout, and many expect prices to trade in a sideways range in the near term. According to RJO Futures senior market strategist Bob Haberkorn, despite growing interest in gold, prices will stagnate near current levels as a new catalyst is needed to push the price above $1,800 an ounce. "Everyone is focused on the Fed and how high interest rates are going," he said. "I think gold will remain fairly sideways until that Fed decision. I think gold will be a boring market until then." Last week, 16 Wall Street analysts took part in the gold survey. Among the participants, seven analysts, or 44%, were neutral about gold. At the same time, six analysts, or 38%, are bullish for the current week, and three analysts, or 19%, are bearish on prices. Meanwhile, 1,054 votes were cast in the Main Street online poll. Of these, 667 respondents, or 63%, expected gold prices to rise this week. Another 253 voters, or 24%, said the price would go down, while 134 voters, or 13%, were neutral in the near term. Not only are retail investors extremely bullish on gold, but last week's survey participation jumped to its highest level since the end of September. Along with the Federal Reserve's monetary policy, some analysts have said they are currently biding their time to see how US dollar flows affect gold prices. Economists noted that the US dollar index is trading at a critical turning point near 106 points, and further weakness will be positive for gold. "Gold appears to have turned a corner with U.S. treasury yields and the U.S. dollar backing off, enabling its role as a store of value in turbulent times to come back to the forefront," said Colin Cieszynski, chief market strategist at SIA Wealth Management. He remains bullish on gold as he expects the US dollar to peak. However, other analysts are not convinced that the US dollar is heading down, especially since expectations that the Federal Reserve will raise interest rates above 5% early next year remain firm. "I am looking for higher rates and a stronger dollar to allow gold in the cash market to test $1,720–$1,730," said Marc Chandler, managing director of Bannockburn Global Forex. Adrian Day, president of Adrian Day Asset Management, said some consolidation in gold would be healthy after the precious metal's solid gains since the start of the month. "Gold needs to rest," he said. "Absent a new development, gold will likely be relatively unchanged next week. As we get closer to the next Federal Reserve and European Central Bank meetings in mid-December, the market will be looking for signs of a slowdown or even pause in tightening and that will boost gold again."     Relevance up to 10:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/328306
Oil Prices Soar on Prospect of Soft Landing, Eyes Set on $80 Breakout

US-Listed Chinese Stocks Have Already Fallen Sharply

InstaForex Analysis InstaForex Analysis 28.11.2022 14:14
On Monday, US stock indices fell amid growing unrest in China caused by restrictions had a negative impact on global markets. The US dollar depreciated after stabilizing during the Asian session on risk aversion. US Treasury bonds rose. Futures on the S&P 500 index lost more than 0.9%, while the NASDAQ index was down more than 1.2%. The Dow Jones Industrial Average declined by 0.6%. European stock market indices fell, and the reason for it are oil companies, which lost the most because of the sharp decline in oil prices. The brewing turmoil in China is affecting expectations about the country's continued path to unlock the economy from restrictions. This diminishes the prospect of more moderate interest rate hikes by the Federal Reserve, which have allowed investors to turn their attention back to riskier assets. Traders who used to bet that China might abandon its Covid Zero policy sooner than expected are now beginning to change their minds. Meanwhile, China's economy is unlikely to re-open soon. It may ill put it at greater risk than previously expected. Endless and pointless lockdowns may lead to a serious health care crisis and slower GDP growth this year. US-listed Chinese stocks have already fallen sharply during the premarket trading, with Internet companies being hit the most. Apple Inc. have fallen because of information that a disturbance at its key manufacturing center in China has begun, which could lead to disruptions in production of nearly 6 million iPhone Pro devices. Oil has fallen sharply and is trading at its lowest level since December, as a wave of unrest in China is also affecting demand, overshadowing demand for risky assets as well. Gold recovered from the previous decline that occurred amid the US dollar strengthening. After the Fed meeting, investors digested a lot of economic data, which eased fears about inflation. Thus, a smaller rate hike is expected but so far it is not giving much support to the stock indices. All eyes will be on the US jobs report this week, as well as Fed Chairman Jerome Powell and New York Fed President John Williams' speeches. As for the S&P 500 index, the pressure on the trading instrument has returned. Bulls now need to protect the support level of $4,000. As long as the index is trading above this level, the demand for risky assets may persist. This is likely to strengthen the trading instrument and return the level of $4,038 under control. If the price pierces $4,064, it may start a further upward correction with the target at resistance of $4,091. The next target is located in the area of $4,116. If the S&P 500 index declines, bulls should defend the psychologically important level of $4,000. If this level is broken through, the trading instrument may be pushed down to $3,968, opening the way to a new support of $3,942. Relevance up to 11:00 2022-11-29 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/328314
The US PCE Data Is Expected To Confirm Another Modest Slowdown

Dallas Fed Manufacturing Index Came In Less Bad Than Expected

Saxo Bank Saxo Bank 29.11.2022 09:06
Summary:  A slew of Fed speakers remained hawkish on Monday, with Bullard saying that markets were under-pricing the risk of a more aggressive Fed This added to the risk-off tone from the protests in China ahead of the focus turning to an array of key US data due in the week. The US Dollar found a fresh bid into the US close, while the yen is being supported by safe haven demand and shifting tone from BOJ officials. Sharp swings in oil prices as well amid demand weakness concerns being reversed by hopes of an OPEC+ production cut, as the cartel meets over the coming weekend. What’s happening in markets? The Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) retreated on China Covid protests and hawkish Fedspeak U.S. equities slid on the outbreak of protests against Covid lockdowns across large cities in China and hawkish comments from Fed officials. Nasdaq 100 dropped 1.4% and the S&P500 lost 1.5%. The selloff was board-based as all 11 sectors of the S&P500 declined on Monday. Energy and materials stocks took a hit as oil and other commodity prices retreated. Apple (AAPL:xnas) fell 2.6% as the iPhone maker could fact a production shortfall of as many as 6 million handsets as a result of the labour unrest in the Foxconn factory in Zhengzhou. US treasuries (TLT:xnas, IEF:xnas, SHY:xnas) pared early gains and finished Monday little changed U.S. treasuries caught a risk-off bid in Asian hours as the Covid protests in China triggered buying in safe-haven assets. The gains were pared when New York came with the St. Louis Fed President Bullard saying that the Fed is “is going to need to keep restrictive policy…to continue through -- as least through – next year.” The 10-year finished unchanged at 3.68%. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) Mainland China and Hong Kong stock markets retreated as investors were wary about the surge in daily new Covid cases across China and the outburst of anti-strict-control protests in several mega cities, including Beijing and Shanghai. The cut in reserve requirement ratio by the central bank on Friday evening did not give the market much of a boost. Hang Seng Index declined 1.6% and CSI 300 lost 1.1%. The China internet space fell 2%-4% except for Meituan (03690:xhkg) which gained 2% on strong Q3 results reported last Friday. Macao casino stocks bucked the trend and rallied following the Macao SAR Government’s announcement to renew casino licenses with all incumbent operators. Wynn Macau (01128:xhkg) jumped nearly 15%. Stocks of the Chinese catering chains listed in Hong Kong gained some market speculation of earlier exit from the dynamic zero-Covid policy due to the now hard-to-contained outbreaks of inflection across the country. Haidilao (06862:xhkg) surged 6.8%. Buying on Hang Seng Index futures emerged in overnight trading in New Your hours and saw the futures contract jump 1.2% and the Nasdaq Golden Dragon China Index rise 2.8%. FX: USDJPY getting a safe haven bid, but there’s more! Choppy moves in the US dollar on Monday amid risk off and volatility in the US yields. But hawkish Fed speak, with Williams and Bullard both hinting at higher rates than the September dot plot, supported a final leg higher in the USD in the late US session. EURUSD touched highs of 1.0500 but reversed all of the day’s gains later with focus on inflation numbers due tomorrow. USDJPY also touched lows of 137.50 before reversing but a clear shift in tone in BOJ officials is being seen in the last few weeks keeping the BOJ pivot narrative alive into early 2023 before Kuroda or just after Kuroda retires. Kuroda referred to wage gains as being supportive of more stable levels of inflation which gave the yen a boost on Monday. Crude oil (CLZ2 & LCOF3) reversed losses on OPEC cut hopes Crude oil prices made a sharp u-turn on Monday after dipping lower earlier in the session on concerns from protests in China which delayed the hopes of a reopening further and a hawkish commentary from Fed speakers (read below). WTI futures fell to lows of $74/barrel while Brent was down to $81. However, losses were reversed later as OPEC+ delegates said deeper production cuts could be an option when they meet this weekend. OPEC+ is scheduled to meet this Sunday to review its current production plan. At the last meeting it cut output quotas by 2mb/d. Saudi Energy Minister Prince Abdulaziz bin Salman said that OPEC+ was ready to intervene with further supply reductions if it was required to balance supply and demand. Meanwhile, European talks on a price cap have stalled.   What to consider? Fed speakers press for higher rates James Bullard (2022 voter) said markets are underestimating the chances that the FOMC will need to be more aggressive next year, adding tightening may go into 2024. He also said that rates will need to be kept at a sufficiently high level all through 2023 and into 2024 even if the Fed reaches restrictive territory by Q1 2023. John Williams (voter) said "there's still more work to do" to get inflation down. He also hinted at “modestly higher” path of interest rates than what he voted for in September, sending another signal that December’s dot plot could see an upward revision, while also hinting at rate cuts in 2024. He provided some clear forecasts: unemployment rate rising from 3.7% to 4.5%-5.0% by late 2023; inflation declining to 5.0-5.5% by the end of 2022 and 3.0-3.5% by late 2023; modest economic growth this year and in 2023. The central bank isn't near a pause, Loretta Mester (2022 voter) told the FT. Richmond Fed President Barkin also spoke about higher-for-longer rates, despite moving slower BlockFi – another casualty in the FTX saga BlockFi Inc. filed for Chapter 11 bankruptcy, the latest crypto-industry operator to seek court protection in the wake of FTX’s collapse. It sold $239 million of crypto ahead of its filing. ECB’s Lagarde maintains tightening stance ECB President Lagarde repeated her previous comments that the ECB will raise rates further but nothing on how much further, and on how fast they need to go. She said the bank will be data-dependent, adding the ECB may need to move into restrictive territory. She also said that she will be surprised if inflation in the Eurozone (due to be reported on Wednesday 30/11) peaked last month. Even if the November print cools slightly, most likely driven by lower energy costs, there is a possibility that inflation will likely remain high in the coming months as winter months progress and cost of living gets worse. Dallas Fed manufacturing signals job stress is building Dallas Fed manufacturing index came in less bad than expected at -14.4 for November, but the underlying metrics indicated a softening in labor markets. 16% of the factories surveyed indicated net layoffs in November, up from 9% previously, and comments suggested more layoffs may be coming as the backlog and holiday season get over. While it may still be early to see any significant signs of softening in Friday’s jobs report, the jobs data remains key to monitor to see if consumers may be vulnerable to a faster-than-expected pullback in spending. Apple production risk is on the rise Reports suggested that the protests in China and the unrest around Apple’s largest manufacturing hub for its iPhone could lead to a production shortfall of close to 6mn iPhone Pro units this year, roughly about 7% of all iPhones scheduled to be delivered this quarter. Apple shares fell 2.6% on Monday on these reports. Pinduoduo (PDD:xnas) beat expectations, Bilibili up next Pinduoduo, after a strong beat in the prior quarter, surpassed again analyst estimates and delivered a strong Q3 beat. The Chinese eCommerce platform’s revenues grew 65% Y/Y, outperforming its peers, for example, Alibaba”s 3% and JD.COM’s 11% revenue growth in Q3. Adjusted operating margin came in at 34.6% vs 33.5% in Q2. 2022 , and 15.2% in Q3 last year. Adjust EPS of RMB 7.33 was much higher than the RMB4.75 consensus. Bilibili ((09626:xhkg) is scheduled to report today.   For our look ahead at markets this week – Read/listen to our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: Market Insights Today: Hawkish Fedspeak; OPEC+ to consider production cut – 29 November 2022 | Saxo Group (home.saxo)
Russia Look Set To Double Its Exports For The First Half Of 2023

Russian Wheat Continues To Be Offered At About The Cheapest Prices | The ECB Will Be Data-Dependent

Saxo Bank Saxo Bank 29.11.2022 09:13
Summary:  Markets have been on edge as we await further signs of the official stance in China on Covid restrictions after civil unrest on the issue at the weekend, with signs this morning from Chinese officialdom that a cautious easing will remain underway. This has inspired a comeback in some commodities and the Chinese renminbi after sharp weakening moves yesterday, but there is no profound sense of relief across markets as we also await incoming US data ahead of the December 14 FOMC meeting.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures are stuck in a tight range between 3,926 on the downside and 4,054 on the upside as the market is struggling to find a clear signal and direction. The noise is filled by the back-and-forth news stream out of China related to it Covid policies and backstop plans for its struggling real estate sector. Meanwhile, the US 10-year yield is also stabilising and earnings releases are minimal except for tomorrow with reports expected from Salesforce and Snowflake. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) Hong Kong and mainland China equity markets rallied strongly with Hang Seng Index and the CSI300 Index each rising more than 3%. The market sentiment was buoyed by new measures from the Chinese securities regulator to relax its restriction on property developers from equity financing. Leading Chinese developers listed in Hong Kong jumped by 5%-12%. In the mainland’s A-share markets, real estate names led the charge higher. Tourism stocks rose on speculation that pandemic control restrictions might be relaxed further. China’s pandemic control regulators are holding a press conference later today. USD firms, but then retreats overnight on hopes China’s reopening prospects Concerns surrounding China’s reopening status after civil unrest at the weekend sparked considerable volatility across FX yesterday, with a US dollar rally yesterday eventually emerging as the dominant development after choppy action. The USD was a bit weaker again overnight, particularly against the USDCNH, which dropped back below the important 7.20 area ahead of a press briefing in China thought to make clear the official central government position on Covid policies. Expect the most volatility in commodity currencies and the Japanese yen depending on how clearly China either a) signals that the path is open to easing restrictions on an accelerated time frame or b) that restrictions will remain in place and could even tighten if virus numbers don’t fall. Crude oil (CLF3 & LCOF3) made a sharp U-turn on Monday ...as one survey after another pointed to an elevated risk that OPEC+, partly depending on the price when they meet next week, will opt to agree on another production cut in order to stem the recent price drop. Having fallen by more than 15 dollars during the past two weeks, a downturn in Chinese demand has been more than priced in, with technical selling and momentum having taken over. Overnight Brent briefly traded $86 after Chinese health authorities announced they would hold a press conference at 7am GMT. At their last meeting OPEC+ cut output quotas by 2mb/d with Saudi Energy Minister Prince Abdulaziz bin Salman saying the group was ready to intervene with further supply reductions if it was required to balance supply and demand. Meanwhile, European talks on a price cap have stalled. Wheat (ZWH3) in Chicago dropped to a three-month low …on Monday on a combination of ample and cheap supply from Black Sea suppliers increasing competing with US origin wheat, and on concerns about the impact of protests in China on growth and demand. Following a bumper crop this summer, Russian wheat continues to be offered at about the cheapest prices in world export markets which is negative for the export prospects of U.S. wheat. In the week to November 22 speculators increased bearish bets on CBOT wheat to the highest since May 2019. Gold (XAUUSD) has recovered from another stronger dollar driven attempt to challenge support ...in the $1735 area after Fed speakers said more rate hikes are coming. pressed for higher rates. Investors will watch this week’s economic data, including ISM on Thursday and Friday’s nonfarm payrolls and US jobs report, for signs the US central bank may soon ease its monetary-tightening trajectory. Total holdings in bullion-backed gold ETFs rose 6 tons last week, the biggest weekly increase since April. During this time investors sold a total of 397 tons, still less than the 400+ tons bought by central banks during the third quarter. After finding support in the $1735 area last week, a break above $1765 may signal a return to key resistance at $1788. US treasury yields recovered after dip to local lows. (TLT:xnas, IEF:xnas, SHY:xnas) Weak risk sentiment after the weekend news of civil unrest in China due to restrictive Covid policies there saw a dip in the 10-year yield benchmark yesterday to new local lows below 3.65%. But there was little energy in the move as the market awaits important incoming US data starting with today’s November Consumer Confidence survey, but more importantly this Friday’s November jobs numbers on Friday. What is going on? The wave of takeover bids continues at the Paris Stock Market This is mostly happening in Euronext Growth – the market segment for small and medium-caps. Yesterday, Abeille Insurance (member of Aema Group, the fifth largest insurance player in France) acquired the small bank Union Financière de France (a bank mostly specialized in wealth management advisory). Abeille Assurance bought the company at a price per action of 21 euros. This represents a premium of 51 %. With the sharp drop in values that has happened since January, we have seen a wave of takeover bids at the Paris Stock Market. This will likely continue in the short-term, especially in the segment of wealth management advisory where there is an ongoing process of consolidation happening. Fed speakers press for higher rates James Bullard (2022 voter) said markets are underestimating the chances that the FOMC will need to be more aggressive next year, adding tightening may go into 2024. He also said that rates will need to be kept at a sufficiently high level all through 2023 and into 2024 even if the Fed reaches restrictive territory by Q1 2023. John Williams (voter) said "there's still more work to do" to get inflation down. He also hinted at “modestly higher” path of interest rates than what he voted for in September, sending another signal that December’s dot plot could see an upward revision, while also hinting at rate cuts in 2024. He provided some clear forecasts: unemployment rate rising from 3.7% to 4.5%-5.0% by late 2023; inflation declining to 5.0-5.5% by the end of 2022 and 3.0-3.5% by late 2023; modest economic growth this year and in 2023. The central bank isn't near a pause, Loretta Mester (2022 voter) told the FT. Richmond Fed President Barkin also spoke about higher-for-longer rates, despite moving slower China relaxes its restrictions on developers from attaining equity financing The China Securities Regulatory Commission (CSRC) fired the so-called “third arrow” to ease some of the restrictions previously imposed on property developers from attaining equity financing. While property developers are still barred from doing IPO in the domestic equity market, they are now domestically listed A-share developers and some Hong Kong-listed H-share developers to issue new shares to raise capital as long as the proceeds are used for restricting, M&A activities, refinancing, buying existing property projects, repaying debts, and project construction. However, proceeds are not allowed to be used in land acquisition. Pinduoduo shares rally 12% Strong Q3 results pushed the shares of the Chinese e-commerce platform to the highest level since November 2021. Q3 revenue was CNY 35.5bn vs est. CNY 30.9bn and adj. EPS at 8.62 vs est. 4.75 driven by tailwinds from the strict Covid policies in China. BlockFi – another casualty in the FTX saga The crypto lender BlockFi Inc. filed for Chapter 11 bankruptcy, the latest crypto-industry operator to seek court protection in the wake of FTX’s collapse. It sold $239 million of crypto ahead of its filing. ECB’s Lagarde maintains tightening stance ECB President Lagarde repeated her previous comments that the ECB will raise rates further but nothing on how much further, and on how fast they need to go. She said the bank will be data-dependent, adding the ECB may need to move into restrictive territory. She also said that she will be surprised if inflation in the Eurozone (due to be reported on Wednesday 30/11) peaked last month. Even if the November print cools slightly, most likely driven by lower energy costs, there is a possibility that inflation will likely remain high in the coming months as winter months progress and cost of living gets worse. Dallas Fed manufacturing signals job stress is building Dallas Fed manufacturing index came in less bad than expected at -14.4 for November, but the underlying metrics indicated a softening in labor markets. 16% of the factories surveyed indicated net layoffs in November, up from 9% previously, and comments suggested more layoffs may be coming as the backlog and holiday season get over. While it may still be early to see any significant signs of softening in Friday’s jobs report, the jobs data remains key to monitor to see if consumers may be vulnerable to a faster-than-expected pullback in spending. What are we watching next? US November Consumer Confidence, September home prices up today The Conference Board’s monthly Consumer Confidence survey has historically correlated most closely with the strength of the US labour market, although after a strong recover from the pandemic lows by mid-2021, confidence fall sharply, hitting a 95.3 local low in July of this year, likely due to steeply rising inflationary pressures (the other major US confidence survey, the University of Michigan sentiment survey, hit the lowest level in its 44-year history in July, likely as the survey contains questions more closely linked to inflation). Confidence then bounced strongly from that July local low, hitting 107.80 in September before dropping sharply to 102.50 last month. The November reading is expected at 100.00. With inflationary pressures easing relative to their peak, a weaker than expected confidence reading today could suggest rising insecurity in the labour market. The September S&P CoreLogic Home Price data is expected to show an ongoing drop in US home prices of some –1.2% MoM after 30-year mortgage rates rose 400 basis points this year to 20-year highs. Apple production risk is on the rise The protests in China and the unrest around Apple’s largest manufacturing hub for its iPhone could lead to a production shortfall of close to 6mn iPhone Pro which was a Morgan Stanley estimate and was published before the intensified issues at the Apple manufacturing site. Earnings to watch Today’s earnings focus is Crowdstrike with analysts expected FY23 Q3 (ending 31 October) revenue growth expected at 51% y/y with operating margin expected to demand as pricing power and demand remain robust in the cyber security industry. Today: Li Auto, DiDi Global, Bank of Nova Scotia, Intuit, Workday, Crowdstrike, HP Enterprise, NetApp, Shaw Communication Wednesday: Royal Bank of Canada, National Bank of Canada, Salesforce, Synopsys, Snowflake, Splunk, Hormel Foods, KE Holdings Thursday: Canadian Imperial Bank of Commerce, Bank of Montreal, Toronto-Dominion Bank, Marvell Technology, Veeva Systems, Ulta Beauty, Zscaler, Dollar General, Kroger Economic calendar highlights for today (times GMT) 0800 – Spain Nov. CPI 0930 – UK Oct. Mortgage Approvals/Consumer Credit 1000 – Eurozone Nov. Confidence Surveys 1300 – Germany Nov. Flash CPI 1330 – ECB's Schnabel to speak 1330 – Canada Sep. GDP 1400 – US Sep. S&P CoreLogic Home Prices 1500 – UK Bank of England Governor Bailey to testify 1500 – US Nov. Consumer Confidence 2130 – API's Weekly Crude and Fuel Stock Report 0030 – Australia Oct. CPI 0130 – China Nov. Manufacturing and Non-manufacturing PMI Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – November 29, 2022 | Saxo Group (home.saxo)
Asia Morning Bites - 14.02.2023

The Asia Forex Market Pack Were Broadly Weaker Vs The USD

ING Economics ING Economics 29.11.2022 10:27
Fed speakers dial up hawkishness ahead of Powell on Wednesday  In this article Macro outlook What to look out for: Fed speakers and US jobs report   shutterstock   Macro outlook Global Markets: Fed speakers were turning up the hawkish dial on Monday ahead of Fed Chair Powell’s speech on Wednesday, at which there is a good chance he will dial it up to 11. John Williams told reporters he was raising his expectations for rates. James Bullard, who has already gone on record as saying that rates could go up to 7%, said he thinks markets are underpricing the risks of a more aggressive Fed. Loretta Mester added that the Fed was nowhere near a pause in their rate-hike campaign, and Lael Brainard said that the Fed needed to lean against the risk of inflation expectations becoming unanchored. Coupled with protests in China over the zero-Covid policy and the prospects for this and rising Chinese Covid cases and lockdowns resulting in probable further supply constraints, and it is no wonder US stocks fell by a about 1.5% yesterday. Bond markets, which tend to be a bit more cerebral and a bit less emotive, are not buying into this hawkishness just yet though. 2Y US Treasury yields dropped 1.4bp and the 10Y yield remained roughly unchanged at  3.681%. EURUSD went on a roller coaster ride yesterday, and came close to 1.05, before retreating to 1.0345, a little lower over the whole 24 hour period. It was more of a straight line slide for the AUD, which is now back to 0.6654, and the GBP also dropped precipitously to 1.1964. The JPY followed the EUR’s moves, dropping at one point to 137.50 before rising back to 138.75, though remains a little stronger than a day ago. The Asia FX pack were broadly weaker vs the USD yesterday. The CNY recovered slightly after its very weak start to end at 7.2069. while the KRW gapped up to 1340 from 1325. G-7 Macro:  Preliminary German inflation data for November is due out today, and could show a slight decline from the October harmonized index rate of 11.6%YoY. That said, ECB President, Christine Lagarde, is adopting the same playbook as the Fed right now, saying that she would be surprised if Eurozone inflation had peaked. Her comments were echoed by Governing Council member, Klaas Knot, who said that the risks to inflation were entirely skewed to the upside. Other releases today include 3Q22 Canadian GDP and September US house price data. What to look out for: Fed speakers and US jobs report Japan labour data and retail sales (29 November) Taiwan GDP (29 November) US Conference board consumer confidence (29 November) South Korea industrial production (29 November) Japan industrial production (29 November) Fed’s Williams and Bullard speak (29 November) China PMI manufacturing and non-manufacturing (30 November) Bank of Thailand policy meeting and trade (30 November) India GDP (30 November) US ADP employment and pending home sales (30 November) Fed’s Bowman speaks (30 November) South Korea 3Q GDP and trade (1 December) Regional PMI (1 December) China Caixin PMI (1 December) Indonesia CPI inflation (1 December) US personal spending, initial jobless claims and ISM manufacturing (1 December) Fed’s Cook, Bowman, Logan, Barr and Powell speak (1 December) South Korea CPI inflation (2 December) Fed’s Evans speaks (2 December) US non-farm payrolls (2 December) TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  
The Current War Between China And The United States Over Semiconductor Chips Is Gaining Momentum

China Protests Hit Apple | BlockFi Files For Bankruptcy

Swissquote Bank Swissquote Bank 29.11.2022 10:34
The week started with a selloff across global equities. Unrest in China due to protests against the Covid zero policy combined with the Federal Reserve (Fed) members’ hawkish comments led to an early week selloff in both Asian, European and US equities. Crypto Market In cryptocurrencies, it was another day of bankruptcy news. This time, the crypto lender BlockFi, which had strong ties with FTX announced to file for bankruptcy. Bitcoin eased but didn’t damage important support on the news, while Coinbase dived another 4%. Stocks Market Elsewhere, the S&P500 lost 1.54% on Monday, as Nasdaq slid 1.43%. The US dollar traded up and down as US crude fell to $73pb then rebounded to flirt with the $80pb this morning, despite the Chinese slowdown worries. Expectation that OPEC would use the Chinese unrest as excuse to restrict outlook boosted bulls’ appetite. Fed There is still hope that Fed President Jerome Powell talks about slower rate hikes at his speech this week, but again, his words shouldn’t be heard halfway through. The Fed is willing to slow the pace of rate hikes to avoid going too far. But if they slow down, it’s also because they want to go higher than 5%. Watch the full episode to find out more! 0:00 Intro 0:24 China unrest, hawkish Fed comments hit sentiment 1:00 Fed remains haw-kish! 3:34 What does China developments mean for markets? 4:29 Why did crude oil rebound? 6:34 Ghana wants to buy oil with gold 7:00 China protests hit Apple, VW, but Chinese ADRs rebound 8:20 BlockFi files for bankruptcy Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #China #Covid #protests #Apple #Foxconn #VW #Fed #expectations #USD #XAU #crudeoil #Chevron #Venezuela #Bitcoin #BlockFi #FTX #bankruptcy #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH  
Rising Tensions in Japan Amid Currency Market Concerns and BOJ Insights

In Shanghai The Local Stock Index Rose More Than 2%

Conotoxia Comments Conotoxia Comments 29.11.2022 10:39
This morning, the US dollar seems to be losing ground again in anticipation of upcoming macroeconomic data later in the week. We are specifically talking about data from the US labor market and the popular NFP. Improvement in the markets. Is the dollar losing again? This morning, the US dollar seems to be losing ground again in anticipation of upcoming macroeconomic data later in the week. We are specifically talking about data from the US labor market and the popular NFP. The U.S. Dollar Index on Tuesday seems to have fallen below 106.5 points, despite earlier statements by U.S. Federal Reserve officials. James Bullard of the St. Louis Fed said the central bank still has "a lot of work to do to become restrictive," reiterating that "the interest rate needs to rise to at least 5% to bring inflation down." New York Fed President John Williams also said that "rates must continue to rise and remain high until next year, while being open to a rate cut in 2024." However, the Fed is widely expected to slow the pace of tightening to 50 basis points in December after four 75 basis point hikes in a row. Meanwhile, Fed Vice Chair Lael Brainard warned that lower supply elasticity due to the effects of Covid-19 and the war could lead to a period of higher volatility in inflation data. This phenomenon could be the largest in several decades. Brainard added that "the experience with the pandemic and the war highlights the challenges for monetary policy in responding to a prolonged series of adverse supply shocks," BBN reported. Source: Conotoxia MT5, USDIndex, H1 China's infections decline One short-term factor that appears probably to influence the behavior of financial markets is the situation in China. After a record number of infections, investors' eyes may be on both the protests and the scale of the outbreak. According to the latest information, the number of newly registered cases fell for the first time in more than a week, the Health Commission (NHC) reported. The figure was said to have dropped from more than 40,000 infections to 38645 newly registered infections. The fewer infections there are, the fewer restrictions may not be enforced, as there would be no need for them, which could help both Chinese citizens and the economy. Additionally, Chinese authorities have announced a press conference on the Zero-Covid policy, which may already have markets hoping for a loosening of restrictions. Stock market, commodities and cryptocurrencies rebound U.S. index futures seem to be pointing to the possibility of a positive opening to the session on Wall Street. Futures on the Dow Jones Industrial Average are up more than 0.2%, while the Nasdaq 100 is up 0.6% this morning. Meanwhile, in Shanghai, the local stock index rose more than 2% to 3144 points. On the commodities market, we could see oil prices rise by more than 1.6% to $78 per barrel. Gold, on the other hand, rose 0.7% to $1,753, and silver rose 1.45% to $21.20 per ounce. The cryptocurrency market is also trying to bounce back. The price of bitcoin has risen to $16456, and Ether is back above $1200.   Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75,21% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
From UFOs to Financial Fires: A Week of Bizarre Events Shakes the World

Markets Still Expecting That The Fed Will Have To Pivot Earlier

Saxo Bank Saxo Bank 29.11.2022 10:43
Summary:  The markets continue to expect a Fed pivot despite a broad-based pushback against rate cut expectations that are priced inn for next year. This puts the onus on Fed Chair Powell who speaks this week on Wednesday to deliver a clear message on the timeline of the Fed policy and the upside risks to inflation and interest rates despite the slowdown in economic data. The FOMC then enters a quiet period next week and focus will turn back to comments from WSJ’s Timiraos ahead of the 14-15 December FOMC meeting. The pushback from Fed speakers on a Fed pivot continues, and the most hawkish Fed member James Bullard was on the wires yesterday clearly stating that the market is under-estimating the Fed path. He also said that rates will need to be kept at a sufficiently high level all through 2023 and into 2024 even if the Fed reaches restrictive territory by Q1 2023. NY Fed President John Williams also said "there's still more work to do" to get inflation down. He also hinted at “modestly higher” path of interest rates than what he voted for in September, sending another signal that December’s dot plot could see an upward revision, while also hinting at rate cuts in 2024. He provided some clear forecasts: unemployment rate rising from 3.7% to 4.5%-5.0% by late 2023; inflation declining to 5.0-5.5% by the end of 2022 and 3.0-3.5% by late 2023; modest economic growth this year and in 2023. However, the message from the Fed is getting lost in translation as the markets are looking at the long-term impact of the tighter Fed policy and still expecting that the Fed will have to pivot earlier. This puts the onus on Fed Chair Powell, who speaks on the economy and labor market on Wednesday at the Brookings Institute in Washington. Chair Powell potentially needs to make another sharp Jackson Hole-type speech to deliver the message of the Fed path more clearly to the markets. The FOMC then goes into a quiet period at the end of this week as the December 14-15 meeting approaches, and then it will become key to monitor what WSJ’s Timiraos has to say. Meanwhile, key US economic data this week and next also remains on watch. Source: Fedspeak Monitor: Hawkish leaning comments, but markets in denial | Saxo Group (home.saxo)
USD/JPY Weekly Review: Strong Dollar and Yen's Resilience in G10 Currencies

Saxo Bank Podcast: Electricity Prices Spiking In Europe, Crude Oil Rebounding And Wheat Falling And More

Saxo Bank Saxo Bank 29.11.2022 10:54
Summary:  Today we look at the market trying to recover its feet as it hopes that China will remain on the path toward reopening on fresh signs that it wants to avoid curbing activity excessively after recent civil unrest due to Covid restrictions. We also note, ahead of important incoming US data over the next couple of weeks and a Fed Chair Powell speech tomorrow, that the market is taking a very strong view on the path of Fed policy and the economy, assuming the Fed will succeed in its fight against inflation and will cut aggressively in 2024. Will Powell and/or the data challenge this pronounced view? We also look at electricity prices spiking in Europe, crude oil rebounding and wheat falling, stocks to watch and upcoming earnings reports and macro data. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: Markets taking a strong view that Fed will succeed | Saxo Group (home.saxo)
Dollar clings to trend

Dollar clings to trend

Alex Kuptsikevich Alex Kuptsikevich 29.11.2022 10:07
The dollar index started on Monday with a pullback and made an impressive reversal, adding 1.3% to the intraday lows. Comments from Fed officials again dashed hopes of an interest rate cut soon. The dollar gained significant support, one step away from an important technical frontier, increasing the risks that the bulls on the US currency will fight to maintain the trend that has prevailed since the middle of last year. Active buying in the USD index started on Monday, just after it reached the area of the 200-day MA at 105.26. Earlier this year, we saw more than one bull and bear fight near 105. Yesterday's sharp rally in the index suggests that the struggle in this area will be harsh this time too. The two-month drop of the dollar from the peak might be just an overbought correction because, till now, the DXY has not crossed over the 200-day MA, and it is still above the 61.8% Fibonacci line. In the EURUSD, the local picture is even more on the side of the USD buyers as they managed to take the pair back under their 200-day MA after touching the 5-month highs and closed the day lower. This is a strong signal from the bears, which could be a new turning point and prolong the dollar rally for months. Nevertheless, there is no denying that the coming days and weeks will be full of struggles for the long-term trend. For now, there are more signals that the dollar’s peak is behind us. The US economic cycle is a couple of quarters ahead of developments in Europe and Japan, implying that the Fed was the first to start changing policy and finish this normalisation. Fed officials are in the process of switching to a new phase where they are not fighting rising inflation but the risks of a hiccup. The FOMC should expect fewer rate hikes in the next 2-4 meetings and then take a long pause. In contrast, the ECB continues to talk about the need for further steep hikes and finalises the parameters for how the balance sheet will be reduced. For investors and traders, this means that in the coming months, we will see a convergence of monetary policy parameters between the Fed and other major central banks, which promises to swing demand away from the dollar. One of the macro impacts of de-globalisation is higher inflation. And this process will affect Europe to a greater extent, as they will have to find new ways of obtaining energy and markets. This political outlook means that in the long term, central banks in the Old World will have to do more work to contain inflation, which will work against the dollar.
The ECB Has Made It Clear That Rates Will Remain High Until There Is Evidence That Inflation Is Falling Toward The Target

Eurozone: The Recession Is Becoming More Apparent

ING Economics ING Economics 29.11.2022 12:26
The economic sentiment indicator increased slightly in November from 92.7 to 93.7, mainly due to a consumer rebound. The overall picture continues to show a mild recession, but also more signs of slowly fading inflation pressures The service sector saw the indicator for recent demand deteriorate further in November     The eurozone economy continues to show clear signs of recession. While consumers became slightly more upbeat – but still at depressed levels – in November, industry and services still showed signs of contracting activity. Industry sentiment decreased from -1.2 to -2 in November, the lowest reading since January last year. Businesses reported a sharp decline in recent production trends as new orders continue to drop. Production expectations slightly improved, perhaps as supply chain problems are easing. Nevertheless, with orders still in decline, it is hard to predict a swift turnaround in production. The service sector also saw the indicator for recent demand deteriorate further in November, although modestly. The retail sector noticed a slight improvement in recent demand and overall we see that the service sector has become slightly more upbeat about the months ahead. Overall, it looks like the current environment is one that is in line with a mild recession occurring. We often hear from the European Central Bank (ECB) that a mild recession is not enough to bring inflation down sustainably, but it is important to take this together with the easing supply side problems that the economy has faced recently. Signs of a changing inflation picture are slowly becoming more apparent. Energy prices have moderated somewhat, which is helping headline inflation readings for November stay on the low side. But easing supply-side pressures, lower wholesale energy prices, weakening demand and higher volumes of stock are also causing businesses to become somewhat less keen to increase prices, according to this survey. In industry and retail, in particular, we clearly see a lower number of businesses that are keen to increase selling prices in November. While these are only the first signs that inflation is set to moderate, they are very important to the ECB. We think the ECB will opt for a 50bp rate hike in December as the recession is becoming more apparent and inflationary pressures are cautiously easing. TagsInflation GDP Eurozone ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Bank of England Faces Rate Decision: Uncertainty Surrounds Magnitude of Hike

Investors also seem to have become less sensitive to the Ukraine War, which was a significant driver of crude in the first half of 2022 says Finimize's Luke Suddards

Luke Suddards Luke Suddards 29.11.2022 13:36
There's no doubt this week is simply 'action-packed'. On Monday news about situation in China discouraged risk-assets investments and let crude oil go significantly down. On the other of side of the globe, dollar index seems to weaken for another week in a row what takes us to discussion about incoming Fed decision. Trying to find answers, we asked Luke Suddards (Finimize) to share his thoughts on the recent events.   Brent crude oil nears $80 at the actual start of heating season, is China's covid situation affecting it to that extent or there's another 'hidden' factor and what can we expect till the end of the year?   I think given China is the largest importer of crude in the world their lockdowns are definitely weighing on the commodity, however, the more important factors in my opinion are the increasingly ominous global economic outlook and a less interventionist OPEC+. Investors also seem to have become less sensitive to the Ukraine War, which was a significant driver of crude in the first half of 2022 as a large geopolitical risk premium was priced in. I'd say the balance of risks are to the downside for oil going forward. Hedge Funds have significantly raised their short bets on the crude ETF XLE, which one would infer as a bearish price signal for crude.    Read next: Europe’s governments are concerned about energy supplies over the winter and the future of Russian gas imports, Musk’s war with APPL| FXMAG.COM   Could NFP save the dollar from a quite long downtrend? Dollar index has been losing since ca. 7 weeks, is correction coming to USD?   Yes, it could definitely put a pep in the step of the dollar. We know the dollar has been driven by a hawkish Fed and they place a lot of importance on the jobs and inflation data. If the NFP comes in well above consensus then the Fed pivot narrative would take a hit and a higher terminal rate would likely be priced in, which would be dollar positive. The dollar index is sitting on a key support threshold in the form of the 200-day SMA. If it holds this it would be a positive signal for the greenback's prospects. However, I do think we see softer NFP reports going forward as the tech layoffs and leading indicators for job vacancies roll over.      This week's prints stand for the last data pack ahead of December Fed decision, supposing they came as a surprise would Fed go for a 75bp rate?   The market currently is pricing a 71% chance of a 50bps hike from the Fed at their December meeting. If we see upside surprises in jobs and inflation data, then yes we would likely see a higher probability for a 75bps hike priced in by markets. However, the Fed strategy as noted in the minutes and communicated by various FOMC members seems to be a slower pace of hikes such as 50bps, but higher end rates as well as holding them at that level for longer instead of flipping to cuts immediately. So it wouldn't necessarily be a guarantee that strong data points would shift the Fed to a 75bps hike.   
Gold's Hedge Appeal Shines Amid Economic Uncertainty and Fed's Soft-Landing Challenge

China's Demand For Commodities, Goods And Production Capacity Is Important

InstaForex Analysis InstaForex Analysis 29.11.2022 14:08
Markets plunged on Monday as unrest in China, which was due to frustration at lockdowns, led to sell-offs. Equity markets closed lower, while crude oil prices dropped significantly. But the downturn is unlikely to last long because even though China's demand for commodities, goods and production capacity is important, a lot depends on the statements of world central banks. For example, St. Louis Fed President James Bullard said interest rates will continue to rise as inflation remains high. Lael Brainard, Thomas Barkin and John Williams said roughly the same thing, although they did not claim that aggressive rate hikes should continue. The upcoming speech of Jerome Powell is also expected to be hawkish, which can put pressure on stock markets and support dollar. There are some that believe that stocks will rally because investors have long since played down the Fed's extreme monetary policy stance. Markets are also reacting with great fervor to positive news, such as the short-term increase after the US published its latest inflation data. If Powell's rhetoric also does not turn out to be hawkish, there is a good chance that risk appetite will surge ahead of the Fed's December meeting. Forecasts for today: USD/CAD The pair is showing a local reversal on the back of a strong rebound in crude oil prices after its fall yesterday. A drop below 1.3415 will push quotes to 1.3320. AUD/USD The pair is rising amid improving market sentiment. A break above 0.6720 could bring the quotes to 0.6800. Relevance up to 08:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/328414
Technical Analysis: Gold/Silver Ratio Still On The Rise

Last Events Affect The Sentiment Of Investors In Precious Metals

InstaForex Analysis InstaForex Analysis 29.11.2022 14:38
Concerns about mass protests in China are in the spotlight. According to the New York Times, "After a weekend of confrontations between officials and demonstrators, video from two sites in Shanghai and Beijing showed a heavy security presence." Chinese citizens staged protests against the strict restrictions and lockdowns in China, which led to nationwide protests. Investors are worried that lockdowns and strict restrictions will dampen economic growth in China, the world's second-largest economy. Various members of the Federal Reserve have been very vocal about the upcoming interest rate hikes. These events affect the sentiment of investors in precious metals. One of the more hawkish members of the Federal Reserve is St. Louis Fed President James Bullard. Last week, he commented on the need to raise the Federal Reserve's base rate to 7% to cope with declining inflation. Speaking to MarketWatch editor Greg Robb this week, when asked how long the federal funds rate would need to stay in the 5% to 7% range, he said that "the Federal Reserve will likely need to keep its benchmark policy rate north of 5% for most of 2023 and into 2024 to succeed in taming inflation." During his interview with MarketWatch, Bullard also added that "it seems markets are still underestimating the degree to which the Fed will need to keep policy tight in order to rein in inflation, explaining that there is still some expectation that inflation might subside on its own." Investors are wondering whether Fed Chairman Jerome Powell will tone down the hawkish rhetoric when he speaks Wednesday at an event hosted by the Brookings Institution in Washington. It is now widely believed that the Federal Reserve will raise its base rate by 50 basis points in December. However, the likelihood of a 50 basis point rate hike is decreasing. Currently, the CME's FedWatch tool estimates a 67.5% chance that the Fed will raise its benchmark rate by 50 basis points at the last FOMC meeting this year. Just a day ago, the CME FedWatch tool predicted a 75.8% chance, and a week ago it predicted an 80.6% chance.     search   g_translate     Relevance up to 11:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/328440
Fed is expected to hike the rate by 50bp, but weaker greenback and Treasury yields don't play in favour of the bank

FxPro's Alex Kuptsikevich: It is unlikely that the Fed would take this step. Monetary policy operates with a lag of about half a year

Alex Kuptsikevich Alex Kuptsikevich 29.11.2022 18:57
Of course, absolute price levels and the state of the economy give little reason to rejoice, but the situation has stopped deteriorating - this is already significant progress. Under such circumstances, the ECB is unlikely to pause   The annual inflation rate likely passed its peak last month, and November's data, following Germany, will show a slowdown. It will not be surprising if inflation proves to be "less sticky" and not supported by weakening demand. Leading inflation indicators such as producer and import prices have been slowing for months. Logistical problems are slowly but surely being solved, causing a reduction in the time and cost of shipping international goods. And all this on top of falling energy prices. Of course, absolute price levels and the state of the economy give little reason to rejoice, but the situation has stopped deteriorating - this is already significant progress. Under such circumstances, the ECB is unlikely to pause, preferring to raise the rate further in the coming quarters and sell assets off the balance sheet. This will be a problem for the economy but will anchor inflation expectations, which is the only correct and historically proven long-term strategy for central banks. The Fed has signalled in the last commentary that it is prepared to switch from a run to a step to take a better look at the effects of the hikes that have already been made   It is unlikely that the Fed would take this step. Monetary policy operates with a lag of about half a year. The Fed has signalled in the last commentary that it is prepared to switch from a run to a step to take a better look at the effects of the hikes that have already been made. Most likely, we will see a 50-point hike in December, and whether the next one will be a 50 or 25-point increase on February 1st will be determined by inflation data coming out in mid-December and January. In addition, we note the steady upward trend in weekly jobless claims, a frequent precursor to a reversal in monthly employment data. We would not be surprised if the coming reports are shocked by job cuts. People may rush to buy, assuming prices will continue to rise, so there is no point in postponing a purchase   Despite the record, Black Friday sales growth has lagged behind inflation. Overall, consumers are struggling to maintain their standard of living, faced with rising borrowing costs and increased fuel and food costs. The fact that people are spending despite gloomy forecasts from economists and corporate CEOs, the market downturn (an essential factor for the US) and the halt of consumer support programs of the covid-restriction era is appealing. People may rush to buy, assuming prices will continue to rise, so there is no point in postponing a purchase.
Assessing 'Significant Upside Risks to Inflation': Insights from FOMC Minutes

Rates Spark: Market Participants Await Nervously Powell’s Speech (Fed) This Evening

ING Economics ING Economics 30.11.2022 08:25
Back in August, the Fed pushed back against an easing of financial conditions and triggered a sizeable sell-off in Treasuries. Markets will be wary of a repeat of this pushback in today’s speech by Fed Chair Powell In this article The Treasury market is nervous about a repeat of the August hawkish Fed pushback Closer to the end of this cycle but the 5Y is most at risk of cheapening today Today’s events and market views   The Treasury market is nervous about a repeat of the August hawkish Fed pushback Market participants await nervously Powell’s speech this evening after the October CPI report sent bond yields lower and riskier asset prices higher. Even if the surprise slowdown in inflation is good news, it is only the first in a long series of conditions the Fed needs to see before it pauses its hiking cycle. Longer-term, the direction of travel is indeed towards lower inflation and an end to this tightening cycle but we expect the Fed to take Fed Funds rates some 100bp higher than currently, just under 5%, before this is the case. The Fed will be wary of markets undoing some of the painstakingly-delivered tightening of financial conditions There is just over two months to go before the last hike in this cycle in our view. In the meantime, the Fed will be wary of markets undoing some of the painstakingly-delivered tightening of financial conditions. There is a precedent. In June to August of this year, 10Y Treasuries rallied 90bp peak to trough, helped by a lower-than- expected inflation report. This prompted a strong pushback from Fed officials in August, culminating in Powell’s Jackson Hole speech. Treasuries went on to sell off 167bp. The drop in nominal and real Treasury yields prompted a pushback by the Fed Refinitiv, ING Closer to the end of this cycle but the 5Y is most at risk of cheapening today Where this phase is different is that the Fed is having a harder time delivering its hawkish message as it signalled in no uncertain terms that the pace of hikes will soon reduce from 75bp to 50bp per meeting. There is still one employment and one inflation report before the December 14th meeting, but the burden of the proof is on those calling for another 75bp hike. Still, the 50bp drop in nominal 10Y Treasury yields, and 26bp in real yields, is a headache for the Fed. So is the aggressive flattening of the term structure, meaning that even if markets continue to expect the Fed to deliver hikes, the effect of these hikes do not feed through to longer borrowing costs. With Treasury yields over 100bp below where we expect the Fed funds rate to peak, we think the market is vulnerable to a sell-off around Powell’s speech. The 50bp drop in nominal 10Y Treasury yields, and 26bp in real yields, is a headache for the Fed Curve flattening is an inevitable effect of markets seeing the end of the Fed’s cycle, but we think this makes the sectors that rallied the most into today’s speech most at risk of a retracement. Rather counter-intuitively, this should mean a re-steepening of the 2s10s slope on the Treasury curve. If Powell is successful in delivering his hawkish message, the 5Y point on the curve should retrace its recent outperformance, which will be visible in a richening of the 2s5s10s butterfly. The curve flattening and richening of the 5Y point are at risk of retracing around Powell's speech Refinitiv, ING Today’s events and market views The eurozone HICP inflation looms large on today’s agenda. Spanish and German releases yesterday came on the low side of expectations, although this was less visible in the EU-harmonised measure that is most relevant for today’s HICP print. Still, a confirmation that other member states are also seeing inflation ease off, however slightly, is welcome news for markets that looked overstretched after their November rally. German unemployment figures complete the list of European releases. In bond supply, Germany will auction 10Y debt. Fed Chair Jerome Powell is due to speak this evening. We expect him to push back against the tightening of financial conditions that occurred in the wake of the lower- than-expected CPI report. US releases feature the second reading of US third quarter GDP, including core PCE. This will complete the ADP employment report, Chicago PMI, job openings, and pending home sales. Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Euro to US dollar - Ichimoku cloud analysis - 21/11/22

If ECB policymakers should make a decision between fighting inflation and avoiding recession, they will likely choose fighting inflation says Ipek Ozkardeskaya

Ipek Ozkardeskaya Ipek Ozkardeskaya 29.11.2022 20:58
Our editors asked Swissquote's Ipek Ozkardeskaya about her thoughts about this week's data, which seems to be crucial ahead of decisions of Federal Reserve and European Central Bank. What's more, we're astonished by Black Friday results which are said to near $10bn, so we asked Ipek for a comment on this case as well.   The ECB, nor any other central bank, can't choose to escape recession over fighting inflation   The ECB, nor any other central bank, can't choose to escape recession over fighting inflation, because inflation is toxic for an economy in the long run, and should be dealt with rapidly to avoid it from becoming structural. Therefore, if ECB policymakers should make a decision between fighting inflation and avoiding recession, they will likely choose fighting inflation. They could however adjust the speed and the force of their action according to the economic conditions. in this respect, recession could slow down the pace of tightening but won't stop it.   Read next: Investors also seem to have become less sensitive to the Ukraine War, which was a significant driver of crude in the first half of 2022 says Finimize's Luke Suddards | FXMAG.COM    This week's prints stand for the last data pack ahead of December Fed decision, supposing they came as a surprise would Fed go for a 75bp rate?   Probably not. The Fed has been clear enough in its communication that they are not done fighting inflation. However, because there is a delay between the monetary policy action and the economy's reaction, the Fed officials prefer taking smaller steps while keeping the topside open for higher rates. Therefore, I wouldn't expect the Fed to surprise with another 75bp hike in December. Unfavourable economic data - stronger-than-expected jobs, high-than-expected inflation - would rather be felt for the Fed's end-rate expectations. For now, it is around 5-5.25%.       When it comes to the Black Friday sales, there are two positive forces that explain the record figures   Despite the record Black Friday sales, retailers broadly reported a rise in inventories and slowing discretionary spending ahead of the peak US shopping season. When it comes to the Black Friday sales, there are two positive forces that explain the record figures. 1. Higher inflation pumps up the final numbers. 2. It is possible that people chose to take advantage of promotions as their purchasing power weakened by inflation. This may explain why we had record Black Friday sales this year.    But even if we factor in inflation there is still be growth in this year's holiday consumption.   This is not necessarily great news for the Fed, which targets a consumer-led recession to slow down inflation. Therefore, the US record pre-holiday sales, combined with the strong monthly retail sales data hint that the US consumer demand has not weakened enough to tame inflation. This means that the Fed would only feel more comfortable pushing its rates higher and get the slow down it is looking for.
FX Daily: Asymmetrical upside risks for the dollar today

The US Dollar (USD) Is Rising Right And Market Is Awaiting For Fed President Jerome Powell's Speech

InstaForex Analysis InstaForex Analysis 30.11.2022 09:10
The current wave markup is quite clear, and the news background is complex. The US dollar is rising right now. However, the market is unwilling to increase demand for it in any way, so even if one downward correction wave is constructed, there are still significant issues. Recalling the numerous FOMC members who have spoken on the state of the economy in recent weeks, their rhetoric has become even more strident. Although the market is anticipating a slowdown in the PEPP's rate of tightening, Fed officials' rhetoric indicates that it is still getting tighter, so this is a good time for the US dollar to resume its upward trend. But as I've already mentioned, the market is unimpressed with the dollar and is unwilling to purchase it for some reason. What exactly is causing the market's fear? The rate will increase in the US for at least a few more meetings. After that, it will stay high for at least 1.5 years. How many more shocks to the world economy can there be in the next 1.5 years? How many more geopolitical conflicts and escalations will we witness during this period? And the US dollar continues to be a reserve currency, with rising demand in challenging times. Therefore, I wouldn't conclude that the market has lost faith in the dollar and is now disillusioned with it. Market players are watching for a significant event to restart its increasing demand. What incidents can be called iconic? First, Fed President Jerome Powell will deliver today's speech. Although Mary Daly's and James Bullard's opinions are undoubtedly noteworthy and carry significant weight, Powell's rhetoric is still far more significant. The market may not take Daly or Bullard at their word, but it is much more likely to listen to what the FOMC chairman says. Additionally, Powell's rhetoric no longer raises any concerns. Powell is also expected to discuss the necessity of maintaining the rate above 5% for a considerable time. What additional "hawkish" elements does the market require? A new nonfarm payroll report for the US will be made public on Friday. Although this indicator's value has been declining in recent years, it is still at levels that cannot be considered weak. Please remind me that the Federal Reserve and Congress think the labor market is still in excellent shape and that it is inappropriate to discuss a recession in the American economy. The market may increase demand for US currency if Friday's payrolls again show a respectable value. The fact that the rate is rising and the labor market is holding steady is just a fantastic alignment for the American economy. A new report on US inflation will be released in mid-December, and that report will serve as the foundation for the decisions made at the FOMC meeting that same month. If inflation resumes its insignificant slowdown, the FOMC members' rhetoric may become more constrictive. Any of this will not harm the US dollar. The market itself is still the problem. I conclude that the upward trend section's construction is complete and has increased complexity to five waves. As a result, I suggest making sales with targets close to the estimated 0.9994 level, or 323.6% Fibonacci. There is a chance that the upward section of the trend will become more complicated and take on an extended form, but this chance is currently at most 10%. The construction of a new downward trend segment is predicated on the wave pattern of the pound/dollar instrument. Since the wave marking permits the construction of a downward trend section, I cannot advise purchasing the instrument. With targets around the 1.1707 mark, or 161.8% Fibonacci, sales are now more accurate. The wave e, however, can evolve into an even longer shape. Relevance up to 06:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/328530
Decarbonizing Steel: Contrasting Coal-based and Hydrogen-based Production Methods

Forex Market: The Inflation Print Will Be Key For The Polish Zloty (PLN)

ING Economics ING Economics 30.11.2022 09:20
Fed Chair Jerome Powell will remind the market of the central bank's hawkish determination today, supporting the dollar. Meanwhile, softer inflation is trimming expectations in the eurozone. Polish inflation will test the central bank's decision not to raise rates. And the EC will publish a statement on Hungary and its rule-of-law progress In this article USD: Holding pattern EUR: Inflation plays second fiddle to Powell GBP: Lack of domestic drivers CEE: Polish inflation will test central bank dovish camp   Federal Reserve USD: Holding pattern Despite geopolitical challenges to the East, it has been a quiet start to the week for FX markets. The trade-weighted dollar index DXY is tracing out a relatively narrow range in the 105.30 to 108.00 area. The next clear catalyst on the agenda is a speech by Fed Chair Powell tonight at 1930CET discussing the economy and the labour market. This comes at a time when the buy-side report two of their top three tail risks as: i) inflation staying high and ii) central banks staying hawkish. (The third being geopolitics.) We would say that Chair Powell has recently shown to be at the more hawkish end of the spectrum and that tonight’s event risk is a positive one for the dollar. Dollar price action after Chair Powell’s speech should also tell us something about FX positioning. If the dollar fails to rally on a hawkish speech it may continue to tell us that the market is caught long dollars at higher levels and that some further consolidation may be due into December. For the time being, however, we think the macro environment continues to favour the dollar and see Powell’s speech, the October PCE price data (Thursday) and November jobs data (Friday) as upside risks to the dollar. Chris Turner EUR: Inflation plays second fiddle to Powell Spanish and German inflation came in lower than expected yesterday. The German CPI fell 0.5% to 10.0% in November, thanks primarily to the energy base effect and lower prices for leisure and entertainment following the autumn holiday period, while food prices continued to rise. Our economics team remains sceptical that this is the series' peak, and we expect inflation to accelerate again in December. Yesterday’s numbers mean that markets are expecting a lower reading in the eurozone-wide CPI today. However, some impact on European Central Bank rate expectations has already occurred, as markets have trimmed around 7bp from December pricing, which is now at 54bp. President Christine Lagarde is scheduled to speak at least twice more before the 15 December policy announcement, but she may not change markets' expectations of a 50bp hike. The impact of the inflation story on the EUR/USD has been, predictably, limited. External factors and dollar dynamics continue to drive the pair's performance, and we see downside risks today given that Fed Chair Powell is scheduled to speak later. A break below 1.0300 could fuel more bearish momentum, bringing EUR/USD back to the 1.0200/1.0250 levels seen earlier this week. This morning, Norges Bank will publish daily FX sales for the month of December. Higher-than-expected NOK sales in 3Q22 contributed to NOK weakness, but the Bank unexpectedly reduced them in November from NOK 4.3 billion to 3.7 billion. Any further reductions may support the currency today. Francesco Pesole GBP: Lack of domestic drivers Yesterday’s testimony by Bank of England Governor Andrew Bailey did not yield any market-moving headlines. Today we’ll hear from Chief Economist Huw Pill, who recently pushed back against a 75bp hike and may therefore keep BoE rate expectations in check. Cable to test 1.1800 as Powell’s speech may support the dollar today. Francesco Pesole CEE: Polish inflation will test central bank dovish camp Today's calendar offers November inflation in Poland, the first print in the CEE region. We expect inflation to be unchanged at 17.9% year-on-year, close to market expectations. However, as usual, the range of surveys is wide, and in addition, Polish inflation has by far posted the biggest surprise in the region over the past three months. Given the pause in the National Bank of Poland's hiking cycle, we can expect a lot of market attention. We will also see the second release of Poland's 3Q GDP, which surprised positively in the flash reading (0.0% vs 0.9% quarter-on-quarter) a few weeks ago. In Hungary, PPI for October will be published and later today the European Commission is expected to release a statement on the progress made in the rule of law dispute and Hungary's access to EU funds. The statement should have been published last week; however, the EC requested more time. Reports from journalists suggest that the EC will recommend freezing part of the cohesion funds with conditions to be met by Hungary but will also recommend approval of the Recovery Plan. Yesterday's reports also suggest that the Ecofin decision will be postponed from 6 December to 12 December, but Hungarian officials remain optimistic about the final decision. In the Czech Republic, the Czech National Bank will publish its semi-annual Financial Stability Report including possible changes to macroprudential tools. We do not expect significant changes to the current mortgage rules or capital requirements for the banking sector, but we will see a press conference later today, which should be attended by the governor, who has not been seen in public very often in recent months. In the FX market, the inflation print will be key for the Polish zloty, which could revive market expectations and support the zloty in the short term. However, unchanged inflation would leave the zloty under pressure from a stronger dollar, moving back above 4.70 per euro, in our view. The Hungarian forint should benefit from the normalisation of EU relations and the end of the risk of a permanent loss of EU money. This should help the forint below 405 per euro. Frantisek Taborsky Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
FX Daily: Upbeat China PMIs lift the mood

The Chinese Authorities To Prepare For Further Easing In Its Covid Policy

Saxo Bank Saxo Bank 30.11.2022 09:31
Summary:  A dash of optimism on Tuesday with Chinese officials continuing their commitment to ease the Zero Covid policies, but US economic data continued to disappoint and focus remains on how hawkish Fed Chair Powell can get today. Along with that, a slew of pivotal US data in the week ahead kept the US dollar range-bound. Crude oil market however continued to see volatility despite easing China demand concerns, as OPEC+ production cut hopes were shattered with the weekend meeting moving online. Eurozone CPI on watch today while the softer Australia CPI for October paves the way for RBA to maintain its slower rate hike path next week. What’s happening in markets? The major US indices, the Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) continue to retreat The major US indices ended weaker, with NASDAQ100 sliding 0.7% and the S&P500 edging down 0.2% as investors are awaiting Fed Chair Powell’s speech later Wednesday. Powell will likely underscore the Fed’s desire to keep interest rates at elevated levels until inflation eases. The latest US consumer confidence reading (released Tuesday) for November showed US consumer confidence fell to a four-month low. The biggest drag on US markets on Tuesday, were information technology, utilities, and consumer discretionary. Apple (AAPL) shares fell 2.1% after the company said that it would deliver 6 million fewer iPhone Pro units in Q4 due to production disruption in Zhengzhou, China. The real estate, energy, financials, industrials sectors outperformed. United Parcel Services (UPS:xnys) gained 2.8% after the Biden Administration called on Congress to prevent a U.S. rail strike. Apple (AAPL) shares fell 2.1%, continuing their three-day pull back, which totals almost 5% ..on the back of the covid lockdown fallout in China. Apple relies heavily on the key manufacturing hub of Zhengzhou, which is now in lockdown. And as a result Apple’s production shortfall could be close to 6 million iPhone Pro units this year (this is according to people who know about Apple’s assembly operations). These reports are swirling at a time when Apple previously dropped its overall production target to about 87 million units (down from the prior 90 million estimate) on the back of demand slowing. However, Apple and the Foxconn facility are allegedly planning to make up the shortfall in lost output in 2023. But, looking at Apple shares from a technical perspective, its trading 8% lower than its 200 day moving average and the indicators suggest Apple shares could see further downward pressure - as suggested by the weekly and monthly charts. US treasuries (TLT:xnas, IEF:xnas, SHY:xnas) rose in yields ahead of Fed Chair Powell’s speech Yields edged up across the yield curve with those in the long-end rising the most. The 2-year yield rose 4bps to 4.47% while the 10-year was 6bps cheaper at 3.74%. Large supply from corporate issuance put some upward pressure on yields. There were about 11 deals with a total amount of about USD18 billion, including USD8.25 billion from Amazon, on Tuesday. Fed Chair Powell is scheduled to speak on the economy and labor market at a Brookings Institution event today on Wednesday at 1:30 U.S. eastern time (2:30am SG/HK). Investors are concerned if Powell would give hints of a terminal Fed Fund rate higher than the 5% being priced in by the market. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) surged on renewed optimism about reopening and additional support to the property sector Hang Seng Index surged 5.2% and Hang Seng TECH Index jumped 7.7%. All sectors gained, with information technology, consumer discretionary, and properties leading the charge higher. The CSI 300 gained 3.1%. The market sentiment was first buoyed by new measures from the Chinese securities regulator to relax its restriction on property developers from equity financing. Then the renewed optimism about China reopening from stringent pandemic control added to the market rally. Leading Chinese developers listed in Hong Kong jumped by 3-14%. In the mainland’s A-share markets, real estate, financials, and food and beverage led the charge higher. The strong revenue and margin beat of Pinduoduo (PDD:xnas) aided the surge of Alibaba (09988:xhkg) by 9.1% and JD.COM (09618:xhkg) by 10.9%. The ADR of Bilibili (BILI:xnas) jumped 22% overnight after reporting results beating market expectations. FX: Dollar range-bound ahead of Powell’s speech While the commodity currencies gained on Tuesday after a relief that China officials maintained their commitment to ease the Zero covid policies despite the protests and a recent rise in cases, cyclical currencies like CAD weakened as crude oil futures traded lower. Overall the dollar was range-bound with expectations around a hawkish Powell today picking up given the substantial easing in financial conditions. EURUSD remained stuck below 1.0400 while USDJPY has gains above 139 getting limited. Crude oil (CLZ2 & LCOF3)volatile with large inventory drawdown ahead of OPEC The relief from continued commitment of China officials to ease zero covid restrictions helped crude oil prices gather some momentum early on Tuesday, but the cheer was short-lived as other concerns still clouded the outlook. US economic data showed economic momentum is weakening, while Fed Chair Powell’s speech today will be key for the dollar and the markets. On the supply side, API survey reported a larger than expected crude draw, with inventories down 7.80mm b/d (exp -2.49mm b/d) but production cut expectations from OPEC (read below) this weekend eased as the meeting moved online. WTI futures traded around $79/barrel, while Brent traded lower after touching $86/barrel earlier. Technical update on Brent crude oil from Kim Cramer, our Technical Analyst. The update also takes a closer look at WTI crude oil, Dutch TTF gas and Henry Hub natural gas.   What to consider? US data disappoints, all eyes on Powell Consumer confidence pared back in November to 100.2 from 102.5 (exp. 100.00); the Present Situation Index decreased to 137.4 from 138.7 last month, while the Expectations Index declined to 75.4 from 77.9. Meanwhile, home prices in 20 large cities slipped 1.2% in September, according to the S&P CoreLogic Case-Shiller gauge. More critical data from ISM to PCE to NFP is lined up for the second half of the week, but before we get there, Fed Chair Powell’s speech will be the one to watch. Easing financial conditions raise concerns about inflation shooting back higher, but pushback from Fed officials so far hasn’t been enough for the markets yet. It remains to be seen what more Fed Chair Powell can deliver today. Reopening optimism returned in China While the daily new cases continued to surge and anti-restriction protests sprang up across major cities, investors took comfort from the light-touch reactions from the Chinese authorities and hints of preparing to ease the pandemic control measures further. A Party-controlled newspaper in Beijing published a long article reporting the stories of people having recovered from Covid, which seemingly aimed at easing people’s worries about the disease. The National Health Commission issued a memo pledging to increase the vaccination rate of the country’s senior population. In a press conference later in the afternoon, health officers again emphasized increasing the senior population’s vaccination rate as a priority and highlighted the Omicron variants as being less severe than the original virus. Officials and the state-controlled media have taken a light-touch approach to the recent protests and have not put any political stigma on the incidents. Putting these together, investors are taking the development as hints of the Chinese authorities to prepare for further easing in its Covid policy. China relaxes its restrictions on developers from attaining equity financing The China Securities Regulatory Commission (CSRC) fired the so-called “third arrow” to ease some of the restrictions previously imposed on property developers from attaining equity financing. While property developers are still barred from doing IPO in the domestic equity market, they are now domestically listed A-share developers and some Hong Kong-listed H-share developers to issue new shares to raise capital as long as the proceeds are used for restricting, M&A activities, refinancing, buying existing property projects, repaying debts, and project construction. However, proceeds are not allowed to be used in land acquisition. Softer Australia CPI paves the way for a dovish RBA next week Australian inflation data for October showed inflation is continuing to fall, and far more than expected which supports the RBA’s dovish tone and only hiking rates by 0.25% next week (December 6). Trimmed mean CPI which excludes volatile items, rose 5.3% year-on-year in October, which marks a fall in price rises, compared to the prior read, 5.4% YoY. This also shows prices for consumer goods and services in Australia are falling less than the market expects as Trimmed CPI was expected to rise 5.7%. Meanwhile, headline inflation also rose less than expected, showing consumer prices rose 6.9% YoY, which was cooler than prior 7.3% read, and less than the 7.6% expected. This follows a suite of Australian economic data that supports the RBA remaining more conservative with rate hikes. Earlier in the week, Australian retail trade data unexpectedly fell, showing consumers are feeling the strain of inflation and rising interest rates. As a house, we think spending will likely continue to slow into 2023, with the full impact of rate hikes passing through households under financial duress giving deb to income ratios are some of the highest in the world. China PMIs likely to show demand weakness China’s NBS manufacturing PMI is expected to decline to 49.0 in November, further into the contractionary territory, from 49.2 October, according to the survey of economists conducted by Bloomberg. The imposition of movement restrictions in many large cities has incurred disruption to economic activities. High-frequency data such as steel rebar output, cement plants’ capacity utilization rates, and container throughputs have weakened in November versus October. Economists surveyed by Bloomberg expect the NBS Non-manufacturing to slow to 48.0. in November from 48.7 in October, on the enlargement of pandemic containment measures. OPEC+ weekend meeting goes virtual Instead of meeting in Vienna as planned earlier, OPEC+ has now moved its December 4 meeting online which is downplaying expectations of any significant policy change after production cut expectations gathered hopes this week with crude oil prices falling to test key support levels. Some delegates also suggested that the cartel is leaning towards approving the same production levels agreed in October, when a 2mb/d cut in output was announced. Bilibili (BILI:xnas/09626:xhkg) Q3 beat expectations Bilibili reported 11% Y/Y revenue growth in Q3 and net loss came in at a smaller amount of RMB1.7 billion. User growth was solid, with average daily active users growing 25% Y/Y to 90.3 million, average monthly active users growing 25% to 332.6 million, and average monthly paying users increasing 19% to 28.5 million. Operating margin improved to -31.9% in Q3 from -44.63 in Q2 and -51.1% in Q3 last year. The company guides for a 4-7% Y/Y increase in Q4 revenue, below the consensus estimate of 8% Y/Y. EUR may be watching the flash Eurozone CPI release Eurozone inflation touched double digits for October, and the flash release for November is due this week. The headline rate of the harmonized index of consumer prices (HICP) is expected to ease slightly to 10.4% YoY from 10.7% YoY last month. The core rate that excludes food and energy prices is forecast to however remain unchanged at 5% YoY. This print will be key for markets as the magnitude of the ECB’s next rate hike at the December meeting is still uncertain, and about 60bps is priced in for now. But even with a slight cooling in inflation, which will most likely be driven by lower energy costs, there is a possibility that inflation will likely remain high in the coming months as winter months progress and cost of living gets worse. Crowdstrike (CRWD:xnas) tumbled on guidance miss The shares of Crowdstrike plunged 18.7% in the extended-hour trading after the cybersecurity provider issued Q4 revenue guidance below market expectations. For our look ahead at markets this week – Read/listen to our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: https://www.home.saxo/content/articles/equities/apac-market-insights-30-nov-2022-30112022
Supply Trends Resurface: Analyzing the Impact on Market Dynamics

Austrailan CPI Report Gives The RBA Room To Remain Dovish

Saxo Bank Saxo Bank 30.11.2022 09:39
Summary:  Daily Dose of financial insights for investors and traders; Apple skids 5% in three days what could be next. Australian inflation slows more than expected, what this mean for interest rates and the Aussie dollar. Coal stocks surge to record highs. The major US indices, the Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) continue to retreat   The major US indices closed on the back foot again as investors continue to weigh the deteriorating Covid developments and increased restrictions in China, while also awaiting Federal Reserve Chair Jerome Powell’s speech later Wednesday. Powell’s will likely underscore the Fed’s desire to keep interest rates at elevated levels until inflation eases. And it’s fair to say that this double blow, of persistent inflation and rising interest rates is denting sentiment. The latest US consumer confidence reading (released Tuesday) for November showed US consumer confidence fell to a four-month low. The biggest drag on US markets on Tuesday, were technology companies with Apple shares continuing to slide. While some travel companies shares saw some stellar gains, with Carnival Cruise (CCL) shares rose almost 5% after announcing Cyber Monday bookings volumes were 50% higher than Cyber Monday 2019. And Norwegian Cruise Line Holdings (NCLH) shares followed higher on the sentiment boost. Apple (AAPL) shares fell 2.1%, continuing their three day pull back, which totals almost 5% ...on the back of the covid lockdown fallout in China. Apple relies heavily on the key manufacturing hub of Zhengzhou, which is now in lockdown. And as a result Apple’s production shortfall could be close to 6 million iPhone Pro units this year (this is according to people who know about Apple’s assembly operations). These reports are swirling at a time when Apple previously dropped its overall production target to about 87 million units (down from the prior 90 million estimate) on the back of demand slowing. However, Apple and the Foxconn facility are allegedly planning to make up the shortfall in lost output in 2023. However, looking at Apple shares from a technical perspective, its trading 8% lower than its 200 day moving average and the indicators suggest Apple shares could see further downward pressure - as suggested by the weekly and monthly charts. Australia’s ASX200 (ASXSP200.1) rises 0.3% mid-session, which brings the market closer to its record high, that it's just 4.5% away from  What is supporting the Aussie market rally on Wednesday, is firstly - weaker than expected inflation data was released, which gives the RBA room to remain dovish and only rise rates by 0.25% next week. Secondly, ahead of the northern hemisphere winter, coal shares are trading considerably higher, trading at new record highs, with Whitehaven Coal (WHC) up 7.3% to $9.34 and New Hope Coal (NHC) up almost 6% to $5.88. Trimmed mean CPI (which excludes volatile items), showed consumer prices rose 5.3% year-on-year in October, which means that prices of goods and services in Australia are falling, compared to the prior read (5.4% YoY). This also shows price rises are not as bad as feared (Trimmed CPI was expected to rise 5.7%). Meanwhile, headline inflation also rose less than expected, up 6.9% YoY, which was cooler than prior read (7.3%), and less than the 7.6% expected. Remember, this follows a suite of Australian economic data that supports the RBA remaining more conservative with rate hikes ahead. Earlier in the week, Australian retail trade data unexpectedly fell, showing consumers are feeling the strain of inflation and rising interest rates. So where to from here? We think spending will likely continue to slow into 2023, as the full impact of rate hikes passes through households, with some under financial duress, given debt to income ratios are some of the highest in the world. This means, the RBA could not only potentially stop rising rates sooner than expected, but now the market is thinking the RBA will begin to cut rates in December next year. Australian dollar holds onto monthly gain Despite the weaker than expected Australian inflation data, that would traditionally cause the Australian dollar (AUDUSD) to fall, today the Aussie is steady at 0.669. However, the AUD is up 5.3% this month. I suspect the reason for this is because it's ahead of LNG and coal shipments likely rising, to cater to the northern hemisphere winter. For a weekly look at what to watch in markets - tune into our Spotlight.For a global look at markets – tune into our Podcast.     Source: Daily Dose of financial insights for investors and traders; Apple skids 5% in three days, Australian inflation slows more than expected | Saxo Group (home.saxo)
Financial World in a Turbulent Dance: Lego, Gold, and Market Mysteries

Florida Governor Ron DeSantis Warned Against Apple’s Monopoly Powers

Saxo Bank Saxo Bank 30.11.2022 09:46
Summary:  Markets are in defensive mode ahead of a speech from Fed Chair Powell later today on fears of hawkish pushback against the recent easing of financial conditions and after having priced in significant rate cuts beyond the end of 2023. Economic data releases continue to roll in, with the Eurozone flash November CPI data up this morning after slightly softer inflation releases around Europe this week and US November ADP private payrolls data up today ahead of Friday’s US jobs report.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures are still boxed into a tighter and tighter range between the 100-day moving average at 3,927 and the 200-day moving average at 4,051. The key event today is of course the FOMC rate decision and more importantly the subsequent press conference where all eyes are on Fed Chair Jerome Powell following the latest rally due to the recently lower US inflation print. Financial conditions have eased considerably, and Powell will likely not get away with talking about terminal rates if he wants to tighten conditions again in line with their strategy of easing inflationary pressures. After the US market call, there are key earnings from Salesforce and Snowflake which could impact sentiment in Nasdaq 100 futures. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) Hang Seng Index climbed 0.8% and The CSI 300 gained 0.2% as optimism returned about an exit from the stringent dynamic zero-Covid policy, if not in name, at least gradually in practice in mainland China. Investors looked beyond the disappointing Manufacturing PMI data, which came at 48, weaker than expectations and further into the contractionary territory. The focus of the investors, however, was on the recent supportive measures to the real estate sector and signs of sticking to or even preparing for more relaxation of China’s stringent pandemic control restrictions even as Covid cases are on the rise. Teleco names outperformed, with China Unicom (00762:xhkg) and China Telecom (00728:xhkg) rising 6-7%. USD edging higher ahead of anticipated hawkishness from Fed Chair Powell Concerns are mounting that Fed Chair Powell is set to administer a hawkish broadside to US markets after a powerful easing of financial conditions in recent weeks and the pricing in of a significant Fed policy easing starting in late 2023 (see more below). But USD bulls have their work cut out for them if they expect to reverse the recent USD sell-off, even if we have seen a solid reversal in places. The key zone for EURUSD stretches from the 1.0223 pivot low and down to perhaps 1.0100, while the similar zone for USDJPY stretches from the 142.25 pivot high all the way to 145.00. Crude oil (CLF3 & LCOF3) volatile with large inventory drawdown ahead of OPEC The relief from continued commitment of China officials to ease zero covid restrictions helped crude oil prices gather some momentum early on Tuesday, but the cheer was short-lived as production cut expectations from OPEC+ this Sunday eased as the meeting moved online and economic data from the US and China showed weakening momentum. Focus on speech from Fed Chair Powell given its potential impact on the dollar, and EIA’s weekly report after the API reported a larger than expected crude draw, with inventories down 7.80mm b/d (exp -2.49mm b/d). WTI futures traded around $79/barrel, while Brent trades back below $84 after touching $86/barrel on Tuesday. US treasury yields recovered after dip to local lows. (TLT:xnas, IEF:xnas, SHY:xnas) Yields edged up across the yield curve with those in the long end rising the most. The 2-year yield rose 4bps to 4.47% while the 10-year rose 6 bps to 3.74%. Large supply from corporate issuance put some upward pressure on yields. There were about 11 deals with a total amount of about USD18 billion, including USD8.25 billion from Amazon, on Tuesday. Fed Chair Powell to speak later today. (more below) What is going on? Reopening optimism returned in China While the daily new cases continued to surge and anti-restriction protests sprang up across major cities, investors took comfort from the light-touch reactions from the Chinese authorities and hints of preparing to ease the pandemic control measures further. A Party-controlled newspaper in Beijing published a long article reporting the stories of people having recovered from Covid, which seemingly aimed at easing people’s worries about the disease. The National Health Commission issued a memo pledging to increase the vaccination rate of the country’s senior population. In a press conference later in the afternoon, health officers again emphasized increasing the senior population’s vaccination rate as a priority and highlighted the Omicron variants as being less severe than the original virus. Officials and the state-controlled media have taken a light-touch approach to the recent protests and have largely refrained from putting any political stigma on the incidents. Putting these together, investors are taking the development as hints of the Chinese authorities to prepare for further easing in its Covid policy. Apple criticized by possible 2024 presidential hopeful DeSantis, also in the anti-trust spotlight Florida governor Ron DeSantis, a potential rival of Donald Trump for the 2024 presidential nomination, inveighed against Apple for providing “aid and comfort to the CCP” by turning off access in China to the AirDrop app that could be used to organize protests. As well, he warned against Apple’s monopoly powers after Twitter CEO Elon Musk complained that Apple had pulled virtually all advertising from the platform and threatened to remove it from their app store. “Don’t be a vassal of the [Chinese Communist Party] on one hand and then use your corporate power in the United States on the other to suffocate Americans and try to suppress their right to express themselves” DeSantis said. US Senators also weighed in against the company on the issue as anti-trust efforts are afoot in Congress. Crowdstrike beats estimates The US cyber security company reported Q3 revenue of $581mn vs est. $574mn and adj. EPS of $0.40 vs est. $0.31 as the underlying structural growth is still strong in the industry. The Q4 outlook on earnings was much better than expected but the Q4 revenue outlook at $620-628mn vs est. $635mn spooked investors, sending shares down 19%. Management said that the lower guidance was due to increased macroeconomic headwinds. Commodities see November gains on China optimism and Fed Pivot The Bloomberg Commodity Index trades up 2% on the month with strong gains among industrial and precious metals offsetting minor declines in energy and grains. The sector has been supported by a 4% drop in the dollar and sharply lower US bond yields on speculation the FOMC will soon slow its pace of rate hikes. The industrial metal sector trades up 12% on optimism that China may shift away from Covid Zero policies and provide additional stimulus to boost demand in the top metal-consuming economy. Copper, up 8%, is heading for its best month since April 2021 while gold and silver has been supported by the change in direction for the dollar and yields.  Wheat prices in Chicago and Paris scrap the bottom with ample supply, especially from the Black Sea region adding downward pressure. What are we watching next? OPEC+ weekend meeting goes virtual Instead of meeting in Vienna as planned earlier, OPEC+ has now moved its December 4 meeting online which is downplaying expectations of any significant policy change after production cut expectations gathered hopes this week with crude oil prices falling to test key support levels. Some delegates also suggested that the cartel is leaning towards approving the same production levels agreed in October, when a 2mb/d cut in output was announced. Fed Chair Powell to speak today – will he lean hawkish? Fed Chair Powell is scheduled to speak on the economy and labor market at a Brookings Institution event today at 13:30 U.S. eastern time. Market participants are expecting hawkish comments from Powell about higher terminal rates for 2023.  Given the huge shift in market pricing of the Fed policy rate in 2024 (cuts of over 150 basis points from the 2023 rate peak are currently priced by end 2024) the more interesting angle on Powell’s comments are whether he pushes back against the recent strong easing of financial conditions and this anticipation that the Fed will be in full retreat in 2024. The September FOMC “dot plot” projections show a wide dispersion of forecasts, but the median projection is that the policy rate will drop about 100 basis points by end 2024 from end 2023. Earnings to watch Today’s earnings focus is US technology sector earnings from Salesforce and Snowflake. Analysts expect Salesforce FY23 Q3 (ending 31 October) revenue growth to slow down to 14% y/y down from 27% y/y a year ago supporting the growth slowdown in the technology sector. To avoid the negative impact from the earnings release Salesforce must deliver meaningful improvement in profitability or face downward pressure on its share price. Snowflake is expected to see FY23 Q3 (ending 31 October) revenue growth to slow down to 61% y/y down from 110% y/y a year ago. As with Salesforce, Snowflake must deliver significant improvements in profitability to avoid a negative impact from falling revenue growth which current trajectory is worse than estimated just one year a ago. Today:  Royal Bank of Canada, National Bank of Canada, Salesforce, Synopsys, Snowflake, Splunk, Hormel Foods, KE Holdings Thursday: Canadian Imperial Bank of Commerce, Bank of Montreal, Toronto-Dominion Bank, Marvell Technology, Veeva Systems, Ulta Beauty, Zscaler, Dollar General, Kroger Economic calendar highlights for today (times GMT) 0745 – France Nov. Flash CPI 0830 – UK Bank of England Chief Economist Huw Pill to speak 0855 – Germany Nov. Unemployment Rate / Change 0900 – Poland Nov. Flash CPI 1000 – Eurozone Nov. Flash CPI 1315 – US Nov. ADP Employment Change 1330 – US Fed’s Bowman (Voter) to speak 1445 – US Nov. Chicago PMI 1500 – US Oct. JOLTS Job Openings 1530 – US Weekly DoE Crude Oil and Product Inventories 1735 – US Fed’s Cook (Voter) to speak 1830 – US Fed Chair Powell to discuss Economic and Policy Outlook 1900 – US Fed’s Beige Book 0145 – China Nov. Caixin Manufacturing PMI Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – November 30, 2022 | Saxo Group (home.saxo)
ECB's Tenth Consecutive Rate Hike: The Final Move in the Current Cycle

U.S. Interest Rates Could Reach Their Peak In 2024

Conotoxia Comments Conotoxia Comments 30.11.2022 09:55
Financial markets may focus on two events today. The first may be the inflation reading for the Eurozone for November (estimates), and the second will be a speech by Federal Reserve Chairman Jerome Powell. Yesterday's inflation data from Germany showed that German consumer prices rose 10.0% year-on-year in November, slightly less than the 10.3% predicted by analysts, according to data released by the Federal Statistical Office (Destatis). A month earlier, in October, inflation was 10.4%. On a monthly basis, consumer prices fell by 0.5%, the BBN service reported. The softer inflation reading from Germany may carry over into today's inflation publication for the eurozone as a whole. The consensus calls for a reading of 10.4% versus 10.6% a month earlier. Investors in the interest rate market, along with lower inflation readings, have pushed back their expectations for action by the European Central Bank. As Bloomberg calculates, interest rate traders now see only a 24% chance of a move greater than 50 basis points at next month's ECB meeting, while as recently as Tuesday it was as high as 52%. Inflation data from the zone will be released at GTM+1. Source: Conotoxia MT5, EURUSD, Daily Markets ahead of Jerome Powell's speech According to Bloomberg, implied volatility in the FX options market is rising in the shorter term, as investors position themselves ahead of Fed Chairman Jerome Powell's key speech on the economy and labor market. The speech is scheduled to begin at 7:30 pm GTM+1 at the Brookings Institution. Investors could expect the speech to offer clues on further action on interest rates or where the current cycle would end, as well as whether an interest rate cut in 2023 is possible. According to Bloomberg data, the peak of the U.S. hike cycle is priced by the market for May or June 2023 at a level close to 5 percent, while the federal funds rate is expected to fall to 4.4 percent by January 2024. This would mean that U.S. interest rates could reach their peak in the same year, and then, according to the market, the Fed could opt for two cuts of 25 bps each. Source: Conotoxia MT5, US30, Daily Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75,21% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
The Downside Of The US Dollar Index Remains Limited

Building permits do not matter at all. As for durable goods orders, even though some significant upward or downward changes are recorded, the effect will be minimal

InstaForex Analysis InstaForex Analysis 30.11.2022 10:04
Monetary policies of major central banks matter a lot to markets, setting the tone for long-term trends. For this reason, markets give a strong response when the Federal Reserve or the ECB revise their agenda. For the time being, the thing is that policymakers of the US regulator appear with contradictory comments. Some of them disapprove of a jumbo rate hike by more than 100 basis points. Others insist that the time is ripe to ease the pace of monetary tightening and moderate further rate hikes to below 50 basis points. No wonder, market participants are baffled to draw conclusions from mixed remarks. What exactly is the cornerstone of monetary policy of any central bank? Inflation dynamics for sure! However, inflation data is on tap only once a month, commonly in the middle of a month. Another point is that the consumer price index is the aggregate value consisting of several metrics and indicators. Each of them is a component that adds to the overall picture. Hence, one metric is not enough to draw a conclusion on inflation as a whole.              Besides, there are other indirect indicators that have an impact on inflation dynamics. Among them are durable goods orders and building permits. Recently, market participants have been alerted to these two metrics. Does it make sense to keep close tabs on them? To answer this question, we should grasp the essence of these two indicators.      For instance, what are durable goods like? They are consumer electronics and vehicles. In other words, it is the merchandise consumers use for a few years. Apparel does not belong to this category. If people purchase durable goods once in three, four, or even five years, they will hardly influence inflation. Indeed, headline inflation depends on changes in the prices of consumer goods such as food and transport fares. Besides, the prices of clothes and medicines make a more serious impact on inflation than the prices of a private jet or bicycle. On top of that, most durable goods could be sold in the second-hand market. Commonly, someone buys a new car when the old one has already been sold. Importantly, prices of second-hand durable goods have a profound influence on inflation. Used cars are always available for sale in greater numbers than new cars. All in all, durable goods orders shed light on further changes in the overall quantity of such goods which have been always available in abundance. In turn, durable goods orders make a minor impact on inflation.               In other words, even though durable goods orders log considerable growth from a month ago, hypothetically we suppose that headline inflation might slow down a bit in the not-too-distant future. In this case, the second-hand market should be taken into account. When it comes to the market of brand-new goods, an increase in durable goods orders mirrors growing demand which, in turn, accelerates consumer inflation. To sum up, both metrics offset each other and are of little importance to inflation. The same is true about building permits, albeit to a lesser extent. It is common knowledge that the US housing market is one of the largest in the world. In fact, the US ranks first in the world in terms of the number of residential buildings. For better understanding, the US offers its nationals twice the bigger housing space per capita than there is in Germany, the high-income and advanced economy which is defined as the powerhouse of the European economy. People can afford to buy a new smartphone once a year and a car – roughly once in five years. In contrast, a home that is more than 10 years old is considered relatively new if it is properly maintained.                     Just walk downtown in an American city and check the dates when residential properties were built. A 50-year-old building still looks robust. Speaking about that particular economic metric, analysts keep track of building permits, not construction sites. Perhaps when a project is greenlighted, a building company needs to amass money for a few months before launching a project in practice. All in all, even though the number of building permits is on the rise, it has no effect on the real estate market and, in turn, on supply and headline inflation. The bottom line is that both metrics make no impact on headline inflation. Building permits do not matter at all. As for durable goods orders, even though some significant upward or downward changes are recorded, the effect will be minimal.               
Hawkish Fed Minutes Spark US Market Decline to One-Month Lows on August 17, 2023

Saxo Bank Podcast: Zoom In Fed Chair Powel's Speech And Apple, Crowdstrike And More

Saxo Bank Saxo Bank 30.11.2022 12:09
Summary:  Today we note that Fed Chair Powell is set to speak later today and will likely try to push back against the recent strong easing of financial conditions and pricing of hefty Fed rate cuts that the market has priced to start as early as late 2023. If Powell can't impress the market, the incoming US data might have to do so, with the November ADP private payrolls up today and the PCE inflation data tomorrow. Elsewhere, we zoom in on the latest on crude oil and commodity performance this month, talk Apple, Crowdstrike and incoming earnings and more. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: Can a hawkish Powell pour cold water on this market? | Saxo Group (home.saxo)
ADP Non-farm payrolls jobs market data show a growth of 127K, much less than the previous print

ADP Non-farm payrolls jobs market data show a growth of 127K, much less than the previous print

Ed Moya Ed Moya 30.11.2022 18:51
US stocks are entering a holding pattern ahead of Fed Chair Powell’s speech as some investors look for him to somewhat ease up on the hawkish rhetoric. ​ The economy is weakening and traders want to see the Fed Chair deliver a clear message that they will downshift their pace of tightening and are close to hitting the breaks. ​ No one wants to put on a major position before Powell and they probably won’t if he sticks to his script that the pace of hikes will slow but they still have more to do to bring inflation down. Wall Street is still rather pessimistic on stocks and many traders might focus on going defensive. ​ US Data Private payrolls showed job growth is slowing. ​ The November ADP payrolls report showed an increase of 127,000 jobs, down from the 239,000 prior reading and well below the 200,000 consensus estimate. ​ ADP Chief Economist Richardson noted, “our data suggest that Federal Reserve tightening is having an impact on job creation and pay gains.” Manufacturing jobs declined by 100,000, while leisure and hospitality jobs rose by 224,000.  ​The holiday factor could be driving some of these service sector jobs so the January report could be when we see a significant slowdown with hiring. ​ The second look at Q3 GDP showed upward revisions, but core growth is slowing and supporting the idea that inflation is weighing on both business and consumer spending. ​ The economy is still expected to have weakening economic data points going forward as the impact of Fed rate hikes starts to be felt. ​ A soft landing or a short and shallow recession still seems to be the favorite scenarios for how 2023 will be. ​ Bitcoin Bitcoin is higher as Wall Street enters a holding pattern ahead of Fed Chair Powell. ​ The news flow has been plentiful, mostly downbeat for cryptos but the focus is shifting on the future of crypto legislation. ​ Pressure is growing for some clear direction on how to put guidelines to avoid another FTX moment. ​ There will still be a lot more pain that comes from the FTX collapse but for now, that seems to be mostly priced in. Over the next couple of weeks, we should start to get an idea of how crypto legislation will look and that should ultimately be long-term positive for the cryptoverse, but it could put added strain on some struggling crypto companies or stablecoins. ​ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Stocks await Powell, US data, crypto focus shifts to legislation - MarketPulseMarketPulse
Rising Tensions in Japan Amid Currency Market Concerns and BOJ Insights

The S&P 500 Is Still On Track For A Monthly Gain

InstaForex Analysis InstaForex Analysis 01.12.2022 08:00
Stock markets saw another downturn as traders considered latest economic data and Fed Chairman Jerome Powell's speech for clues as to whether the central bank will ease the pace of rate hikes to prevent a hard landing. On the bright side, the S&P 500 is still on track for a monthly gain despite recent losses. This is the longest streak since August 2021. Bond yields have also risen. As for European stock indices, they are more confident, thanks to falling inflation in the eurozone. Powell's speech is expected to stress that the fight against inflation will last until 2023. It may not be an overly hawkish tone, but it will be hawkish nonetheless. But this does not mean that stock markets will collapse because given the real Fed targets right now, a strong year-end rally is less likely than many think. A slew of economic data was also released, with key US activity indicators painting a mixed picture in the third quarter. Jobless claims falling in October is an encouraging sign for the Fed as it seeks to curb demand. Key events this week: - S&P Global PMI, Thursday - US construction spending, consumer income, initial jobless claims, ISM Manufacturing, Thursday - BOJ's Haruhiko Kuroda speech, Thursday - US unemployment, nonfarm payrolls, Friday - ECB's Christine Lagarde speech, Friday     Relevance up to 17:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/328634
Hong Kong’s Hang Seng Had Its Best Month | EU Inflation Slowed

Hong Kong’s Hang Seng Had Its Best Month | EU Inflation Slowed

Saxo Bank Saxo Bank 01.12.2022 09:08
Summary:  Fed Chair Powell signaled the moderation of the tightening pace could start as soon as December and the terminal Fed Fund rate would be “somewhat higher” than the FOMC’s September projections. His tone was overall less hawkish than feared. S&P 500 rose to its two-month high and Hong Kong’s Hang Seng had its best month since 1998. Bond prices surged with the 10-year treasury yield falling to 3.61%. Crude oil and commodity currencies gained. What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) surged on Powell’s speech and signs of China relaxing Covid-19 restrictions Fed Chair Powell signaled that the Fed would start to moderate the pace of rate hikes as soon as December and the terminal rate might just be “somewhat higher” than the September FOMC’s projections. The less-than-feared comments stirred up another round of risk-on buying in equities. The sentiment was also bolstered by more signs coming out of China on the country’s course to ease Covid restrictions gradually despite the recent outbreaks. The S&P 500 rose by 3.1% to a two-month high. All sectors within the S&P 500, led by information technology and communication services, each rising by around 5%. Nasdaq 100 surged 4.6% to 12,030. The Dow Jones Index rose 2.2% and was said to have technically entered a bull market, after rising more than 20% from is September closing low. US treasuries (TLT:xnas, IEF:xnas, SHY:xnas) rallied on the lack of new hawkishness in Powell’s speech Yields edged up a few basis points after a mixed bag of data in the morning until Fed Chair Powell’s speech hit the wire in the New York afternoon, seeing yields reversing and yields of the 2-year up to the 5-year tumbling by more than 15bps almost immediately from the intra-day highs. The 5-year performed the best and finished the day 19bps richer at 3.74%. The 2-year yield dropped 16bps to 4.31% and the 10-year yield was 14bps lower to settle at 3.61%.  Powell reiterated his well-telegraphed higher-for-longer message but did not add additional hawkish pushback as some feared. He said that it makes sense to moderate the pace of rate increases as the Fed “approach[es] the level of restraint that will be sufficient to bring inflation down. The time for moderating the pace of rate increases may come as soon as the December meeting”. Further, his remark of terminal rate being “somewhat higher” than the Fed’s September projection was less hawkish than feared. Australia’s ASX200 (ASXSP200.1) about 3% away from its record high The Aussie market is up 12% from its October low, with commodities back in focus and rallying after the Fed signals a possibly smaller pace of rate hikes ahead. That has pressured the US dollar, with the US dollar index now down 5.4% from its peak, and that’s supported commodity prices higher, plus, as above, there is forward looking optimism on China. Locally, equites also appear supported in Australia as monthly inflation data came out weaker than expected yesterday, which supports the RBA remaining dovish and likely only hiking by 25bps (0.25%) next week. However, the important inflation read (quarterly CPI) is due early next year, which will be a more accurate reflection of price rises, and will likely show inflation in Australia is more sticky than monthly inflation read alluded to. Also consider if the best performers of late (who are all commodity companies) can continue to build momentum if stimulus continues in China’s property sector. In November, copper-gold company Sandfire (SFR) rose 45%, energy business Origin Energy gained 41% while Australia’s fourth biggest iron ore company, Champion Iron (CIA) rose 35%, with Nickel company Nickel Industries (NIC) following up 33%. So, it’s clear to say we are watching commodity companies closely as we believe the world will still struggle with the lack of tangible supply. Hong Kong’s Hang Seng (HIZ2) gained on the removal of lockdown in four Guangzhou districts Hong Kong stocks surged on Wednesday afternoon after Guangzhou lifted the lockdown in four districts even when the number of new cases was still rising in the city. Hang Seng Index climbed 2.2% with consumer discretionary, consumer staples, and industrials rising the most. In the consumer space, food and beverage names surged, with Haidilao (06862:xhkg) up 15.5% and Xiabuxiabu Catering (00520:xhkg) up 10.9%. Bilibili (09626:xhkg) jumped nearly 17% on the earnings beat. The three Chinese airlines listed in Hong Kong gained around 5% each on reopening optimism. The share prices of automakers jumped 4% to 11% on speculation for an extension of purchase tax credits for petrol vehicles. EV maker XPeng (09868:xhkg) surged 16% ahead of earnings. Another EV maker, Li Auto (02015) surged 8.9%. Hang Seng finished November up more than 26%.  It was the best monthly performance since October 1998 at the end of the Asian financial crisis. After Hong Kong market closed, XPeng reported Q3 results, missing analyst estimates but the share price of its ADRs jumped 46%. In A shares, CSI 300 was flat with auto names outperforming. FX: NZDUSD broke above 0.63, USDJPY below 137.50 Lower yields drove the US dollar lower after Powell’s speech lacked any hints of keeping the door open for 75bps in December or laying out a path for rate hikes through the course of 2023. The Euro was supported by Powell's dovish speech taking EUR/USD back above 1.04, but lacked conviction as hawkish ECB bets also retreated after a softer Eurozone CPI for November. The biggest gainers were NOK and NZD, and NZDUSD broke above the pivotal 0.63 which is the 200dma. USDJPY heading lower for a test of 137 with 200dma next in sight at 134.50. Crude oil (CLZ2 & LCOF3) higher on weaker USD and lower US inventories Crude oil markets extended recent gains amid signs of strong demand. US crude oil inventories fell by 12.6mbbl last week, the biggest decline since June 2019, according to EIA data. Meanwhile, Chinese authorities announced relaxation of Zero Covid policies in Guangzhou despite worsening Covid outbreak, signalling a better demand outlook as well. The lack of escalation in Powell’s speech also turned the dollar lower. WTI futures rose to $81/barrel while Brent futures rose above $85. The focus is now shifting to the weekend OPEC meeting, with some expecting a cut while others suggest a rollover of the current deal is more likely. Breakout in Silver (XAGUSD), Gold (XAUUSD) up as well Silver broke above the key 22 level to its highest levels since May this year as Powell signalled that the pace of interest rate hikes will slow in December. Gold edged higher as well and finished the month up over 8%, the biggest gains since July 2020. Next key levels to watch in Gold will be the 200dma and key level at 1808 while Silver may likely be heading to the 0.618 retracement at 23.35.   What to consider? Jerome Powell sticks to the script Fed Chair Powell repeated his comments from the November FOMC and what we have heard more generally from the Fed speakers over the course of the month. He said it makes sense to moderate the pace of interest rate hikes and the time to moderate the pace of hikes may come as soon as December, while he added it seems likely that rates must ultimately go somewhat higher than what was thought in the September SEPs. Powell also said they have made substantial progress towards sufficiently restrictive policy but have more ground to cover and they will likely need to hold policy at a restrictive level for some time. While his comments still tilted towards the hawkish side but there was no escalation that the markets had hoped for. His comment that he does not want to over-tighten but cutting rates is not something to do soon was a slight contrast to his earlier acceptance that risk of tightening less is greater that the risk over-tightening. Fed's Cook (voter) also said it is prudent for the Fed to hike in smaller steps as it moves forward and how far the Fed goes with hikes depends on how the economy responds, overall sticking to the consensus. US economic data broadly weaker, focus now on PCE prices and ISM manufacturing The private ADP jobs report showed US payrolls rose 127,000 this month, the slowest pace in nearly two years, as wage gains moderated. Job openings also fell in October to 10.334mln from September's 10.687mln, reversing a surprise jump in the prior month but still remaining elevated, according to the JOLTS report. The biggest downside surprise came in Chicago PMI for November which came in at 37.2 against an expected 47.0, falling from a prior 45.2. While monthly surveys can be noisy, but this one is now flirting with pandemic lows and puts the focus on ISM manufacturing due today. The only ray of positive news came from the Q3 GDP release which was upwardly revised by to 2.9% from 2.6% previously. Softer EU CPI weakens hawkish ECB bets Euro inflation slowed for the first time in 1.5 years to 10% in November from 10.6% YoY in October. ECB officials have highlighted the data will be key for their next rate decision, suggesting lower chance of another 75bps rate hike at the December 15 meeting. Still, it remains hard to say that inflation in the Eurozone has peaked. ECB members also remain broadly hawkish and suggest that the commitment to bring inflation back to target will stay. Guangzhou lifted the lockdown of several districts as a sign of easing restrictions even as new cases at elevated levels Guangzhou, the third largest city in China and the capital of the southern province of Guangdong, removed the “temporary control areas” restrictions of several districts even though the city’s daily new cases of Covid-19 stayed at nearly 7,000. It was an encouraging sign pointing to China’s willingness to continue the fine-tuning measures that it had recently started despite the surge in new cases across the country. Speaking at a pandemic control policy workshop, Vice Premier Sun Chunlian emphasized the importance of gradually fine-tuning the pandemic control measures in response to the lower fatality of the Omicron, higher vaccination rate, and the accumulation of experience in containing the spread of the virus. Equities in focus that could benefit from rate hikes not being as aggressive, and from the festive season spending It’s the world’s first festive season not in lockdown (excluding China), so we are watching retailer shares given they will likely benefit from retail shopping rising. It’s worth watching travel and tourism companies with the market forward looking and seeing that travel-services revenue could likely continue to gain momentum. Carnival shares are up 44% from October with the company seeing some of its strongest sales since pre-covid, Royal Caribbean shares are up 83% from July. We are also watching other travel affiliated companies do well, like Boeing, which is up 48% from September, as well as airlines, such as Singapore Airlines, Qantas, Air New Zealand. However, we think although the travel and tourism sector, especially airlines, will likely see a pick-up in sales amid the seasonality, we wonder if airlines will be able to extend their share price rally into 2023 as fuel costs are not expected offer respite into 2023. This means, those larger companies or those with a wide moat, might be more in focus, as they will be more likely able to sustain the costs pressures.   For our look ahead at markets this week – Read/listen to our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: Market Insights Today: Powell’s lack of new hawkishness; Guangzhou restrictions eased – 1 December 2022 | Saxo Group (home.saxo)
Metal Market Insights: Global Aluminium Output Holds Steady, Nickel Spreads Surge, and Indonesia's Copper Exports to Cease

The Commodities: Aluminium Production Is Estimated To Rise

ING Economics ING Economics 01.12.2022 09:20
Commodities received a boost along with other risk assets after some mildly dovish comments from the US Fed chairman. No surprise that this led to USD weakness, providing further support to the complex In this article Energy - US crude oil inventories plunge Metals – Copper output recovers in Chile   Energy - US crude oil inventories plunge The oil market received a boost yesterday from multiple factors. ICE Brent managed to settle more than 3.2% higher on the day. Most risk assets rallied on the back of the US Fed chairman signalling smaller rate hikes as soon as December, while hopes of an easing in China’s covid policy also proved supportive. In addition, noise in the oil market continues to build ahead of the OPEC+ meeting this weekend. It is still not exactly clear what action if any, the group will take. The weakness in the market over the last several weeks means that further supply cuts cannot be ruled out. The EIA’s weekly inventory report was also bullish for the market yesterday. The latest data shows that US commercial crude oil inventories fell by 12.58MMbbls over the week - the largest weekly decline since June 2019. When taking into consideration SPR releases, total US crude oil inventories fell by 13.98MMbbls. Trade played a large role in the significant inventory draws with crude oil imports falling by 1.03MMbbls/d over the week and exports rising by 706Mbbls/d. Refiners also increased their utilisation rates by 1.3pp to 95.2% - the highest levels since August 2019. As a result of stronger refinery throughput, gasoline and distillate fuel oil inventories increased by 2.77MMbbls and 3.55MMbbls respectively. Metals – Copper output recovers in Chile Chile, which accounts for about a quarter of the world supply of copper, just registered its first year-on-year output increase since July 2021. October production edged up 2.2% from the same month last year, according to data from the National Statistics Institute. Month-on-month output jumped 11%. Chile’s copper production has struggled for much of this year amid lacklustre ore grades, labour woes and water scarcity. Rio Tinto expects its iron ore production to remain roughly in line with 2022 and forecasts to ship between 320-335mt of iron ore in 2023 from its Pilbara project in Australia, unchanged from its previous guidance. The group expects medium-term iron ore production capacity to remain between 345mt-360mt. Meanwhile, aluminium production is estimated to rise to 3.1mt-3.2mt in 2023, compared to an estimated 3mt-3.1mt for 2022. TagsOPEC+ Iron ore Federal Reseve EIA Copper Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Gold's Hedge Appeal Shines Amid Economic Uncertainty and Fed's Soft-Landing Challenge

Asia Marekt: Bank Indonesia Will Remain Hawkish Due To Rise In Core Inflation

ING Economics ING Economics 01.12.2022 09:28
Asian markets rally on China re-opening hopes and dovish Powell speech. Indian 3Q22 GDP better-than-expected, but Korean trade data was very weak and further weakness is expected from China's Caixin indices  In this article Macro outlook What to look out for: Fed speakers and US jobs report   shutterstock Macro outlook Global Markets: It looks as if Fed Chair Powell didn’t get the memo to push back against pivot hopes and keep financial conditions tight before he went to give his speech at the Brookings Institution yesterday. It was at best a neutral speech, acknowledging that rate hikes might be reduced in magnitude as early as the December meeting, but on the other hand, noting that there was still work to be done. But it also threw in a couple of what can only be described as dovish remarks  - namely that the Fed didn’t want to overtighten (no, but don’t tell the market that!). And also that he thought the economy could achieve a “soft landing”. Yes, that would be nice, but wouldn’t it have been better not to cloud the message with growth aspirations that possibly undermine the Fed’s single-mindedness to bring down inflation? It is going to be very hard now for the Fed to push back at market pivot hopes. So let’s hope that inflation does keep on falling, or this may look like a missed opportunity. Equities rallied hard following Powell’s speech. That’s not the direction we would have expected from the speech we think the market needed to hear. The S&P500 rose 3.09% and the NASDAQ rose 4.41%. Chinese stocks yesterday were also strong as re-opening hopes continue to provide support. The key to the “success” or otherwise of Powell’s speech yesterday, though, probably lies more in the US Treasury response. 2Y US Treasury yields fell 16.3bp to only 4.31%. 10Y US Treasury yields fell 13.9bp to 3.605%. The May 2023 implied rate from Fed funds futures has dropped all the way back to 4.925%. A couple of days ago, it was almost 5.0%. It’s no surprise, given all of this, to see the EURUSD exchange rate back above 1.04. The AUD has surged almost all the way back to 0.68, Cable is back up to 1.2069 and the JPY is looking stronger than for some time at 137.83. Asian FX was pretty strong yesterday, led from the front by the CNY which is still betting on re-opening, and by the high beta currencies, KRW and THB. More of the same seems likely today. US financial conditions look well and truly eased. G-7 Macro: For those who like backwards-looking employment data, yesterday’s October JOLTS survey showed a further small decline in job openings, though the measure did not fall as much as had been expected, not that we think the markets would have paid much heed even if it had. More importantly, the ADP survey came in much weaker at 127,000, down from last month’s 239,000.  If we got a figure like that for tomorrow’s US non-farm payrolls (expected 200,000), then that really would be grounds for further declines in bond yields, dollar weakness and equity gains. Though we would caution that payrolls rarely move in lock step with its monthly indicators, and nothing is certain until the data is printed. Today, the main market risk comes from the PCE deflator figures for October. A lot of attention has been placed on whether the core PCE rate will decline or not, given the differences in the scope of PCE compared to CPI and their different weightings. The market is betting on a very small decline in the core PCE inflation rate to 5.0%YoY from 5.1%. And while we don’t disagree, the risk is probably skewed to a higher figure, and perhaps no change in the inflation rate. Maybe after the big market swings yesterday, that would be a better way to be positioned. The US manufacturing ISM index completes the data for today. China: The Caixin manufacturing PMI should indicate that the activity of smaller manufacturers contracted further in November compared to a month ago. Rising Covid cases, together with shrinking exports, added pressure on exporters. Local government officials will likely exercise Covid measures with an intent to reduce their impact on the economy even if there are no further imminent changes in the overall Covid rules. South Korea: Preliminary GDP rose 0.3%QoQ sa in the third quarter, the same as the advanced estimate. However, the details have changed slightly. By expenditure, private consumption (1.7% vs 1.9% advanced) and construction (-0.2% vs 0.4% advanced) were lowered, while facility investment was revised up to 7.9% (vs 5.0% advanced) as machinery and transportation investment increased. Meanwhile, exports continued to fall -14.0% YoY in November (vs -5.7% in October, -11.2% market consensus) for the second straight month. Imports continued to rise, but at a slower pace, only 2.7% in November (vs 9.9% in October, 0.5% market consensus), resulting in the trade deficit widening to -7.0bn USD (vs -6.7bn in October). Semiconductor exports (-29.8%) and exports to China (-25.5%) were particularly weak.  The nationwide truckers’ strike is adding more burden on manufacturing and exports. Considering the sluggish October IP outcomes from yesterday and sluggish exports this morning, the downside risk for the current quarter’s GDP forecast (-0.1% QoQ) has increased. Japan: 3Q capital spending rose 9.8% YoY (vs 4.6% in 2Q, 6.4% market consensus), which is not in line with 3QGDP results. And based on today’s stronger-than-expected capital spending, Japan’s revised 3QGDP is likely to improve from the advance figure which showed a 0.3% QoQ sa contraction. Indonesia:  November inflation will be reported today.  Market consensus points to a softening in headline inflation to 5.5%YoY (from 5.7%) but core inflation may pick up to 3.4%.  The steady rise in core inflation should be enough to keep Bank Indonesia hawkish with Governor Warjiyo likely following through with a rate hike to close out the year.   India: Yesterday evening, India published 3Q22 GDP data. Please read our short snap for more detail. The short version is that at 6.3%YoY, growth exceeded expectations and apart from an outsize drag from imports, there was nothing in the 3Q data to set off alarm bells for the 4Q figure. As such, it will only take a very moderate further growth to ensure that at least a 6% GDP growth rate is achieved for the calendar year 2022.  If so, that would be one of the fastest growth rates in Asia. Fiscal deficit figures yesterday were a little less encouraging, with a big year-over-year jump which if repeated next month, could threaten the government’s fiscal deficit target for FY 2022/23 of 6.4%. What to look out for: Fed speakers and US jobs report South Korea 3Q GDP and trade (1 December) Regional PMI (1 December) China Caixin PMI (1 December) Indonesia CPI inflation (1 December) US personal spending, PCE core deflator, initial jobless claims and ISM manufacturing (1 December) Fed’s Cook, Bowman, Logan, Barr and Powell speak (1 December) South Korea CPI inflation (2 December) Fed’s Evans speaks (2 December) US non-farm payrolls (2 December) TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
OPEC+ Meeting: Saudi Arabia Implements Deeper Voluntary Cuts to Boost Oil Prices

The International Energy Agency (IEA) Expects Russian Crude Production To Fall

Saxo Bank Saxo Bank 01.12.2022 09:35
Summary:  Jerome Powell signals downshift likely next month; stocks surge. Dow Jones enters bull market. ASX200 is a sneeze off its record all time high. Focus is on commodity companies with China easing some restrictions and retailers ahead of potential festive season rally. We cover the three key areas of equities to be across and the stocks you might like to watch, with some already up 80% from their fresh lows What’s happening in markets? The US; Fed Chair Jerome Powell signaled the Fed will likely not be as aggressive next month, and only hike by 50 bps (0.5%), however he suggested the hiking cycle is far from over to slow inflation. He said the Fed will need "substantially more evidence" to ensure prices are moderating, with the path ahead for inflation remaining highly uncertain. However, amid the somewhat dovish pivot, Bond traders coiled back their peak rate expectations to below 5%, and that resulted in treasury yields falling; the 10-year yield fell 11 bps to 3.63%, pushing the dollar down against the entire G-10 basket. As a result, the S&P 500 rose 3.1% to a two-month high, while it notched its longest monthly winning streak since August 2021. The Dow Jones 30, rose 2.2% and entered a bull market, after collectively rising 20% from its September low. Gold spiked more than 1%, with most commodities rallying up supported by the US dollar falling. Crude oil rose 2.9% to $80.44 - getting an extra boost on forward looking optimism that China is encouraging vaccinations, while at the same time the International Energy Agency (IEA) said it expects Russian crude production to fall by some 2 million barrels of oil per day by the end of the first quarter next year. However gains were capped in oil as OPEC+ is due to hold its December 4 meeting and reports swirled that OPEC is not really likely to shift its policy. In Australia, the ASX200 (ASXSP200.1) is 3% away from its record high The Aussie market is up 12% from its October low, with commodities back in focus and rallying after the Fed signals a possibly smaller pace of rate hikes ahead while one key province in China has eased restrictions. The Fed’s somewhat pivot has pressured the US dollar (with the US dollar index down 5.4% from its peak). This is also supporting commodity prices higher, as well as the forward looking optimism on China. Locally, equites also appear supported as monthly inflation data came out weaker than expected yesterday - which supports the RBA remaining dovish and likely only hiking by 25bps (0.25%) next week. However, the important inflation read (quarterly CPI) is due early next year, which will be a more accurate reflection of price rises, and will likely show inflation in Australia is more sticky than monthly inflation read alluded to.(remember the RBA previously mentioned food and energy prices would rise – we didn’t see that reflected in yesterday’s data, but it will likely be reflected in the quarterly CPI read due out next year).   Three considerations and investment areas to watch  Firstly, consider if the best performers of late (who are all commodity companies) can continue to build momentum if stimulus continues in China’s property sector In November, copper-gold company Sandfire (SFR) rose 45%, energy business Origin Energy gained 41% while Australia’s fourth biggest iron ore company, Champion Iron (CIA) rose 35%, with Nickel company Nickel Industries (NIC) following up 33%. So, it’s clear to say we are watching commodity companies closely as we believe the world will still struggle with the lack of tangible supply. Secondly, watch those companies that could benefit from rate hikes not being as aggressive, and from the festive season spending It’s the world’s first festive season not in lockdown (excluding China), so we are watching retailer shares given they will likely benefit from retail shopping. As we’ve also been reporting, it’s worth watching retailers like perhaps JBH, HVN, Premier Investments (PMV), given they will likely benefit from Xmas shopping revenue rising. Also, travel and tourism companies will be on watch with travel-services spending likely to continue to gain momentum. Carnival shares are up 44% from October with the company seeing some of its strongest sales since pre-covid, Royal Caribbean shares are up 83% from July. We are also watching other travel affiliated companies do well, like Boeing, which is up 48% from September, as well as airlines, such as Singapore Airlines, Qantas, Air New Zealand. However we think although the travel and tourism sector, especially airlines, will likely see a pick up in sales amid the seasonality, we wonder if airlines will be able to extend their share price rally into 2023 as fuel costs are not expected offer respite into 2023. This means, those larger companies or those with a wide moat, might be more in focus, as they will be more likely able to sustain the costs pressures. And thirdly, as well, keep an eye on companies making the news Australia’s biggest oil companies will be a focus with the oil price likely to pick up next year. Woodside (WDS) today announced it sees operating cashflow at around $7-9 billion in the next five years. BHP (BHP) is also in a focus with its CEO saying steel demand from China will grow next year. Mike Henry sees China’s economy only experience a short-term slowdown before returning to a long-term growth. Lastly, other companies to watch include those lockdown stalwarts that aren’t doing so well, like Domino’s Pizza (DMP) with the company planning to raise $165 million in capital. Domino’s operates in Australia, NZ, France, Belgium and Asia. Domino’s Pizza shares are down 56% from their covid high. But the market thinks the business could see a turn around in revenue growth next year and the year after. So if you are a long-term investor, that’s food for thought.   For a weekly look at what to watch in markets - tune into our Spotlight.For a global look at markets – tune into our Podcast.     Source: Daily Dose of financial insights for investors and traders; Fed signals likely downshift, China eases some restrictions. Santa rally? | Saxo Group (home.saxo)
The ECB Has Made It Clear That Rates Will Remain High Until There Is Evidence That Inflation Is Falling Toward The Target

The ECB Members Also Remain Broadly Hawkish | US Payrolls Rose This Month

Saxo Bank Saxo Bank 01.12.2022 09:46
Summary:  The US equity market exploded higher yesterday in the wake of a Fed Chair Powell speech that outlined the Fed’s view on inflationary risks and the preferred course of monetary policy. Powell confirmed the market view that the Fed willl downshift to a smaller 50-bp hike at the December FOMC meeting. Weak US data added to the sense that an economic slowdown is underway, taking long US treasury yields to new local lows.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities exploded higher yesterday after Fed Chair Powell’s speech failed to push back against easing financial conditions and as US yields dropped further. This gives the impression that further soft data from the US (see preview below) that takes yields lower still will see an extension of this market squeeze higher, despite the implications from softer data that a recession draws nearer. The Nasdaq 100 index closed clear of the important 12,000 level for the first time since September yesterday and may extend its rally to the 200-day moving average, currently near 12,550 for the cash index. The S&P 500 spiked to new highs since September as well and cleared its 200-day moving average at 4,050, closing at 4,080 on the day. This is the first time that moving average has fallen since the March-April time frame. THe next major resistance there is the pivot high near 4,325 from August. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) Hang Seng Index climbed 1.7% and CSI300 Index gained 1.5% following the less-hawkish-than-feared speech from the U.S. Fed Chair Powell overnight and China’s Vice-Premier Sun Chunlan, who oversees containing the spread of Covid-19, acknowledged in a pandemic control export workshop that the Omicron variant is less deadly. Mega-cap China internet stocks surged 4-5%. EV maker XPeng (09868:xhkg) jumped 13% after reporting Q3 earnings. Caixin China PMI Manufacturing came in at 49.4 in November, above the consensus estimate of 48.9 and October’s 49.2. USD blasted after Fed Chair Powell’s speech craters US treasury yields, sparks risk-on rally Fed Chair Powell failed to make any notable pushback against easing financial conditions in his speech yesterday (more below), and US Treasury yields downshifted sharply all along the curve after he confirmed the likely downshift to a 50-basis point hike at the December FOMC meeting, with weak US data also pushing US yields lower. The US dollar was lower across the board: EURUSD rushed back higher, and trades this morning not far below the pivotal 1.0500 area, which could open up for 1.0600+, while the action in US yields was a particular tailwind for USDJPY bears, as that pair fell to new local lows well south of the former 137.50 low water mark, hitting 136.21 overnight and possibly on its way for a test of the 200-day moving average near 134.50. Gold trades higher supported by a breakout in silver Silver’s impressive 16% rally last month extended overnight following Powell’s speech in which he signaled a slowdown in the pace of future rate hikes. It trades around $22.25, the 50% retracement of the March to September selloff, and a close above could see it challenge $23.35 next. In addition, the recent dollar and yield slump, the metal has also been supported by improved supply and demand fundamentals.  Gold has built on last month's impressive 8% gain and has now returned to challenging a key area of resistance between $1788 and $1808. Focus on the dollar and incoming US data starting with today’s ISM and Friday’s job report. Crude oil (CLF3 & LCOF3) supported by weaker USD and lower US inventories Crude oil’s three-day recovery has been supported by a weaker dollar and traders assessing signals that China may soften its Covid Zero policy after China’s Vice Premier in charge of fighting Covid acknowledged the Omicron variant is less deadly. Developments that have forced a reduction in recently established short positions ahead of Sunday’s OPEC+ meeting. A meeting that is likely to be strong on words but low on actions, not least considering the unclear impact of an EU embargo on Russian oil starting next week. In addition, US crude stocks fell by 12.6mbbl last week, the biggest decline since June 2019, while the net crude and product export hit a record, highlighting continued strong demand amid Russian sanctions. US treasury yields recovered after dip to local lows. (TLT:xnas, IEF:xnas, SHY:xnas) With Fed Chair Powell confirming a likely downshift to a smaller hike in December and not pushing back against easing financial conditions, the entire US Treasury yield curve fell sharply yesterday, with treasury buying also encouraged by weak US data, including a terrible Chicago PMI and weak ADP private payrolls growth number. The 10-year treasury yield benchmark hit a new local low near 3.60% and is now only 10 basis points above the pivotal 3.50% area, which was the major pivot high from June. What is going on? Jerome Powell sticks to the script Fed Chair Powell repeated his comments from the November FOMC and what we have heard more generally from the Fed speakers over the course of the month. He said it makes sense to moderate the pace of interest rate hikes and the time to moderate the pace of hikes may come as soon as December, while he added it seems likely that rates must ultimately go somewhat higher than what was thought in the September FOMC projections. Powell also said they have made substantial progress towards sufficiently restrictive policy but have more ground to cover and they will likely need to hold policy at a restrictive level for some time. While his comments still tilted towards the hawkish side, there was no specific hawkish pushback against the markets pricing of significant rate cuts in 2024 that the markets feared. His comment that he does not want to over-tighten but cutting rates is not something to do soon was a slight contrast to his earlier acceptance that risk of tightening insufficiently is greater than the risk over-tightening. The Fed's Cook (voter) also said it is prudent for the Fed to hike in smaller steps as it moves forward and how far the Fed goes with hikes depends on how the economy responds, overall sticking to the consensus. US economic data broadly weaker, focus now on PCE prices and ISM manufacturing The private ADP jobs report showed US payrolls rose 127,000 this month, the slowest pace in nearly two years, as wage gains moderated. Job openings also fell in October to 10.334mln from September's 10.687mln, reversing a surprise jump in the prior month but remaining elevated, according to the JOLTS report. The biggest downside surprise came in Chicago PMI for November which came in at 37.2 against an expected 47.0, falling from a prior 45.2. While monthly surveys can be noisy, but this one is now flirting with pandemic lows and puts the focus on ISM manufacturing due today. The only ray of positive news came from the Q3 GDP release which was upwardly revised by to 2.9% from 2.6% previously. Softer EU CPI weakens hawkish ECB bets Euro inflation slowed for the first time in 1.5 years to 10% in November from 10.6% YoY in October. ECB officials have highlighted the data will be key for their next rate decision, suggesting lower chance of another 75bps rate hike at the December 15 meeting. Still, it remains hard to say that inflation in the Eurozone has peaked. ECB members also remain broadly hawkish and suggest that the commitment to bring inflation back to target will stay Guangzhou lifted the lockdown of several districts as a sign of easing restrictions even as new cases at elevated levels  Guangzhou, the third largest city in China and the capital of the southern province of Guangdong, removed the “temporary control areas” restrictions of several districts even though the city’s daily new cases of Covid-19 stayed at nearly 7,000. It was an encouraging sign pointing to China’s willingness to continue the fine-tuning measures that it had recently started despite the surge in new cases across the country.   China’s Vice Premier in charge of fighting Covid acknowledged the Omicron variant is less deadly Speaking at a pandemic control policy workshop, Vice Premier Sun Chunlan emphasized the optimization measures of the pandemic control were supported by a lower fatality rate caused by the Omicron variant, an increasing vaccination rate, and the accumulation of experience in containing the spread of the virus. She called for the acceleration of vaccination and preparation of therapeutic drugs and the news report did not quote her mentioning the dynamic zero-Covid policy What are we watching next? Melt-up in risk if US data remains tepid or worse? The reaction to Fed Chair Powell’s speech yesterday and soft US data comes ahead of a string of US data through tomorrow’s November US jobs report. If the data is in-line or especially if it is a bit softer than expected, the market may continue to celebrate the implications of a lower peak for the Fed policy rate, as well as for the impact on valuations if longer US treasury yields also continue falling. Despite Chair Powell specifically indicating that peak Fed rates next year are likely set to rise above the Fed’s own forecasts from the September FOMC meeting, the market dropped its forecast for peak rates yesterday by several basis points in the wake of his speech. Eventually, market may begin to fret the impact of an incoming recession on asset valuations, but for now, the one-dimensional focus on the monetary policy outlook and rates persists. For the risk-on to continue, we would likely need to see a benign PCE Core inflation data point today, in-line or below expectations of +0.3% MoM and +5.0% YoY (vs. +5.1% in September and Feb. peak of 5.4%). The ISM Manufacturing survey today (expected: 49.7, which would be first sub-50 reading since 2020) is less important than Monday’s ISM Services, but the jobs report tomorrow is important, as a slackening US jobs market will be a key ingredient to confirm a slowdown (and the weekly jobless claims usually give off a warning for many weeks before the evidence shows up in the monthly report – the latest weekly number is up today and it will take some time for this indicator to point to weakness in the US jobs market. The market will be in for significant churn if we get a hotter core inflation reading and a strong jobs report. Earnings to watch A heavy focus on Canadian banks today, as three are reporting, including the largest of them all, Toronto-Dominion. Marvell Technology is a significant semiconductor company with 5G solutions and has been on the comeback trail, up some 30% from its lows ahead of today’s report after the market close, as will Veeva Systems. Today: Canadian Imperial Bank of Commerce, Bank of Montreal, Toronto-Dominion Bank, Marvell Technology, Veeva Systems, Ulta Beauty, Zscaler, Dollar General, Kroger Economic calendar highlights for today (times GMT) 0815-0900 – Eurozone Final November Manufacturing PMI 0930 – UK Final November Manufacturing PMI 1000 – Eurozone Oct. Unemployment Rate 1230 – US Nov. Challenger Job Cuts 1330 – US Oct. PCE Inflation 1330 – US Weekly Initial Jobless Claims 1420 – US Fed’s Logan (Voter 2023) to speak 1500 – US Nov. ISM Manufacturing 1530 – US Weekly Natural Gas Storage Change 1645 – ECB Chief Economist Lane to speak Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – December 1, 2022 | Saxo Group (home.saxo)
China’s Caixin Manufacturing PMI Data Might Support The New Zealand Dollar (NZD)

The New Zealand Dollar (NZD) Has Been Strengthened

TeleTrade Comments TeleTrade Comments 01.12.2022 10:06
NZD/USD has refreshed its three-month high at 0.6335 on upbeat market sentiment. The speech from Jerome Powell confirmed the termination of a 75 bps rate hike spell in December meeting. New Zealand Dollar has picked strength on upbeat Caixin Manufacturing PMI and the reopening of the Chinese economy. NZD/USD is expected to smash 0.6350 as the US Dollar is seeing more downside on policy moderation fears. NZD/USD is marching north firmly after shifting its auction profile above the round-level resistance of 0.6300 in the Asian session. The kiwi asset has refreshed its three-month high at 0.6335 as the New Zealand Dollar has been strengthened by a surprise rise in Caixin Manufacturing PMI data and a significant improvement in investors’ risk appetite post-Federal Reserve (Fed)’s commentary. Fed Powell’s promise to moderate the extreme-tight monetary policy in the December meeting has infused fresh blood into risk-sensitive assets. S&P500 futures are gathering momentum adding more upside to Wednesday’s gains. The US Dollar Index (DXY) has surrendered its short-lived recovery attempt and is on the verge of refreshing its day’s low below 105.50. Meanwhile, the 10-year US Treasury yields have slipped again to 3.60% amid healthy demand for US government bonds by investors. Federal Reserve’s Powell is set to terminate the 75 bps rate hike culture The commentary from Fed chair Jerome Powell has confirmed that the central bank is looking to slow down its interest rate hike pace. Catalysts that have compelled Fed Chair to sound less hawkish while providing interest rate guidance for December’s monetary policy meeting are a slowdown in labor demand, a decline in economic activities, and a soft October inflation report. The Federal Reserve is bound to bring price stability to the United States economy but not at the cost of the economy. Fed Chair in his speech cited that it is not appropriate to ‘Crash the economy and clean it afterward’. This has confirmed that the Federal Reserve (Fed) won’t continue the 75 basis points (bps) rate hike spell now and may shift to a lower rate hike to 50 bps. As per the CME FedWatch tool, the chances of a 50 bps rate hike announcement by the Fed in the December meeting holds around 80%. US Dollar to remain volatile ahead of Nonfarm Payrolls Another critical trigger that is going to keep US Dollar bulls on the tenterhooks in the United States Nonfarm Payrolls (NFP) data, which will release on Friday. As per the consensus, the United States economy added 200K jobs in November, lower than the prior release of 261K. Cues from US Automatic Data Processing (ADP) Employment data indicate that the additional payrolls in November are merely 127K. The Unemployment Rate is seen unchanged at 3.7%. Apart from that, investors will keep an eye on Average Hourly Earnings data. The street is expecting that the next trigger that could create troubles for the Federal Reserve is rising wage prices. Wage inflation carries the capability of driving price inflation higher. Post a slowdown in inflation led by accelerating interest rates, the United States households will remain with higher earnings that could trigger retail demand. Upbeat Caixin Manufacturing PMI drove New Zealand Dollar In early Tokyo, IHS Markit reported a surprise rise in Caixin Manufacturing data. The economic data was released at 49.4 for November month vs. 48.9 as projected and October’s release of 49.2. Despite extreme lockdown measures in November by Chinese authorities to contain the COVID-19 epidemic, the economy has managed to display better-than-projected performance. This has strengthened the kiwi asset significantly as New Zealand is one of the leading trading partners of China. Meanwhile, signs of the gradual opening of the Chinese economy led by relaxations in zero Covid-19 policy to return economic prospects on track have also strengthened the New Zealand Dollar. NZD/USD technical outlook NZD/USD has comfortably established above the 200-period Exponential Moving Average (EMA) at around 0.6200, which indicates that the long-term trend has turned bullish. Also, a bull cross, represented by the 20-and 50-EMAs at 0.5871, indicates a continuation of the upside. Going forward, the ultimate resistance is placed from August 12 high at 0.6470. Apart from that, the Relative Strength Index (RSI) (14) is oscillating in a bullish range of 60.00-80.00, which indicates that the upside momentum is intact.     search   g_translate    
Hawkish Fed Minutes Spark US Market Decline to One-Month Lows on August 17, 2023

Investors Got Clues About Further Changes In US Interest Rates

Conotoxia Comments Conotoxia Comments 01.12.2022 10:38
Last night's speech by Jerome Powell, chairman of the US Federal Reserve, was one of the key events of the day. Investors were expecting clues about further changes in US interest rates, and they got them. Powell sounded more dovish. During his speech at the Brookings Institute, Jerome Powell signaled that the Fed may slow the pace of interest rate hikes in December, "the time for a moderate pace of rate hikes may come as early as the December meeting," - Powell said, while adding that it is likely "that restoring price stability will require maintaining policy at restrictive levels for some time." In addition, Powell added that historically premature policy easing has been strongly discouraged. "We will stay the course until the job is done," he said. - he concluded. Federal Reserve Chairman Jerome Powell also said that he "doesn't want to over-tighten" interest rates, as the central bank doesn't see fit to "crash the economy and clean up after it." Nevertheless, answering questions at a session organized by the Brookings Institute, Powell stressed that "cutting rates is not something I want to do anytime soon," the BBN service concludes. This was the Fed chairman's last public appearance before the December interest rate decision. Source: Conotoxia MT5, USDIndex, Daily Markets in a little euphoria The U.S. Nasdaq index hit its highest level in 10 weeks yesterday, the AUD/USD pair rate hit its highest level in 11 weeks, NZD/USD rose to levels seen 2.5 months ago, gold reached its highest level in 2 weeks, and the dollar index fell in November in percentage terms by the strongest amount since 2010. This reaction of the markets seems to show quite well how high investors' hopes were placed on Powell's speech, and that they were not disappointed. In addition to Powell's speech, events from China may also provide support for the markets. Investors may be pleased with China's softening stance on Covid. The top official in charge of tight restrictions on the Covid outbreak said the country's fight against the virus is entering a new phase amid a waning omicron variant, rising vaccination rates and broader experience in preventing Covid. Source: Conotoxia MT5, US100, H4 What's next ahead? After the Fed chairman's speech, it seems that the key for the markets may be Friday and data from the US labor market. It is in it that high hopes may be placed to resist the economic slowdown. However, if the labor market situation began to deteriorate as well, the Fed could face a difficult choice. Which to fight? With inflation or with the deterioration in US employment. That is what we will find out tomorrow. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75,21% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
The Challenge to the Dollar: De-dollarisation and Geopolitical Shifts

Fed: The Pace Of Rate Hikes Will Slow Down | Positive Potential Of Crude Oil Is Limited

Swissquote Bank Swissquote Bank 01.12.2022 10:50
Powell said that the Federal Reserve (Fed) will slow down the pace of rate hikes from next month, while insisting that smaller increases are less important than how much further to go and for how long. But all investors heard was ‘the Fed will hike by 50bp next month and bla bla bla…’ US yields and the dollar fell, equities rallied!!! Forex The US dollar’s depreciation is being cheered across the market. The EURUSD pushed above the 200-DMA as the dollar-yen fell to 136.50.And if Japan doesn’t need to spend its FX reserves to strengthen the back of the yen, they could well use it to increase the defense spending, without increasing taxes and without cutting spending. Japan And Japan is not the only country that increases defense spending. Bigger global budget for spending boosts defense stocks! Commodities In commodities, American crude rallied past the $81pb yesterday as US crude oil inventories fell by 12.6 million barrels last week, well above the 3.2 million barrel draw expected by analysts. It is because exports ran hot, and refineries hit their highest capacity since August 2019. But be careful with the rising recession odds, because investors have been cutting their net speculative positions despite the supply concerns, and that’s probably going to limit the topside potential! Watch the full episode to find out more! 0:00 Intro 0:28 Investors don’t want to hear what Powell tries to say! 3:49 FX & data roundup 6:50 Defense stocks to continue outperform 7:56 Crude oil jumps but positive potential is limited Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Powell #speech #USD #economic #data #ADP #JOLTS #GDP #NFP #unemployment #EUR #inflation #TTF #natgas #crudeoil #defense #stocks #Themes #trading #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
As more central banks continue to catch up with the FED's policy, we could be seeing a shift in the balance of power in the currency market says XTB's Walid Koudmani

As more central banks continue to catch up with the FED's policy, we could be seeing a shift in the balance of power in the currency market says XTB's Walid Koudmani

Walid Koudmani Walid Koudmani 30.11.2022 16:40
The level of $80 could play an important role in determining whether the upward move continues or if WTI will encounter resistance and pullback once again   While the situation on the oil market has been quite uncertain as of late, particularly after the start of the Russia-Ukraine conflict, prospects of slowing demand resulting from economic downturn have been weighing increasingly on the price of this key commodity. Furthermore, the ongoing zero-covid China policy has significantly impacted demand prospects in the world's second biggest economy as lockdowns and industrial shutdowns have reduced the need for transportation and impacted shipping routes. Despite this, there is still one last OPEC+ decision left for 2022 and while it is unlikely the group will decide to adjust production, any notable shift in production quotas could have an effect on prices and bring an increase in volatility as we head towards the end of the year. The level of $80 could play an important role in determining whether the upward move continues or if WTI will encounter resistance and pullback once again.  This week's prints stand for the last data pack ahead of December Fed decision, supposing they came as a surprise would Fed go for a 75bp rate?   This week's highly anticipated data pack may play an important role in the final FED decision of 2022 as the central bank continues its fight against inflation while attempting to not cause a demand shock. Consumers remain under extreme pressure as prices rise across the board while rising commodity prices add to the problem and as the central bank's hawkish policy continues to constrain demand. The US central bank has shown a willingness to adjust its policy according to the data and this time could be similar as many begin to speculate as to when it will begin to reverse its policy while others wonder if the target rate will be adjusted further. In either case, the FED might be running out of ammo when it comes to tackling inflation and may choose a more cautious approach in order to ensure that it is mitigated in a sustainable manner. Read next: Steen Jakobsen: ECB strategy is praying, hoping and waiting... not exactly action which gives hope for real economy| FXMAG.COM   This NFP report may also have an important role when it comes to the strength of the US Dollar as the greenback continues to be under pressure after a period where it dominated all other currencies   In addition to playing a key part in the inflation discussion, this NFP report may also have an important role when it comes to the strength of the US Dollar as the greenback continues to be under pressure after a period where it dominated all other currencies. The USD Index has been dropping for several weeks and while it may be unlikely that we see a significant rebound, the FED's decision may lead to a change in sentiment as we head into 2023. Furthermore, the USDIDX is testing the 200 SMA on the daily chart after trading in the reaction area around 106 points which may act as a support if it manages to hold. As more central banks continue to catch up with the FED's policy, we could be seeing a shift in the balance of power in the currency market away from the US dollar which has reigned over others in recent times.  
FX Daily: Upbeat China PMIs lift the mood

The Signals Coming From China Look Very Positive

Craig Erlam Craig Erlam 01.12.2022 13:04
We’re seeing green flashing across the board on Thursday, with sentiment buoyed by positive signals on Fed rate hikes and China’s Covid response. While it could be argued that Jerome Powell’s comments on Wednesday were relatively balanced – slower tightening now but rates high for longer – the last year has proven that anticipating the path of inflation for even a short period ahead is incredibly difficult. Knowing what the Fed intends to do next is far more valuable than what it thinks it may do 6-12 months down the line. And anything that is perceived to reduce to possibility of an interest rate recession is going to be a positive for equity markets. The Fed has every opportunity to tighten more in the months ahead if the data doesn’t play ball. What’s far more difficult is undoing the damage caused by moving too fast now with little to no visibility on how impactful past tightening has been. Positive signals The signals coming from China also look very positive. While we shouldn’t expect a dramatic shift in policy from the leadership, particularly before the March Congress, any modest softening in its Covid-zero policy will and should be welcomed. The approach has been extremely damaging to growth and confidence and the protests highlight how public opinion towards it is changing. We shouldn’t be naive to the fact that a move away from the policy won’t be easy and there’ll be plenty of setbacks. But it’s certainly a step in the right direction that, along with the measures announced to revive the property market, could put the economy on a much better path. Some relief for cryptos The risk relief rally is coming at just the right time for bitcoin, helping it to recover from the lows to trade around $17,000. This is around the highs of the last few weeks since it settled after its latest plunge. Whether it will be enough to revive interest in the cryptocurrency, I’m not sure. The FTX fallout is continuing to weigh heavily on the space and the prospect of more contagion or scandals is hard to ignore. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
The Melbourne Institute Inflation Gauge For Australia Rose More Than Expected

There Is A Chance That The RBA Will Again Raise Rates By 25bp

Kenny Fisher Kenny Fisher 01.12.2022 13:14
AUD/USD continues to power upwards and hit 10-week highs earlier today. The Australian dollar climbed 1.5% on Wednesday and has edged higher today. In the European session, AUD/USD is trading at 0.6796, up 0.14%. US dollar slides after Powell speech Fed Chair Jerome Powell spoke on Wednesday and gave the markets what they wanted to hear with regard to the December rate hike. Powell strongly hinted that the Fed would slow the pace of rate increases at the December 14th meeting, after four successive 75-bp hikes. Powell said that slowing down at this point “is a good way to balance the risks”, as the Fed Chair is trying to slow the economy while avoiding a recession. The markets duly responded by pricing in a 50-bp rate hike at 80%, up sharply from 65% prior to Powell’s remarks. This sent financial markets higher, while the US dollar was broadly lower. Investors focussed on Powell’s hint that rate hikes will slow at the next meeting, choosing to ignore his comments that rates could rise higher than previously expected and for a prolonged period in order to curb stubborn inflation. The likely easing to 50 bp was a green light for the markets, and what is down the road can be worried about another time. In Australia, Private Capital Expenditure disappointed in Q3 with a reading of -0.6%. This was below the Q2 reading of 0.0% and way off the consensus of 1.5%. The RBA meets on December 6th after having eased on rate hikes, with two straight increases of 25-bp. The cash rate is currently at 2.85%, and there is a good chance that the RBA will again raise rates by 25 bp next week, as it looks to fight inflation while guiding the economy to a soft landing.   AUD/USD Technical AUD/USD is testing resistance at 0.6829. Above, there is resistance at 0.6903 There is support at 0.6707 and 0.6633 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
Oanda Podcast: US Jobs Report, SVB Financial Fallout And More

Saxo Bank Podcast: The Fed Chair Powell Speech, The US Equity Market Rallied And More

Saxo Bank Saxo Bank 01.12.2022 13:19
Summary:  Today we look at the market exploding higher in the wake of the Fed Chair Powell speech on inflation and the labor market yesterday, as we note that Powell failed to specifically push back much against the current easing of financial conditions and market expectations that Fed policy will be loosening already by late next year and especially in 2024. But we also caution that, while the US equity market rallied through key resistance yesterday, the market has a tendency to react strongly to event risks on the day without notable follow through in following sessions. On that note, we also have important incoming data that can test yesterday's reaction in the form of the October US PCE inflation indicator ahead of tomorrow's US jobs report. We also look at the commodities market reaction to Powell's speech, particularly precious metals and discuss copper in the context of the drumbeat of news pointing to China easing up on Covid policy, as well as crude oil. Today's pod features Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.     Source: https://www.home.saxo/content/articles/podcast/podcast-dec-1-2022-01122022
Rates and Cycles: Central Banks' Strategies in Focus Amid Steepening Impulses

Soft US Data Helped US Yields Lower All Along The Curve

Saxo Bank Saxo Bank 01.12.2022 14:28
Summary:  Fed Chair Powell’s speech on the economy, inflation and the labor market yesterday only confirmed the market’s forward expectations for Fed policy. The lack of notable pushback from Powell on the market’s pricing of eventual Fed easing saw equity markets in a celebratory squeeze and the USD taken down a few notches as weak data prior to his speech added to the reaction and the drop in US treasury yields. But now that we have the binary reaction, cue the incoming data. Today's Saxo Market Call podcastToday's Market Quick Take from the Saxo Strategy TeamFX Trading focus: USD dumped on Fed Chair Powell speech, but cue the incoming data. Fed Chair Powell failed to deliver the kind of pushback against easy financial conditions that many had the right to expect in his speech yesterday, as the policy guidance was rather light in the speech. Most of the speech centered on a discussion of inflationary risks and where the Fed felt comfortable with the trajectory and outlook, and where it felt less certain, which was especially notable in the labor market/wage dynamics. The heart of the speech discussed the likely permanent reduction in the potential labor force due to older workers leaving the work force during the pandemic and the uncertainty of how quickly the wage pressures would ease. Near the end of the speech, Powell said “Given our progress in tightening policy, the timing of that moderation is far less significant than the questions of how much further we will need to raise rates to control inflation, and the length of time it will be necessary to hold policy at a restrictive level. It is likely that restoring price stability will require holding policy at a restrictive level for some time.” The lack of certainty and Powell suggesting it may be appropriate to reduce the size of Fed hikes to 50 basis points at the December FOMC meeting emboldened the market. The question is whether the very “binary” interpretation of his speech will feed a new extended sell-off in the US dollar, as incoming data could quickly reject the narrative. Soft US data added to the reaction function yesterday and helped US yields lower all along the curve, although this did not unfold until the market had a look at what the Fed Chair had to say. The November Chicago PMI plunged to a scary 37.2 (vs. 47 expected and 45.0 in October) and the November ADP private payrolls change were out at a 21-month low of +127k vs. the +200k expected. Today’s key event risk is the core month-on-month PCE inflation print, expected at +0.3% MoM and 5.0% year-on-year. Any upside surprise would sit very poorly with yesterday’s reaction, as would a stronger than expected November jobs and/or earnings data tomorrow. Chart: USDJPYUSDJPY plunged down through the 137.50 area recent pivot low yesterday in the wake of Fed Chair Powell’s speech as US yields dropped all along the curve, with the US 10-year benchmark yield hitting 3.60%, a new local low ahead of the important 3.50%. The 200-day moving average, currently near 134.50 and rising rapidly, is zooming into view and will be a key test that might be hard to break unless US yields continue lower, which will be far more down to incoming data in coming weeks. The pain trade across markets now will be either a) stronger than expected US data and/or b) more inflationary data regardless of the strength in the real economy (that would require the Fed to remain higher for longer and for the market to eventually reset forward inflation expectations). Also watch global energy prices, a second source of vulnerability for the JPY due to its import of nearly all energy supplies. Some BoJ member jaw-boning overnight on an eventual policy shift also helping the JPY at the margin. Source: Saxo Group Not a big focus for traders, but EURSEK is still up in the high part of the range despite what has normally been a supportive backdrop for SEK (the historic SEK sensitivity to risk sentiment). Why? Likely, as the market shields its eyes at the implications of the rate hike cycle into the Swedish domestic economy on the one hand. We recently saw that staggering 7.7% drop in real volumes of Retail Sales for October and the country’s consumers have yet to feel the brunt of higher mortgage payments as the impact on discretionary spending mounts in coming months (well over half of mortgages taken out in 2020-21 were on floating rates of a year or less). As well, European PMIs are weak and are unlikely to pick up significantly as long as energy prices remain an issue, with the Swedish economy traditionally leveraged to the EU economy. The Swedish November Manufacturing PMI was also out this morning and hit a new cycle low at 45.8. Table: FX Board of G10 and CNH trend evolution and strength.The US dollar down-trend re-intensified yesterday after Fed Chair Powell’s speech, with the USD breaking to new cycle lows in places, but will the incoming data continue to support both risk on and lower US yields, the ideal combination for USD bears? Elsewhere, note the NZD continuing its remarkable run while the JPY has perked up as a function of falling US treasury yields. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs.AUDNZD hits new cycle lows today as the market may be fretting RBA dragging its heels on rate tightening more than the supportive news out of China on the trend toward reopening. If there is a pair ripe for mean reversion on the one-month time frame or less, it might be NZDCAD, the trending outlier in absolute value terms. Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights 1230 – US Nov. Challenger Job Cuts 1330 – US Oct. PCE Inflation 1330 – US Weekly Initial Jobless Claims 1420 – US Fed’s Logan (Voter 2023) to speak 1500 – US Nov. ISM Manufacturing 1645 – ECB Chief Economist Lane to speak   Source: https://www.home.saxo/content/articles/forex/fx-update-usd-bears-celebrate-lack-of-powell-pushback-01122022
Market Focus: US Rate Hikes, Eurozone Inflation, and UK Monetary Policy Uncertainty

There are quite strong indications that Fed and ECB will go for 50bp rate hikes

ING Economics ING Economics 01.12.2022 15:16
Fed Chair Powell has a clear ambition to hike by 50bp in December, and likely the same in February 2023, and maybe more. Given that, and a likely terminal funds rate of at least 5%, the drift lower in the US 10yr yield looks anomalous. Then again, year end can be like that. A move back above 4% still looks probable – it just might take a bit longer to achieve A hawkish hike (even if smaller) now needed to help re-tighten conditions If Chair Powell wanted to use yesterday’s speech to help re-tighten financial conditions, then he won’t be very happy with the impact market reaction. Market rates have fallen, credit spreads are tighter and effectively we’ve gone “risk on”. Financial conditions started out at about 0.6 of a standard deviation tight versus normal pre-Powell. They are now at closer to 0.5 of a standard deviation tight. We think it needs to be a full standard deviation tight, to be at least somewhat statistically meaningful. The reason we are not tighter is (mostly) lower market rates and tighter credit spreads. The US 10yr is now down to 3.7%, more than 50bp below the peak seen at end-October / early-November. Some 8bp of that has come in the wake of Chair Powell’s speech today. At 3.7%, the 10yr yield is some 130bp below the discounted terminal rate of 5%. That’s quite a spread. We think it’s far too wide. It’s telling us one of two things: (1) If the Fed hits 5%, then it’s not sustainable and a cut is coming really soon after that, or (2) The Fed will in fact not hit 5% at all, and they are done in December. The flip from 22 to 23 does not magically rid us of inflation risks Our view? We think the Fed does hit 5% (in February), and that the 10yr should be comfortably back above 4% in anticipation of that. This can happen soon, but could also morph into a turn of the year call, as we're now in this weird end of year swing where anything can happen. There can be some net buying going on as investors square books into year end, often buying back duration that had been shorted during the year. The first quarter of 2023 will bring the realization that the flip from 22 to 23 does not magically rid us of inflation risks that the Fed will feel emboldened to continue to address. Market rates are not fully reflecting this; but they will. Real Treasury yields are positive across the curve, the Fed will want to avoid an early drop Source: Refinitiv, ING EUR inflation solidifies expectations for a 50bp hike The eurozone flash CPI sees inflation having decelerated to 10% in November versus expectations of only a moderate slowing to 10.4% had surprisingly little effect on the market. Our economists also see this report having strengthened the case for a 50bp hike in December after the series of 75bp over the past meetings, but the market has been leaning to a slowed pace already in the wake of the first country readings at the start of the week, reducing the discount to only slightly more than 20% for still another larger 75bp hike after around 50% previously. The more relevant core measure of inflation remains at a painfully elevated 5% Yet away from the energy price-induced, headline-grabbing drop to 10%, the more relevant core measure of inflation has not budged and remains at a painfully elevated 5% year over year, in line with the consensus. The European Central Bank has rightly shifted the focus of the policy debate to underlying inflation and its persistence, being well aware that drops in the volatile headline can lead to false dawns. The bond rally has limited - but not reversed - ECB and Fed hike expectations Source: Refinitiv, ING   The ECB’s Isabel Schnabel has been the most vocal about still worrying underlying trends in her latest speech last week. Chief Economist Lane has employed a more measured tone in his latest expansive blog, though, warning not to read too much into current measures of underlying inflation. In particular he cautioned that the staggered adjustment of wages to the increase in the cost of living can play out over several years, but shouldn’t automatically signal a change in overall wage dynamics, i.e. the onset of a much feared wage-price spiral. The ECB should still have qualms about letting financial conditions ease too much, too early That the ECB isn’t done raising rates is clear. While it is widely accepted that the ECB will have to move into restrictive territory is also widely accepted, the latest inflation data has taken the edge off calls for more larger pre-emptive hiking. This also means that the tailwind for a further curve flattening dynamic is fading, but it should not distract from the prospect of rates possibly staying higher for longer. Similar to the Fed, the ECB should still have qualms about letting financial conditions ease too much, too early in its battle with inflation.   Today's events and market view US rates should remain in the driving seat given the busy data slate and the mixed signals that come from them. Yesterday's US GDP revisions for instance have pointed to a more resilient underlying demand, while last night’s Fed Beige Book hinted at slowing price pressures. Prices will remain in focus with today’s PCE deflator. That could be interesting as it is the Fed’s preferred inflation measure and does not always match what happens in core CPI. Today’s ISM manufacturing could drift just below the break-even 50 level, while the employment component, which markets will draw on ahead of tomorrow’s jobs data, is seen stable at 50. Even after Fed Chair Powell’s speech yesterday, some attention should still fall on Fed speakers in the final days ahead of the pre-meeting black out period. Today will see appearances of the Fed’s Logan, Bowman and Barr.   In secondary markets France and Spain will auction their final bonds for the year. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
So, may be extending Fed hiking won't be necessary...

So, may be extending Fed hiking won't be necessary...

ING Economics ING Economics 01.12.2022 15:59
With CPI, PPI, import prices and now, most significantly, the core PCE deflator pointing to weakening price pressures, the Federal Reserve's hawkish messaging is being questioned by the market. Admittedly the consumer is still spending, but it appears that pricing power is moderating and there may not be the need for a prolonged period of high rates  US inflation surprises on the downside again Federal Reserve Chair, Jerome Powell, tried his best to talk up the prospect of a higher-for-longer interest rate policy story, but the market didn’t believe him yesterday and will be even less inclined to do so after today’s personal income and spending report. The 0.2% month-on-month core Personal Consumer Expenditure deflator outcome (consensus 0.3%) is another inflation surprise with the year-on-year rate slowing to 5% from 5.2%. This is significant as it is the Fed’s favoured measure of inflation and with pipeline price pressures, such as import prices and PPI, also continuing to soften after we got the soft core CPI print, it poses real challenges to the Fed’s narrative on inflation. Read next: There are quite strong indications that Fed and ECB will go for 50bp rate hikes | FXMAG.COM In fact, the situation could get even trickier for the Fed with the chart below plotting the core PCE deflator against the National Federation of Independent Businesses price plans survey. It shows that the proportion of companies looking to raise their prices over the next three months has dropped sharply very recently, presumably reflecting some evidence of softening demand and rising inventory levels. This relationship suggests the core PCE deflator could head down to 3% by the end of 1Q, which would argue that we are getting close to the top for the Fed funds target rate. Moreover, if the economy does fall into recession as many fear, that corporate pricing power story will weaken much further and could contribute to inflation getting close to the 2% target by the end of 2023. Weakening corporate pricing power points to a sharp fall in inflation Source: Macrobond, ING Activity still holding up for now For now though, the activity side is holding up well with real consumer spending rising 0.5% MoM in October, the strongest gain since January. The news on the Black Friday/Cyber Monday retail sales has also been good and means that real consumer spending is on track to rise at a 4% annualised rate in the current quarter. We also expect to see a strong jobs number tomorrow given that job vacancies exceed the total number of unemployed Americans by a factor of almost two. The Fed will likely point to these factors as justifying an ongoing hawkish position insofar as demand exceeding supply will keep the inflation threat alive. A 50bp interest rate hike for December still looks a certainty and we continue to expect a final 50bp hike in February. For any more hikes we are going to need to see strong demand continue, but with US CEO confidence at the lowest level since the Global Financial Crisis and the housing market deteriorating rapidly, it is not our base case. Read this article on THINK TagsUS Inflation Federal Reserve Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
S&P 500 ended the session 1.4% higher. This evening Japan's inflation goes public

Jing Ren talks macroeconomic indicators across the globe

Jing Ren Jing Ren 01.12.2022 09:54
Risk appetite got a bit of a boost overnight despite disappointing Chinese NBS PMI figures. Health authorities in the world's second largest economy promised to revise the way in which zero-covid policies would be enacted, and touted progress in vaccinations for the elderly. The latter is seen as a key point in finally getting China in a position where restrictions can be lifted. Chinese factory orders hit the lowest level in seven months. But that was for the larger, government-run companies that are surveyed by the National Bureau of Statistics. The private measure of smaller, more export-oriented business is carried out by Caixin, which could moderate the current outlook What could move the markets Meanwhile, focus is on the rest of the world as PMIs are expected to repeat the upbeat tone seen during the preliminary results published two weeks. Here are some of the major factors to watch out for: China: China Caixin Manufacturing PMI is forecast to come in at 48.9, down from 49.2 previously. But given the result out of the official survey, the market is likely to be not surprised if the measure is closer to 48. On the other hand, a smaller drop than expected could add to the current positive momentum and buoy commodity currencies. Europe: German flash PMI was the standout, coming in well above expectations and breaking a multi-month slide. It stayed well into contraction, but could be shining a light at the end of the tunnel. Particularly when taken in combination with the surprise drop in inflation in the largest economy in Europe. Although it doesn't appear to be enough to shake the perception that the ECB will act quite aggressively at their final meeting for the year. Eurozone PMI is expected to repeat the flash reading of 47.3, which was a substantial improvement over the 46.4 of October. But, it's still below the 50 level, which separates contraction from expansion. Europe continues to contract, but not as much as expected. This also can be seen in the context of Eurozone inflation also coming in below expectations, just like with Germany. But, it should be pointed out that core CPI stayed steady, suggesting the improvement in inflation reading is due more to easing energy prices than a structural change in the shared economy. United States The final reading for S&P Manufacturing PMI is expected to be the same as the flash reading at 47.6, which was significantly down compared to 50.4 in the prior month, and well below the technical contraction of 49.9 expected. But this could be due to methodological differences. This is because the ISM Manufacturing PMI for November came in broadly speaking within expectations, at 50.2 compared to 50.0 expected. A couple of decimal points isn't a major difference this close to the line between contraction and expansion. But, it's expected that ISM will revise their measure down to 49.8, meaning both PMI measures will move into contraction, if expectations are met.
USA: Jerome Powell steals the show ahead of the release of labor market data

USA: Jerome Powell steals the show ahead of the release of labor market data

Jing Ren Jing Ren 01.12.2022 16:34
Tomorrow has the all-important release of US labor market numbers. But the Fed's Powell kind of already robbed the thunder from the release during his speech at the Brookings Institute yesterday. He basically implied that the Fed would start slowing down its tightening at the next meeting. Naturally the market jumped and the dollar weakened in response. Now the question is whether there will be follow-through on the optimism with the jobs numbers. November's NFP is expected to come in lighter compared to the prior month, but it should be noted that the data has been markedly outperforming expectations lately. Taken in context of the latest BLS report showing that the labor market remained tight, the consensus for what to expect out of NFP has drifted up, slightly. A week ago, analysts were forecasting 200K jobs added, but that has now moved up to 210K jobs, compared to 261K in October. The trends remain favorable Prior to covid, a 210K jobs report would be considered relatively good. But referring back to the BLS report that came out yesterday, there are some worrying signs. As mentioned, in October there were 261K jobs created, but 353K jobs went off the market. Meaning that companies are closing down job offers faster than people are being hired. The largest drop in job offers occurred in state and local governments, followed by manufacturing. Combined, that represented the bulk of the reduction in job openings. For now, the market remains tight, mostly because the extraordinarily large gap between job openings and jobseekers that occurred from the pandemic is still there. There were 6.1 million people looking for work last month, but there were 10.3 million jobs for them. Despite this mismatch, wages have failed to keep up with inflation. Current expectations are that average hourly earnings will slow to 0.3% from 0.4% reported in October. Putting the pieces together The Fed's main worry though this cycle has been that higher inflation combined with an extremely tight labor market would lead to a wage-price spiral. However, that hasn't happened, giving the Fed plenty of space to raise rates to combat inflation. Recently, inflation has been starting to come down, from a combination of higher borrowing costs and worries about an impending recession. The prolonged loss of purchasing power among American workers as their salaries fail to keep up with prices would be expected to lead to demand destruction. Which would also contribute to reducing inflation, as Americans see their pocketbooks being pinched and refuse to pay higher prices. As retailers across the country report rising inventories and some are suspending buying new inventory for the start of next year, the natural expectation is that the economy will slow down. Which in turn also contributes to lower inflation. The unemployment rate is expected to remain steady at 3.7%, and so is the participation rate. This is reflected in the BLS data showing the number of people quitting to find better pay far outweighed the number of people being fired.
The Collapse Of The Silicon Valley Bank Weakened The Dollar And USD/JPY But Supported EUR/USD, AUD/USD, And GBP/USD

The Demand For US Currency (USD) Significantly Dropped

InstaForex Analysis InstaForex Analysis 02.12.2022 08:27
The demand for US currency significantly dropped on Wednesday night and Thursday during the day. Due to this, the euro/dollar and pound/dollar instruments saw price increases of about 200 and 300 basis points, respectively. In yesterday's reviews, I already conducted a thorough analysis of the news landscape of these days. I concluded that economic data could not have a significant enough impact on market sentiment to cause the US dollar to depreciate significantly against the euro and the pound. The market did not react that way because the news background was not that bad for the dollar. The only thing that has anything to do with the US dollar's decline is Jerome Powell's speech on Wednesday night. Other analysts have written quite a bit about this subject, and most concur that Powell's speech didn't offer anything novel or demoralizing. The Fed President noted that economic growth is below the anticipated trajectory, inflation is still very high, and a slowdown in the rate increase could occur as early as December. However, he added that the interest rate might rise for longer than the Fed had anticipated in September. What qualifies as the "hawkish" element? Why did the market respond to the "dovish" statements rather than him? Other FOMC members have expressed this "dovish" rhetoric numerous, but the market did not retaliate as violently. I don't think explaining how the market reacted to the speech is worthwhile because it initially "aimed" at buying both instruments. Just look at how the US session began on Thursday and how the US dollar immediately began to decline (and both instruments up). Although Powell's speech was given days earlier, the American statistics at the start of the session had yet to be made public. However, the market also identified factors that reduced demand for the dollar. Thus, I conclude that, rather than Powell's speech being full of "dovish" theses, the market decided that the demand for the dollar was declining. It didn't abound, though. What comes next? The wave e peak on the euro currency has been broken once more, and the wave marking may get even more complicated. The British pound believes that everything is the same. Another significant Nonfarm Payrolls report will be released in the USA today, which is expected to send the market into a frenzy. But I think the market won't care what this report is worth. Regardless of how compelling the report is, the value of the US dollar will decline if they decide to keep selling it. Perhaps I need to be more accurate and treat the market fairly. I would be okay if the situation changed the next day completely. But if the market interprets the news background in its convenient manner, what use is it to analyze it at all? I conclude that the upward trend section's construction is complete and has increased complexity to five waves. As a result, I suggest making sales with targets close to the estimated 0.9994 level, or 323.6% Fibonacci. The trend's upward portion could become more complicated and take on a longer form, and the likelihood of this happening is increasing daily. The construction of a new downward trend segment is predicated on the wave pattern of the pound/dollar instrument. I cannot suggest purchasing the instrument immediately because the wave marking already permits the development of a downward trend section. With targets around the 1.1707 mark, or 161.8% Fibonacci, sales are now more accurate. The wave e, however, can evolve into an even longer form.       Relevance up to 05:00 2022-12-03 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/328781
The Price Of USD/JPY Pair Has To Fight With The Resistance Level

The Japanese Yen (JPY) Gained Versus The US Dollar (USD)

Saxo Bank Saxo Bank 02.12.2022 08:40
Summary:  The U.S. Core PCE came in slightly softer than expected. November U.S. ISM Manufacturing Index dropped by 1.2 percentage points to 49.0, entering the contractionary territory. Treasury yields fell across the curve, with the 10-year yield falling to 3.50%. Yen gained 2% on lower U.S. yields and a BOJ board member called for a review of Japan’s monetary policy. Mores encouraging signs coming out of China pointing to the prospect of further easing of Covid restrictions. What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) finished Thursday flat after softer economic data U.S. stocks fluctuated between modest gains and losses and finished the session nearly flat. Investors were weighing the decline in bond yields resulting from the softer Core PCE prints and the ISM Manufacturing Index entering into the contractionary territory and the concerns about a contraction in manufacturing activities. Eight of the 11 sectors within the S&P 500 were lower with the exception of communication services, healthcare, and information technology which registered modest gains. Salesforce (CRM: xnys) dropped 8% after the enterprise software maker reported an earnings miss, a weak outlook, and CEO resigning. Dollar General (DG:xnys) shed 7.5% on disappointing results and an outlook cut. Snowflake (SNOW:xnys) gained 7.8% on an earnings beat. Netflix (NFLX:xnas) gained 3.7% on news that the company is expanding a program to seek comments from preview audiences. US treasury yields (TLT:xnas, IEF:xnas, SHY:xnas) fell on softer PCE and ISM Manufacturing A softer core PCE at 0.219% M/M (vs consensus 0.3%; Sept: 0.463% and 4.984% Y/Y in October (vs consensus 5.0%; Sep 5.182%), together with the slide of the ISM Manufacturing Index to 49.0 triggered buying in treasuries. The 2-year yield dropped 8bps to 4.23% and the 10-year yield was 10bps richer, closing at 3.50%.  The long-end outperformed as the 30-year yield fell 14bps to 3.60%. Fed Governor Michelle Bowman echoed Powell’s “somewhat higher” rhetoric as she said that “expectation would be that we ould have a slightly higher rate than I had anticipated in September”. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) gained on a less hawkish Powell and more signs of China preparing to ease Covid restrictions further Hang Seng Index climbed 0.8% and CSI300 Index gained 1.1% following the less-hawkish-than-feared speech from the U.S. Fed Chair Powell overnight and China’s Vice-Premier Sun Chunlan, who is in charge of containing the spread of Covid-19, acknowledged in a pandemic control export workshop that the Omicron variant is less deadly. China is reportedly instructing local authorities to get 90% of the population over 80 years old vaccinated in two months. Caixin China PMI Manufacturing came in at 49.4 in November, above the consensus estimate of 48.9 and October’s 49.2. EV maker XPeng (09868:xhkg) jumped 12.8%. See our update here on a brighter outlook for A shares in 2023, supported by the trend of credit impulse. FX: Yen gained nearly 2% to 135.40 vs the dollar on lower US bond yields and a BOJ board member calling for a review of Japan’s monetary policy The Japanese Yen gained almost 2% to 135.30 versus the dollar as U.S. bond yields fell on a less hawkish Powell and Naoki Tamura, a Bank of Japan board member said that “it would be appropriate to conduct a review at the right time, including the momentary policy framework and inflation target”. What to consider? October U.S. Core PCE softer than expectations The U.S. Core PCE decelerated more than expected to 0.219% M/M (vs consensus 0.3%; Sept: 0.463% revised), and 4.984% Y/Y in October (vs consensus 5.0%; Sep 5.182%). The Core Services Prices excluding Housing Services sub-index, which Fed Chair Powell highlighted as the “most important category for understanding the future evolution of core inflation” in his speech at the Brookings Institution on Wednesday, moderated to 0.33% M/M in October, down from 0.48% M/M in Sep. Headline PCE came in at 0.3% M/M (consensus: 0.4%; Sep 0.3%) and 6.0% Y/Y (consensus 6.0%; Sep: 6.3% revised).  Dropping to 49.0, the U.S. ISM Manufacturing Index entered the contractionary territory  The November ISM Manufacturing Index dropped by 1.2 percentage points to 49.0 (vs consensus 49.7; Oct 50.2) and entered the contractionary territory. It was the lowest since May 2020. The weakness was broad-based with new orders falling to 47.2, order backlogs dropping to 40.0, employment down to 48.4, and prices paid sliding to 43.0. U.S. job data is the key thing to watch today The U.S. Labor Bureau of Statistics is scheduled to release the November job data on Friday. According to the Bloomberg survey of economists, the median forecasts are looking for a 200,000 increase in non-farm payrolls, down from 262,000 in October, and an unchanged unemployment rate at 3.7%. Average hourly earnings are excepted to come in at 0.3% M/M (vs Oct 0.4%) or 4.6% Y/Y (vs Oct: 4.7%) For our look ahead at markets this week – Read/listen to our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: Market Insights Today: Softer US Core PCE, ISM Manufacturing Index entering the contractionary territory – 2 December 2022 | Saxo Group (home.saxo)
Rates and Cycles: Central Banks' Strategies in Focus Amid Steepening Impulses

Weak US Data Took US Yields Lower All Along The Curve

Saxo Bank Saxo Bank 02.12.2022 08:52
Summary:  Risk sentiment fizzled after the strong from the prior day on Fed Chair Powell’s less hawkish than feared speech. That was despite softer than expected October PCE inflation data that helped US treasury yields trade to new local lows all along the curve. Today’s US November jobs report will carry a bit more weight for the treasury market, where yields have helped drag the US dollar to new lows.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) U.S. stocks fluctuated between modest gains and losses and finished the session nearly flat. Investors weighed the decline in bond yields from softer US data (see below). Eight of the eleven sectors within the S&P 500 were lower except for communication services, healthcare, and information technology which registered modest gains. Salesforce (CRM: xnys) dropped 8% after the enterprise software maker reported earnings miss, a weak outlook, and CEO resigning. Dollar General (DG:xnys) shed 7.5% on disappointing results and an outlook cut. Snowflake (SNOW:xnys) gained 7.8% on an earnings beat. Netflix (NFLX:xnas) gained 3.7% on news that the company is expanding a program to seek comments from preview audiences. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) Hang Seng Index and CSI300 Index consolidated and were modestly lower on Friday after the recent rally on signs of further easing of Covid restrictions in mainland China. Profit-taking selling weighed on Chinese property developers, with leading names dropping 4-5%. Online health platform stocks surged. Alibaba Health (00241:xhkg), JD Health (06618:xhkg), and Ping An Healthcare and Technology (01833:xhkg) gained 9-13%. USD lower still on falling treasury yields, fresh incoming data Weak US data, including a slightly softer than expected core PCE inflation reading and ISM Manufacturing survey, took US yields lower all along the curve and took the US dollar lower as well, with EURUSD trading above the psychologically key 1.0500 area this morning. The next important resistance there is perhaps the pandemic-outbreak low around 1.0636 or the 38.2% retracement of the entire sell-off from the 1.2350 top at 1.0611. The yield-sensitive USDJPY continued lower as well, nearly hitting the 135.00 level overnight after a chunky further drop yesterday and not far from its 200-day moving average at just above 134.50. An important test for US yields and the US dollar today with the November jobs data releases. Strong week for precious metals on Fed pivot speculation Gold rose above $1800 on Thursday supported by softer US data sending the dollar and yields lower, thereby underpinning speculation about a slower pace of future rate hikes. US 10-year real yields have fallen to a two-month low at 1.14% after hitting 1.82% in October while the Bloomberg Dollar Index has lost close to 8% during the past month alone. A break above resistance at $1808 may add further fuel to an ongoing sentiment change towards the metal but with ETF investors not yet engaging the importance of the dollar and yield developments remain key. Silver, supported by a firmer industrial metal sector, trades above $22.25 with the next level of interest being $23.36. Focus today on the US job report given its potential impact on the dollar and yields. Crude oil (CLF3 & LCOF3) trades up on the week Crude oil is heading for its best week in two months following another roller coaster week that saw Brent test support at $80 before finding resistance at $90. From an early lockdown scare in China on Monday, the sentiment improved ahead of Sunday’s OPEC+ meeting and the beginning of an EU embargo on Russian seaborne oil from Monday. Additional support was provided by a weaker dollar, China softened its virus approach and Washington calling for halt to further sales from its Strategic Petroleum Reserves. Ahead of the OPEC+ meeting a Bloomberg survey found that OPEC, led by the four major Gulf producers cut production by 1 million barrels a day last month. We expect the online meeting is likely to be strong on words but low on actions. Focus on today’s US job report given its potential impact on the dollar. US treasury yields edge lower still on weak US data. (TLT:xnas, IEF:xnas, SHY:xnas) The weak US data (see below) took US treasury yields lower all along the curve, with the 10-year benchmark within a basis point of the important 3.50% area yesterday. That level was a major pivot high posted around the time frame of the June FOMC meeting. But the weak data has not seen much steepening in the US yield curve, even if 2-year yields dropped to new lows cine early October yesterday near 4.25% as the market prices in a slightly lower Fed cycle peak next year (currently 4.87% peak priced) and steeper pace of cuts by late 2023 and especially into 2024. The US November jobs report later today offers an important test for the treasury market as the 10-year has hit this pivotal level. What is going on? Weaker US data continues to take the air out of US yields The October PCE inflation data came in softer than expected for the core month-on-month reading at +0.2% vs. +0.3% expected, while the year-on-year level of 5.0% was expected. Another soft data point was the November ISM Manufacturing survey which came in at 49.0 vs. 49.7 expected and suggesting modest contraction in US manufacturing activity for the first time since the pandemic outbreak months. The New Orders component of that survey dropped to 47.2, Prices Paid plunged further to 43.0 and Employment nudged lower to 48.4. Sterling boost yesterday on hopes for Northern Ireland deal EU Commission president Ursula von der Leyen said that Britain and the EU said that the latest talks with UK Prime Minister Rishi Sunak were “encouraging” and that she is “very confident” a solution is possible if the UK government is on board, with Sunak seen as motivated to iron out a deal with a more pragmatic approach to the issue than former Prime Ministers Boris Johnson and Liz Truss. EURGBP briefly touched a multi-month low yesterday below 0.8560 and traded within 10 pips of the the 200-day moving average before rebounding overnight. Blackstone limits withdrawals from large property fund The company said it would limit how much the wealthy individual investors in its $69 billion real estate fund can withdraw funds to 2% of the net asset value of the fund monthly and 5% quarterly. Real estate is a notoriously illiquid asset. What are we watching next? US November Jobs report on tap The November jobs data is up today, theoretically expected to show payrolls growth of +200k, but with the market perhaps leaning a bit lower after the softest ADP private payrolls growth number in more than 20 months. The Unemployment Rate is seen steady at 3.7%, and Average Hourly Earnings are anticipated to rise +0.3% month-on-month and +4.6% year-on-year after the October data point at 4.7% YoY was the lowest year-on-year reading in just over a year. The Atlanta Fed’s median wage tracker, meanwhile, has shown entirely different levels of earnings growth, with +6.4% in October and 6.7% in both of the prior two months. Earnings to watch Earnings next week are a mish-mash of companies, and include high-end homebuilder Toll Brothers on Tuesday, as it will be interesting to hear their outlook on the new home market after the enormous surge in US mortgage rates and collapse in home sales activity. Broadcom (AVGO: xnas) is the market cap giant of the week to report, with the CEO of the company having said that the semiconductor market will not be affected by the US’ new export restrictions on technology to China. Tuesday:  MongoDB, AutoZone, Toll Brothers, Ferguson Wednesday: Brown Forman, Campbell Soup, GameStop Thursday: Broadcom, Costco, Lululemon, Chewy Friday: Oracle Corp, Li Auto Economic calendar highlights for today (times GMT) 1330 – Canada Nov. Employment Change / Unemployment Rate 1330 – US Nov. Change in Nonfarm Payrolls 1330 – US Nov. Unemployment Rate 1330 – US Nov. Average Hourly Earnings 1415 – US Fed’s Barkin (non-voter) to speak 1900 – Us Fed’s Evans (voter 2023) to speak Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: https://www.home.saxo/content/articles/macro/market-quick-take-dec-2-202-02122022
Weaker Crude Oil Prices Undermine The Loonie Pair (USD/CAD)

The USD/CAD Pair May Witness Further Downside

TeleTrade Comments TeleTrade Comments 02.12.2022 09:13
USD/CAD remains indecisive after two-day downtrend, defends weekly gains. Federal Reserve policymakers’ dovish bias, softer United States data weigh US Dollar. Chatters surrounding China, Oil price cap on Russian exports test WTI bulls. Downbeat expectations from Canada, United States employment report tease Canadian Dollar buyers. USD/CAD portrays the market’s indecision ahead of the monthly employment data from the United States and Canada during early Friday. In doing so, the Canadian Dollar fails to justify the retreat in the WTI crude oil, Canada’s key export item, amid a lackluster US Dollar. That said, the Loonie pair seesaws around 1.3430 by the press time, after a two-day downtrend. Even if the USD/CAD pair remains inactive as of late, the hopes of slower rate hikes from the Federal Reserve (Fed) contrasts with the recently hawkish bias surrounding the Bank of Canada (BOC) to keep the bears hopeful. It’s worth noting that the looming Oil price cap from the Group of Seven (G7) nations and recovery in China’s Covid conditions hint at the further firming of Canada’s key earner, which in turn could weigh on the Loonie pair. Federal Reserve policymakers contrast with Bank of Canada officials to favor USD/CAD bears The dovish bias of the Federal Reserve (Fed) Chairman Jerome Powell, as well as downbeat comments from US Treasury Secretary Janet Yellen, initially raised hopes of easy rate hikes. Following that, Federal Reserve (Fed) Governor Michelle Bowman stated that (It is) appropriate for us to slow the pace of increases. Before him, Fed Governor Jerome Powell also teased the slowing of a rate hike while US Treasury Secretary Yellen also advocated for a soft landing. Further, Vice Chair of supervision, Michael Barr, also said, “We may shift to a slower pace of rate increases at the next meeting.”  It’s worth noting that the recent comments from New York Fed’s John Williams seemed to have tested the US Dollar bears as the policymakers stated that the Fed has a ways to go with rate rises. On the other hand, Bank of Canada (BOC) Governor Tiff Macklem testified in late November while saying, “We expect our policy rate will need to rise further.” Additionally, BOC’s Senior Deputy Governor Carolyn Rogers said, “It will take time to get back to solid growth with low inflation but we will get there.” Differences between United States and Canada data also weigh on Loonie pair On Thursday, United States Core Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s preferred inflation gauge, matched 5.0% market forecasts on YoY but eased to 0.2% MoM versus 0.3% expected. Further, US ISM Manufacturing PMI for November eased to 49.0 versus 49.7 expected and 50.2 prior. Earlier in the week, the US ADP Employment Change marked the lowest readings since January 2021 with 127K figure for November versus 200K forecast and 239K previous readings. Further, the second estimate of the US Gross Domestic Product (GDP) Annualized for the third quarter (Q3) marked 2.9% growth versus 2.6% initial forecasts. Talking about Canada, Labor Productivity jumped to 0.6% in the third quarter (Q3) versus -0.1% expected and 0.1% prior (revised). Further, S&P Global Manufacturing PMI for November increased to 49.6 from 49.3 market expectations and 48.8 prior. Previously, Canada’s Gross Domestic Product Annualized for the third quarter (Q3) eased to 2.9% versus 3.5% expected and 3.2% (revised down) prior. Oil buyers stay hopeful WTI crude oil remains on the bull’s radar despite the latest retreat to $81.00. The reason could be linked to the comments from the Group of Seven Nations (G7) Price Cap Coalition, as well as hopes for China’s economic recovery. Late on Thursday, Reuters quoted an Official from the G7 Price Cap Coalition as saying, “We are 'very very close' to agreement on $60-a- barrel price cap on Russian oil exports.” The diplomat also showed optimism about agreeing on refined products price cap by February 5. Further, the consecutive three days of the downtrend of Chinese daily Covid infections from a record high allowed the policymakers to tease the “next stage” in battling the virus while announcing multiple easing of the activity-control measures. Additionally, a likely inaction at this week’s meeting of the Organization of the Petroleum Exporting Countries and allies including Russia, known as OPEC+. Considering Canada’s reliance on reliance on Crude Oil exports and likely hardships for the black gold supplies, as well as improvement in demand, the USD/CAD pair may witness further downside. United States, Canada job numbers are the key Given the likely downbeat outcome from both the Canadian and United States employment data, USD/CAD pair traders may try to find greater details and could react with more aggression in case of a surprise outcome. That said, the headline US Nonfarm Payrolls (NFP) is likely to ease with a 200K print versus 261K prior while the Unemployment Rate could remain unchanged at 3.7%. It should be noted that a likely easing in the Average Hourly Earnings for the stated month could also weigh on the USD/CAD price. On the other hand, Canada’s Net Change in Employment may decline to 5K versus 108.3K prior while the Unemployment Rate could increase to 5.3% from 5.2% previous readings. USD/CAD technical analysis Despite the latest inaction, the USD/CAD pair portrays a clear U-turn from the 50-DMA, as well as a downward-sloping resistance line from October 13, currently joining each other around 1.3570-75. However, a failure to break a two-week-old ascending support line, near 1.3400 by the press time, keeps the Loonie pair buyers hopeful. Even if the quote breaks the 1.3400 support line, a convergence of the 100-DMA and an ascending trend line from August 25, close to 1.3290 at the latest, appears a tough nut to crack for the USD/CAD pair sellers. Alternatively, a clear upside break of the 1.3570-75 resistance confluence will need validation from the recent peak of 1.3645 to convince USD/CAD bulls. Following that, a run-up towards the 23.6% Fibonacci retracement level of the Loonie pair’s August-October upside, near 1.3680, can’t be ruled out. It should be noted that the USD/CAD pair’s advances past 1.3680 may witness a bumpy road around 1.3840 before the bulls could aim for the yearly high marked in October around 1.3980. Overall, USD/CAD is likely to remain sidelined with a short-term downside bias. USD/CAD: Daily chart Trend: Limited downside expected     search   g_translate    
ECB's Tenth Consecutive Rate Hike: The Final Move in the Current Cycle

Below-Forecast NFP Figures Could Encourage The Fed To Shift To A Softer Stance

InstaForex Analysis InstaForex Analysis 02.12.2022 09:27
Markets are looking out for today's US employment data as it could signal whether the Fed will finally end its cycle of aggressive interest rate hikes. Wednesday's ADP jobs report already came in well below expectations, while Jerome Powell's recent speech was less hawkish than expected. If upcoming news indicate a surge in lay-offs, sharp fall in employment and dip in new job gains, then this means that inflation is likely to ease soon, so the bank can confidently start to reduce the rate increases. This is also what Powell said when he indicated that Fed rates may increase by 0.50%, not 0.75%, in December. In short, below-forecast labor market figures could encourage the Fed to shift to a softer stance, which will be positive for markets. It could lead to a new rally in equities, especially in the US. As for Treasury yields, they will go down along with dollar. Forecasts for today: AUD/USD The pair is trading below 0.6830. If positive sentiment increases, the quote could break out of the resistance level and head towards 0.6900. USD/CAD A renewed rally in crude oil prices could put pressure on the pair. A drop below 1.3400 will bring it down to 1.3300. Relevance up to 06:00 2022-12-05 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/328785
Hawkish Fed Minutes Spark US Market Decline to One-Month Lows on August 17, 2023

Inflation Breakevens Rose After Chair Jerome Powell’s Speech

ING Economics ING Economics 02.12.2022 09:50
The US 10yr has returned to the 3.5% area, 75bp below the high hit in October. We think the 0.2% reading on core PCE helps to rationalise the move. But we need a consistent run of these, and we doubt that's in the works, at least not in the coming quarter. Given that, this move feels like a mid-cycle overshoot to the downside for yields We expect the Federal Reserve to raise rates by 75 basis points Core PCE at 0.2% month-on-month at least helps to validate the fall in market rates Yesterday's magical hit of 0.2% on core PCE for the US is enough to solidify the move lower we’ve seen in market rates. Why? The reading of 0.2% annualises to 2.7%. It's fine margins, but that's worlds apart from one notch up to 0.3%, as that annualises to 4.3%. And 0.4% gives 6%, etc. The 0.2% outcome is low enough to secure an annualised inflation reading with a 2% handle. OK, it's still closer to 3% than 2%, but it is something that the Federal Reserve would feel quite good about given where annual inflation currently is. The fall in market rates started well before we had the November 10th CPI number. That was really a base-effect impacted fall in the year-on-year CPI inflation rate, but took the 10yr yield crashing back below 4%. The subsequent core PCE month-on-month outcome is arguably more significant. The big question now is whether we see this from other inflation readings, or indeed whether we see a repeat from the core PCE number next month.  To really justify the move lower in rates, the Fed needs to be practically done in December But to really justify the move lower in rates, the Fed needs to be practically done in December. We don’t think so, and more importantly, the Fed does not think so (at least not yet anyway). But the market is looking at things through that kind of prism, pulling the terminal fund rate down to 4.9%. While 4.9% technically discounts that the Fed is not done in December and continues to hike in February, the bulk of the volumes are in the first three contracts, which brings the funds rate to 4.7% in February (and falling). US inflation break-evens rose in the wake of Powell's supposedly hawkish speech Source: Refinitiv, ING No more than a mid-cycle overshoot to the downside, pain deferred to 1Q23 Also, it must be noted that players will have a tendency to square up some of the duration and credit shorts set in 2022, in what has been the biggest bear market of modern times. This risk-on mode could sustain if the labour market cools, which is where today's payrolls come in. But it also likely pushes pain into the first quarter of 2023, the pain of resumed upward pressure on market rates and wider spreads. Anomalously, inflation breakevens actually rose after Chair Jerome Powell’s speech on Wednesday, in what is supposed to be an inflation-topping bond rally. The big move lower in rates came from a virtual collapse in real rates; from 1.5% to 1.25% in the 10yr – a massive move! That discounts macro pain ahead and suggests worries about defaults and growth ahead. That appears to be the dominant market reaction post-Powell’s speech. We doubt the 10yr gets below 3% in the rate-cutting cycle ahead The bottom line is, we think that a 0.2% outcome is significant. It brings us to 3.5% for the 10yr. Note that's a low yield level. We doubt the 10yr gets below 3% in the rate-cutting cycle ahead, so 3.5% is pricing a lot already. From here it really should drift higher, up towards 3.75%. And if it comes to pass that the 0.2% was a one-off (for now), then a return to the 4% area can't be ruled out by the first quarter of 2023. In fact, that remains our central call if the Fed goes ahead and feels the need to hike to 5% at the 1st February FOMC meeting. We need more than a single 0.2% monthly inflation print to justify Treasuries at 3.5% Source: Refinitiv, ING Today's events and market views The focus is squarely on today's US jobs data. There have been signs already of the labour market starting to cool. This week saw job openings falling, although from still very high levels, while yesterday's weaker ISM manufacturing index saw its employment component dropping 1.6 points to 48.4. There have also been announcements of substantial layoffs, particularly in the technology sector over the past months, which have added to the concerns about the resilience of the labour market. That said, the consensus is looking for a payrolls growth of 200k this month, down from last month's 261k. That may be still high enough for the Fed to see the need for further action, but low enough for markets to sustain their current risk-on mode. While a 10Y US Treasury yield arguably looks stretched already, we would be cautious to call an end to the rally in the current environment going into year-end.  Of course, further comments from Fed officials will also be followed given this is probably the last opportunity to steer expectations ahead of the pre-meeting black-out period. The Fed's Williams has been out yesterday underscoring that it will take a couple of years to get inflation back to target. Today's scheduled appearances are by the Fed's Barkin and Evans.   Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
BRICS Summit's Expansion Discussion: Impact on De-dollarisation Speed

FX: Today’s US Payrolls With A Strong Bearish Rhetoric On The USD

ING Economics ING Economics 02.12.2022 09:56
While macro factors continue to point at dollar resilience in our view, markets are fully buying into the Fed's pivot story, and have turned more structurally bearish on the dollar. Today's US payrolls may fall short of triggering an inversion of this trend, and USD downside risks persist. Keep an eye on Canadian numbers too ahead of next week's BoC meeting USD: Payrolls may not offer lifeline to the dollar With the DXY index correcting by more than 7% since the early November peak, and trading below 105.00 for the first time since July, it is now evident that markets have operated a structural shift towards a bearish dollar narrative. It’s also evident that such a shift is primarily due to expectations that the Fed is nearing the end of its tightening cycle. As explained by our US economist here, investors have called Fed Chair Jerome Powell’s higher-for-longer “bluff”, applying a larger weight on four indicators (CPI, PPI, import prices and yesterday’s PCE) that are pointing to abating price pressures. Fed Funds futures show peak rate expectations have dropped below 4.90%, after having priced in 5.25% less than a month ago. In our view, this radical shift in the market’s reaction function is premature, and may not be sustainable if the Fed increases the volume of its rate protest by sounding more stubbornly hawkish and the next inflation readings argue against a rapid descent in inflation. Incidentally, the global macro picture remains challenging – especially in Europe (where colder weather may push gas prices higher) and China – which also points to dollar resilience. However, we must acknowledge that markets are approaching today’s US payrolls with a strong bearish rhetoric on the dollar, and would likely jump on more risk-on (USD-negative) bets unless we see a convincingly strong payroll read. The consensus is centred around 200k, and we forecast 220k, with the unemployment rate staying at 3.7%. Those numbers would be quite respectable and indicate that the jobs market has indeed remained extremely tight, but while it may halt the dollar’s trend, it could fail to invert it. All in all, the balance of risks appears slightly tilted to the downside for the dollar today. A contraction in payrolls to 150k could generate a fresh round of large USD selling.    The yen should be exceptionally sensitive to the jobs figures today. The main risk for USD/JPY is that UST 10Y yields fail to find extra support at 3.50%: a further bond rally could force a break below the 134.50 200-d MA and unlock additional downside potential for USD/JPY. Still, markets may struggle to live with sub-3.50% rates for long in the current environment. Francesco Pesole EUR: Ignoring some warning signs EUR/USD moves should only be a function of the market’s reaction to US payrolls today. There is a non-negligible risk we explore 1.0600, with the pair not having any clear resistance levels until the 1.0780 6-month highs. We are, however, getting the feeling that markets are ignoring at least one warning sign for the euro. The recovery in business sentiment in the eurozone has undoubtedly been the result of lower gas prices, which have benefitted from mild weather in Europe. TTF contracts are trading at one-month highs now and may see further upside volatility in the near term as temperatures in northern Europe are expected to fall. A significant recovery in gas prices would likely make the recent rally in EUR/USD unsustainable. On the domestic side, we’ll see PPI numbers in the eurozone today, and hear from ECB president Christine Lagarde again. Yesterday, she sounded quite hawkish, signalling the need to keep inflation expectations anchored and implicitly leaving the door open for a 75bp move in December. Markets currently price in 55bp, and we are calling for a half-point hike. Francesco Pesole GBP: Cable nearing the peak? There are no domestic drivers for the pound today given a light data calendar and no Bank of England speakers. As discussed in the dollar section above, US payrolls may fail to invert the bearish dollar trend and GBP/USD may find a bit more support around 1.2300-1.2350. However, as for EUR/USD, cable is not factoring in the negative implications of rebounding gas prices and weak economic fundamentals. A return to 1.1500 around the turn of the year seems appropriate in our view. Francesco Pesole CAD: Jobs numbers quite key for BoC Payrolls will also be published in Canada today. We must note the employment series has been rather volatile, with the October figures coming in at a very strong 108k, which was entirely driven by full-time hiring. The consensus is centred around a very small 10k increase, and there is a high chance we could see a negative read. This would probably keep markets leaning in favour of a 25bp rate hike by the Bank of Canada next week (currently, 30bp are in the price). However, we see room for some upside surprise today in the jobs numbers and see a higher chance of another 50bp by the BoC. USD/CAD may soon re-test the 1.3290 100-d MA, but would require a more steady rebound in crude prices to keep the bearish momentum going. Francesco Pesole Read this article on THINK TagsPayrolls FX Dollar CAD Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Commodities Feed: OPEC+ meeting ahead

Oil Bulls In Charge Before OPEC Meeting | Equities Posted Timid Gains

Swissquote Bank Swissquote Bank 02.12.2022 10:16
Sentiment was mixed at yesterday’s trading session. Equity bulls were timid, while the dollar bears were in charge of the market after the latest PCE data, which is the Fed’s favorite gauge of inflation showed that the core PCE index slowed more than expected in October. USD The softening inflation sent the US dollar index tumbling below its 200-DMA for the first time since summer 2021. The US dollar index slipped below its major 38.2% Fibonacci retracement on 2021-2022 rally, and stepped into the bearish consolidation zone. Finally! Markets Trading in equities was much less festive than the FX yesterday, as the ISM manufacturing index warned that the US manufacturing activity fell below 50, the contraction zone, for the first time since summer 2020.Today, the much-expected jobs data should determine whether the S&P500 deserves to quit the ytd negative trend, or stay in it. How strong, or soft the NFP data should be to keep the equity rally going? Watch the full episode to find out more! 0:00 Intro 0:38 US dollar tumbled on soft PCE data 3:51 But equities posted timid gains on ugly ISM figure 4:44 What NFP print could help the S&P500 extend gains? 6:31 Gold broke important technical resistances 7:11 Oil bulls in charge before OPEC meeting, Russian price cap 8:12 Bitcoin rallies past $17K 9:02 Blackstone limits withdrawals from its real estate fund. Ouch. Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #USD #NFP #jobs #unemployment #PCE #data #Powell #speech #economic #data #EUR #GBP #JPY #XAU #crudeoil #EU #Russia #oil #cap #OPEC #Bitcoin #Blackstone #realestate #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq  Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
The Bank Of Canada Is Preparing To Announce Its Final 25bp Hike

Canada’s Economy Showed A Massive Gain In Jobs

Kenny Fisher Kenny Fisher 02.12.2022 10:21
The Canadian dollar continues to show limited movement. In the European session, USD/CAD is almost unchanged at 1.3433. We are likely to see stronger movement in the North American session, as both the US and Canada release the November employment reports. US nonfarm payrolls expected to soften Today’s highlight is the US nonfarm employment report, with a consensus of 200,000 for November. This follows a 261,000 gain in October. The US employment market has been surprisingly resilient, considering the sharp rise in interest rates. The employment market has recently started to cool off, but unless today’s NFP release significantly underperforms, it won’t change the Fed’s view that it is still too early to tell if inflation is on its way down. Canada’s economy showed a massive gain in jobs in October, with 108,300. This was ten times the estimate of 10,000. November is expected to show a small gain of 5,000, with the employment rate projected to tick higher to 5.3%, up from 5.2%. Canada’s economy is generally performing well, and today’s employment report is the final key release prior to the Bank of Canada’s rate meeting on December 7th. The Bank of Canada has been aggressive in its tightening, in order to curb inflation which is running at a 6.9% clip. Like the Fed, the BoC is looking for signs that inflation has peaked, but until then we can expect oversize rate hikes to continue, with a 50-bp hike likely next week. Jerome Powell’s speech on Wednesday sent the US dollar sharply lower, as Powell’s comments were not as hawkish as feared. Powell said that more evidence was needed to show that inflation was falling, and reiterated that rates would likely rise higher than the Fed has projected in September. Still, investors chose to focus on Powell’s broad hint that the Fed would ease the pace of rates next week with a 50-bp move, after four straight hikes of 75 bp.   USD/CAD Technical USD/CAD has support at 1.3398 and 1.3300 There is resistance at 1.3478 and 1.3576 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
Technical Analysis: Gold/Silver Ratio Still On The Rise

The Precious Metal Sector Recorded A Strong Month Of November

Saxo Bank Saxo Bank 02.12.2022 12:01
Summary:  The Bloomberg Commodity Index Total Return index traded up 2.7% in November, thereby driving the index to a 19% gain on the year. Led by precious and industrial metals which following several challenging months found support as the dollar weakened and bond yields dropped in response to lower-than-expected CPI and emerging weakness in US economic data. Developments leading to speculation that the US Federal Reserve may soon slow its pace of rate hikes. Also, China signaling a more pragmatic approach to Covid controls potentially laying the fundation for additional metal support in the coming months The Bloomberg Commodity Index Total Return index traded up 2.7% in November, thereby driving the index to a 19% gain on the year. The strong gains among industrial and precious metals offset the minor decline in energy and grains prices. Following several challenging months, the metal sectors found support from a weaker dollar and sharply lower bond yields, both driven by a lower-than-expected US CPI print last month. The emerging weakness in US economic data has led to speculation that the US Federal Reserve may soon slow its pace of rate hikes. A development that was confirmed by Fed Chair Powell in a speech on Wednesday when he signaled a smaller December rate hike as he presented a case for achieving lower inflation without tipping the economy into a deep recession. Whether successful or not may turn out to be a major driver of risk sentiment into 2023, with precious metals especially standing to benefit should he fail. The industrial metal sector jumped 14.5% on the month, thereby reducing the year-to-date loss to 4.5%. The primary driver, apart from the softer dollar, is the optimism that China may shift away from Covid Zero policies and provide additional stimulus to boost demand in the top metal-consuming economy. Copper jumped 11% last month to record its best month since April 2021 and its first monthly advance since March. Having started the year on a high note driven by post-Covid optimism, the subsequent and prolonged Covid zero focus in China drove the price sharply lower from March onwards. The result of this is a metal that, despite the strong November, remains down 17% on the year. The precious metal sector also recorded a strong month of November as the Bloomberg Precious metal index rose by 8%, thereby reducing the annual loss to just 5%. Silver led the charge with a 16% gain to $22.16, clawing back half of the losses that was seen between the March peak at $30 and the September low at $17.50. Gold, out of favor for months by traders and investors as the dollar and Treasury yields surged higher, managed a strong turnaround, rising 8% to reach $1768 – thereby reducing the year-to-date loss in dollar terms to just 3.3%. This is impressive in a year that, despite the recent weakness, has seen the dollar surge by 8% while US ten-year real yields have surged higher by around 2.3%. Silver’s impressive rally has continued into December with the price breaking above $22.25 – a 50% retracement of the March to September selloff – and on route to the next level of resistance at $23.35. Meanwhile, gold is currently working its way through a key area of resistance between $1788 and $1808. However, with the market increasingly focusing on a Fed pivot, potentially without getting inflation under control, an upside break would confirm a cycle low around $1615 and with that a potential push higher.  Source: Saxo Crude oil recovers from unwarranted China demand scare The energy sector suffered a small setback in November but remains up 55% on the year due to very strong gains in diesel and gasoline as well as natural gas. In November, all the major contracts, with the exception of natural gas, traded lower as the market took fright from continued lockdowns in China, a seasonal slowdown in demand and a steeply inverted US yield curve increasingly pointing in the direction of a sharp economic slowdown next year. Crude oil spent the week recovering from a ten-month low after renewed and, in our opinion, unfounded worries about a deteriorating demand outlook in China. The bounce was supported by a weaker dollar and traders assessing signals that China may soften its Covid Zero policy after China’s Vice Premier in charge of fighting Covid acknowledged the Omicron variant is less deadly. These developments forced a reduction in recently established short positions ahead of Sunday’s OPEC+ meeting. A meeting that is likely to be strong on words but low on actions, considering the unclear impact of an EU embargo on Russian oil starting on 5 December. In addition, US crude stocks fell by 12.6 million barrels last week, the biggest decline since June 2019, while US crude and product export hit a record close to 12 million barrels per day – highlighting continued strong demand from buyers looking for alternative supplier than Russia. In addition, the US government is likely to halt sales of crude from its Strategic Reserves soon, thereby removing an important source of supply which has seen 205 million barrels flow into the market this year. Recession versus tight supply The risk of an economic downturn at a time of tight supply of several major commodities will be one of the key battlegrounds that, together with the strength of a post-Covid recovery in China, will help determine the direction of commodities in 2023. Following months of aggressive rate hikes, the US Federal Reserve is now signalling a slowing pace of future rate hikes – with the eventual peak rate being determined by incoming data. From an investment perspective, the commodity sector has beaten most other asset classes this year and, despite a recent softness and easing of tightness, we maintain the view that investors should maintain a broad exposure to commodities into 2023. The one-year implied roll yield, using a weighted average of the 23 commodities in the Bloomberg Commodity Index, remains positive, albeit lower than at the start of the year. The positive roll yield or backwardation signals a tight market outlook across most commodities currently led by commodities from energy, grains and softs.   Backwardation and its positive impact on investment returns A positive roll yield, i.e. selling an expiring futures contract, at a higher price than where the next is bought, has supported the strong return investors have achieved through an investments via futures and ETFs this year. The chart below shows the year-to-date performance of an ETF tracking the Bloomberg Commodity Total Return Index and the Bloomberg Spot index which excludes the extra income achieved from the roll yield. Year to date, the ETF has realised a 17.6% return while the underlying spot index has delivered a six percent lower return. We expect the tailwind from tight markets trading in backwardation will rise again over the coming months. Not least driven by increased tightness across the energy complex as the embargo on Russian oil and, from next year, fuel products increasingly adds upward pressure on the front end of the forward curve. Source: Bloomberg   Source: Weekly Commodity Update: Strong November led by metals | Saxo Group (home.saxo)
The Gold Rally Is Continuing To Stall, This Could Be A Good Year For Crude Oil

Saxo Bank Podcast: Reports From Yesterday, The Crude Oil And Natural Gas Outlook And More

Saxo Bank Saxo Bank 02.12.2022 12:07
Summary:  Today we look at a slight divergence in reaction patterns across markets after a weaker than expected core PCE inflation reading and ISM Manufacturing survey in the US pushed treasury yields and the US dollar lower, but failed to support further equity market upside. Elsewhere, we round up interesting earnings reports from yesterday, discuss silver technicals and the crude oil and natural gas outlook, today's November US jobs report and more. Today's pod features Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: https://www.home.saxo/content/articles/podcast/podcast-dec-2-2022-02122022
The Collapse Of The Silicon Valley Bank Weakened The Dollar And USD/JPY But Supported EUR/USD, AUD/USD, And GBP/USD

USA: Jobs market data play in favour of Fed hawkish script. Non-farm payrolls add 263K

ING Economics ING Economics 02.12.2022 15:10
Strong job creation and a big increase in wages underscore the Federal Reserve's argument that a lot more work needs to be done to get inflation under control. It has certainly jolted the market. But with recessionary fears lingering, market participants will remain sceptical over how long the strong performance can last US job growth was strong and wages rose in November 263,000 Number of US jobs added in November   Surging employment and wages show the economy remains strong The US economy added 263,000 jobs in November, well ahead of the 200,000 consensus estimate, even when accounting for a 23,000 downward revision to the past couple of months of data. Private payrolls rose 221,000, led by 88,000 jobs in leisure and hospitality and 82,000 in education and health. Construction was up 20,000 and manufacturing gained 14,000. However, there was weakness in trade & transport (-49,000) and retail trade (-30,000). There was more positive news for workers in the form of big wage gains of 0.6% month-on-month, double what was expected, which leaves the annual rate of wage growth at 5.1%. The unemployment rate remained at 3.7% despite the household survey showing an apparent drop of 138,000 people saying they were in work – the second consecutive decline. The unemployment rate held steady because the participation rate fell yet again as workers remain reluctant to return to the workforce. Read next: FX: Today’s US Payrolls With A Strong Bearish Rhetoric On The USD| FXMAG.COM Given the Fed’s repeated warnings that rates are likely to stay higher for longer to ensure inflation is defeated, officials will be hoping that today’s numbers will be the jolt needed to get market participants to finally believe the Fed’s intent. Payrolls growth is slowing, but not fast enough for the Fed (Jobs added per month '000s) Source: Macrobond, ING Jobs market remains far too hot for the Fed In his speech earlier this week, Fed Chair Jerome Powell discussed the prospect of declines in inflation relating to core goods and housing. His focus though was on another area, core services other than housing, where the situation is more troubling. This grouping accounts for more than half of the core PCE index, the Fed’s favoured measure of inflation. The tightness of the jobs market and the implication for wage pressures, which make up the largest cost in delivering these services, is therefore key to the outlook for interest rates. In the speech, he argued that “job growth remains far in excess of the pace needed to accommodate population growth over time—about 100,000 per month by many estimates.” Consequently, wage growth “shows only tentative signs of returning to balance”. Today’s 263,000 jobs number confirms we remain a long way off from demand balancing with supply, which would ease those labour market related inflation pressures. Adding to the Fed’s problems, monetary conditions have loosened in recent weeks as the dollar and longer-dated Treasury yields have fallen and credit spreads have narrowed. This is undoing the tightening effects of the Fed’s recent rate rises. Furthermore, the latest consumer spending numbers together with the anecdotal evidence of the Black Friday weekend sales show that the economy has not yet met the Fed’s requirements of slowing to a rate “well below its longer-run trend”. As such, the Fed has more work to do and we look for further 50bp rate hikes in December and in February, with the potential for tightening needing to go on for longer. Read this article on THINK TagsWages US Payrolls Jobs Federal Reserve Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
When it comes to Friday’s NFP report, we think that we’re unlikely to see too much volatility around the data, barring a significant deviation from expectations

When it comes to Friday’s NFP report, we think that we’re unlikely to see too much volatility around the data, barring a significant deviation from expectations

Roman Ziruk Roman Ziruk 30.11.2022 12:44
Could NFP save the dollar from a quite long downtrend? Dollar index has been losing since ca. 7 weeks, is correction coming to USD?   In general, we think that the turnaround in the US dollar has been long overdue and that the EUR/USD pair has only recently started moving towards levels we expect it to trend towards. That said, the move has been quite sharp and we’re hesitant to say it has been fully justified. When it comes to Friday’s NFP report, we think that we’re unlikely to see too much volatility around the data, barring a significant deviation from expectations. We think that the Federal Reserve will ease the pace of rate hikes from December, and believe that this week’s NFP data is highly unlikely to get in the way of that. We actually believe that Thursday’s PCE data, the Fed’s preferred measure of inflation, could be more important in guiding Fed expectations and the dollar. Confirmation of the disinflation signal from the latest CPI report could cement market expectations for the Fed’s dovish pivot. If, on the other hand, core PCE inflation surprises to the upside, this could sow doubt among market participants, opening the way for a correction in the recent move lower in the US dollar.   Read next: If ECB policymakers should make a decision between fighting inflation and avoiding recession, they will likely choose fighting inflation says Ipek Ozkardeskaya| FXMAG.COM
For What It Is Worthy To Pay Attention Next Week 23.01-29.01

Saxo's Hallmark Outrageous Predictions Ahead

Saxo Bank Saxo Bank 02.12.2022 14:36
Summary:  Saxo's hallmark Outrageous Predictions will be out next week. The provocative publication has never been about being right - it has always been about being outrageous. Still, sometimes the world catches up and becomes just the right amount of outrageous for the predictions to become true. We've checked our archives to find out which Outrageous Predictions from the past were much closer to the truth than anticipated. All large market moves are driven by something that surprises expectations - sometimes outrageously. Crystal gazing with this in mind is the core of our annual Outrageous Predictions, as we try to suggest what events that seem unlikely right now could unfold and cause outrage in our world and financial markets - and provoke you to think differently along the way," says John J. Hardy, Head of FX strategy in Saxo.In this article, we thought it would be fun to go back in time and see which of the past predictions came true even though truth isn't a measure of success with these: "Our Outrageous Predictions are not our baseline forecasts for what will happen in the New Year. Rather, they are meant as an exercise in provoking thought on what unanticipated developments can shock our world and financial markets," says Hardy. 2013 Outrageous Prediction: Gold corrects to USD 1,200 per ounce "Our $1,200 call, at the time of writing, signaled a one-third drop in the price," says Head of Commodity Strategy, Ole S. Hansen who, in 2013, had the first correct Outrageous Prediction. Here's what he had to say about it: "Gold corrected to and actually went below USD 1,200 per ounce in 2013, as investors increasingly turned their attention to stocks and the dollar as central banks supported a post-GFC recovery in global growth. A major trigger was the April 2013 break below key support at $1,525 - a move that in our mind raised the risk of a bear market taking the price down towards $1,100," says Hansen. 2015 Outrageous Prediction: Brexit in 2017 In the Outrageous Predictions for 2015, our Strats wrote that the UK Independence Party (UKIP) would win 25% of the national vote in Britain’s general election on 7 May, 2015, sensationally becoming the third largest party in parliament. UKIP would then join David Cameron’s Conservatives in a coalition government and calls for the planned referendum on Britain’s membership of the EU in 2017. UK government debt suffers a sharp rise in yields. The timing was a bit off, but the circumstances around it were pretty accurate. “We had a very strong sense that ‘protest votes’ would be coming both in the US election and also ultimately in a vote on Brexit” said Steen Jakobsen, CIO at Saxo.“We, to some extent, correctly talked about the ‘social-contract being broken’ – meaning society no longer benefitted as a whole with monetary policy, creating increased gap in equality. “This call was too early, but context and reasoning was spot on. The split in the Tory Party could not be healed and the modus operandi of ‘Talking down to the voters’ was blatant mistake, which we used for this call.” 2017 Outrageous Prediction: Huge gains for Bitcoin as the cryptocurrencies rise As cryptocurrencies, particularly Bitcoin, began to gather momentum in the public eye, our Strats predicted that the then leading currency would have a huge bump in value. The rationale behind the jump was justified by the Trump regime overspending, causing high national debt to rise and inflation to skyrocket. Combining this with the global public wanting to break away from the currencies of central banks, Bitcoin would become a preferred alternative. The Outrageous Prediction ended up coming to fruition and more, with the price of Bitcoin growing to almost USD 20K at its 2017 peak.However, the circumstances around the prediction weren’t entirely correct for the time. It wasn’t as much due to the macroeconomic movements of the Trump era, but rather the speculation around Bitcoin that fueled its initial meteoric rise. However, when looking at the more recent spikes in cryptocurrencies, particularly Bitcoin in 2021, the justifications outlined in the 2017 Outrageous Prediction held true.   2018 Outrageous Prediction: Volatility spikes after flash crash in stock markets "We did not get a 25% drop in a single 1987-like event, but we did get two dramatic events in 2018 that vindicated our point," says Peter Garnry, Head of equity strategy. He further explains how the prediction came about: "We got the idea about this Outrageous Prediction in late 2017, as the year was about to end with astonishingly low volatility and Bitcoin had gone from just below $1,000 in late 2016 to around $10,000 in November 2017 (Bitcoin eventually rose to almost $20,000 before year end). Everyone speculated in Bitcoin and selling volatility in currencies and equities were heralded as easy predictable money. That's where we got this super awkward feeling from that the entire euphoria and these types of positions can have dramatic outcomes if conditions change even the slightest."Garnry says that the volatility started in February and ended in dramatic fashion over Christmas: "The ‘Volmageddon’ event in February 2018 almost completely wiped out short volatility funds including some famous ETFs in these strategies as the VIX Index exploded from 13.64 to 50.30 in just two trading sessions. The event changed the short volatility complex in the subsequent years. Later in 2018, the market was trying to tell the Fed that it was doing a policy mistake by hiking its policy rates because the economy was deteriorating. It led to a selloff of 20% from the peak in October to the intraday bottom on 26 December 2018 with the most dramatic trading sessions happening over the Christmas holiday period when liquidity was drying up. Dramatic events that set the stage for the crazy bull-run in 2019 as investors again forgot everything about risk." 2022 Outrageous Prediction: The plan to end fossil fuels gets a rain check As we headed into 2022, Ole S. Hansen, Head of Commodity Strategy, wrote that policymakers would kick climate targets down the road and support fossil fuel investment to fight inflation and the risk of social unrest, while rethinking the path to a low-carbon future. The overarching prediction also came into fruition, but it was regrettably fueled even further by the unforeseen invasion of Ukraine by Russia."Little did we know last November that the world was galloping into an energy crisis triggered by Russia’s war in Ukraine," says Ole S. Hansen, Head of Commodity Strategy, who explains how he then caught on to the idea that fossil fuels would become relevant again in 2022:"Lack of investments and an increasingly urgent need to support gas over coal led us to come up with the 'The plan to end fossil fuels gets a rain check' which basically envisaged a more investor friendly environment for (up until then) shamed investment in so-called 'dirty energy production.  A move that supported a decision by the EU to classify gas and nuclear as green investments," he says. Read next: Steen Jakobsen: ECB strategy is praying, hoping and waiting... not exactly action which gives hope for real economy| FXMAG.COM How will the Outrageous Predictions turn out for 2023? Not all of our Strats' predictions come true, but they are guaranteed to be Outrageous. If you want to read what they have to say about 2023, be sure to check back with Saxo on December 6, 2022, or open an account to get the Predictions sent straight to your inbox.      Source: https://www.home.saxo/content/articles/thought-starters/outrageous-predictions-that-werent-so-outrageous-02122022
Turbulent Times Ahead: Poland's Central Bank Signals Easing Measures

An Encouraging NFP Report Could See Markets End The Week On A High

Craig Erlam Craig Erlam 02.12.2022 12:27
A tentative start to trading on Friday as we wrap up another action-packed week with the US jobs report in a couple of hours. Jerome Powell’s comments on Wednesday made clear the direction of travel that Fed policymakers are keen to undertake but ultimately, the data must allow for it. So far, that has very much happened with inflation falling more than anticipated in October, the manufacturing sector softening, supply chains improving and labour market performing less well. US nonfarm payrolls expected to fall to 200K Today’s jobs report will offer further insight into whether this last point continues to be the case. Jobs growth around 200,000 would continue the trend since earlier this year and, alongside rising jobless claims, point to a cooling in the labour market. But it’s the wages that the Fed cares most about. A moderation in earnings growth is essential to get policymakers on board and perhaps even bring down the terminal rate over the coming months. It’s not just about putting inflation on a better trajectory, it’s about ensuring it can return to target on a sustainable basis and that requires earnings to rise at a more modest rate to ensure inflation doesn’t become entrenched. Read next: If ECB policymakers should make a decision between fighting inflation and avoiding recession, they will likely choose fighting inflation says Ipek Ozkardeskaya| FXMAG.COM Considering the data we’ve seen since the last meeting, it would take something truly shocking for the Fed to change course now, I feel. And perhaps even that would need to be backed up by a nasty shock from the inflation data a day before they announce their next rate decision. Of course, at this point, the terminal rate is what matters most so an encouraging report today would be very welcomed and could see markets end the week on a high. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
FXStreet’s Dhwani Mehta Opinion About Gold Movements

Central Banks Increased Their Buying Of Gold Significantly Over The Q3

ING Economics ING Economics 03.12.2022 11:50
US dollar strength and central bank tightening have weighed heavily on the gold market in 2022. In the near term, there is room for more downside with further tightening expected. The medium-term outlook looks more constructive In this article US strength hits gold prices Record gold buying from central banks lifts global demand Chinese gold demand picks up, but Covid risks remain Gold to rebound slightly next year as Fed easing starts Shutterstock   US strength hits gold prices Spot gold is trading at its lowest levels in more than two years and has fallen more than 20% from its peak of above $2,000/oz in March as the US Federal Reserve and other central banks have raised rates to tackle inflation. The strengthening of the US dollar has hit sentiment across the commodities complex, including gold. The USD index has surged to a 20-year high. This strength is largely a result of the aggressive stance the Fed has taken in terms of monetary tightening to fight inflation. Real yields have also been climbing. Ten-year real US yields have reached their highest levels in more than a decade and are back in positive territory. Given the strong negative correlation between gold prices and real yields, gold has struggled in this rising yield environment. Higher yields increase the opportunity cost of holding gold, which appears to be turning investors off the precious metal. Record gold buying from central banks lifts global demand So far this year central banks have continued to increase gold reserves. During times of economic and geopolitical uncertainty and high inflation, banks appear to be turning to gold as a store of value.  The latest data from the World Gold Council (WGC) shows that central banks increased their buying of gold significantly over the third quarter. Central banks bought 399 tonnes in 3Q22, which is up 341% year-on-year and also a record quarterly amount. The data shows that Turkey, Uzbekistan, India and Qatar were the largest buyers of gold over the quarter, but a substantial amount of gold was also bought by central banks that did not publicly report their purchases. The WGC did not give any details on which countries these could be, although banks that do not regularly publish information about their gold stockpiles include China and Russia. The pace at which central banks have accumulated gold reserves this year has not been seen since 1967. Given the current environment is likely to persist, central banks are likely to continue to add to their gold holdings in the months ahead. The gold purchases made by central banks around the world constitute only a portion of the total demand for bullion, which also includes the consumption of jewellery, investments in gold bars, coins, exchange-traded funds (ETFs), and technology. Chinese gold demand picks up, but Covid risks remain Chinese gold demand suffered earlier in the year due to the Covid-related lockdowns, particularly over the second quarter of the year, which is when strict restrictions were in place across Shanghai and Beijing. According to WGC data, Chinese consumer demand was down 23% YoY over 1H22.  However, more recently, gold in China has been trading at a huge premium to international prices as improved demand exceeds the country’s imports, which are constrained by quotas. Only accredited banks in the country are allowed to import gold, with quantities set by the People’s Bank of China. The elevated Shanghai-London gold price spread has continued in October with the seven-day National Day holiday, a stable local price, weak renminbi and economic uncertainty supporting gold sales in Beijing and Shanghai, according to data from the WGC. However, fluctuating Covid-19 cases and subsequent lockdowns could weigh on gold sales in certain areas going forward.   For another key gold consumer, India, demand remained strong in October amid the onset of festivals and weddings season with both jewellery and bar and coin purchases boosted. Despite stronger consumer demand, gold’s price direction will continue to be driven by investment flows, for which the outlook is less constructive in the short term. Global gold ETF holdings saw their sixth consecutive monthly decline in October, standing at 3,490t (US$184bn) at the end of the month. North American funds led global outflows. In the third quarter, investment demand was down 47% year-on-year, as ETF investors responded to a challenging combination of markedly higher interest rates and a strong US dollar. Speculative positioning in COMEX gold further highlights the lack of investor interest – the latest COMEX exchange numbers showed that speculators in US gold futures were betting on lower prices, however, the number of the bets had declined. China's gold imports surge China premium/ discount to international gold ($/oz) China premium/ discount to internatational gold China's gold imports surge China non-monetary gold imports (tonnes)  China Customs, ING Research Gold to rebound slightly next year as Fed easing starts We expect gold to remain on a downward trend during the Fed’s ongoing tightening cycle. But while in the short term we see more downside for gold prices amid monetary tightening, any hints from the Fed of an easing in its aggressive hiking cycle should start to provide support to prices. For this to happen, we would likely need to see signs of a significant decline in inflation. We should see inflation coming off quite drastically over 2023 and this will then open the door for the Fed to start cutting rates over 2H23, according to our US economist.  Under the assumption that we see easing over 2H23, we expect gold prices to move higher over the course of 2023 with prices reaching $1,850/oz in 4Q23. ING forecasts ING research TagsGold Commodities Outlook 2023 Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Bank Of Canada Paused Rates Hiking, The ADP Employment Report Had A 242K Increase In Jobs

Bank Of Canada Meeting Ahead: Whether It Will Be A 25bp Or 50bp Hike?

ING Economics ING Economics 03.12.2022 12:09
The Bank of Canada's policy meeting will be the highlight of next week, and it's a very close call on whether to expect a 25bp or 50bp hike. For now, we favour the latter given robust third-quarter GDP data, ongoing elevated inflation readings and a tight jobs market In this article US: Recession fears remain elevated Canada: Favour 50bp however a very close call   Shutterstock US: Recession fears remain elevated We are rapidly heading towards the 14 December FOMC meeting where a 50bp interest rate hike looks likely after four consecutive 75bp moves. Nonetheless, the Federal Reserve will not be pleased with the recent sharp falls in Treasury yields and the dollar, which are loosening financial conditions and undermining the Fed’s efforts to beat inflation down. Consequently, we are likely to see strong messaging in the press conference and the accompanying forecast update that the rate rises are not finished and that the policy rate is set to stay high for a prolonged period of time. Markets are likely to remain sceptical given that recession fears remain elevated. Softening consumer confidence, weaker ISM services and a relatively subdued PPI report are unlikely to do the Fed many favours next week in this regard. Canada: Favour 50bp however a very close call In Canada, the highlight will be the central bank policy meeting for which both markets and economists are split down the middle on whether it will be a 25bp or 50bp hike. We favour the latter given a robust 3Q GDP outcome, the tight jobs market and the ongoing elevated inflation readings. But we acknowledge there are signs of softening in the economy. The housing market is looking vulnerable and Canadian households are more exposed to higher rates than elsewhere due to high borrowing levels so we recognise this is a very close call. We are getting very close to the peak though, which we think will be 4.5% in 1Q 2023. Key events in developed markets next week Refinitiv, ING This article is part of Our view on next week’s key events   View 3 articles TagsUS Canada Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Equity Markets Rise, VIX at 12 Handle After ECB Rate Hike and US Economic Resilience

Final PMIs, Revised GDP, CPI And Retail Sales Ahead

Craig Erlam Craig Erlam 04.12.2022 10:16
EU There are a number of economic releases on the calendar next week but it’s almost entirely made up of tier two and three data. That includes final PMIs, revised GDP and retail sales.  The most notable events for the EU over the next week are speeches by ECB policymakers ahead of the last meeting of the year a week later – including President Lagarde on Monday and Thursday – and the final negotiations on the Russian oil price cap as part of a package of sanctions due to come into force on Monday. UK  Compared with the soap opera of the last few months, next week is looking pretty bland from a UK perspective. A couple of tier two and three releases are notable including the final services PMI, BRC retail sales monitor and consumer inflation expectations. I’m not convinced any will be particularly impactful, barring a truly shocking number. Russia The most notable economic release next week is the CPI on Friday which is seen moderating further to 12% from 12.6% in October, potentially allowing for further easing from the CBR a week later. South Africa Politics appears to be dominating the South African markets at the moment as efforts to impeach President Cyril Ramaphosa go into the weekend. The rand has seemingly been very sensitive to developments this week, with the prospect of a resignation appearing to trigger sharp sell-off’s in the currency and the country’s bonds. Under the circumstances, that could bring weekend risk for South African assets depending on how events progress over the coming days.  On the data front, next week brings GDP on Tuesday and manufacturing production on Thursday.  Turkey Ordinarily, especially these days, inflation releases are widely followed but that is less the case for a country and central bank that has such little interest in it. Official inflation is expected to ease slightly, but only to 84.65% from 85.51% in October, hardly something to celebrate. The central bank has indicated that its easing cycle will now pause at 9% so perhaps another reason to disregard the inflation data. Switzerland A quieter week after one of repeated disappointment on the economic data front. Whether that will be enough to push the SNB into a slower pace of tightening isn’t clear, although it has repeatedly stressed the threat of inflation and need to control it. The meeting on 15 December remains this months highlight while next week has only unemployment on Wednesday to offer. China The PBOC announced on 25 November its decision to cut the reserve requirement ratio for banks by 25 basis points, lowering the weighted average ratio for financial institutions to 7.8% and releasing about 500 billion yuan in long-term liquidity to prop up the faltering economy.   In response to the various property crises that have emerged in the real estate sector over the past year or so, i.e. debt defaults by real estate companies, mortgage suspensions leading to unfinished buildings, and real estate-related non-performing loan crises, the Chinese government has issued a new 16-point plan. Focus next week will be on the Caixin services PMI, trade data, CPI release and the protests. China’s strict zero-Covid measures are hammering growth and the public is clearly becoming increasingly frustrated. It will be a fine balance between managing protests and easing Covid-zero measures to support growth in a country not used to the former. India The RBI could potentially bring its tightening cycle to a close next Wednesday with a final 35 basis point hike, taking the repo rate to 6.25%. While the outlook remains cloudy given the global economic outlook, there is some reason to be optimistic. The tightening cycle may soon be at an end, the economy exited recession in the last quarter and Indian stock hit a record high this week, something of an outlier compared with its global peers. Australia & New Zealand Recent figures show that inflation (YoY) in Australia rose to 7.3% in the third quarter, compared to the target range of 2%-3%. The RBA began to weaken their hawkish stance in the past two months, raising rates by just 25 basis points each time to bring the official rate to 2.85%. The market is currently expecting a 25 basis point rate hike next week as well. Also worth noting is Australia’s third quarter GDP trade balance figures. New Zealand inflation (YoY) surged 7.2% in the third quarter, compared to the RBNZ’s inflation target range of 1%-3%. Previously, the RBNZ had been raising rates by 50 basis points but that changed last month as they ramped it up with a 75 basis point hike. The current official rate is now 4.25%. Japan The Japan Tokyo CPI rose by 3.8% year-on-year in November, up from 3.5% in October and the 3.6% expected. Ex-fresh food and energy it increased by 2.5%, up from 2.2% and above the 2.3% expected. Japan’s manufacturing PMI fell to 49.4 in November, the worst in two years, with both new export orders and overall new orders declining and falling below 50 for the fifth consecutive month, which alines with the unexpected 0.3% fall in Japanese GDP in the third quarter. Japan department store sales rose 11.4% year-on-year in October, down from 20.2% in September.    The poor PMI and retail sales data may have reinforced the BOJ’s view that domestic demand is weak and CPI inflation is largely input and cost driven and, therefore, unsustainable. The central bank will likely continue to pursue an accommodative monetary policy, especially in light of the current poor global economic outlook. Final GDP for the third quarter is in focus next week, with the quarterly figure expected to be negative meaning the economy may be in recession. Lots of other releases throughout the week but the majority, if not all, are tier two and three. Singapore Singapore’s CPI for October was 6.7% (YoY), below expectations of 7.1% and the 7.50% reading. GDP for the third quarter (YoY) was 4.1%, below expectations of 4.2% and 4.40% previously. On the quarter, it was 1.1% down from 1.50%. Next week the only release of note is retail sales on Monday. Economic Calendar Saturday, Dec. 3 Economic Events ECB President Lagarde chairs a roundtable on “The Global Dimensions of Policy Normalization” at a Bank of Thailand conference Sunday, Dec. 4 Economic Data/Events Thailand consumer confidence OPEC+ output virtual meeting ECB’s Nagel and Villeroy appear on German television Monday, Dec. 5 Economic Data/Events US factory orders, durable goods orders, ISM services index Eurozone Services PMI Singapore Services PMI Australia Services PMI, inflation gauge, job advertisements, inventories China Caixin services PMI India services PMI Eurozone retail sales Japan PMI New Zealand commodity prices Singapore retail sales Taiwan foreign reserves Turkey CPI European Union sanctions on Russian oil are expected to begin ECB President Lagarde gives a keynote speech on “Transition Towards a Greener Economy: Challenges and Solutions” ECB’s Villeroy speaks at a conference of French banking and finance supervisor ACPR in Paris ECB’s Makhlouf speaks in Dublin EU finance ministers meet in Brussels The US Business Roundtable publishes its CEO Economic Outlook survey Tuesday, Dec. 6 Economic Data/Events US Trade Thailand CPI RBA rate decision: Expected to raise Cash Rate Target by 25bps to 3.10% Australia BoP, net exports of GDP Germany factory orders, Services PMI Japan household spending Mexico international reserves South Africa GDP Georgia’s US Senate runoff The first-ever EU-Western Balkans summit is held in Albania Goldman Sachs Financial Services conference Wednesday, Dec. 7 Economic Data/Events US Trade MBA mortgage applications China reserves, Trade Australia GDP, reserves Eurozone GDP Canada central bank (BOC) rate decision: Expected to raise rates by 25bps to 4.00% India central bank (RBI) rate decision: Expected to raise rates by 25bps to 6.15% Poland central bank rate decision:  Expected to keep rates steady at 6.75% Singapore reserves Germany industrial production Japan leading index BOJ’s Toyoaki Nakamura speaks in Nagano EIA crude oil inventory report Foreign policy forum is held in Moscow with Russian Foreign Minister Lavrov speaks at a foreign policy forum in Moscow. Thursday, Dec. 8 Economic Data/Events US initial jobless claims Australia trade Indonesia consumer confidence Japan GDP, BoP Mexico CPI New Zealand heavy traffic index South Africa current account, manufacturing production ECB President Lagarde speaks at the European Systemic Risk Board’s sixth annual conference SNB’s Maechler participates in a panel discussion ECB’s Villeroy speaks at the Toulouse School of Economics European Defence Agency holds its annual conference in Brussels Friday, Dec. 9 Economic Data/Events US PPI, wholesale inventories, University of Michigan consumer sentiment China CPI Russia CPI  China PPI, aggregate financing, money supply, new yuan loans Japan M2 New Zealand card spending, manufacturing activity Spain industrial production Thailand foreign reserves, forward contracts Portuguese PM Costa, Spain PM Sanchez, and French President Macron attend a meeting in Spain Sovereign Rating Updates United Kingdom (Fitch) EFSF (Moody’s) ESM (Moody’s) Netherlands (Moody’s) Saudi Arabia (Moody’s) This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
The China’s Covid Containment Continued To Negatively Impact The Output At The End Of 2022

Cities In China Announced To Ease Pandemic Control Restrictions | OPEC Is Keeping The Current Production Levels Unchangeded

Saxo Bank Saxo Bank 05.12.2022 08:56
Summary:  A hot US jobs report on Friday brought about a reversal in Fed rate path expectations, but a big part of the move was later reversed. Fed goes into a quiet period, but China reopening optimism is set to gather further momentum this week with easing measures being implemented in Shanghai. This would mean a further bump to metals and energy prices, especially with OPEC+ staying away from a production cut over the weekend and the next meeting only scheduled for February. Key levels on test this week with 3.50% in US 10-year Treasury yields, and USDJPY heading below the 200-day moving average at 134.50. What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) finished the week higher despite a surge in wage inflation In spite of a strong non-farm payroll print and a surge in average hourly earnings on Friday which might cause some Fed officials to be wary about the unabated upward wage pressure when they meet on Dec 13 and 14, the major U.S. equity benchmark indices were largely flat and managed to retain the 1-2% gains following Fed Chair Powell’s dovish-leaning remarks on Wednesday. S&P500 and Nasdaq sold off more than 1% at the open but staged an impressive clawback of nearly all the losses when the closing bell rang on Friday. Materials and industrials were the top-performing sectors with the S&P 500 while energy stocks, followed by the information technology space were laggards. PayPal (PYPL:xnas) dropped 4.9%. US treasury yields (TLT:xnas, IEF:xnas, SHY:xnas) clawed back all early losses and more with the 10-year yield down 2bps to 3.49% When the stronger-than-expected 263,000 growth in nonfarm payrolls and white-hot 5.1% Y/Y increase in November average hourly earnings (October revised up to 4.9% Y/Y from 4.7%) hit the wires, yields surged across the curve with the 2-year yield jumping 18bps to 4.41% and the 10-year yield rose 13bps to 3.63% in a matter of minutes. Bids emerged and yields spent the rest of the session grinding lower. By the time of market close, except for the 2-year yield which was 4bps cheaper at 4.27%, treasury yields were 1bp to 5bps richer, with the 30-year being the best performer. The 10-year yield slid 2bps to 3.49% and the 30-year yield dropped 5bps to 3.55%, hitting the lowest yield levels in nearly 3 months. The strong job and wage data made a further drift down to a 25bp hike in February 2023 less likely (only about 20% probability as money market rates suggest) and kept the 2-year yield from falling. The 2-10-year curve inversion widened 6bps to -78bps. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) Hang Seng Index and CSI300 Index consolidated and were modestly lower on Friday after the recent strong rally on signs of further easing of Covid restrictions in mainland China. Online health platform stocks surged. Alibaba Health (00241:xhkg) and JD Health (06618:xhkg) gained more than 9%, and Ping An Healthcare and Technology (01833:xhkg) jumped 15.4%. Profit-taking selling weighed on Chinese property developers, with leading names, such as Longfor (00960:xhkg) and Country Garden (02007:xhkg) dropping around 4%. More cities rolled out support policies to the property sector. In addition, after the market close, China reportedly told the country’s top state-owned banks to provide offshore financing to help property developers in repaying offshore debts. Overnight in New York hours, the Nasdaq Golden dragon China Index caught a bid, surging 5.4%, and Hang Seng Index Futures gained more than 2%. FX: Dollar continues its downtrend despite a strong jobs report The USD index got a bump higher after the stronger-than-expected jobs report on Friday which suggested that it might not be easy for the Fed to pause or pivot, but gains were reversed later and the index closed back at 104.50. NZDUSD was however a notch weaker this morning staying below 0.64 with AUDNZD testing 1.06 support ahead of RBA meeting tomorrow. USDJPY is testing a critical support level of 134.30 with lower US yields and some BOJ officials hinting at a policy review soon (read below). EURUSD looking stretched above 1.05. USDCNH fell below the 7 handle As cities in China relaxing Covid restrictions across the country and the spread between US treasury and Chinese government bond yields narrowing, the USDCNH dropped below 7.0, the first time since September, to 6.9852. Crude oil (CLZ2 & LCOF3) lower on unchanged OPEC+ output After strong gains in crude oil last week, some softness was seen at the end of the week after speculation of no production cut from OPEC mounted. WTI traded back to $80/barrel from $83 levels mid-week on China’s reopening optimism, while Brent retreated from $90 levels to sub-86. The Sunday OPEC meeting did come out with an unchanged output decision, as expected, while the EU’s price cap on Russian oil was also fixed at $60. This week will be key to watch further China reopening and any signs of a retaliation from Russia on the price cap. European gas prices also continue to pick up as falling weather boosts heating demand, and expectations are for a colder-than-expected winter. Gold (XAUUSD) and Silver (XAGUSD) poised for further upside The supportive factors for precious metals continue to line up – China’s reopening, lower US yields and a weaker dollar. This helped gold run higher to test a break above the key $1800 level for the first time since August. Meanwhile, Silver’s impressive November rally has extended into December with the price breaking above $22.25 – a 50% retracement of the March to September selloff – and on route to the next level of resistance at $23.35. Other metals such as Copper and Iron Ore also charged with China now reopening Shanghai, while the risk of a policy error by the Fed continues to run high. In Australia, home of some of the world’s biggest commodity commodities, BHP and Rio; it could be a positive week The benchmark index, the ASX200  is already trading at a seven-month high and could get a fresh kick this week as the iron ore (SCOA) price is back above $100 for the first time since August on optimism China could increase demand. The iron ore price has moved up 38% from its October low, so if we continue to see easing of restrictions in China, you might except this rally to continue and benefit forward earnings of BHP, Rio, Fortescue and Champion iron. What to consider? Hot US jobs report gives markets a re-think on Fed’s rate path The nonfarm payroll (NFP) data came out stronger-than-expected on Friday, with US employers added 263,000 jobs in November, less than October's upwardly revised 284,000 but well short of the turning point Fed officials seek in their battle against inflation. The unemployment rate was maintained at 3.7% while the wages were very hot: M/M rose 0.6% (exp. 0.3%) and Y/Y rose 5.1% (exp. 4.6%). After a few weeks where markets have been taking the slowdown in the pace of rate hikes by the Fed positively, this report was a reminder that rate hikes will still continue well into 2023. WSJ's Fed Whisperer Timiraos said the report keeps the Fed on track to raise interest rates by 50bps at its meeting in two weeks and underscores the risk that officials will raise rates above 5% in the first half of next year. November Caixin China PMI Services is expected be remain in the contractionary territory Caixin China PMI Services is scheduled to release on Monday. The consensus estimate from the Bloomberg survey is 48.0 for November, shrinking deeper into the contractionary territory from 48.4 in October. The lockdown and pandemic control restrictions during the best part of November when the survey took place weighed on economic activities, especially services. Investors will tend to look beyond this number and focus on the scope and pace of the easing of the pandemic restriction undergoing in China. Beijing, Shanghai, Hangzhou, Tianjin, Guangzhou and other large cities eased Covid policies Cities in China, one after one, announced to ease pandemic control restrictions including removing the requirement to show negative PCR test results when taking public transportation. Shanghai and Hangzhou joined the others on Sunday and announced that the cities no longer require negative PCR test results to enter public venues or taking public transportation. Economic reopening plays and commodities will be in focus this week with China easing some COVID restrictions On Monday, Shanghai and Hangzhou scrapped PCR testing to enter public venues including on public transport and to enter parks. Shanghai and Hangzhou joined other top-tier cities, Beijing, Shenzhen and Guangzhou in relaxing curbs after mass protests took place against China’s stringent policies last week. In equites, focus will be on markets being forwarding looking and hoping of a potential turnaround in consumption, especially cities with easing restrictions.   Another BOJ official fuels policy review speculation New BOJ board member Naoki Tamura urged a policy review, in his conversation with Bloomberg, saying that it would be appropriate for the central bank to conduct a review at the right time – soon or a little later depending on what happens to prices. The yen rose on speculation an assessment flagging policy change may come before Haruhiko Kuroda steps down in the spring. OPEC+ held production unchanged The OPEC+ group decided to keep the current production levels unchanged, as the crude oil prices started to show some tentative signs of a recovery after China’s continued commitment to ease its Zero covid policies. Still, a 2mb/d cut was announced in October, and the full effect of that is yet to be seen. Furthermore, there is volatility expected due to the EU sanctions and a G7 price cap on Russian crude which will go into effect this week, and further changes in China’s zero covid policy are also set to continue. The group’s next meeting is not scheduled until February. EU sets in a price cap for Russian oil, to kick in from today The EU nations have agreed to cap the price of Russian seaborne oil at $60/barrel, with a motive to diminish Russia’s revenues, paving the way for a wider deal with the G7 countries. This price cap is to go in effect on December 5, and represents a discount of ~$27 to the current price for Brent crude, but Urals has been trading at a discount of about $23 in recent days. However the risk of setting a price cap too low is that Russia could slash its output, which would roil markets. It will be important to watch for Russia’s reaction this week, after Putin has repeatedly said that they will not supply oil to countries that implement the price cap.   For a global look at markets – tune into our Podcast. Source: Market Insights Today: Hot US jobs report; No production cut from OPEC – 5 December 2022 | Saxo Group (home.saxo)
Euro-dollar Support Tested Amidst Rate Concerns and Labor Strikes

Chinese Stocks Rallied On Easing Covid Measures | US Dollar (USD) Gained

Swissquote Bank Swissquote Bank 05.12.2022 10:15
US stocks fell on Friday, after the latest data showed that Americans got more jobs in November, and more importantly they got a better pay. More, and better paid jobs fueled US inflation expectations, boosted the Fed hawks, and brought forward the idea that the Fed could be attracted by another, a fifth 75bp hike in the December meeting. US US equities fell and the dollar gained, but the post-NFP pricing fully disappeared. The US dollar kicked off the week on a weak footage – a pricing that raises a flashy red flag. Energy market In energy, the weekend was rather eventless, as OPEC decided to maintain its daily output restriction unchanged at 2mio barrels per day at Sunday’s meeting, which could be seen as a negative development for the bulls. But there are two price-supportive developments that could limit losses and support gains. Watch the full episode to find out more! 0:00 Intro 0:34 What happened to post-NFP pricing?! 4:16 USD will likely soften, but it won’t be a one-way trade… 6:39 OPEC's output cut unchanged, EU sets price cap on Russian oil 7:39 Chinese stocks rallied on easing Covid measures. Time to jump in? Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #USD #NFP #jobs #unemployment #data #Fed #expectations #EUR #GBP #crudeoil #EU #Russia #oil #cap #OPEC #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
The German Purchasing Managers' Index, ZEW Economic Sentiment And More Ahead

Saxo Bank Podcast: Key Economic Indicators Point To An Incoming Recession In Europe

Saxo Bank Saxo Bank 05.12.2022 11:31
Summary:  Today we note that the market seems to be in see-no-evil, hear-no-evil mode, as hot earnings data from the US on Friday was unable to sustain a reaction in treasury yields, with financial conditions at their easiest in months. Still, key economic indicators point to an incoming recession in Europe even as the EURUSD manages to pull above 1.0500. We also preview tonight's RBA meeting, interesting earnings reports this week and much more. Today's pod features Peter Garnry on equities, with John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: Financial conditions continue to ease, ease, ease | Saxo Group (home.saxo)  
Nasdaq 100 Faces Bearish Breakdown Below Ascending Wedge and RSI Momentum Indicator

The hourly chart of the DXY index shows the end of the global corrective trend, which took the form of a triple zigzag consisting of five main cycle waves w-x-y-x-z

Jing Ren Jing Ren 05.12.2022 08:43
Thus, the market may currently be at the beginning of the first part of a major bearish trend. It is assumed that the bears form a triple zigzag pattern Ⓦ-Ⓧ-Ⓨ-Ⓧ-Ⓩ. It seems that the sub-waves Ⓦ-Ⓧ-Ⓨ-Ⓧ have already been completed. In the near future, the price is expected to continue falling in the primary wave Ⓩ. Its end is possible near 101.59. At that level, it will be at 76.4% of wave Ⓨ. Let's consider an alternative option in which the formation of a cycle triple zigzag will continue. Most likely, we see a zigzag price movement in the wave z. The wave z may take the form of a zigzag Ⓐ-Ⓑ-Ⓒ, where the first impulse Ⓐ and the correction Ⓑ in the form of an intermediate double zigzag are already completed. The entire wave z can complete its pattern near 116.21 level. At that level, it will be at the 61.8% Fibonacci extension of wave y. The first sub-wave (1), which is part of the primary wave Ⓒ, is likely to reach the level of 107.22, marked by a minute correction.
Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

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

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

Presumably, stronger-than-expected ISM affected stocks. Aussie gained from the RBA decision

Ipek Ozkardeskaya Ipek Ozkardeskaya 06.12.2022 08:09
Stocks fell and the US dollar strengthened on Monday.   One of the reasons that could have triggered the move was a stronger-than-expected ISM services read in the US, which came in above expectations, and hinted that the economic activity, at least in the US services sector continues growing, and growing un-ideally faster-than-expected despite the Federal Reserve's (Fed) efforts to cool it down.   So, the economic data may have fueled the Fed hawks yesterday, although I just want to note that another data, which is PMI services remained comfortably in the contraction zone at around 46.   In the short run, the S&P500 may have seen a top near 4100 But the fact that the S&P500 was flirting with critical yearly resistance may have played a bigger role in yesterday's selloff.   The S&P500 shortly traded above the year-to-date bearish channel top last week without a solid reason to do so. The pricing in the markets barely reflects the scenario that the US rates will go above the 5% mark. Therefore, a downside correction was necessary to reflect the reality of the Fed game. Read next: Vodafone Shares Fell By 45%, Apple May Be Moving Production Outside Of China | FXMAG.COM Some people say that it's because the market sees the Fed's bluff. But at the end of the day, if Fed's bluff of tighter policy doesn't do the job, then the Fed will have to do the job itself.   In the short run, the S&P500 may have seen a top near 4100 and could opt for a further downside correction, with the first bearish target set at 3956, the minor 23.6% Fibonacci retracement on the latest rally, then to around 3870, the major 38.2% retracement level and which should distinguish between a short-term bearish reversal, and the continuation of the latest bear market rally.   It is possible we will see the EURUSD recover to 1.10 and Cable to 1.30 within the next 3 to 6 months Looking at the FX, the Aussie was slightly better bid after the Reserve Bank of Australia (RBA) raised its rates by another 25bp today, and took the rates to levels last seen a decade ago.   Elsewhere, the US dollar strengthened as a result of the hawkish Fed rectification. The dollar index first eased to a fresh low since June, then rebounded. It has way to recover above its 200-DMA, which hints that some majors, including EURUSD and Cable could return below their 200-DMA as well.   Yet, even if we see rebounds in the US dollar, the medium to long term direction of the dollar will likely be the south in the coming months.   Read next: The reduction of fears related to a possible frosty winter may support the euro exchange rate | FXMAG.COM The currency markets are not like the equity markets, or the cryptocurrency markets. The valuation of one currency cannot go to the moon, forever. Therefore, it is possible we will see the EURUSD recover to 1.10 and Cable to 1.30 within the next 3 to 6 months.   Even the Japanese yen, which has been the black sheep of the year, is expected to do much better in the coming months.   Analysts at Barclays and Nomura expect the yen to rally more than 7% next year - which is not a big deal if you think that the US dollar gained up to 30% against the yen since the beginning of this year.   Vontobel sees the yen's fair value below the 100 level against the US dollar, which, on the other hand, is a bit stretched as the dollar-yen hasn't seen that level since 2016, and it was a short visit. The last time the dollar-yen was really below 100 is before 2013.   What's more realistic is, we see the dollar-yen trend slowly lower. In the short-run, resistance at 140 should keep the pair within the bearish trend with the next downside target set at 130.
The Melbourne Institute Inflation Gauge For Australia Rose More Than Expected

The Focus Will Be On The RBA Commentary | Crude Oil Pulled Back

Saxo Bank Saxo Bank 06.12.2022 08:43
Summary:  U.S. stocks and bonds sold off on Monday. On the back of the wage inflation in the job report released last Friday, the ISM Services Index and its employment and price-paid sub-indices on Monday increased the uncertainty of the Fed’s interest path in 2023 as officials would now need to think twice before slowing the pace of rate hikes. China and Hong Kong stocks surged on more signs of China loosening Covid restrictions. What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) sold off on a solid ISM Services report After an unexpectedly strong ISM Services, U.S. equities sold off. S&P 500 dropped by 1.8% and Nasdaq 100 lost 1.7%. The selloff was broad-based as all 11 sectors within the S&P 500 pulled back, with consumer discretionary, energy, and financials being the top losers. Within the financial sector, regional banks were the worst performers. Telsa (TSLA:xnas) plunged 6.4% on reports that the EV maker plans to cut production in its Shanghai factory. VF Corp (VFC:xnys) dropped by 11.1% after the maker of the North Face and Vans brands, cut revenue and earnings outlooks and announced the retirement of its Chairman and CEO. United Airlines shares gained 2.6% after a leading U.S. investment bank upgraded the airliner on expecting 2023 travel to be a ’goldilocks’ year with earnings to pick up.  US treasuries (TLT:xnas, IEF:xnas, SHY:xnas) sold off with yields higher on a hot ISM Service Index U.S. treasuries sold off and yields surged after a strong ISM Service Index that came in with a rise in the headline to 56.5 and the employment sub-index back to expansion while price-paid moderating only slightly and remaining in strong expansion territory. Wall Street Journal’s Nick Timiraos, who is considered by market participants of the Fed’ media mouthpiece, said in his latest article that “ elevated wage pressures could lead [the Fed officials] to continue lifting [the Fed fund target] to higher levels than investors currently expect”. The 2-year yield surged 12bps to 4.39% and the 10-year yield climbed 9bps to 3.57%. The 2-10 year curve further inverted to minus 81bps. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) rallied strongly on the loosening of Covid-restrictions Hong Kong and China equity markets surged on yet more signs of the easing of Covid-related restriction measures in mainland China. Hang Seng Index gained 4.5% and CSI 300 climbed 2%. Hang Seng TECH Index soared 9.3%. Technology names, online healthcare platforms, EV makers, and Chinese developers led the charge higher.  Bilibili (09626:xhkg) jumped nearly 29%. Alibaba (09988:xhkg) surged 9.3% and Tencent (00700:xhkg) climbed 7.1%. Tech hardware names performed strongly, with Sunny Optical (02382:xhkg) up 10.1% and Xiaomi (01810:xhkg) rising 13.6%. EV maker XPeng (09868:xhkg) soared more than 26%, followed by Nio (09866:xhkg) up 14.9% and Li Auto (02015:xhkg) up 12.2%. Online healthcare platforms were among the top gainers, with Alibaba Health (00241:xhkg) surging nearly 20% and JD Health (06618:xhkg) advancing 15%. Shares of leading Chinese developers gained. Longfor (00960:xhkg) rose 17.1% and CIFI (00884:xhkg) jumped nearly 24%. Macau casino shares soared by 15%-20%. In A shares, infrastructures and financials were among the top performers. Australia’s share market rally halts, metal prices head lower, coal stocks surge. RBA decision ahead  The Australian benchmark index, the ASX200 (ASXSP200.1) today is lower on Tuesday, following global markets; with selling in oil, gas, and gold stocks dragging down the market. As a result, the ASX200 stumbled from its seven-month high on expectations the Fed might keep rates higher for longer, which is also why interest rate sensitive stocks such as Block (SQ2) are in the loser board, down 5.3%, taking its year to date loss to 51%. While on the upside, coal stocks such as New Hope Corp (NHC) are up 2% with Whitehaven (WHC) up 1.2% supported higher by the coal Newcastle futures price heading back toward its record all-time high, on expectations coal demand will peak up.  FX and Commodities Oil pulled back 3.8% and gold plunged 1.6% as the US dollar rallied and bond yield rose. Iron ore (SCOA) fell 1.7% but held onto near its fresh highs of $106.50. USDJPY bounced 1.6% to 136.43. The Chinese renminbi strengthened versus the dollar to 6.9560 on more signs of China reopening from Covid restrictions.   What to consider? U.S. ISM Services Index unexpectedly rose by 2.1pp to 56.5 The U.S.’ November ISM Services Index came in at 56.5, which is 2.1 percentage points higher than October’s 54.4 and is way above the consensus estimate of 53.5. The business activity sub-index jumped 9pp to 64.7, the higher level since last December. The employment sub-index bounced to 51.5, back to the expansion territory, from 49.1 in October. The price paid sub-index remained at an elevated level of 70, down only modestly from 70.7 in October. China may roll out 10 additional measures to loosen Covid restrictions Reuters, citing “sources with knowledge of the matter”, reports that China “may announce 10 new COVID-19 easing measures as early as Wednesday” and downgrade the containment of COVID-19 to Category B management or even Category C, which are less stringent. Category A covers highly transmissible and deadly diseases such as bubonic plague and cholera. Category B includes SARS, anthrax, and AIDS while Category C has diseases such as influenza, leprosy, and mumps. The major focus in Australia is on the outcome of the RBA meeting today   At 2.30 pm Sydney time, Australia’s central bank is expected to hike rates by a quarter-point (0.25%) for the third straight month, which will take the cash rate from 2.85% to 3.1%. The focus will be on RBA commentary potentially ending its rate hike cycle, given that Australian households have the highest debt-to-income ratios in the world; with indebted households highly vulnerable to tightening, with loan arrears and insolvencies increasing. Look for color in the RBA statement that may allude to the RBA pausing rate hikes in early 2023. Lenders in Australia, Commonwealth Bank (CBA), ANZ (ANZ), Westpac (WBC), and National Australia Bank (NAB), as well as Suncorp (SUN) and Bank of Queensland (BOQ) will be on watch as they have been experiencing smaller profits as the property market is at breaking point with mortgage holders under stress. However, insurance companies are continuing to benefit from higher rates and are worth watching. Insurance company QBE Insurance (QBE) is trading up 9.2% this year and is a buy side analyst favorite. For more Australian buy-side analyst favouities, click here. If the RBA mentions a potential rate hike pause, you could expect banks to rally as well as REITs. For a list of Australian REITs, refer to Saxo’s Australian REIT stock basket. Caixin Services PMI slid further into contraction China’s services sector shrank deeper into contraction in November according to the Caixin Services PMI, which came in at 46.7 below both the consensus estimate (48.0) and the prior month (48.4). Covid containment measures weighed on business operations and consumer demand. China’s Xi is attending a China-Arab summit this week in Saudi Arabia China President Xi Jinping is expected to fly to Saudi Arabia on Dec 9 to attend a China-Arab summit. Saudi Arabia is the largest supplier of crude oil to China. China has been pursuing a grand strategy to move westward to secure ties with countries in Central Asia and the Middle East.   For our look ahead at markets this week – Read/listen to our Saxo Spotlight. For a global look at markets – tune into our Podcast. Market Insights Today: U.S. Stocks and bonds sold off on a solid ISM Services print – 6 December 2022 | Saxo Group (home.saxo)
FXStreet’s Dhwani Mehta Opinion About Gold Movements

The Key In Holding Down Gold’s Potential Was The Market’s Mistaken Consensus

Saxo Bank Saxo Bank 06.12.2022 09:21
Summary:  "2023 is the year that the market finally discovers that inflation is set to remain ablaze for the foreseeable future." - Ole S. Hansen. In 2023, gold finally finds its footing after a challenging 2022, in which many investors were left frustrated by its inability to rally even as inflation surged to a 40-year high. It turns out that the key in holding down gold’s potential was the market’s mistaken consensus bet that inflation would prove transitory. Central banks largely anticipate that inflation will fall back to target within a mere couple of years, and even the market’s own forward pricing of inflation risks predicts the same. And how was gold supposed to rally in 2022, especially in strong USD terms, if you can get well over 4.0 percent on a 5-year US treasury at a time when 5-year forward inflation rates are priced to drop below 2.5 percent?  2023 is the year that the market finally discovers that inflation is set to remain ablaze for the foreseeable future. Fed policy tightening and quantitative tightening drives a new snag in US treasury markets that forces new sneaky ‘measures’ to contain treasury market volatility that really amount to new de facto quantitative easing. And with the arrival of spring, China decides to pivot more fully away from its zero-COVID policy, touting effective treatment and maybe even a new vaccine. Chinese demand unleashed again drives a profound new surge in commodity prices, sending inflation soaring, especially in increasingly weak USD terms as the Fed’s new softening on its stance punishes the greenback. Under-owned gold rips higher on the sea-change reset in forward real interest rate implications of this new backdrop.  In 2023, the hardest of currencies receives a further blast of support from three directions. First, the geopolitical backdrop of an increasing war economy mentality of self reliance and minimizing holdings of foreign FX reserves, preferring gold. Second, the massive investment in new national security priorities, including energy sources, the energy transition, and supply chains. Third, rising global liquidity as policy makers move to avoid a debacle in debt markets as a mild real  growth recession (certainly not in nominal prices, however!) takes hold. Gold slices through the double top near USD 2,075 as if it wasn’t there and hurtles to at least USD 3,000 next year.  Market impact: Spot gold rises above $3,000 per ounce and the VanEck Junior Gold Miners index quadruples in value.   Source: Gold rockets to USD 3,000 in 2023 - Saxo Outrageous Prediction | Saxo Group (home.saxo)
The ECB Has Made It Clear That Rates Will Remain High Until There Is Evidence That Inflation Is Falling Toward The Target

The ECB Takes Decisive Steps Towards Unwinding Its Bond Portfolio

ING Economics ING Economics 06.12.2022 09:50
We expect pre-FOMC profit-taking on Treasury longs. The ECB shouldn’t take the calm in peripheral bond markets as a sign that QT is no big deal The Treasury rally stalls at 3.5% 10Y Treasuries bounced on the 3.5% resistance level after a surprising rally that took them down 75bp from the 4.25% reached as recently as the end of October. The rally occurred with no encouragement from the Fed. On the contrary, the Fed has been at pains to stress that, if anything, it saw a higher terminal rate than in its September projection. Since then, data has been mixed, with a slowdown in various measures of inflation being balanced by still strong labour market indicators. What’s skewed market reaction in favour of a dovish interpretation to the recent data flow has been the Fed signalling a downshift to 50bp hikes. Momentum towards lower rates has indeed stalled Market participants may see a vindication of their recent dovish inclinations if US PPI does slow down on an annual basis as is expected in Friday’s release, but we feel the lack of other ‘tier one’ economics publications this week and the proximity of the 14 December FOMC meeting, suggest momentum towards lower rates has indeed stalled. We think 3% is a reasonable forecast for 10Y yields in 2023. The recent rally from 4.25% to 3.5% has taken rates more than halfway towards that level so we suspect many short-term investors will consider that the risk-reward balance of chasing the rally further is poor and will take profit. That profit-taking should mean yield will rise into next week. The November rally has taken bond yields too close to our end-2023 forecast Source: Refinitiv, ING Calm in the bond market can breed complacency The Fed is now in the midst of its pre-meeting quiet period, meaning we’re expecting no policy guidance until next Wednesday’s press conference. The ECB’s start on Thursday, which leaves two more days for its officials to skew expectations. So far, only a minority has pushed for a 75bp hike at the 15 December meeting, thus cementing expectations of a smaller 50bp move. Instead, focus has been on the timing and size of its bond portfolio reduction (QT), with little noticeable market impact so far. Indeed, 10Y Bund yields have rallied 50bp since their October peak, and 10Y Italy has outperformed them by more than 60bp. Focus has been on the timing and size of its bond portfolio reduction (QT), with little noticeable market impact so far Hawkish voices have pushed in favour of a QT start as soon as early 2023 with, for instance, Gabriel Makhlouf arguing for end Q1/early Q2 2023. Whilst we would expect QT to take the form of a progressive phasing out of APP (one of the two ECB QE portfolios) redemptions, Joachim Nagel said last week that markets were able to handle an abrupt end. We expect this view to be in the minority but it does illustrate an important point: it’s not just central bank policies that influence markets, the reverse is also true. The decreasing dispersion between euro sovereign yields has given the impression that QT is no big deal, and has emboldened the hawks. Italy-Germany 10Y spreads standing below 190bp is probably below where most would have put them just one week before the ECB takes decisive steps towards unwinding its bond portfolio. This tool has been instrumental in compressing spreads, most would expect that its going into reverse would put widening pressure to spreads, even if the effect might not be felt immediately. Sovereign and credit spreads have tightened into the ECB QT announcement Source: Refinitiv, ING Today's events and market view Construction data features prominently on today’s calendar, with construction output from Germany and the UK’s construction PMIs all to watch out for today. In bond supply, Germany is scheduled to sell €5bn of 2Y debt. Lack of supply and data has favoured bond bulls in recent weeks but we think the Treasury rally has stalled at a psychologically important level, and will now run into pre-FOMC profit taking. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
BRICS Summit's Expansion Discussion: Impact on De-dollarisation Speed

The US Dollar Strengthened As A Result Of The Hawkish Fed Rectification

Swissquote Bank Swissquote Bank 06.12.2022 10:21
Stocks fell and the US dollar strengthened on Monday on a stronger than expected ISM services read in the US, which came in above expectations, and hinted that the economic activity, at least in the US services sector continues growing, and growing un-ideally faster-than-expected despite the Federal Reserve’s (Fed) efforts to cool it down. The Aussie In the FX, the Aussie was slightly better bid after the Reserve Bank of Australia (RBA) raised its rates by another 25bp today, and took the rates to levels last seen a decade ago. EUR/USD and GBP/USD But elsewhere, the US dollar strengthened as a result of the hawkish Fed rectification. The dollar index first eased to a fresh low since June, then rebounded. It has way to recover above its 200-DMA, which may mean that some majors, including EURUSD and Cable could return below their 200-DMA as well. Yet, even if we see rebounds in the US dollar, the medium to long term direction of the dollar will likely be the south in the coming months. The EURUSD could recover to 1.10, Cable to 1.30. USD/JPY More stretched… Vontobel sees the USDJPY’s fair value at 100, and Standard Chartered predict Bitcoin could fall another 70%, and spur a 30% rally in gold! Watch the full episode to find out more! 0:00 Intro 0:25 Fed hawks are back 3:07 S&P500 could further fall 4:40 Selling USD rallies sounds like a plan 8:22 A 70% fall in Bitcoin could spur a 30% rally in gold?! Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #economic #data #Fed #expectations #USD #EUR #GBP #JPY #XAU #Bitcoin #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
Industrial Metals Outlook: Assessing the Impact of China's Stimulus Measures

Should The EU Borrow Money From The US? A Significant Role Of Gig Workers In The Future Of Shopping

Kamila Szypuła Kamila Szypuła 06.12.2022 12:04
The end of this year is extremely intriguing. It shows how economies cope with rising inflation and what lies ahead. Despite the difficulties, there is still development in many areas of our lives. In this article: Prospects of Norwegian companies EU and borrowing money from the US Gig Workers US economy Norwegian companies can Reuters company, in its tweet, writes about the deteriorating prospects of Norwegian companies. Norway companies see weaker outlook, central bank survey shows https://t.co/Hs0kOmgOee pic.twitter.com/KlWSqICCBq — Reuters Business (@ReutersBiz) December 6, 2022 The Norwegian market is also deteriorating. Inflation significantly reduces activity. Data on the condition of firms provide key information for the future policy of the central bank. Norges Bank raised interest rates, which are currently at 2.5% and it looks like they will continue to rise. Further actions may worsen the situation of companies that are already struggling with difficulties. EU and borrowing money from the US CNBC tweets about Germany's stance on borrowing money from the US. Germany says borrowing more money to compete with the U.S. would be a 'threat' to Europe https://t.co/4R6jZqWVRT — CNBC (@CNBC) December 6, 2022 Germans believe that borrowing can threaten competitiveness  The EU is vocal about its concerns about the US Inflation Reduction Act (IRA) that threatens European businesses. Of course, there are advantages to borrowing money, but the greater the dependence can have a negative effect. For this reason, there may be skeptical attitudes as to further sources of financing. The rise of digitization J.P. Morgan tweets about gig workers Through the rise of digitization, gig workers are enhancing many shopping experiences. Learn how payments can help to attract and retain these workers. — J.P. Morgan (@jpmorgan) December 5, 2022 The future of shopping will require different types of employees to provide a topnotch customer experience. For many businesses, gig workers will serve a significant role in the future of shopping experience. These workers are becoming more and more common for two reasons. First, they redefine many roles and responsibilities in companies' business models (discussed below). Second, they provide structure to an otherwise disorganized labor pool; these workers now have a platform and business model to perform ad hoc tasks. In short, the development of employees means better quality of work and thus the development of the company. US economy may soft landing in 2023 Morgan Stanley tweets about US economy. While 2022 saw the fastest pace of policy tightening on record, has the Fed’s hiking cycle properly set the U.S. economy up for a soft landing in 2023?Read more about this episode: https://t.co/RSjBBIX7xm pic.twitter.com/7Qa248UKIW — Morgan Stanley (@MorganStanley) December 5, 2022 This year has undoubtedly been full of events. From the continuation of the fight against the effects of the pandemic, through the war in Ukraine to the fight against inflation. Central banks around the world are trying to fight inflation so as not to worsen the state of their governments and lead to a recession. While many economies believe they are already entering a recession cycle, it is believed that the US economy may land softly in this situation. Increases in interest rates in the fight against inflation cause difficulties for companies, as well as for households. Many experts believe that the Fed has prepared its economy for all eventualities. The coming months will be crucial to confirm this. Share price performance in metals and trading UBS tweets about its report results. Can measures to hold down cost of equity help drive share price performance in metals and trading? Find out how in our #UBSResearch report. #shareUBS — UBS (@UBS) December 6, 2022 UBS conducts numerous studies that are important to many markets as well as their sectors. UBS believe efforts to control COE are now likely to become a more important factor in maintaining and expanding multiples against this backdrop. Its analysis indicates several cases wherein CoE has functioned as a key share price driver.
The Commodities Digest: US Crude Oil Inventories Decline Amidst Growing Supply Risks

US Inflation Is Clearly On A Path Towards Reaching The Fed’s Target

ING Economics ING Economics 07.12.2022 08:39
Appetite for high beta fixed income has allowed the ECB to reduce its overweight in peripheral bonds. There is no sign of US curve dis-inversion yet - we think this is most likely to occur with a long-end sell off. ECB reduces its peripheral bond overweight The ECB didn’t use the flexibility offered by the PEPP’s redemption to lean against wide sovereign spreads in the months of October and November. On the contrary, data show that it increased its holding of core (eg Netherlands and Germany) and reduced its holding of periphery (eg Spain, Portugal and Italy). The changes may be explained in part by different timing between redemption and reinvestment of the proceeds but there seems to be a trend here: the overweight in peripheral countries is at least being partially unwound. The higher-beta sovereign bond markets require less of the ECB’s support Looking at market moves of late, this is understandable. Spreads have been on a tightening spree, suggesting the higher-beta sovereign bond markets require less of the ECB’s support. This is good news, until it isn’t anymore. As long as the ECB retains the flexibility to lean against volatility in the sovereign bond markets all should be well. The looming QT announcement is one key risk to this. So far, spreads have tightened alongside the improvement in global risk sentiment. That tightening cannot be entirely explained by the rally in core rates, and suggests instead genuine risk appetite for high beta fixed income. The ECB has partially unwound its summer intervention in peripheral markets Source: Refinitiv, ING No sign of re-steepening yet If the bond rally has stalled, which itself is still unsure, there is no sign yet of curve re-steepening. In the US in particular, where the Fed has presumably the most room to cut rates, the curve remains as inverted as ever. Dis-inversion can occur for two reasons. Firstly, front-end rates can drop on expectations of imminent Fed easing. In our view, this is only realistic once inflation is clearly on a path towards reaching the Fed’s target, and the economy is near a recession. We think these conditions will only be met by mid-2023. It is not yet clear that the Fed is near the end of its cycle The other reason for a curve dis-inversion is if long-end rates reverse some of their November rally. This looks a more realistic scenario in the near-term. Risk appetite, from stock to credit, has received a boost once it became clear that the Fed was easing off on the pace of hikes. This has also boosted demand for duration on the Treasury curve as investors look more kindly to any kind of investment risk. The problem is that it is not yet clear that the Fed is near the end of its cycle. Fed Funds forwards are steeply inverted from late 2023, implying the odds of a rate cut are rising. We think this is right but that pricing may be reversed soon if data doesn’t worsen quickly. The rally in long-end bonds has come with Fed Funds forwards pricing rate cuts in 2024 Source: Refinitiv, ING Today's events and market view The headline Q3 Eurozone is less liable to surprise markets, this being the third and final release but the details of the report, including employment, will be of interest. The EU has mandated banks for the sale of a new 15Y bond for €6.5bn. The same deal will also features a smaller tap of a 30Y bond. The deal may weigh on bonds but supply this week is otherwise light. Today is the last day before the start of the pre-ECB meeting quiet period. Fabio Panetta and Philip Lane, both doves, are scheduled to speak. Any hawkish comment would catch the market off guards and push yields higher. The US Q3 unit labour cost publication is also a final release but, as it is key to the Fed’s decision-making, any revision will be of importance. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Crude Oil Upward Trend Remains Limited

Recessionary Fears And A Higher US Dollar Are Causing Selling In Oil

Saxo Bank Saxo Bank 07.12.2022 08:57
Summary:  There is a lot to be said about stepping back and reflecting on what’s driving markets. The most selling over the last few sessions has been stocks and sectors that will likely come under pressure from rates staying higher for longer, combined with a slowdown in US GPD. As such a Tech names like Atlassian, to EV makers including Lucid are down 10% this week. While the most upside in stocks and sectors are in those that will likely benefit from increased consumption in China and increased commodity demand with the nation continuing to map out further easing of restrictions. Here is what you need to watch in markets, in this seven minute video           Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) head lower ahead of Fed decision next week The S&P500 continued to fall below its 200-day average, slipping 1.4% on Tuesday, taking the four-day loss to 3.4%, with the next level of support at perhaps 3900. The Nasdaq 100 fell 2%, taking its three-day fall to 4%. The most selling over the last few sessions has been stocks that will likely come under pressure from rates staying higher for longer, combined with a slowdown in consumption. Luxury EV maker- Lucid Group, team software company-Atlassian, and online dating company Match, have fallen over 10% this week. While stocks exposed to China, such as Baidu and JD.com have rallied over 3%. For more inspiration of other stocks doing well this month, likely to benefit from China easing restrictions; see Saxo’s China Consumer and Technology basket. What’s driving markets and shareholder returns right now? Fed hiking Vs China easing covid restrictions Firstly – what's pressuring stocks is the hotter than expected US service sector, showing the US economy is strong enough for the Fed to keep hiking interest rates to slow inflation. While major investment banks are saying 2023 will be a downbeat year. Goldman’s David Solomon says a US recession is possible, with smaller bonuses and job cuts expected. Morgan Stanley says it will reduce its global workforce by about 2,000, (2% of the total), while BofA’s chief Brian Moynihan says his bank slowed hiring and JPMorgan’s Jamie Dimon warned of a "mild to hard recession" in 2023, saying the economic clouds "could be a hurricane." So damp sentiment is causing bond yields to move higher again, the US 10-year yield hit 3.53%, while the US dollar is rising again - on track to make its biggest weekly gain in almost 12 weeks. Secondly, what’s driving upside in markets is the easing of restrictions in China, with the country preparing to ease further. This is benefiting forward looking Chinese consumption and commodities, as there is expectations demand will pick up. Refer to Saxo’s China Consumer and Technology basket and Saxo’s Australian Resource basket for stock inspiration. In commodities, iron ore heads back to its highest level since August as China prepares to ease Oil pulled fell 3.5% to $74.25 with hedge funds continuing to sell oil amid nervousness about the Fed’s interest rate decision next week, and its path ahead. Recessionary fears and a higher US dollar are also causing selling in oil. The next level of support is perhaps around $71.74. There is talk in Europe the market has shifted toward supply not being as tight. Engie said Europe may pull through this winter and next as it replaces dwindling Russian natural gas flows, with European refiners making more gasoline than the continent needs. Read our head of commodity strategy’s latest update. The precious metal, gold, rose 0.3% to $1769. While the big news of the day, is that Iron Ore (SCOA) price advanced as China is preparing to ease restrictions further, moving iron ore’s price up 0.7% to $108.95 (its highest level since August). Australia’s iron ore kings roar back to six-month highs; Australia’s economy grows, but less than expected The Australian benchmark index, the ASX200 (ASXSP200.1) lost 0.6% on Wednesday, taking its week to date loss to 1%. However, after the iron ore price advanced, iron ore players tested six-month highs; Fortescue Metals, Champion Iron, BHP and RIO shares are all higher. In other parts of the market, insurance companies continued to shine, as they traditionally do when interest rates are rising. QBE and IAG rose almost 2% today taking their YTD gains to over 14% each. In terms of economic news out today; Australian economic growth showed an improvement in in the third quarter of 2022, but the growth was weaker than expected. GDP grew from 3.6% YoY in the 2nd quarter to 5.9% YoY. But more growth was expected (6.3% YoY). The Aussie dollar rose slightly, gaining 0.2% to 67.02 US cents. Also remember services are the biggest drivers of GDP in Australia; and as GDP is expected to slowly grind higher over current quarter, watch travel stocks, such a Flight Centre, Corporate Travel Management, Webjet, Auckland International Airport and Qantas. Also keep an eye on stocks affiliated with dining out such as Endeavour Group, Treasury Wine, and Metcash which owns Celebrations, IGA Liquor and Bottle-O.       For a weekly look at what to watch in markets - tune into our Spotlight.For a global look at markets – tune into our Podcast.
India: Reserve Bank hikes and keeps tightening stance

The Reserve Bank Of India Decision Impacted On Indian Indices Volatility

TeleTrade Comments TeleTrade Comments 07.12.2022 09:14
Bearish S&P500 has faded optimism in Asian indices. China’s easing Covid-19 restrictions-inspired optimism has dwindled the impact of a weaker Trade Balance. The oil price has refreshed its 11-month low at $74.54 amid downside revision in economic forecasts. Markets in the Asian domain have failed to continue Tuesday’s optimism and are facing pressure due to negative market sentiment. Indices are following bearish cues from S&P500 as the latter has witnessed selling pressure consecutively for two trading sessions. Volatility inspired by Federal Reserve (Fed)’s interest rate peak chaos is still breathing and impacting risk-sensitive assets. At the press time, Japan’s Nikkei225 dropped 0.69%, ChinaA50 added 0.20%, Hang Seng eased 0.10%, and Nifty50 slipped 0.35%. Growing concerns over Fed’s interest rate peak have strengthened the risk-off mood in global markets. Evidence of fresh strength in the United States economy is compelling for a higher neutral rate as inflation is set to rebound again amid rising fears of wage inflation. No doubt, a higher interest rate peak by the Fed will accelerate recession fears ahead. Meanwhile, optimism in Chinese equities led by easing Covid-19 lockdown restrictions has faded weaker Trade Balance data. In US Dollar terms, Exports dropped by 8.6% against the consensus of 3.5% and Imports tumbled by 10.6% vs. the projections of 6.0%. China’s Trade Balance has slipped sharply to $69.84B in comparison with the estimates of $78.1B. Meanwhile, Indian indices are displaying volatility as the Reserve bank of India (RBI) has raised the repo rate by 35 basis points (bps). Also, RBI Governor Shaktikanta das has trimmed Gross Domestic Product (GDP) forecast to 6.8% for FY2023. The 50-stock Indian basket has slipped by 0.35%. On the oil front, the oil price has refreshed its 11-month low at $74.54 as expectations for a higher interest rate peak by the Fed have revised down economic projections. A fresh downside revision in the growth forecast has offset supply worries from Russia.
Analysis Of The EUR/JPY Pair Movement

The USD/JPY Pair Will Be Able To Hold Its Annual Growth

InstaForex Analysis InstaForex Analysis 07.12.2022 09:35
The USD/JPY pair plummeted in November, which made many question its bullish potential. However, the dollar's recent growth convinces investors otherwise. So what to expect from the major? The dollar is winning so far The greenback rose 0.3% against its major peers on Wednesday night. The dollar was supported by rising concerns about the global recession. The day before, three leading U.S. banks - J.P. Morgan, Goldman Sachs and The Bank of America - said they expect a slowdown in global economic growth next year, as rising inflation is threatening consumer demand. The pessimistic outlook reinforced the anti-risk sentiment that prevailed for the third consecutive session. The MSCI All-Country World Index, which tracks stock market performance in 48 countries, fell 1.26%, down from a three-month high last week. The loss of appetite for equities and increased demand for the dollar was also triggered by strong US macrodata. Recall that earlier this week the Institute for Supply Management (ISM) said that economic activity in the services sector grew from 54.4 to 56.5 in November. The data followed Friday's report from the U.S. labor market, which also pleased dollar bulls. The nation's NonFarm Payroll employment rose more than forecast last month. The portion of optimistic data greatly strengthened the market's hawkish expectations for further monetary policy by the Federal Reserve. Currently, most traders expect the U.S. central bank to raise the rate by 50 bps next week. The probability of an increase by 75 bps is only 5%. However, talk of a higher peak in U.S. interest rates has returned to the market. Many investors believe the rate could reach 5.25% in 2023, whereas now it is in the 3.75-4% range. The hope that the Fed will continue to raise rates next year and keep them high for a long time acts as a very powerful trigger for the dollar at this point. This factor particularly helps the greenback against the yen. After USD/JPY plummeted to a 3-month low of 133.64 last week, it has now gained 3% and has managed to stay above 137. There aren't many new factors that can strongly influence the asset's dynamics now. In the coming days, investors will focus on two events: the US consumer price index for November and next week's Fed meeting. If investors see more robust inflation and hear hints of a higher peak in U.S. interest rates from U.S. officials, it will likely trigger a new wave of growth in the USD/JPY pair. What's in store for the USD/JPY next year? In November, the U.S. currency posted its worst monthly performance in 14 years against the yen. It fell by more than 7% due to fears that the US central bank is going to slow the pace of rate hikes. However, most currency strategists, recently surveyed by Reuters, believe that in the next few months, USD/JPY will be able to hold its annual growth, which amounted to 20%. The growing threat of recession in the U.S. and other countries should provide support to the dollar. In the backdrop of risk aversion, the greenback will once again feel a surge of strength, which will help it recover its recent losses on all fronts, even against the yen. "For now, the forces that have supported the USD this year remain valid, despite the recent correction lower. Other currencies do not look as attractive yet," said Athanasios Vamvakidis, head of G10 FX strategy at Bank of America. In the BofA baseline, the U.S. dollar will remain strong early next year and will only start a more sustained downward path after the Fed pauses. Despite the dollar's recent pullback, major currencies are not expected to recoup their 2022 losses against the USD until at least late 2023, the survey showed. Analysts estimate that the Japanese yen, down nearly 20% for the year and currently trading around 136.50 per dollar, was expected to change hands around 139.17, 136.17 and 132.67 per dollar over the next three, six and 12 months respectively.   Relevance up to 08:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/329168
Australia Is Expected To Produce A Bumper Year Of Crops

Australia Is Expected To Produce A Bumper Year Of Crops

Saxo Bank Saxo Bank 07.12.2022 09:50
Summary:  The US equity market rolled over further, with the S&P 500 index crossing back below the pivotal 4,000 level, completing the rejection of last week’s rally attempt. In Asia overnight, further signs that China will continue to lift Covid restrictions failed to buoy sentiment further, with weak November export data spooking sentiment at the margin. In commodities, the major crude oil grades dropped to new lows for the cycle on demand concerns.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures declined another 1.5% yesterday pushing briefly below the 100-day moving average before bouncing back above that average. In today’s session the 100-day moving average which sits around the 3,937 level is the important level to watch on the downside and if it breaks then the 3,900 is the next major area of gravitation. The US 10-year yield remains close to 3.5% adding no further pressure from the cost of capital side and in general the equity market is slowly transitioning into hibernation. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) After a lackluster morning session, Hong Kong and mainland China stocks rallied in the afternoon after investors took note of the no mention of dynamic zero-Covid and a more balanced tone towards economic growth in the readout of the politburo meeting. However, stocks pared their gains and more, with the Hang Seng Index and CSI300 Index reversing and losing 1% and 0.4% respectively as of writing. The Chinese health authorities announced 10 additional measures to further fine-tune its pandemic control strategy ... and are holding a press conference later in the afternoon. Separately, China’s exports in November declined 8.7% (in USD terms) in November from a year ago, weaker than expectations. Geely (00175:xhkg) rose more than 2% as the Chinese automaker is reportedly talking to investment banks for a Hong Kong IPO of its Cao Cao Mobility ride-hailing arm. USD stays bid on weak risk sentiment, BoJ comments overnight A weak session for risk sentiment yesterday helped support the greenback, with treasury yields trading sideways and therefore marginalized as a factor. One of the bigger movers overnight was USDJPY, which is challenging above the important 137.50 area (prior range low) this morning after BoJ board member Toyoaki Nakamura supported the BoJ’s current easy policy, noting that the elevated inflation in Japan in the recent cycle is not wage-driven. Nakamura expressed concern that policy tightening might prompt the return of deflation. Elsewhere, USDCAD is making a bid at establishing a new up-trend, AUDUSD has posted a bearish reversal, and EURUSD & GBPUSD still need more downside to suggest a similar reversal, while all USD traders are holding their collective breath for next Tuesday’s US November CPI print and the FOMC meeting the following day. Gold (XAUUSD) holds above support at $1765 despite dollar strength and weak risk sentiment Stronger than expected US services data on Monday has renewed pressure on the Fed ahead of next week’s FOMC meeting, and with ETF investors still side-lined, gold remains very dependent on movements in the dollar and yields, both of which have been providing some headwind this week. While lower energy prices may ease inflationary concerns, Friday’s US producer price report may provide the next round of price volatility. Key resistance at $1808 with support below $1765 at $1735. Crude oil (CLF3 & LCOG3) suffering a three-day decline of close to 9% Brent closed below $80 on Tuesday for the first time since early January with WTI trading near $74on fading risk appetite as the attention turns to 2023 and increased worries about an economic slowdown hurting demand. The slump comes against a backdrop of low liquidity with Brent open interest falling to a seven-year low, thereby stoking volatility. After five months of cuts the EIA upgraded its 2023 production saying it could average a record 12.34m barrels per day. The API reported another big draw in crude oil stocks while China imported 11.42 million barrels per day last month, up 12% from October and highest since January. Overall, however, the market is undoubtedly going through a soft patch with time spreads softening as the spot price falls faster than prices further out the curve. US treasuries drop again, as safe-haven appeal comes and goes. (TLT:xnas, IEF:xnas, SHY:xnas) US treasury yields at the long end of the curve erased much of the previous day’s rise as risk sentiment was broadly weak yesterday, suggesting a safe-haven appeal. The 3.50% area remains the pivotal one for the 10-year benchmark yield. The 2-year US treasury yield was sideways, meaning that the 2-10 yield curve hit new cycle lows around –84 basis points. What is going on? EU to move forward with cases against China on trade policy at the WTO The first case is related to China restricting Lithuanian exports, a move that came after Lithuania allowed Taiwan to open what is arguably an embassy in the country. The other case revolves around Chinese treatment of patent holders. Apple set to postpone the roll-out of its first EV The company will postpone the launch of its first EV to 2026 (thought to be about a year later than originally intended), according to “people familiar” with the situation cited by Bloomberg. The original intention was for the EV to be fully autonomous, but the realization that this is an insurmountable engineering challenge for now has resulted in the redesign, which is now set to include human controls. TSMC plans to more than triple its investment to $40 billion in building plants in Arizona In an equipment installation ceremony at Taiwan Semiconductor Manufacturing Co’s (TSMC) first microchip production plant in the US, which President Biden attended, TSMC Chairman Mark Liu announced that the Taiwan chip foundry is building a second production plant that will make 3-nanometer chips in Arizona. The additional plant will bring TSMC’s previously announced investment of USD12 billion to USD40 billion. TSMC expects the second facility will begin operation by 2026. Also attending the ceremony were CEOs from Apple, Nvidia, AMD, Applied Materials, and Lam Research. The additional investment is a boost to President Biden’s plan to bring the semiconductor supply chain, in particular the capability to fabricate high-end chips, back to the U.S. CBOT Wheat (ZWH3) trades near a 14-month low Despite floods Australia is expected to produce a bumper year of crops including record wheat production in the current financial year, the government said on Tuesday, despite the impact of widespread flooding in the country's eastern region. An announcement that will pose even tougher conditions for US exporters already dealing with reduced competitiveness from the strong dollar and robust supplies from the Black Sea region. On Tuesday, the CBOT bellwether wheat contract dropped as low at $7.23 to the lowest level since October 2021. Focus on Friday’s WASDE report which will publish the US governments latest projections for production and stocks. Sugar prices likely to remain supported as India sees output drop 7% India, the world’s biggest producer and second largest exporter has said its output is likely to fall 7% this year as erratic weather conditions have cut cane fields. A reduction may, despite global economic growth concerns, lift prices and allow rivals Brazil and Thailand to increase their shipments. Sugar (SBH3) traded in New York recently surged higher by 17% before spending the past couple of weeks pairing back some of those strong gains. The biggest short-term risk remains the potential for speculators reducing exposure ahead of yearend. This following a three-week buying spree to November 22 during which time the net long increased four-fold to 202k lots, the strongest three-week period of buying in more than four years. Toll Brothers beat on margin and home sales The high-end US homebuilder delivered strong earnings yesterday with revenue at $3.7bn vs est. $3.2bn and EPS of $5.63 vs est. $3.96. The gross margin outlook for the current quarter came out at 27% vs 27% expected as pressures in building materials are easing. One negative trend for the homebuilder was the backlog which shrunk to 8,098 vs est. 8,814. Australia: Q3 GDP softer than expected, mining majors rally, then retreat Australian economic improved in the third quarter of 2022, but was weaker than expected at +0.6% QoQ and 5.9% YoY (vs. +0.7%/6.3% expected). The Australian market fell on the day, with mining companies Fortescue Metals, Champion Iron, BHP and RIO testing six-month highs before selling off later in the session. In other parts of the market, insurance companies continued to shine, as they traditionally do when interest rates are rising. QBE and IAG rose almost 2% today taking their YTD gains to over 14% each. China’s exports shrank 8.7% Y/Y in November In USD terms, China’s exports declined 8.7% Y/Y in November, much weaker than the -3.9% consensus estimate and -0.3% in October. The fall in exports was broad-based across destinations, U.S.  down 3.8% Y/Y, European Union down 9.3% Y/Y, and Japan down 4.6%. Exports to ASEAN slowed to a 7.7% growth in November from 19.7% in October. Imports, falling by 10.6% Y/Y, also below expectations. What are we watching next? Bank of Canada meeting today – market divided on anticipated hike size The Bank of Canada has shown considerable flexibility in its tightening path, having hiked 100 basis points in one go back in July, followed by a 75-basis point hike in September and 50-basis points hike in October. With that pattern in mind, the market is divided on whether the BoC will hike 50- or 25 basis points today, with market-pricing leaning for the smaller hike, while the majority of surveyed analysts are looking for another 50 basis points, which would take the policy rate to 4.25%. Regardless, the market is pricing that the Bank of Canada is nearing the end of its hiking cycle, projecting a peak rate next year of sub-4.50%. China opening up trade – has it run out of steam? The latest news in China of a further easing of curbs on activity relative to Covid saw equities in Hong Kong and mainland China posting marginal new highs before rolling over badly and then closing near the lows of the session, suggesting that after a torrid 35% rally off the lows, in the case of the Hang Seng Index, the further potential for this story to continue to support a positive outlook may have run out of steam. The highs overnight in the Hang Seng were within a few points of the 200-day moving average. Earnings to watch Today’s US earnings focus is Campbell Soup which is an US processed food manufacturer of meals and snacks. The company is expected to deliver 9.5% revenue growth for the quarter that ended in October suggesting substitution effects as middle income families are shifting into lower priced options. Today:  Brown Forman, Campbell Soup, GameStop Thursday: Broadcom, Costco, Lululemon, Chewy Friday: Oracle Corp, Li Auto Economic calendar highlights for today (times GMT) 1500 – Canada Bank of Canada meeting 1530 – EIA's Weekly Crude oil and Fuel Stock Report 2000 – US Oct. Consumer Credit 2130 – Brazil Selic Rate Announcement 0001 – UK Nov. RICS House Price Balance 0030 – Australia Oct. Trade Balance Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – December 7, 2022 | Saxo Group (home.saxo)
WTI Oil Shows Signs of Short-Term Uptrend Amid Medium-Term Uptrend Phase

FX: Financial Markets Now Seem To Be Settling Into The View Of A 2023 Recession

ING Economics ING Economics 07.12.2022 11:23
After the broad-based risk rally seen over the last six weeks, financial markets now seem to be settling into the view of a 2023 recession. And as long as the Federal Reserve stays hawkish, the dollar should perform well. For today, look out for policy rate meetings in Canada and Poland, where we expect a 50bp hike and unchanged rates respectively USD: Recessionary fears should keep the dollar in demand After a positioning-led rally in risk assets over the last six weeks, financial markets seem to be settling back into a macro-led environment where the 2023 global slowdown is front and centre. Brent crude is dipping sub $80/bbl despite the OPEC+ supply cut, bonds are rallying and equities are starting to hand back some of their impressive rally from October lows. Importantly, the US yield curve continues to deeply invert. The 2-10 year Treasury curve is now inverted by a staggering 82bp. This is by far the best representation of the macro view that recessionary fears are building, yet the Fed has yet to cave in. We continue to see this as a positive environment for the dollar and a negative one for commodity and pro-cyclical currencies. DXY has found support under 105 and could well make a run to 107 ahead of next week's FOMC meeting, where we think it is too early for the Fed to signal the 'all-clear' on inflation with its influential Dot Plots. The main threat to our bullish dollar view comes from the risk of any softer US November price data (PPI released tomorrow, CPI next Tuesday) or a more positive re-assessment of Chinese growth prospects on the back of relaxed Covid measures. However, poor Chinese trade data released overnight serves as a reminder that the export environment will remain exceptionally challenging for China into 2023.   Chris Turner The Bank of Canada (BoC) will announce monetary policy today. As discussed in our meeting preview, the consensus is split between a 25bp and 50bp hike, but we believe a half-point move looks more appropriate given strong economic activity and a very tight labour market. Still, we admit it is a very close call given that the expected economic slowdown and fragility of the Canadian housing market argue for a smaller rate increase. Markets are pricing in 35bp for this meeting, so slightly leaning in favour of a quarter-point hike: in our base-case 50bp scenario, the Canadian dollar should rally on the back of the hawkish surprise. However, we don’t see the BoC impact on CAD to be very long-lasting, as external factors remain more important. A sustained recovery in CAD from these levels undoubtedly requires a rebound or at least a stabilisation in oil prices. Today, USD/CAD could trade back below 1.3600, but short-term upside risks remain high.  Francesco Pesole EUR: Sideshow It has felt like EUR/USD trading has become more settled over the last week, yet one week and one month realised EUR/USD volatility are still above 13%. This could be a precursor to one of the main themes we outlined in our 2023 FX Outlook, one of less trend and more volatility in FX markets.  There is a case that last week's 1.0595 print was the corrective high in EUR/USD - we should know a lot more by next Wednesday evening after the FOMC meeting - and it will be interesting to see what the European Central Bank has to say on the 15th. Some are speculating that the current calm in European bond markets could prompt the ECB to be slightly more aggressive in its quantitative tightening plans - so let's see. We have a couple of ECB speakers today, Philip Lane at 0810CET, and Fabio Panetta at 1530CET, but neither looks likely to knock the market off its consensus of a 50bp hike next week. For today, EUR/USD could drift down to 1.0400 in quiet markets. Chris Turner GBP: Mildly bearish Trading conditions have certainly settled down for sterling where one-month traded volatility is pretty steady in the 12-13% area having traded above 20% in late September. It looks like the Gilt market has rallied enough for the time being, with spreads to German Bunds now starting to widen again. In other words, the fiscal rectitude rally has run its course and sterling will not find any more positives here. If, as above, we are turning to a more macro-led trading environment, then sterling should underperform. A Fed staying hawkish into a recession should see equity markets come under renewed pressure. Typically, this is a negative environment for sterling, where the UK's large current account deficit is penalised. GBP/USD has turned from a strong resistance level at 1.23 and our bias into next week would be for a return to the 1.19 area. Chris Turner CEE: NBP closing the tightening cycle Top of today's agenda is the monetary policy meeting of the National Bank of Poland (NBP). After last week's surprisingly low inflation, it is hard to expect any outcome other than stable interest rates. Although we think the peak in inflation is still ahead and inflation will slow only very gradually next year, the prospect of a weak economic performance will prevail at the MPC and we expect the same story next year. However, for now, the bigger focus will be on tomorrow's press conference by Governor Adam Glapinski and any potential mention of interest rate cuts, which could be a red rag to a bull for the markets. As we mentioned on Monday, the gap between the zloty and the interest rate differential is the largest in the region at the moment and together with EUR/USD heading lower, this is not good news for FX. EUR/PLN is thus vulnerable, especially to the upside in our view and we could see a move above the 4.720 level which was already tested on Monday. On the EU/Hungary story, as expected yesterday's Ecofin meeting did not bring a resolution to the current saga. The Ecofin was due to discuss both the recovery funds to Hungary and the European Commission's proposal for sanctions under the rule of law mechanism. EU member states have requested a new assessment of Hungary from the EC given that the original version did not include the latest changes on the Hungarian side. According to reports, the new assessment is expected to be discussed at an additional Ecofin meeting on 12 December and formally approved on 19 December. On the one hand, the EU's timing problems play into Hungary's hands, as the rule-of-law procedure will end without sanctions if the European Council does not decide on the issue; on the other, the EU may block the disbursement of cohesion funds after that date. However, after yesterday, it seems that the situation will be tense until almost the final day of the year. On the FX side, the Hungarian forint touched its weakest levels since mid-November yesterday, but the currency erased some of its losses after the Czech finance minister, who is leading the current negotiations, said he believes a deal will be reached in the coming days. Thus, positioning continues to clear and in our view, the trend is tilting more towards the negative side of this story now. Hence, tangible progress should bring a significant rally, while further negative news may result in only slight weakening. Nevertheless, for today we expect a partial calming of the situation after yesterday's headline storm and we expect the forint closer to 410 EUR/HUF. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Australian Dollar Failed To Hold Its Gains, The Pound Strengthened Against The US Dollar

The Australian Dollar Failed To Hold Its Gains, The Pound Strengthened Against The US Dollar

Kamila Szypuła Kamila Szypuła 07.12.2022 13:14
The darkening economic outlook drove fresh safe-haven demand for the US Dollar on Wednesday. The US dollar changed little after some of America's biggest banks warned of an impending recession The Fed, Bank of England (BoE) and European Central Bank (ECB) will set interest rates next week and central bankers will enter a period of silence before meetings. Positive reports appeared in the euro zone. Policymakers enter a period of calm ahead of key meetings of the Bank of England, the Federal Reserve and the European Central Bank Australian Dollar is facing renewed pressure. BoJ board member Nakamura once again encouraged the JPY bears Read next: Euro: Is There A Broader Correction To Be Feared? Aussie Got Little Support From The RBA Decision | FXMAG.COM EUR/USD may be bearish? The EUR/USD pair trades close to 1,050. Any breakout lower than 1.045 will be considered bearish. Economists at ING note that the pair could move lower to 1.0400. The European currency is expected to closely follow the dynamics of the dollar, the impact of the energy crisis on the region and the divergence between the Fed and the ECB. Additionally, the markets' overestimation of the potential Fed policy reversal remains the sole driver of the pair's price action for now. There were further concerns about the impact of colder winter conditions, especially in the context of the still uncertain energy situation. Positive reports appeared in the euro zone. Employment rose slightly and the GDP Y/Y and GDP Q/Q readings turned out to be higher than expected. GDP Y/Y increased to 2.3% against the expected 2.1%, while GDP Q/Q increased by 0.1% to 0.3%. Speeches by members of the European Central Bank will also take place today, but they are not expected to have a significant impact on the euro exchange rate. GBP/USD holds gains above 1.2150 The GBP/USD pair is trading around 1.2190. The pound strengthened against the dollar on Wednesday to a nearly six-month high as policymakers enter a period of calm ahead of key meetings between the Bank of England, the Federal Reserve and the European Central Bank. There are no significant macroeconomic events for the pound today. The Bank of England raised interest rates from 0.1% to 3.0% in the current monetary policy tightening cycle, with markets pricing in an interest rate peak of around 4.6% next year. Economists predict the Bank of England will decide to raise interest rates by 50 basis points next Thursday. One BoE policymaker said higher interest rates could lead to a deeper and longer recession. Yesterday, the Reserve Bank of Australia recently raised its key interest rate by 25 basis points to 3.1% The Australian dollar failed to hold its gains and it is facing renewed pressure after data showed that the Australian economy expanded less than expected in the third quarter. Annual GDP by the end of July was 5.9% instead of the expected 6.3% and the previous reading of 3.6% was revised down to 3.2%. Overall, national data show a strong economy. Yesterday, the Reserve Bank of Australia recently raised its key interest rate by 25 basis points to 3.1%, taking borrowing costs to a level not seen in a decade, and further tightening is expected to bring down inflation. A board member of the Bank of Japan (BoJ) said that adjusting monetary policy would be premature The currency pair is trading around 137.3590. BoJ board member Nakamura once again encouraged the JPY bears with his statement. A board member of the Bank of Japan (BoJ) said that adjusting monetary policy would be premature. Source: dailyfx.com, investing.com, finance.yahoo.com
Walmart CEO raised the issue of switched consumers' buying habits

Walmart CEO raised the issue of switched consumers' buying habits

Jing Ren Jing Ren 07.12.2022 14:53
Yesterday, several major CEOs gave interviews to financial media in the context of a couple of major investor conferences. Their comments left a sour note for the markets, and tech stocks led a move lower in US equities which fed over into the Asian and European stocks. Aside from the less than optimistic outlook, it underscored a brewing debate about the Fed. The results of that debate could be the difference between a mild (or no) recession, and an economic "hurricane". First, the disappointing news What captured most of the attention were comments from Walmart's CEO and the CEO of JPMorgan. The latter has been quite a bit more outspoken about worries of a pending recession. In fact, the "economic hurricane" phrasing was his invention. The issue is that several CEOs echoed a sentiment: that consumer demand was slowing. Read next: The Australian Dollar Failed To Hold Its Gains, The Pound Strengthened Against The US Dollar| FXMAG.COM Walmart was seeing a trend where consumers were being more conservative in their buying habits, focusing on household essentials and holding back from things like electronics. This dovetailed with the CEO of Union Pacific, who said that shipping volumes were down.   Still good, but for how long? Jamie Dimon, as the CEO of one of the largest consumer banks in the US, would have some insight into how his customers were spending their money. He pointed to spending this year being 10% higher than last year. Which sounds good, but inflation has to be factored into that. He also pointed out that savings that people had accumulated during the pandemic and thanks to the stimulus were running out, and that might mean further credit crunch in the first half of next year. Read next: Unconventional Measures Taken By Musk In Managing Twitter| FXMAG.COM This is where the discrepancy starts to show: What will the Fed do. For now, the Fed is raising rates to stave off inflation, and are expected to level out at around 5.0%. This makes borrowing costs significantly higher, which would make buying things with credit cards, or taking out loans, much more difficult.   History won't repeat itself? In the past, the Fed has hiked rates right up until there was an economic downturn, and then quickly cut in order to support the economy. Particularly to support the jobs market, which is their second mandate. But Dimon is warning this might not be the case this time, as inflation remains elevated, the Fed might be much more concerned with restoring monetary stability. This would make the recession harder, since there wouldn't be the sudden influx of cheaper credit that happened with previous recessions. The relative strength in the jobs market contributes to that view. Even if the economy slips into contraction, with over 10 million job openings, it could be some time before the unemployment rate starts to tick up. Unemployment is a lagging indicator, and that lag might be even more extended this time around. Which could mean that the more rosy expectations of a quick "pivot" by the Fed next year might not play out.
China: PMI positively surprises the market

Asia Market: The CNY Made Further Gains Yesterday, Japan GDP Contracted

ING Economics ING Economics 08.12.2022 08:52
All is fairly quiet on the data front...but bond markets are still rallying...some suggest that this has gone too far... Source: shutterstock Macro and markets outlook - bonds the star of the show Global Markets: US equities registered further small declines yesterday and equity futures are setting us up for further declines today. Chinese stocks have also steadied after their recent return of optimism. Bond markets were far less humdrum. 2Y US treasury yields fell 11bp while 10Y yields fell 11.5bp to 3.417%. There was no substantial market-moving data out yesterday, nor Fed comments to explain this. One possibility is that bonds are simply making room to rise at next week’s FOMC meeting. Peak Fed funds implied rates are only pricing in 4.195% in June. And that seems almost 10bp too low, as we still look for a further 50bp of tightening after next week’s 50bp hike. Some newswire stories today suggest that the recent bond rally has become overbought. Charts lend some support to this suggestion. The EURUSD exchange rate pushed back up above 1.05 yesterday, mainly on the back of the further declines in US bond yields. Other G-10 currencies have also gained against the USD. Otherwise, it was a mixed day for Asian FX. The PHP was the best-performing currency on the day. Seasonal remittances, stock inflows and a reaction to the drop in the October unemployment rate to 4.5% are all vying as the catalyst to explain these outsize moves, which have left the USDPHP rate at 55.47. Manila is off today for a public holiday. The CNY also made further gains yesterday and is now 6.97. But it wasn’t such good news across the board in Asia. The KRW, THB and IDR all lost ground on the day. G-7 Macro: With the exception of the final revision of 3Q22 Japanese GDP, it is a very quiet day for G-7 Macro. Some articles today are highlighting the University of Michigan inflation expectations figure due out tomorrow as being the next big challenge for markets, suggesting that it may stall. I’d be surprised if it had much effect either way. It usually doesn’t.   China: The government has eased Covid measures further, while a Politburo meeting on 6th December pinpointed growth as the main policy initiative going forward. But we are not overly optimistic about either of these announcements leading to a significant uptick in economic growth. Even if there was a decrease in mobility restrictions before the Chinese New Year, many consumers may avoid crowded places. As such, we do not expect a sizeable jump in consumption in 1Q23. Australia: October trade data due at 0830 SGT is forecast to show a slowdown in export and import growth, but deliver a small contraction of the trade surplus to about AUD12bn. This is unlikely to have much impact on the AUD. Japan: The final 3Q22 GDP revision showed a slightly smaller revision than initially. GDP contracted by 0.2%QoQ (-0.3% previously). A slightly smaller drag from net trade (-0.6pp vs -0.7pp) and a small boost from inventories (0.1pp from -0.1pp) seem to have been enough to overcome a weaker consumer spending figure (0.1%YoY down from 0.3%).  What to look out for: Not a lot! Japan: Final revision of 3Q22 GDP data - already released Australia: October Trade data Read this article on THINK TagsEmerging markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Rates and Cycles: Central Banks' Strategies in Focus Amid Steepening Impulses

The Falling Yields Kept The US Dollar (USD) Under Pressure

Swissquote Bank Swissquote Bank 08.12.2022 10:08
Stocks fell for a fifth day, but the sovereign bonds gained, a hint that the market catalyzer shifted from the hawkish Federal Reserve (Fed) pricing – where stocks and bonds fall at the same time, to recession fears, where stocks remain under pressure, while investors seek refuge in safer sovereign assets. Yields and USD The falling yields kept the US dollar under pressure below the critical 200-DMA, which stands at 105.75. American crude oil One big move of the day was oil. The barrel of American crude slipped below the $73 floor and fell to $71.70 on the back of rising recession fears. Oil And note that we have started seeing a structural change in the oil markets. Crude price curve was in backwardation up until a month ago. But over the past weeks we started seeing the front-end of the price curve falling and even going back to contango. I discuss in this episode what that means for oil prices. Gold Elsewhere, news that China increased its bullion reserves for the first time in three years have a boost to gold and silver. The mint ratio fell below 80, but gold could still be a better choice for those preparing their portfolios for recession. Watch the full episode to find out more! 0:00 Intro 0:31 Markets price in recession 2:36 Oil slips below $72pb 3:57 Is contango coming & what does it mean? 6:25 Loonie to remain under the pressure of weaker oil 8:00 Gold or silver?! Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Crude #oil #contango #backwardation #energy #crisis #recession #fear #market #selloff #USD #EUR #Gold #silver #mint #ratio #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
US Stocks Extend Rally Amid Optimism Over Fed's Monetary Policy

The Euro Benefited From The Weakening Of The US Dollar, A Potential Downside Risk For The Australian Dollar Over The Next Few Weeks

Kamila Szypuła Kamila Szypuła 08.12.2022 14:14
The euro stabilized against the US dollar on Thursday and the U.S. dollar clawed back some of the previous day's declines, as the market weighs in on the Fed's rate hike path. The euro benefited from the weakening of the US dollar The Australian dollar against the US currency fell sharply the 10-year Treasury note has fallen almost continuously EUR/USD was unable to overcome its late-June high EUR/USD hit a five-month high earlier this week but was unable to overcome its late-June high of 1.0615. The pair's mood remains bearish today. Compared to the previous day, the EUR/USD pair has fallen and is trading around 1.0469. The euro gained overnight after better-than-expected euro-wide GDP data showed an increase of 0.3% q/q in the third quarter instead of the expected 0.2%. This may indicate that the economic slowdown in Europe may not be as serious as previously feared. The European Central Bank will review its policy on 15 December. The broader weakness of the US dollar also helped strengthen the euro. GBP/USD The pound fell 0.3% against the dollar to $1.2175 and fell 0.35% against the euro. Sterling falls as falling UK house prices add to recession fears. The UK is facing a winter of strikes as rail workers, teachers and nurses demand better wages as the cost of living soared, exacerbated by rising energy costs after the Russian invasion of Ukraine. What's more, the prospects for next year are equally bleak. The UK economy could contract in the coming months. AUD/USD- commodity prices have a negative impact The Australian dollar against the US currency fell sharply this week. Currently, the pair is trading at mid-September levels. From The Australian Dollar (AUD) perspective, commodity prices have a negative impact on the currency coupled with yesterday's weaker GDP data. This morning started positively for the Australian dollar with a better-than-expected trade balance for October, but today the main focus will be on the US labor market data. If the reports turn out to be positive for the dollar, they will bring bears for the AUD/USD pair. Most recently, the Australian dollar got support from the easing of COVID restrictions in China, but that has since dissipated due to the rising number of COVID cases causing concern. The RBA's decision on interest rates also failed to support the Aussie. Overall, the current fundamental headwinds facing the AUD outweigh the US Dollar, which could suggest a potential downside risk for the Australian Dollar over the next few weeks. JPY is weaker The Japanese Yen is slightly weaker so far today despite GDP there narrowly beating forecasts. Annualised GDP was -.08% for the third quarter instead of -1.1% anticipated. The Japanese yen (JPY) which is highly sensitive to shifts in U.S. Treasury yields, fell 0.2% to 136.82. Instead the dollar-yen pair jumped. Currently, the pair is trading around 136.8130. The yield on the 10-year Treasury note has fallen almost continuously since hitting a 15-year high in late October. The Bank of Japan's ultra-loose monetary policy at a time when other central banks around the world are aggressively raising interest rates has made the yen the weakest major currency in the world in recent months. As a result, the USD/JPY exchange rate increased. However, according to some experts, the yen may rise against the US dollar next year. Source: finance.yahoo.com, dailyfx.com, investing.com
There Are Risks That An Increase In The Price Of Oil May Provoke China To Limit The Export Of Diesel Fuel

Saxo Bank Podcast: Look At Crude Oil Dynamics, Natural Gas In Europe, Weak Outlook From US Banks And More

Saxo Bank Saxo Bank 08.12.2022 14:26
Summary:  Today, we look at the overall sense that market players don't want to take any strong new bets until we get to the other side of Dec 31. We also look US treasury yields dropping through pivotal levels at the longer end of the curve and the remarkable fact that the curve remains near its most inverted even as the 2-year yield is at local range lows. The market is increasingly convinced that Fed easing is set to start within 12 months after a bit more hiking next week and early next year. We also look at crude oil dynamics, natural gas in Europe, Swedish housing prices, weak outlook from US banks, the latest woes for Tesla, the Bank of Canada keeping CAD the weakest of G10 currencies, and more. Today's pod features Peter Garnry on equities, Ole S Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: Will market be allowed to go into hibernation until 2023? | Saxo Group (home.saxo)
Analysis And Trips For Trading The GBP/USD Pair In Short And Long Positions

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

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

USA: UMich Consumer Sentiment Index is expected to slide. Investors can send the dollar down

FXStreet News FXStreet News 08.12.2022 15:54
US Consumer Sentiment is set to show a downbeat mood among shoppers. Markets focus on inflation expectations one ahead of the last Fed decision of the year. Lower gasoline prices may change consumers' perceptions about future costs. The Dollar has room to pare some of its weekly gains in response to the data. Crying all the way to the cashier – that is how consumer surveys can be described in 2022. The University of Michigan's Consumer Sentiment Index stood at a low level of 56.8 points in November, and economists expect another slide to 53.3 in the preliminary read for December. Nevertheless, Black Friday shoppers continued busting doors. I also want to stress that the UoM tends to reflect the political mood – Democrats are much more optimistic about the economy than Republicans in the past two years. It was the other way around before the 2020 elections. However, this survey's 5-year inflation expectations gauge is already a gem that moves markets. Why? Because Federal Reserve Chair Jerome Powell highlighted its importance. Back in November, Americans' long-term inflation expectations hit 3%, the highest since June, but below the cycle peak of 3.1%: Source: FXStreet Market environment and reaction Investors are becoming nervous ahead of next week's all-important Federal Reserve meeting, the last of the year. The bank is set to raise rates by 50 bps, but its projections for future rates remain unknown. Will the terminal rate top 5% or remain below it? The US Dollar has been rising in fear of a hawkish message from the Fed, reversing falls recorded in the previous week. The UMich survey is the last data point of the week and may trigger last-minute repositioning ahead of the weekend. Read next: BMW Was Fined 30,000 Pounds By CMA, Google Wants To Become More Productive| FXMAG.COM After a positive week for the Greenback, some profit-taking would be the natural reaction – but the data need to support it. A mere repeat of 3%, without any unwanted acceleration in long-term inflation expectations, could suffice to down the Dollar. There is room for an even more significant fall. Why? US gasoline prices have been dropping, and that impacts Americans' minds. Yes, the survey is about five years forward, but we humans have a recency bias, and gas stations serve as giant billboards. Final thoughts The University of Michigan's preliminary Consumer Sentiment Index gauge for December has the last word of the week, and its long-term inflation expectations is especially eyed after the Fed highlighted its importance. Investors might want to take profits on weekly Dollar gains and a drop in gasoline prices points to a weaker read, further weighing on the Greenback. The UMich data is released after the Producer Price Index (PPI) report, which could also show softer inflation in the pipeline, according to the economic calendar. One weak data point may be insufficient to topple the Dollar – the second blow could be decisive.
Long-Term Yields Soar Amidst Hawkish Fed: Will They Reach 5%?

Rates Spark: The Focus In The Eurozone Is On The ECB's TLTROs

ING Economics ING Economics 09.12.2022 08:37
Whether it is the end of the rally or not, there are good reasons to take a breather. The Fed meeting next week is drawing closer, with a crucial CPI release just ahead of it. Resuming Treasury supply will add another technical headwind. But already today we see a consumer inflation survey that has swayed the Fed before. The ECB will announce the TLTRO repayment Source: Shutterstock Rates rally puts in a breather, but the Fed's patience is likely tested already Just as we were starting to wonder whether the rally was ever going to stop, Treasuries put in a breather yesterday. The extent of the move and its contrast to the messaging from the Fed would have been reason enough already earlier on. But now the actual FOMC meeting next week is within grasp, including another crucial inflation report just ahead with Treasury supply to top it off. Already today will see data that could give reason for pause Already today will see data that could give reason for pause. While the PPI data is seen to confirm easing pipeline inflation pressure,  the University of Michigan consumer survey could be a bit more of a wildcard. One is tempted not to place too much weight on the reading given the relatively small sample size, but we recall the FOMC having had an eye on that measure when they decided to hike 75bp in June, despite earlier guidance of a 50bp hike. Currently, market consensus looks for unchanged consumer inflation expectations. The June meeting set a recent precedent about the Fed swerving way from prior guidance. We do not know what it would take to tip the Fed towards placing another sounding with the press in order to steer market expectations ahead of a meeting. But the way current money market and yield curves are plotting for the path of key rates, at least beyond the upcoming meeting, is not aligned with the narrative that the Fed is trying to instil in markets.        10Y Treasury yields have dropped through 3.5% into the December FOMC Source: Refinitiv, ING A TLTRO piece to the ECB's balance sheet puzzle Today at 12.05 CET the ECB will announce the amount that banks will repay of their currently outstanding TLTROs ahead of year end. That amount will come on top of the €52bn TLTRO.III tranche that matures this month. We are looking for an early repayment of around €200bn, but admittedly it is not a high conviction call. Already ahead of November’s repayment, polling pointed to a wide range of forecasts from €200bn to €1.5 trillion for total repayments this year. The close to €296bn that materialised last month was clearly at the lower end of expectations, and likely also a disappointment for the ECB itself. The TLTRO repayments were seen as an important first step in the ECB balance sheet reduction process From the October ECB accounts we gathered that the TLTRO repayments were seen as an important first step in the balance sheet reduction process. The amounts repaid could also inform the decision on the reduction of the asset portfolios. According to the minutes the Council deemed the TLTRO recalibration “more efficient” than trying to achieve the same objective through an earlier start of (quantitative tightening) QT or more aggressive interest rate hikes. Taken at face value, that would imply another disappointing repayment could prompt a more hawkish reaction from the Council to achieve the desired pace of policy tightening – be it via rates or faster QT. However, one should also be aware that year-end considerations can influence repayment decisions and one should not move to rash conclusions. In any case it could spice up the Governing Council deliberations, where our economists have been seeing the risk of another 75bp rate hike on the rise again. Our main take remains that there is an overarching desire by the ECB to withdraw the exceptional accommodation provided via its balance sheet. And we have repeatedly said that we think the ones that have benefitted the most now also most at risk for an adverse market reaction. Yet, especially sovereign bond spreads of the eurozone periphery have proven remarkably resilient so far. While there was some widening in the 10Y Italian-German spread of around 5bp, it still remains at a relatively tight 186bp overall.        The ECB has incentivized early TLTRO repayments, with modest results so far Source: ECB, ING Today's events and market view The rates rally has finally put in a breather. A level of 10Y US Treasury yields below 3.5% still looks stretched and today's data could give first reason for pause. Less so the PPI data, where the consensus is looking for a clear decline in wholsale prices. Probably more eyes will fall on the preliminary readings on surveyed consumer inflation expecations by the University of Michigan. Consensus is not seeing any change here, making it a bit of a wildcard. But there is a precendent for the Fed putting some weight on this measure.  Away from the US the focus in the Eurozone is on the ECB's TLTROs and the annoucement of banks' early repayments for December.  Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Melbourne Institute Inflation Gauge For Australia Rose More Than Expected

The Australian Benchmark Index Looks Like It Could Close Off The Week Lower

Saxo Bank Saxo Bank 09.12.2022 08:59
Summary:  U.S. equities rallied after declining for five consecutive days as investors took a pause in the growth-fear-triggered selling as treasury yields bounced. Hong Kong stocks surged by 3.4%, completely reversing their loss on Wednesday after profit-taking being out of the way and investors looking at the potential improvement to the economic outlook in China. What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) snapped a 5-day losing streak An interesting recent development in the U.S equity markets was that investors worried about falls in long-term treasury yields and cheered rises of them as their focus shifted from long-term treasury yields’ negative impact on equity valuation to their signaling function of potentially a U.S. recession, especially when the yield curve going more inverted in the process. The bounce of the 10-year treasury yield by 7bps to 3.48% on Thursday was cited as positive for equities by some investors. Optimism about the outlook of an economic recovery in China also contributed to the improvement in sentiment. S&P 500 gained 0.8% and Nasdaq 100 advanced 1.1%. Nine of the 11 S&P500 sectors climbed, with information technology, consumer discretionary, and healthcare leading the gain, while communication services and energy lost by 0.5%. The Federal Trade Commission is seeking to block Microsoft’s (MSFT:xnas) acquisition of Activision Blizzard (ATVI:xnas). Shares of Microsoft rose by 1.2% while Activision dropped by 1.5%. US treasury yields (TLT:xnas, IEF:xnas, SHY:xnas) bounced on a rise in continuous jobless claims and ahead of PPI and supply U.S. treasury yields took a little pause in their continuous falls. The 2-year yield rose 5bps to 4.31% and the 10-year yield was 7bps cheaper to 3.48%, after retesting the 3.5% level during the day. Initial jobless claims were in line with expectations but traders took note of the larger-than-expected increase in continuous jobless claims to 1,671K from the prior week’s 1,608K. Trading activities were muted ahead of the PPI on Friday and the CPI next week. The Treasury Department announced USD90 billion in the 3-year, 10-year, and 30-year auctions next week. Treasury Secretary Janet Yellen told reporters that “whether or not we can avoid a recession, I believe the answer is yes.” Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) sold the new Covid-19 containment measures news Hang Seng Index rallied strongly, up 3.4% on Thursday and recovered all the loss from “buy the rumor, sell the news” profit-taking selling the day before. The 10 additional fine-tuning measures to ease pandemic containment may be underwhelming relative to the high expectations. However, when reading together with the readout of the Politburo, an overall direction of a gradual and now seemingly determined loosening of restrictions seems to have taken hold. Omitting the language of “housing is for living in, not for speculation” and pledging to “be vigilant of large economic and financial risks and strive to prevent systemic risks” point to conditional support to the property sector when socioeconomic and financial stability are at stake. After the profit-taking selling out of the way, technology stocks led the rally. Hang Seng TECH Index surged 6.6% with Bilibili (09626:xhkg), soaring 22%, being the top gainer within the index. Alibaba (09988:xhkg), Meituan (03690:xhkg), and Tencent (00700:xhkg) advanced 5%-6%. Shares of Macao casino operators soared 12%-22%, following Macao said it will stop requiring negative PCR or RAT test result proof from Chinese visitors. Hong Kong shortened the home isolation period for people infected with Covid-10 to five days from seven days. A newspaper story suggests that the Hong Kong authorities are considering relaxing the outdoor mask rule. Cosmetic chain Sa Sa (00178:xhkg) jumped 19.7%. In A shares, trading was lackluster with CSI300 ending the session flat. Among industries, property, financials, telecom services, and healthcare outperformed. Australia’s share market rises for the first time in four days, with miners leading the charge The Australian benchmark index, the ASX200 (ASXSP200.1) opened 0.7% higher on Friday but looks like it could close off the week lower, with the market now down 1.5%, which marks the first weekly drop in three weeks. The ASX200 holds six-month high territory largely buoyed by the mining sector being bought up (bid) on forward looking hopes that China will ramp up economic activity next year and keep accommodative monetary support in place, which will likely support infrastructure and property. As such, this has supported the key steel making ingredient, iron ore (SCOA) raise 3.6% this week and elevated Fortescue Metals (FMG) shares by 8% this week, with Champion Iron (CIA) up 7%, with Rio Tino (RIO) following. Fortescue Metals shares are on watch as they appear in overbought territory, but what support likely further upside is the iron ore price hit a fresh four-month high today, $109.60, which suggests if this uptrend in iron ore continue, Fortescue Metals earnings could pick up. And it could see subsequent share price upgrades from buy and sell side brokers.  FX: The U.S. dollar index weakened modestly by 0.3% to 104.77 The US dollar weakened modestly against all G10 currencies except for being unchanged versus the Yen. The Aussie dollar gained the most against the U.S. dollar and it rose by 0.7% to 0.6770. Crude oil (CLF3 & LCOF3) declined nearly 10% so far this week At USD72, WTI crude was down nearly 10% over the week on worries of a slowing U.S. economy and larger-than-expected buildup in U.S. fuel product inventories. The first five month of the WTI futures contracts are now in contango. What to consider? Look for more hints about U.S. inflation from the PPI and the University of Michigan Consumer Survey Economists surveyed by Bloomberg are expecting the headline PPI growth in the U.S. to slow to 7.2% Y/Y in November from 8.0% in October and PPI ex-Food and Energy to come at 5.9% Y/Y in November versus 6.7% in October as supply chains continue to improve. Investors will dig in the components of PPI to scrutinize the price changes in various services to gauge their impacts on the more important core personal expenditure price (core PCE). Investors will also look for hints about the trend of the U.S. inflation from the inflation expectation numbers in the University of Michigan Consumer Survey. China’s inflation is expected to have moderated in November The Bloomberg consensus is expecting China’s PPI to shrink further by -1.5% Y/Y in November (vs Oct: -1.3% Y/Y) and CPI to slow to +1.6% in November from +2.1% in October. Weak industrial demand in the midst of countrywide pandemic control-related restrictions during the month and weakness in energy prices would likely have contributed to the decline in the PPI. November CPI would have been dragged by base effects and weakness in food prices. China’s new aggregate financing and RMB loans are expected to have bounced in November Market economists, as surveyed by Bloomberg, are expecting China’s new aggregate financing to bounce to RMB 2,100 billion in November from RMB 907.9 billion in October and new RMB loans to rise to RMB 1,400 billion in November from RMB 615.2 billion as People’s Bank of China urged banks to extend credits to support private enterprises including property developers. Less bond issuance by local governments and corporate and weak loan demand however might have weighed on the pace of credit expansion in November.   For our look ahead at markets this week – Read/listen to our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: Market Insights Today: U.S. equities snapped a 5-day losing streak and bond yields bounced ahead of PPI; Hong Kong stocked rallied – 9 December 2022 | Saxo Group (home.saxo)
Growth Of The USD/JPY Pair Is Hampered By Resistance

The US 10-Y Yield Situation Creates An Obstacle For Further Strengthening Of The JPY

InstaForex Analysis InstaForex Analysis 09.12.2022 09:52
By the end of the week, the dollar was under pressure from negative sentiment about the future prospects of the U.S. economy. This led to a sharp fall on many fronts. USD/JPY was no exception On Friday morning, USD/JPY plummeted by 0.6% and dropped below the 136 level. The reason for the sharp decline was the general weakness of the greenback. The DXY index fell more than 0.5% at the start of the day. The ground was knocked out from under the dollar's feet by increased fears of recession in the United States. Weaker-than-expected US economic data contributed to the growth of speculations on the subject. A report from the Labor Department released yesterday showed that initial claims for state unemployment benefits increased more than forecast to 230,000 over the week, while the number of people receiving benefits after an initial week of aid jumped to a 10-month high of 1.671 million. The fact that unemployment remained steady reinforced the market's view of the unenviable prospects for the world's largest economy. America could enter recession as soon as next year. Another harbinger of a negative scenario is the inversion of the U.S. Treasury bond yield curve. Now the gap between the yield of 2-year and 10-year bonds is -83.7 bps. Given all these factors, investors are concerned that the growing risk of a slowdown in economic growth may force the Federal Reserve to soften its monetary policy. Currently, traders estimate the probability that the Fed will raise rates by 50 bps in December at 93%. At the same time, most market participants believe that the rate will peak at just below 5% next May. Less hawkish market expectations significantly weigh on the U.S. currency. Against this backdrop, the dollar index has already lost more than 8% from its 20-year high reached in September. Recall that this year's peak for the greenback was 114.78. The USD is now trading just above 104. The dollar suffered the heaviest losses last month against the yen, which, on the contrary, showed the worst dynamics among the Group of 10 currencies throughout the year. The JPY gained more than 7% against the greenback in November. The key catalyst was an increase in speculations about a slowdown in U.S. rate hikes, which led to a sharp collapse in U.S. Treasury bond yields. The Japanese currency is extremely sensitive to changes in this indicator. Its significant dynamics always provokes equally strong movement of the yen. At the moment, the yield of 10-year US government bonds is keeping its growth above 3.48%, which creates an obstacle for further strengthening of the JPY. The US Consumer Price Index for November is expected to provide strong support to the yields. The report will be released next week, ahead of the Fed's interest rate decision. Economists estimate that overall inflation will remain unchanged at 7.7%. If the forecast comes true and we do see a more robust figure, it could change the mood of the market considerably. It is likely to bring back talk of a higher final level of interest rates in America and a continuation of an aggressive anti-inflation campaign. Analysts at Danske Bank see a further hike in interest rates by 50 basis points (bps) and a hawkish message from Federal Reserve chair Jerome Powell for CY2023. Also, the neutral rate is expected at 5.00-5.25%. Experts think that the steady rise in prices is the only chance for the dollar to hold out next week where in addition to the Fed meeting, the interest rate decisions of the ECB and Bank of England are also expected. As for USD/JPY, it is likely to remain in a consolidation phase until U.S. consumer inflation data is released. Most analysts predict that the pair will trade in a narrow price range of 136-137 in the short term. However, strong volatility in the asset is expected after the release of the key report. Depending on the data, dollar-yen might show either a strong upward bounce or a sharp retreat to the downside. The next potential trigger for the pair is the Fed's decision on the interest rate, which will be announced on Wednesday, December 14. Technical analysis of the USD/JPY pair The fall below the neckline, built from the December 6 low at 135.96, put a lot of pressure on the USD this morning. In addition, the USD/JPY asset failed to stay above the 200-period exponential moving average at 137.10, which also indicates the strength of the Japanese yen. Meanwhile, the RSI relative strength index has shifted into a bearish range of 20.00-40.00, indicating the start of downward momentum. In order to fall further, bears need to pull the pair below Friday's low of 135.77. This would take the pair to round support at 135.00, followed by the December 5 low of 134.13. On the other hand, a break above the 200-EMA near 137.00 would open a quick path to Wednesday's high at 137.86. A takeover there would send dollar bulls to the November 25 high of 139.60.   Relevance up to 08:00 2022-12-14 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/329392
The Challenge to the Dollar: De-dollarisation and Geopolitical Shifts

Saxo Bank Podcast: The Market's Conviction That The Fed Will Be Cutting Rates, Today's Important WASDE Report And Much More

Saxo Bank Saxo Bank 09.12.2022 11:46
Summary:  Today, we look at recent commodity market performance, where hopes for a reopening of Chinese activity is weighed against concerns for the forward outlook elsewhere. We also highlight the market's conviction that the Fed will be cutting rates in the second half of next year and wonder how the market will treat a less accommodative dot plot from the Fed at next Wednesday's FOMC meeting. A look at recent earnings reports, soybeans ahead of today's important WASDE report and much more on today's pod, which features Peter Garnry on equities, Ole S Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: Next week’s likely FOMC dot plot is not what the market is pricing | Saxo Group (home.saxo)
China Restricts Gallium and Germanium Exports, Heightening Global Tech War

Major Currency Pairs Have Recently Shown A Slowdown In Their Growth (EUR/USD, GBP/USD, AUD/USD)

Kamila Szypuła Kamila Szypuła 09.12.2022 13:54
The dollar was broadly flat against major currencies on Friday as concerns about the health of the US economy resurfaced, as well as ahead of producer inflation data later in the day and the Federal Reserve's interest rate meeting next week Investors are expecting a series of interest rate decisions from central banks - including the Fed, the European Central Bank and the Bank of England - next week. Markets bet all three will limit pace of rate hikes, with hikes of 0.5bp The dollar index continued its decline yesterday keeping the Euro bulls on the front foot. The GBP/USD pair is rising for the third day in a row. The yen benefiting from growing expectations AUD/USD tried to regain ground today Read next: The FTC Is Trying To Block Microsoft's Merger With Activision| FXMAG.COM EUR/USD EUR/USD continues its grind higher in early European trade as key US data events lie ahead. The euro/dollar pair is trading in a better position than yesterday. This morning the euro rose 0.25% is $1.0581. The pair is currently trading at 1.0513. The dollar has a tendency for weakness in December. The dollar index continued its decline yesterday keeping the Euro bulls on the front foot. There has been comments this week from some ECB members discussing the possibility of further rate hikes. Later in the day attention turns to the US economic calendar as we await the US PPI as well as University of Michigan data. A positive data print could offer some support for the dollar while a weaker print could push EUR/USD lower. As for the US PPI, it is expected to maintain its previous level of -0.2%. A University of Michigan date specifically Michigan Consumer Sentiment is important, it is expected to increase by 0.1 to reach 56.9. GBP/USD GBP/USD Pair is on the buyers radar today. The GBP/USD pair is rising for the third day in a row and steadily climbing to the upper end of its weekly range. The pair points to a well-established short-term uptrend. A combination of factors is bringing the US dollar back to near the multi-month low reached earlier in the week. The Bank of England set to announce its monetary policy decision next week, with another interest rate increase of 50 basis points expected. It also can impact on the pound. Moreover, the gloomy outlook for the UK economy may keep investors from betting aggressively around the British pound and limit the GBP/USD pair, at least for now. Investors are now looking at Friday's US economic breakdown, which will release the Producer Price Index and flash Michigan Consumer Sentiment Index. This, along with US bond yields and broader risk sentiment, could influence USD price dynamics and provide some impulse for the cable market. AUD/USD AUD/USD tried to regain ground today China’s loosening Covid restrictions also lent optimism to the market, though renewed global recession fears and uncertainty around US Federal Reserve policy tightening kept sentiment in check. Meanwhile, latest data showed that Australia’s economy expanded less than expected in the third quarter as persistent inflation and rising interest rates dampened domestic consumption. The Reserve Bank of Australia raised its policy rate by 25 basis points to 3.1% at its December meeting. USD/JPY Currently, the pair is trading at 134.4750. On the daily chart, you can see that the dollar against the Japanese yen is falling. The recent weakness of the dollar affects the pair's advantage. The Japanese yen appreciated to around 136 per dollar, heading back to its highest levels. Also the yen benefiting from growing expectations that the Bank of Japan could end its ultra-easy monetary policy with inflation around 40-year highs. Source: investing.com, dailyfx.com, finance.yahoo.com
BRICS Summit's Expansion Discussion: Impact on De-dollarisation Speed

"Our view is that rates will go higher than markets anticipate and stay higher for longer." says Josh Lohmeier

Josh Lohmeier, CFA Josh Lohmeier, CFA 09.12.2022 14:28
The 10-year US Treasury (UST) yield has spent most of the last decade between 2.50% and 0.50% and investment grade (IG) credit spreads have certainly traded in a tight range as well.1  As a consequence of this incredibly low yield environment, investors were pushed to look for additional yield in lower-quality asset classes. This rationale is based on the fact that fixed income investors need and want income. Moreover, higher-quality, longer-duration assets had significant total return risk purely due to the potential for an eventual rise in interest rates. This is exactly what we have seen year-to-date in 2022.   Exhibit 1 below can help set the tone for how the US IG market has behaved over the course of 2022 and consider the range of outcomes we might expect in 2023. It shows how volatility in UST rates and credit spreads can impact the total return over a one-year investment horizon.   Below is a sample range of outcomes for 10-year US investment grade, and what happened is in orange 2.50% UST yield rise and 0.75% spread widening. (Most underperformance driven by 2.50% rise in US Treasury yields.) Exhibit 1: Hypothetical Forecasted Return MatrixAs of December 31, 2021 Source: Bloomberg; Bloomberg US Corporate Bond Investment Grade Index. Indexes are unmanaged and one cannot directly invest in them. They do not include fees, expenses or sales charges. Past performance is not an indicator or a guarantee of future results. There is no assurance any forecast, projection or estimate will be realized. At the start of 2022, the UST rate was 1.50% and IG credit spreads were 1%. The number in green, a total return of 2.50%, is the outcome if nothing had changed. In other words, if UST yields and credit spreads didn’t change, the hypothetical investor would earn 2.50% over the year. However, as we all know, over the course of 2022 UST yields rose by approximately 2.50% and spreads widened by approximately 0.75%. The orange highlights show that the result is a total return for 10-year IG of approximately -15%/-19%. If we look forward toward potentially less volatile UST rates and consider the much higher starting point for both yields and spreads, one could make the argument that there is a much more asymmetrically positive range of outcomes for US IG credit looking forward. See Exhibit 2 below. Today: Positive asymmetry to total return outcomes for investment grade given starting point for US Treasury yields of 4% and investment grade spreads of 1.75%, and potentially less rates volatility from here. Exhibit 2: Hypothetical Forecasted Return Matrix, Part 2As of November 2022 Source: Bloomberg; Bloomberg US Corporate Bond Investment Grade Index. Indexes are unmanaged and one cannot directly invest in them. They do not include fees, expenses or sales charges. Past performance is not an indicator or a guarantee of future results. There is no assurance any forecast, projection or estimate will be realized. Though there was certainly some weakness in widening credit spreads, rising UST yields drove most total return losses in fixed income year-to-date. We believe that this outcome has created a path for longer-term tailwinds for IG credit going forward. First and foremost, even if there is a recession, the probability of default for IG issuers is very low. What this means for higher-quality fixed income sectors, like IG, is that investors from this point forward will get the benefit of higher yields and duration as a potential defensive mitigator to any possible spread volatility if the US economy enters a recession. In a recession, UST yields will likely rally, which can provide a big positive boost to total returns. Moreover, it would help offset any potential weakness from widening credit spreads, as shown in the table above. The range of outcomes where IG credit investors could potentially lose money from today’s starting point has lowered considerably. This is not to say that spreads won’t widen; they can widen significantly if we enter a recession. But we have reached a point in time where investors can play both offense and defense through their allocations to US IG corporate bonds. We believe the defensive benefits of higher UST yields can materially offset credit spread weakness going forward. Fixed income is finally delivering income! Credit spreads have widened since the beginning of the year and remain above five- and ten-year averages after hovering near historically tight levels for most of 2021. In terms of fundamentals, muted consumer demand, higher input costs and a strong US dollar have negatively impacted corporate profitability. However, balance sheets remain generally robust, providing most IG corporates with more financial flexibility to navigate a period of slowing economic growth, in our view. Overall, we believe that yields in the asset class are better, and the risk-reward balance of current valuations has improved materially compared to the start of the year. This makes IG corporates a more attractive place for investors seeking relatively safe income. However, due to ongoing market uncertainty, slowing growth and deteriorating fundamentals, we acknowledge spreads can go wider and are certainly up in quality today within our US IG allocations to preserve liquidity and take advantage of any potential volatility in markets.  Interest rates likely to remain higher for longer Given a very uncertain environment, it is likely that volatility will remain high over the foreseeable future. Increased levels of volatility are driven by limited visibility into the Federal Reserve’s (Fed’s) policy tightening path, for one, as investors keep hoping for an earlier pause in policy rate hikes and some are expecting rate cuts in late 2023. Our view is that rates will go higher than markets anticipate and stay higher for longer. Secondly, since Fed Chair Jerome Powell appears more concerned about not tightening enough rather than overtightening, we do believe a shallow recession is likely over the medium-term. However, this doesn’t appear to be priced into earnings estimates. In times of increased volatility, higher-quality credits with strong fundamentals and less sensitive end-demand are likely to outperform. We are therefore pushing more of our portfolio risk into non-cyclical sectors and still believe the US financial sector has strong risk-adjusted return potential given elevated spreads and very strong capital levels.  Coping with challenges ahead Looking ahead, companies are going to face some challenges. Margins are likely to continue to feel the squeeze from elevated labor, financing and input costs. Corporates are already feeling the effects of significant wage increases as evidenced by the first layoff announcements from various technology companies. While companies are still benefiting from interest costs that have hovered near generational lows for more than a decade and have frontloaded borrowing, rising rates will certainly bite into the broader macro economy from both consumers to future corporate borrowing needs. Also, though we have seen improvements in supply chain issues, inflation will most likely stay higher, even if it stabilizes or retreats, and for longer than consumers or markets are accustomed to. This will continue to impact global growth. Considering our expectations for a potentially challenging market environment over the near to medium term, we believe that cyclical consumer-focused industries and companies with high levels of exposure and sales to weaker markets, such as Europe, will likely underperform. We are also less excited about commodity sectors; although fundamentals are decent and commodity prices may hold up, valuations are stretched to us. Weaker economic growth can and certainly should cause spread volatility in these sectors as aggregate demand slows.    Endnote Source: Bloomberg; Bloomberg US Corporate Bond Investment Grade Index. September 30,2011–September 30, 2022. Indexes are unmanaged and one cannot directly invest in them. They do not include fees, expenses or sales charges. Past performance is not an indicator or guarantee of future results.  WHAT ARE THE RISKS? All investments involve risks, including possible loss of principal. The value of investments can go down as well as up, and investors may not get back the full amount invested. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in an investment portfolio adjust to a rise in interest rates, the value of the portfolio may decline. Investments in lower-rated bonds include higher risk of default and loss of principal. Changes in the credit rating of a bond, or in the credit rating or financial strength of a bond’s issuer, insurer or guarantor, may affect the bond’s value. Actively managed strategies could experience losses if the investment manager’s judgment about markets, interest rates or the attractiveness, relative values, liquidity or potential appreciation of particular investments made for a portfolio, proves to be incorrect. There can be no guarantee that an investment manager’s investment techniques or decisions will produce the desired results. Source: Fixed income is finally delivering income! | Franklin Templeton
Jerome Powell wasn't that dovish yesterday, hinting at acceleration of rate hikes and higher rate peak

FOMC is on the verge of deciding which way to go. Here are scenarios of what may happen to inflation, rates, economy, greenback, QT and bonds prepared by ING

ING Economics ING Economics 09.12.2022 16:37
A 50bp hike is widely expected given high inflation and a tight jobs market, but the market is pricing in a recession, and falling Treasury yields and a weakening dollar are undermining the Fed’s efforts to dampen price pressures. A hawkish Fed message will likely fall on deaf ears unless the data start proving the central bank right US Federal Reserve Chair Jerome Powell 50bp Expected Federal Reserve interest rate hike   A step down to a higher peak A 50bp hike at the 14 December Federal Open Market Committee (FOMC) meeting is the strong call from both financial markets and economists. After implementing 375bp of rate hikes since March, including consecutive 75bp moves at the previous four meetings, Federal Reserve officials are of the view that they’ve made “substantial progress” on tightening policy so it is time to “step down” to lower increments. Nonetheless, Fed Chair Jerome Powell and the team have been at pains to point out that despite smaller individual steps, the “ultimate level of rates will need to be somewhat higher than thought at the time of the September meeting”. Scenarios for the 14 December FOMC meeting Source: ING Signalling could fall on deaf ears In this regard, the Fed will be concerned by the recent steep falls in Treasury yields and the dollar, coupled with a narrowing of credit spreads, which are loosening financial conditions – the exact opposite of what the Fed wants to see as it battles to get inflation lower. These moves were themselves triggered by a weak core CPI print for October that came in at 0.3% month-on-month versus a 0.5% consensus expectation, while the Fed’s favoured measure of inflation – the core personal consumer expenditure deflator – was even softer, rising just 0.2%. The market reaction seems excessive to us given this is just one month of data, annual core inflation is still running at triple the target, and to hit 2% year-on-year the month-on-month readings need to average 0.17% over time – and we aren’t there yet. The Federal Reserve will need to see several months of core inflation readings of 0.1% or 0.2% to be confident that inflation is on its way back to target and this is likely to be a key plank of its messaging. With that in mind, we think the Fed is not finished with its rate hikes and its new forecasts will indeed indicate a higher path for the Fed funds rate to 5% with potential slight upward revisions to near-term GDP, and persistently high inflation forecasts used to justify this. Certainly, the consumer sector has been holding up better than many – including ourselves – expected, with strong jobs and income gains supporting spending. ING's expectation for what the Fed will predict Source: ING, Federal Reserve   Looking further ahead, several officials such as James Bullard and John Williams have suggested the Fed may not be in a position to cut interest rates until 2024, and we suspect Powell and the forecasts will echo this sentiment. However, we strongly suspect that this is more tied to the Fed trying to get longer-dated Treasury yields higher rather than a conviction call that recession and lower inflation over the medium-term will be avoided. Inflation makes things tricky Now, it is important to remember we get November inflation on 13 December – the day before the FOMC meeting – and the outcome will be important for what the Fed has to say. If core CPI comes in at or above the 0.3%MoM consensus forecast, its messaging as outlined above will probably prevail. If inflation is softer and yields tumble further then the Fed may have to be more forceful and perhaps raise the possibility of accelerating a run-down in the size of its balance sheet via reduced reinvestment of proceeds from maturing assets. The central bank will stick with the hawkish messaging until it is confident inflation is beaten. 5% in the first quarter but rate cuts from the third In terms of our view, we look for a final 50bp hike in February, taking the Fed funds ceiling to 5%. But like the market, we think a recession will dampen price pressures and the composition of the US inflation basket, which is heavily weighted to shelter and vehicles, will facilitate a far faster drop in annual inflation readings than elsewhere. Remember too that the Fed has a dual mandate which includes an employment dynamic. This offers the Fed greater flexibility versus other central banks to respond with stimulus and we believe it will from the third quarter of 2023 onwards. Market rates have dropped like a stone – time for the Fed to sell bonds? If the Fed wants to re-tighten financial conditions by enough, it needs to engineer a hawkish hike. Longer dates, in the wake of the recent falls in yields, are trading as if the Fed is done post the December hike. Assuming the Fed is not done, the first quarter of 2023 should sustain a rising rates theme to it. That should force yields back up, commencing a dis-inversion process on a curve that is now heavily inverted. We’ve likely seen the peak in market rates, but that does not prevent market rates from moving higher, at least for as long as the Fed is still hiking and the end-game is not fully clear. The Fed has not said too much about the circumstances on the money markets. We still have in excess of $2tr going back to the Fed on the reverse repo facility, reflecting an excess of liquidity in the system. This in turn is driven there as a counterpart to the volume of bonds still sitting on the Fed’s balance sheet. The Fed is rolling off some $95tr per month, but there is always the option to do more, or more pertinently to sell bonds back to the market outright. While it may be a tad premature to suggest this, it’s an option should the Fed really want to see longer-dated market rates revert higher. FX markets: Short-end rates hold the key for the dollar Dollar price action over the last two months has been very poor. The dollar has tended to sell off sharply on signs of softer price data but has struggled to rally on any positives – such as the November US jobs reports. That price action suggests a market caught long dollars at higher levels after a five-quarter dollar rally. The hope for dollar bulls now is that positioning is much better balanced after an 8% drop in the trade-weighted dollar and a 12% drop in USD/JPY. Preventing an even sharper dollar sell-off has probably been the view that the Fed will continue to hike into 2023. The terminal rate is still priced not far from 5% and only 50bp of rate cuts are priced in the second half of 2023. As long as the FOMC statement, Dot Plots, and press conference do not generate any more dovish pricing – and that seems unlikely – we doubt the dollar has to sell off much further. Our baseline view would see EUR/USD holding around the 1.05 area as the Fed validates the current pricing of its trajectory in money markets. A more dovish turn would be a surprise and with seasonals against the dollar in December, EUR/USD could spike above resistance at 1.06 towards the 1.07 area in thin year-end markets. Our multi-week preference, however, is that the Fed is still going to talk tough, and heading into January the dollar starts to make a comeback – where 4.5%+ deposit rates look increasingly attractive amid a global slowdown. Read this article on THINK TagsUSD US Treasuries Interest rates Federal Reseve Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

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

ING Economics ING Economics 10.12.2022 08:58
A 50bp hike by the Fed is firmly expected. With concerns over the recent steep falls in treasury yields and the dollar, we are likely to end up at a higher ultimate interest rate than the bank indicated back in September. For the ECB, we think the risk of a 75bp hike has increased – still, we expect a 50bp hike, supported by hawkish communication as a compromise In this article US: A hawkish Fed message will likely fall on deaf ears UK: Hectic data week proceeds key Bank of England decision Eurozone: Another jumbo rate hike has become more likely in recent days   Shutterstock US: A hawkish Fed message will likely fall on deaf ears Markets are firmly expecting the Federal Reserve to opt for a 50bp hike at the 14 December Federal Open Market Committee (FOMC) meeting after already implementing 375bp of rate hikes, including consecutive 75bp moves at the previous four meetings. The central bank has been at pains to point out that despite smaller individual steps, we are likely to end up at a higher ultimate interest rate than the central bank indicated was likely back in September. Its forecasts are likely to show the Fed funds rate rising above 5% with potential slight upward revisions to near-term GDP and inflation and a lower unemployment rate to justify this. Officials have been suggesting they may not cut rates until 2024 and we suspect Fed Chair Jerome Powell will echo this sentiment. Nonetheless, this “hawkish” rhetoric is likely the result of concern that the recent steep falls in Treasury yields and the dollar, coupled with a narrowing of credit spreads, is loosening financial condition – the exact opposite of what the Fed wants to see as it battles to get inflation lower. In terms of our view, we continue to expect a final 50bp rate hike in February, but with recession risks mounting, which will dampen inflation pressures further, we look for rate cuts from the third quarter of next year. Ahead of that announcement, we will have consumer price inflation data. The surprisingly soft core CPI print was the catalyst for the recent moves lower in Treasury yields and the dollar, and a second consecutive low reading would reinforce the market conviction that rate cuts are going to be on the agenda for the second half of 2023. This means Powell will have to battle hard with his commentary in the post-FOMC press conference to prevent financial conditions from loosening too much before inflation is defeated. UK: Hectic data week proceeds key Bank of England decision There’s probably just about enough in the latest UK data and recent Autumn Statement for the Bank of England to pivot back to a 50bp rate hike at its meeting next Thursday. Inflation looks like it has peaked, although BoE hawks will be keeping a close eye on the data due a day prior to its announcement. Headline CPI is likely to dip, however core could be more sticky, and last month’s data saw core services inflation come in slightly higher than the bank had forecast in November. Jobs data has also hinted at persistent labour shortages, which will keep the pressure on wage growth. Still, Chancellor Jeremy Hunt probably did enough last month to lower concerns that the BoE and the Treasury are working at cross-purposes, even if the fiscal tightening announced won’t have a huge bearing on the economy, relative to the Bank’s forecasts released last month. We expect a 50bp hike next week, and another 50bp hike in February, which is likely to mark the peak of this tightening cycle. Read our full Bank of England preview here. Eurozone: Another jumbo rate hike has become more likely in recent days Macro data since the European Central Bank's October meeting has shown resilience in the eurozone economy in the third quarter but also confirmed a further cooling of the economy in the last few months of the year. The drop in headline inflation, as little as it says about the impact of the rate hikes so far, could at least take away some of the urgency to continue with jumbo rate hikes. At the same time, the ECB seems to be increasingly concerned that the fiscal stimulus and support measures announced could extend the inflationary pressure. ECB Executive Board Member Isabel Schnabel has been one of the more influential voices to watch, definitely since the summer with her Jackson Hole speech. Judging from her recent comments that “incoming data so far suggest that the room for slowing down the pace of interest rate adjustments remains limited, even as we are approaching estimates of the 'neutral' rate", 75bp is clearly still on the table. We think that the risk of a 75bp rate hike at next week’s ECB meeting has clearly increased. Next to the rate hike, the ECB is likely to set out some general principles of how it plans to reduce its bond holdings. We expect the ECB to eventually reduce its reinvestments of bond purchases but to refrain from outright selling of bonds. Besides the ECB, industrial data for the eurozone are out on Wednesday. Don’t expect anything that will influence the governing council meeting too much. While a tick down in production is to be expected, the fact that industry has outperformed recent expectations is likely to uphold. The Friday data are just as interesting as the PMI will show how the economy is faring at the end of the fourth quarter. Expect it to continue to signal a contraction, but just how deep is the question relevant for markets and policymakers. Finally, trade-in goods data are also out on Friday and will provide a clue on how the trade deficit is faring, which is very important for euro fair value. Read the full ECB preview here. Key events in developed markets next week Refinitiv, ING Read the article on ING Economics TagsUS Federal Reseve ECB Bank of England Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Equity Markets Rise, VIX at 12 Handle After ECB Rate Hike and US Economic Resilience

Reviewing The Past 12 Months: Concerns Over A Potential Recession Shifted Market Sentiment Negative

Franklin Templeton Franklin Templeton 10.12.2022 11:40
While 2022 was a challenging year for the muni-bond market, 2023 is setting up for more positive momentum, according to Franklin Templeton Fixed Income Municipal Bond Director Ben Barber. Read the team’s views on the year ahead. 2022: A persistently volatile year Reviewing the past 12 months, municipal bond (muni) investors will be hard pressed to find a more persistently volatile market time since the global financial crisis of 2008. At the beginning of the year, the US Federal Reserve (Fed) maintained its fed funds rate at the zero-lower-bound, and concerns over rising inflation were muted as many thought that these forces were “transitory.” But as the year progressed and inflation marched higher, the Fed entered a period of rapid rate hikes at a pace and magnitude not seen since the 1980s. The fed funds rate moved to an economically restrictive 3.75%–4.00% range. Consequently, US Treasury (UST) yields moved much higher, particularly on the front end of the yield curve. Increased market volatility negatively impacted most fixed income sectors as concerns over a potential recession shifted market sentiment negative. Munis were not exempt, as the sector saw large continuous outflows of funds throughout much of the year, driving down valuations. This, coupled with rising UST yields, led to poor absolute performance for munis—the Bloomberg Municipal Bond Index has declined 9.32%1 year-to-date, and yields rose from 1.12% to 3.65%.2 The selloff was broad-based over most sectors and rating classifications. Despite the negative technical tone, there have been several short periods of strong positive performance, which indicates the market’s resilience and investors’ appetite to return to the asset class. These factors speak to a technically driven selloff, rather than one driven by poor credit fundamentals. Fundamentals remained strong throughout 2022, and we have observed many more rating upgrades than downgrades. Many muni issuers have been operating at surpluses for the better part of the past 12 months and have been able to increase their contributions to “rainy-day” funds. New-issue supply has been lower for most of the year in both the tax-exempt market and taxable muni market. At the beginning of 2022, muni valuations were considered “expensive;” however, they cheapened aggressively as fund outflows increased by mid-April. This trend carried on for most of the year. Only in the latter part of November did we start to see shorter-maturity bonds become expensive relative to historical averages as investors moved out of their cash holdings into less interest-rate sensitive positions, while still capturing a strong yield pickup. Technicals Driving Selloff Exhibit 1: Long-Term Mutual Fund Net New Cash Flow in Millions, US DollarsAs of November 30, 2022   Source: Investment Company Institute. Estimated Long-Term Mutual Fund Net Cash Flow “Release: Estimated Long-Term Mutual Fund Flows | Investment Company Institute (ici.org).   Despite the poor performance relative to previous years, the municipal bond sector remains in a fundamentally stable position with valuations cheaper than those of 2021 where the sector saw record inflows. Muni momentum looking more positive in 2023 Looking forward into 2023, there are a few key themes that we believe could provide strong momentum for munis. First, the technical environment may be shifting more positive as tax-loss harvesting and fund redemptions slow. As the Fed cuts back its pace of interest rate hikes, this could provide a path for a more stable yield environment, which would bolster investor confidence in the sector. Munis can be valuable for investors looking to find an attractive yield, especially considering the after-tax equivalent options available. Fundamentals remain strong as surpluses have accumulated over the past several years, and prudent fiscal budgeting will continue to provide a ballast to balance sheets. With the threat of a recession still an overhang on the market, we are paying particular attention to several sectors as we progress through 2023. We feel security selection will become even more critical in 2023, with deep credit research proving vital to investment returns. We believe opportunities will continue to present themselves up and down the credit quality spectrum in 2023. Moving into 2023, valuations will need to be closely watched. The shorter end of the maturity curve has been extremely active in late 2022, and its yields have moved lower more aggressively than longer-maturity bonds. Investors seem to be nervous about the Fed’s rate-hiking cycle and may continue to favor a shorter-duration positioning. That being said, the longer-maturity end of the muni yield curve looks attractive to us on a historical basis. Additionally, the potential carry from higher muni yields further solidifies the opportunity for investors to take advantage of better valuations available on the longer end of the curve. Endnotes Source: Bloomberg as of November 25, 2022. Source: Bloomberg as of November 25, 2022. WHAT ARE THE RISKS? All investments involve risks, including possible loss of principal. The value of investments can go down as well as up, and investors may not get back the full amount invested. Because municipal bonds are sensitive to interest rate movements, a municipal bond portfolio’s yield and value will fluctuate with market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in an investment portfolio adjust to a rise in interest rates, the portfolio’s value may decline. Changes in the credit rating of a bond, or in the credit rating or financial strength of a bond’s issuer, insurer or guarantor, may affect the bond’s value.    
Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

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

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

The Fed And Slowing Down The Pace Of Rate Hikes On Last Meeting This Year?

Kamila Szypuła Kamila Szypuła 10.12.2022 16:14
There are 3 weeks left till New Year, but the situation in the financial markets is not becoming less tense. Next week it seems to be the most importan of these 3. 2022 has been a dramatic year for rate hikes from the U.S. Federal Reserve (Fed), and there is still one meeting to go. Read next:Monetary Aggregates - Money Supply In The Economy| FXMAG.COM Data There’s lot of economic data came before the meeting, this will shape the December decision. The main things to watch are inflation and employment. The Producer Price Index, which measures the prices companies pay for goods and services before they reach consumers, rose 7.4% in November from a year earlier, the Bureau of Labor Statistics said on Friday. This is less than the revised 8.1% increase recorded in October.US stocks fell immediately after the report was released. The PPI report generally receives less attention than the corresponding Consumer Price Index, which measures the prices US consumers pay for goods and services. However, it is a rare month that the PPI report comes ahead of the CPI report due out on Tuesday. It is expected to decline again and reach 7.3%. The downward trend in inflation has been maintained since August, which may be a sign that the Fed's actions are bringing results. Source: investing.com The number of Americans filing new unemployment claims rose moderately last week, pointing to a still tense and strong labor market despite growing fears of a recession, economists have warned against reading too much as data is volatile at this time of year. Tensions and labor market resilience mean the US central bank is on track to continue raising interest rates for some time. Claims tend to be volatile at the start of the holiday season as businesses temporarily close or slow down hiring, which can make it difficult to get a clear picture of the job market. Forecast The Fed is widely expected to slow down to raise its benchmark rate by half a percentage point, slower than four 0.75 point rate hikes since June. This will put the Fed reference rate in the range of 4.25%-4.5%. While some economists argued that November's strong jobs report brought back a 0.75 point hike. Overall, economists are expecting a hawkish Wednesday. The key question here is how high the Fed wants rates to go in 2023. If December sees a 0.75 percentage point increase, that’s a signal that interest rates may top out at 5.5% or higher. However, if the December decision is a 0.5 percentage point hike or lower, then peak rates for this cycle may come in closer to 5%. Fed Chairman Jerome Powell During the Federal Reserve’s last battle with high inflation in the 1970s and 1980s, Fed officials didn’t talk much at all publicly. Forty years later, there is no sign of a lack of comment from the central bank when Fed Chairman Jerome Powell holds a press conference after the meeting. And investors and economists will get plenty of information, not just smoke, from the central bank. At his press conference in November, Powell said that if the Fed tightened policy, "we could use our tools to support the economy." Markets then picked up a dovish signal from Powell's comment from a week ago that the central bank did not want to tighten policy. Source: investing.com
Czech National Bank Prepares for Possible Rate Cut in November

Inflation Will Continue To Be One Of The Key Themes Of 2023

ING Economics ING Economics 11.12.2022 09:37
Rarely have predictions for an upcoming year been so difficult and wide-ranging. But we are sure of some things, and we are doing our best to help you navigate this unprecedented uncertainty  In this article Goodbye to all that Different shades of recession The widest range of possible outcomes and forecasts 3 calls for 2023: Recession, inflation and central banks Carsten Brzeski on what he's expecting in 2023 Goodbye to all that 'May he live in interesting times' is a Chinese proverb that many of us have heard, perhaps a little too often in recent times. The list of unprecedented crises gets longer by the year. 2022 was supposed to be the year of post-pandemic and post-lockdown reopenings. But it became the year of war, inflation, energy and commodity price crises, drought and floods. It was also a year which saw a paradigm shift at major central banks, trying to fight inflation at all costs. It's where we said goodbye to low interest rates for longer and that easing bias. Central banks got all of us used to jumbo-size rate hikes and, at least in the US, the policy rate is almost back at levels last seen prior to other financial crises. 2022 was also the year of what the Germans call 'Zeitenwende' or 'game changer', at least for Europe: a war in the EU’s backyard, which is still ongoing with no end in sight; an end to cheap energy, and an end to globalisation as we knew it. Combined with the well-known longer-term challenges of population ageing, a lack of international competitiveness, and the never-ending debate on further European integration, Europe's to-do list is long. The chances are very high that the continent will have a hard time returning to a pre-crisis growth trajectory any time soon.  Different shades of recession So what will 2023 bring? A natural reflex of many forecasters is to simply extrapolate recent trends and developments into the new year. And, indeed, many of this year's issues will also be prominent in the next: war, the energy crisis, inflation, trade tensions and even Covid are likely to affect the global economy significantly. This is not the moment to identify potential new black or grey swans... nor even pink ones. Our predictions and calls for 2023 reflect our base case: median forecasts backed by this year’s events and assumptions. We expect to see several different shades of recession in 2023. We should get a rather textbook-style recession in the US with the central bank hiking rates until the real estate and labour markets start to weaken, inflation comes down, and the Fed can actually cut policy rates again.  Expect a recession that feels but doesn’t read like a recession in China with Covid restrictions, a deflating real estate market and weakening global demand, bringing down economic activity to almost unprecedented low levels. And finally, look forward to an end to the typical cycle in the eurozone, where a mild recession will be followed by only very subdued growth, with a risk of a 'double dip', as the region has to shoulder many structural challenges and transitions. These transitions will first weigh on growth before, if successfully mastered, they can increase the bloc’s potential and actually add to growth again. The widest range of possible outcomes and forecasts Inflation will continue to be one of the key themes of 2023. We expect it to come down quickly in America, given the very special characteristics of the US inflation basket, allowing the Fed to stop rate hikes and eventually even cut before the end of the year. In the eurozone, inflation could turn out to be stickier than the European Central Bank would like and also perhaps afford. Still, with interest rates entering restrictive territory in early 2023, the looming loss of economic wealth and a large need for investment, the bank will be forced to stop earlier than it perhaps might like. Or, alternatively, it could commit a policy mistake if it hikes rates far beyond mildly restrictive levels. In any case, we are entering a year with the widest range of possible outcomes and forecasts in years. And this is not even taking into account potential blind spots such as the start of a pandemic or a war in Europe that markets simply did not have on their radar screens at the end of 2019 or 2021. It is both interesting and challenging, for the economy, for financial markets, for companies, for households but also for economists like us. 'May he live in interesting times'. A friend of mine just told me that this is actually not a Chinese proverb but more a curse. We shall see. In any case, Merry Christmas and a Happy New Year.   This article is part of ING’s Economic Outlook 2023: ‘May he live in interesting times’ Read the article on ING Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more   View 21 articles
Gold's Hedge Appeal Shines Amid Economic Uncertainty and Fed's Soft-Landing Challenge

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

ING Economics ING Economics 11.12.2022 09:48
The global economy at a glance In this article US: Markets doubt the Fed’s intent Eurozone: Lower energy prices have temporarily stopped the downturn UK: Calmer markets and delayed fiscal pain not enough to stop recession China: Still dire from rising number of Covid cases Rest of Asia: No recession, but certainly slowdown CEE: Geopolitical misfortune  Rates: To reverse higher first, and then collapse lower as a theme for 2023 FX: Everyone is asking whether the dollar has topped   Shutterstock The World Reimagined globes in London, UK - 20 Nov 2022   1US: Markets doubt the Fed’s intent The economy is experiencing a strong second half of 2022. Jobs are being created in significant number, wages continue to rise and household keep spending as the Fed signals a step down to 50bp incremental rate hikes, but with a higher ultimate rate than they indicated was likely back in September. Officials suggest they may not cut rates until 2024 given their concern about stickiness in key service sector components of inflation, but their forward guidance needs to be taken with huge handfuls of salt given their recent track record. The “hawkish” rhetoric is likely the result of concern that the recent steep falls in Treasury yields and the dollar, coupled with a narrowing of credit spreads is loosening financial condition – the exact opposite of what the Fed wants to see as it battles to get inflation lower. Nonetheless, the softer core inflation prints seen in October, combined with bad housing market data and weaker business confidence has led the market to anticipate rate cuts from second half of 2023 – in line with our long-held view. 2Eurozone: Lower energy prices have temporarily stopped the downturn With lower natural gas prices on the back of the unusual warm autumn weather the downturn in sentiment has been temporarily halted, though most indicators are still weak. With retail sales falling sharply in October a recession over the winter quarters still looks very likely, albeit perhaps not as deep as we previously pencilled in. Thereafter, growth will be subdued at best, as higher interest rates will start to bite, energy prices are likely to remain at elevated levels, while budgetary stimulus is bound to peter out in the course of 2023. Headline inflation fell back in November to a still high 10%, while underlying inflation remains stuck at 5%. The ECB is therefore likely to lift the deposit rate to 2% in December, considered by some members of the Governing Council as the neutral rate. The first quarter might see another 50 bp further tightening, as well as the start of gradual reduction of the balance sheet, though at a very slow pace in the beginning. 3UK: Calmer markets and delayed fiscal pain not enough to stop recession Calmer financial markets and some fresh tax rises allowed the Chancellor to put off some of the painful spending cuts until after the next election in 2024/25 in his Autumn Statement. Nevertheless, energy support will become considerably less generous for most households from April, and the housing market is showing very early signs of faltering. Despite the sharp fall in swap rates since September’s mini-budget crisis, mortgage rates have fallen much more gradually. A recession now looks virtually inevitable, though it might not be until the first quarter until we see more material signs of slowing. The Bank of England has begun to talk down market rate hike pricing, and investors have taken the hint, but are still probably overestimating what is to come. We expect the BoE to pivot back to a 50bp hike in December, and expect one further 50bp move in February, which is likely to mark the top of this tightening cycle. 4China: Still dire from rising number of Covid cases Even the government offers property developers to increase funding channels, uncompleted home projects are yet to be finished. Most of those projects are left in the hands of local governments to find a private company to finish the construction work. This takes time to finish. The housing market is therefore quiet as home price continues to fall. On Covid, more local governments have subtly changed to slightly softer practices to implement Covid measures. But the higher number of Covid cases means that there is limitation on how fine-tuning can benefit the economy. Sporadic lockdowns would continue and still affect retail sales and production adversely. We have already seen retail sales fell into yearly contraction in October, and PMIs showed that could easily repeat for the rest of 4Q22. More, exports should continue to show weaknesses due to high inflation in US and Europe. The only support to the economy is now fiscal spending, which has been in the area of advanced technology and new energy. 5Rest of Asia: No recession, but certainly slowdown On the positive side, inflation rates in Asia look to be peaking out, and at levels well below comparable rates in Europe and the US. And this has also meant that although central banks across the region have been raising policy rates, they have not gone up alarmingly, and it feels as if in many cases, we are nearing a peak after the next one or two hikes. On the negative side, Asia is highly geared to global growth through global trade, and so with Europe contracting, China in as weak a state as we have seen it, and the US slowing, it is not surprising to see Asia export figures swinging sharply negative, with Korea and Taiwan the bellwethers for the North Asia, and Singapore’s Non-oil domestic export declines performing the same barometer role for SE Asia. Not entirely independently, the global semiconductor downturn is heaping further downward pressure on the region, which is the key production centre for most global technology hardware, weighing on industrial production and exacerbating the export downturn. 6CEE: Geopolitical misfortune  In addition to the global story of high energy prices and headline inflation, the CEE region is suffering from its own problems. The common denominator is the region's unfortunate geographic location in the current geopolitical landscape and historically strong labour market. The result is significantly higher inflation than in Western Europe, but also high and persistent core inflation, underpinned by a still massively tight labour market that shows no signs of easing despite the coming recession. Moreover, in response to the energy and migration crises at the same time, governments across the region have come up with another wave of household support spending, resulting in massive twin deficits. However, this has been countered by central banks tightening monetary conditions through interest rate hikes, well above global peers, but also often through the FX channel. The resulting picture of this wild mix for next year is thus a shallow recession driven mainly by a fall in household consumption, only gradually slowing inflation with a possible upside surprise, and cautious central bank foot-dragging around the timing of the start of monetary policy normalisation.  7Rates: To reverse higher first, and then collapse lower as a theme for 2023 2022 is shaping up to be the biggest bear market for bonds in modern times. This might help explain why market rates have reversed lower in recent weeks. But it’s also to do with position squaring, as a decent rump of investors square up on bear market positions taken in 2022. That requires the buying of both duration and risk. However, this stores up problems for the turn of the year. Arguably, financial conditions (especially in the US) are prone to loosening too much, driven there by falls in market rates. But the Fed is still hiking and needs tighter financial conditions. That should force market rates back up first. But the biggest narrative for 2023 will be one of big falls in market rates. The Fed and the ECB will peak in the first quarter, and once there, market rates will have a carte blanche to anticipate future cuts. 8FX: Everyone is asking whether the dollar has topped At top of everyone’s minds in the FX market is the question as to whether the dollar has topped. Softer US inflation data and some hints of softer Covid policy in China have combined to knock the dollar some 8% off its late September highs. Those arguing for a continued dollar decline are wholly focused on the Fed story and the extension of a Fed pivot into a full-blown easing cycle. We certainly agree that a dovish turn at the Fed – a turn that finally sees short-dated US yields start to fall – is a necessary condition for a drop in the dollar. But a sufficient condition requires investment destinations in Europe and Asia being attractive enough to pull funds out of dollar deposits yielding 4%+. It remains questionable whether either of these necessary or sufficient conditions are met in 2023 and we remain sceptical that EUR/USD will be able to sustain gains above the 1.05 level. Elsewhere, sterling has recovered after November’s fiscal U-turn – a sign that policy credibility has a big role to play in FX markets. And finally, Japanese policy makers will be looking at back at some incredibly effective FX intervention to sell USD/JPY in September and October. Read the article on ING Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Challenge to the Dollar: De-dollarisation and Geopolitical Shifts

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

ING Economics ING Economics 11.12.2022 10:19
Global central banks are facing unprecedented challenges. Here's our focus on the main ones In this article Federal Reserve European Central Bank Bank of England People's Bank of China Shutterstock   Developed markets: Our calls at a glance ING Central and Eastern Europe/EMEA: Our calls at a glance ING Asia (ex Japan): Our calls at a glance ING Central banks: Our forecasts Macrobond, ING Federal Reserve After 375bp of rate hikes since March, including four consecutive 75bp moves, the Federal Reserve has concluded that it is now time to move in smaller increments. Nonetheless, the market doubts the Fed’s intent and the recent falls in Treasury yields and the dollar are undermining the central bank's efforts to defeat inflation. Officials have been trying to convince the market that the ultimate/terminal interest rate will be above where they had signalled in September, but this is falling on deaf ears. The market is focused on soft inflation readings, coupled with a sense that recession is around the corner. While we agree that the second half of 2023 will be about rate cuts, we think there is the risk of a more aggressive response to inflation in the near term, with upside potential to our call for 50bp rate hikes in December and February. We could even see the Fed consider a faster run down of its balance sheet in an effort to re-steepen the Treasury yield curve at a higher level. European Central Bank Eurozone inflation is close to its peak, unless energy prices surge again next year, but the road towards the ECB’s 2% target will be long and bumpy. The pass-through of wholesale gas prices, as well as still high selling price expectations, suggest that there is still inflationary pressure in the pipeline. It could take until 2024 before inflation has returned to 2%. For the ECB, this means that its job is not done, yet. At the same time, the looming recession, the risk of a subdued recovery and increasing government debt bring the ECB closer to the point at which rate hikes become overly restrictive. As a consequence, we expect the ECB to bring the deposit rate to a maximum of 2.5% in the first quarter of 2023. The reduction of the balance sheet, a.k.a reducing the ECB’s bond portfolio, could become the ECB’s main policy instrument to fight inflation. Bank of England The Bank of England may have hiked by 75bp in November but it made it abundantly clear that this was likely to be a one-off, and that investors were overestimating future tightening. Admittedly, recent data has been slightly hawkish, and the committee is alive to the risk that services/wage inflation may only fall gradually despite the forthcoming recession. But the Chancellor’s Autumn Budget probably did just about enough to assuage the BoE's concerns about fiscal and monetary policy working at cross purposes. While much of the fiscal pain was delayed to future years, the government still scaled back energy support for households next year. We expect 50bp rate hikes in both December and February, marking a peak Bank Rate of 4%. With labour shortages unlikely to disappear next year, and wage growth therefore likely to stay more elevated than in past recessions, we suspect the BoE’s first rate cut may not come until 2024, and after the Federal Reserve.  People's Bank of China The PBoC cut the reserve requirement ratio (RRR) by 0.25 percentage points, effective in December, following a cut in April. There were also two 10bp cuts in the 7D reverse repo policy rate and 1Y Medium Lending Facility (MLF) rate back in January and August this year. The loosening of monetary policy has been mild relative to the slow rate of growth, which averaged 3.0% over the first three quarters of 2022. We believe that Covid measures are more likely to ease in 2023. But external demand could be weaker compared to 2022. Overall, growth in the domestic market should outpace the potential contraction of exports. Still, inflation should be absent in China. As such, the PBoC may choose to stay on hold next year as the central bank has hesitated to lower the 7D interest rate to near the 1% level to avoid falling into a liquidity trap. We do not expect the PBoC to cut the RRR or interest rates in 2023. That said, the re-lending programme for specific targets, e.g. SMEs and unfinished home projects, should continue at least in the first half of 2023.  TagsPBoC Federal Reseve ECB Central banks Bank of England Read the article on ING Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
RBA Minutes Signal Close Decision, US Retail Sales Expected to Rise

FX: Movement Of Major Currency Pairs This Week

Kamila Szypuła Kamila Szypuła 10.12.2022 20:01
Next week we will have another powerful breakthrough in this respect: besides the release of important reports, 4 major world central banks (USA, Switzerland, UK and eurozone) will announce their decisions on monetary policies. The dollar may strengthen again. A strong US economy and aggressive interest rate hikes are strong assets for the US dollar, but not the only ones. The USD index rose as a result of strong demand for safe assets at a time when fear dominated the markets. A deep recession would increase the demand for the US dollar as a safe-haven asset. Read next:The Fed And Slowing Down The Pace Of Rate Hikes On Last Meeting This Year?| FXMAG.COM EUR/USD This week the pair started at 1.0545. This level was followed by a weekly high of 1.0585. On Wednesday, the pair met the expectations of ING economists and moved around 1.0400, thus reaching the lowest levels of the week at 1.0452. The mood was gloomy and the bulls had challenges ahead. The pair gradually recovered from losses and returned to trading above 1.0500. Currently, the pair is trading at 1.0572 There were no economic events during the week that could significantly affect the currency pair. On Wednesday, the euro received support from the eurozone as the domestic gross production reading was higher than expected. Moreover, the weak us dollar during the week added strength to EUR/USD. EUR/USD price movement will depend on the Federal Reserve and the European Central Bank. Next week the central banks will sum up the year results and outline further prospects. EUR/USD Weekly Chart GBP/USD The cable market started the week well at 1.2295. On the same day, GBP/USD hit its highest level of the week, trading at 1.2336. Tuesday and Wednesday were the weakest days for the couple. Just like EUR/USD, the pound/dollar also hit a low on Wednesday, dropping to 1.2107. After that, the pair rose and recorded a correction. Currently, the price of the pair is at 1.2239. This week has been empty in terms of reports. The movement of the pair was influenced mainly by the situation of the dollar. Next week brings a lot of emotions among traders. British reports will open in the coming week with data on industrial production and GDP for October. This report presents aggregated economic data and will have a major impact on the Bank of England's monetary policy decision (Thursday). GBP/USD Weekly Chart AUD/USD The pair of Australian dollar (AUD/USD) started the week at 0.6799. Like the British pound, the Aussie hit a weekly high on Monday. The highest price level was 0.6848. Then the pair began to wane. Following the trend of currencies from the old continent, Wednesday was the lowest level of the pair, 0.6672. And just like the pairs above, AUD/USD tried to recover. The pair closed the week at 0.6772. China's announcement of easing covid restrictions added support to the Australian dollar. On Tuesday, the Reserve Bank of Australia recently raised its key interest rate by 25 basis points to 3.1%, but the bank's decision did not add strong support to the AUD price. AUS/USD Weekly Chart USD/JPY USD/JPY started the week at a low of 134.4900, on the same day it recorded a weekly low of 134.1300. The upward trend continued until Wednesday. On that day, the Japanese yen pair peaked at 137.8010. There were declines after that. The week ended with USD/JPY at 135.0740 Undoubtedly, the weakness of the dollar and the statement of the representative of the Bank of Japan added support to the Yen. USD/JPY Weekly Chart Source: investing.com, finance.yahoo.com
Asia Morning Bites - 14.02.2023

Asia Market: One More Hike Early Next Year Should Do It For The RBI

ING Economics ING Economics 12.12.2022 08:49
India inflation reading out tonight but the highlight for the week will be US inflation and the Fed policy decision later in the week  Source: shutterstock Macro outlook Global Markets: At times, markets simply see what they want to see in the data to justify the direction they intended to go anyway, and Friday’s trading looked a lot like that. US data (on which more below) put in a mixed performance on Friday. On balance, the data still pushed in the direction of moderating inflation, but there were some upside misses (PPI) and some downside (University of Michigan inflation expectations) misses too.  Neither of these has all much relevance for this week’s CPI data, save to confirm that it will probably also show a moderation, though exactly how much, and what split between headline and core rates remain uncertain. Yet markets had been longing to correct, which is exactly what they did. The S&P500 lost 0.74%, rounding off a poor week, while the NASDAQ lost 0.7%. Chinese stocks finished in better form, still buying into the China reopening story. The CSI rose 0.99% on Friday, the Hang Seng rose 2.32%. US equity futures remain a little downbeat about today’s opening prices. US Treasury yields added a little more gloom to the market story, with yields rising, though only by 3.7bp for the 2Y, while the 10Y yield rose 9.6bp taking the yield to 3.578%.  EURUSD remains above 1.05, pulling back from just below the 1.06 level on Friday and settling slightly lower. The AUD is a little stronger at 0.6788, the same as Cable at 1.2246, and the JPY is more or less unchanged at 136.71.  Most Asian FX made small gains on Friday, but there aren’t many clues as to their direction today. For choice, it’s probably looking a bit more negative for Asian FX than positive today. G-7 Macro: As mentioned above, the news flow out of the US on Friday supported the moderating inflation theme. University of Michigan inflation expectations for one year ahead dropped to 4.6%YoY from 4.9%, against expectations for no change, but the PPI index for November showed producer price inflation dropping less than expected at both headline and core levels, and this was probably what markets zoomed in on when selling Treasuries and stocks on Friday. It’s a big week for macro and probably therefore markets this week, with US CPI on Tuesday, and the FOMC Wednesday (3am SGT Thursday), not to mention NFIB and retail sales. UK production and construction data dominate the G-7 calendar today, and while this may have implications for Gilts and sterling, probably won’t do too much to alter the broader market picture. India: November CPI inflation is expected to come in at 6.36%YoY by the Bloomberg consensus, though we think there is a bit of downside risk to that figure (ING f 6.2%YoY). Falling vegetable prices and stable gasoline prices will drive a weak month-on-month increase and help deliver the lower inflation print, which will then be only just above the RBI’s 4%+/-2% target and suggests that they may be getting close to a peak in rates with the policy rate in line with projected inflation at 6.25%YoY.  Probably one more hike early next year should do it for the RBI. What to look out for: Inflation reports and central bank meetings later in the week Japan PPI inflation (12 December) India CPI inflation and industrial production (12 December) Australia Westpac consumer confidence (13 December) Philippines trade balance (13 December) US CPI inflation (13 December) South Korea unemployment rate (14 December) Japan Tankan survey and industrial production (14 December) US MBA mortgage applications and import price index (14 December) FOMC policy meeting (15 December) New Zealand GDP (15 December) Japan trade balance (15 December) Australia labor report (15 December) China industrial production and retail sales (15 December) Indonesia trade balance (15 December) BSP policy meeting (15 December) Taiwan CBC policy meeting (15 December) ECB policy meeting (15 December) US retail sales and initial jobless claims (15 December) Singapore NODX (16 December) Japan Jibun PMI (16 December) Eurozone CPI inflation (16 December) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Commodities: In The Near Term The Oil Market Remains Relatively Well Supplied

The Price Of Russian Crude In Asia Appears To Be Holding Well Above The $60 Cap

Saxo Bank Saxo Bank 12.12.2022 08:59
Summary:  U.S. treasuries and stocks sold off after the hotter-than-expected PPI prints which suggest inflation not cooling enough and making the water murkier in the week of CPI and FOMC. The 10-year yield surged 10bps to 3.58%. Other key central bank meetings from the ECB to Bank of England also on watch this week. Hong Kong and Chinese stocks rallied on Friday on continuous optimism about reopening from Covid restrictions and supportive economic policy from the Chinese authorities. The Chinese Communist Party’s Central Economic Work Conference is expected to convene this week. What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) retreated on hot PPI data U.S. equities edged down after the producer price Index (PPI), headline as well as core, came in stronger-than-expected and stirred up concerns about risks of pushing the Fed back towards a more hawkish leaning. Nasdaq 100 declined by 0.6% and S&P500 fell by 0.7%. 10 of the 11 S&P sectors declined, with energy, healthcare, and materials dropping the most. Lululemon (LULU:xnas) plunged 12.9% after a gross margin miss, inventory build-up, and below-expectation full sales guidance. Tesla (TSLA:xnas) bounced 3.2%. US treasury yields (TLT:xnas, IEF:xnas, SHY:xnas) bounced on higher producer inflation prints U.S. treasuries sold off on the hotter-than-expected PPI headline as well as core prints. With heavy selling in the 10-year and 30-year segments, the yield curve became less inverted. Two-year yield rose 4bps to 4.34% and 10-year yield surged 10bps to 3.58%. The 2-year-10-year yield curve closed at 76bps on Friday, after hitting as low as 85bps during the week. The money market curve is predicting a 77% probability for a 50bp rate hike on Wednesday. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) rallied on growth optimism Hang Seng Index rallied 2.3% on Friday on continuous optimism on the prospect of a recovery in the growth of the Chinese economy in 2023 as the country reopens from Covid containment restrictions and more supportive government policies. Premier Li Keqiang said China will strive to achieve steady growth. Defaulted Chinese property developer Sunac (01918:xhkg) said it is in discussion with creditors to restructure USD9 billion of debts, including swapping USD3-4 billion of debts into ordinary shares or equity-linked instruments.  Reportedly another defaulted mainland developer Evergrande is meeting offshore creditors to discuss restructuring proposals. The Chinese authorities are considering allowing REITs to invest in long-term rental and commercial real estates. Leading mainland Chinese property developers listed in Hong Kong surged 5% to 18% with Longfor (00960:xhkg) soaring the most. A day after shortening the home isolation period for people infected with Covid-10 to five days from seven days, a Hong Kong health official said the city is considering to end its vaccine pass scheme. Hong Kong local property developers gained 2%-5%. In A shares, the CSI300 Index rallied 1%. The Chinese Communist Party is expected to convene its annual Central Economic Work Conference this week to formulate the macroeconomic policy blueprint for 2023. In Australia; this week the focus will be consumer confidence, employment data and China reopening talk vs pre lunar new year production halt There are a couple of economic readouts that could move the market needle, the ASX200 (ASXSP200.1) this week. Weakening confidence is expected; starting with Consumer Confidence for December (released on Tuesday), followed by Business Confidence for November. Employment reports are due on Thursday for November, and likely to show employment fell; 17,000 jobs are expected to be added, down from the 32,200 that were added in October. So focus will be on the AUD and a potential pull back if the data is weaker than expected. On the equity side, with iron ore (SCOA) trades at four month highs $110.80 but is lower today. We mention on Friday the price of iron ore has been rallying as China on  easing restrictions and because of whispers that Chinese property developers will get more support, which would support demand for iron ore rising. However we mentioned why iron ore could pull back, as buying volume appears slowing. So be mindful of potential pull back in iron ore pricing and mining equities. Secondly, consider seasonable halt of Chinese steel plants ahead of the Lunar New year. Restocking typically occurs 5-8 weeks before the holiday, but plants could be closed earlier, due to poor profits and weak demand. So keep an eye on iron ore majors, Fortescue Metals, Champion Iron, BHP and Rio as they could see profit taking as well after rallying ~25-55% from October.  FX: A weaker start for NZD in Asia, Japan’s November PPI above expectations The US dollar started the week on a firmer footing with a big week ahead as the US CPI and FOMC meeting is eyed. A reversal of the short-term downtrend would however require US 10-year yields to get closer to 4% again. NZDUSD has been a strong performer since the softer October US CPI print and maybe the one to watch if the Fed fails to surprise hawkish this week, given that the RBNZ remains committed to its fight against inflation. Pair dropped below 0.64 in early Asian trading hours this morning as New Zealand Institute of Economic Research (NZIER) published slower GDP growth forecasts through 2025. A higher-than-expected Japan’s November PPI of 9.3% YoY/0.6% MoM, along with an upward revision to last month’s print, may create more talks of a possible policy review (read below) and USDJPY headed higher to 136.80. Crude oil (CLF3 & LCOF3) prices to watch Russia’s response to G7 price cap this week Crude oil prices saw a steadier start to the week after plunging sharply last week on demand concerns from a weakening macro backdrop as well as thin liquidity and control of short-term traders. The uncertainty surrounding European sanctions on Russian oil and the related price also kept volatility high, but was overshadowed by recession concerns. The impact of the potential pickup in demand from China as lockdowns continue to ease also started to fade. This week Russia will announce how it intends to counter the introduced price cap with the risk of a production cut potentially adding fresh support to the market ahead of what looks like a challenging 2023 where supply worries in our opinion will keep prices elevated, despite the risk of lower demand. WTI futures rose above $72 in the Asian morning, while Brent was seen above $77/barrel.   What to consider? Stronger-than-expected US PPI suggests inflation not cooling enough Headline PPI rose 7.4% in November Y/Y, above the expected 7.2% albeit down from the upwardly revised 8.1% for October. The core (ex-food and energy) Y/Y was also above expectations at 6.2% (exp. 5.9%), but cooler than the prior upwardly revised 6.8%. on a M/M basis, headline rose 0.3% while core was stronger at 0.4%, beating expectations. While the PPI data continued to show a peak in inflation in the Y/Y terms, but the downward surprise remains limited and may not be enough to support the Fed pivot expectations. Attention now turns to the US CPI data on Tuesday to see if a similar inflation story is seen for December ahead of the FOMC rate decision on Wednesday. Preliminary University of Michigan survey for December was also strong across the board, as the headline rose to 59.1 from 56.8, and above the expected 56.9. The headline was supported by current conditions and the forward-looking expectations both lifting to 60.2 (prev. 58.8, exp. 58.0) and 58.4 (prev. 55.6, exp. 56.0), respectively. Putin threatening to curb crude exports Vladimir Putin said Russia may lower crude output in response to the G-7 price-cap and added the country won't sell to price-cap participants. The price of Russian crude in Asia appears to be holding well above the $60 cap as it finds enough shipping and insurance capacity. While the crude oil prices last week have remained in the grip of technical traders and seen little impact from the price cap decision, there could be more volatility in store this week as Russia’s response is awaited which could range from production cuts to retaliatory measures. Bank of Japan board members continue to differ on timing for ending YCC All eyes are turning to who could be the possible replacement of Bank of Japan Governor Kuroda in April 2023. One of the contenders, Takehiko Nakao, said that subtle changes in policy framework should be considered as the leadership is changed next year. This comes after board member Naoki Tamura called for a policy review last week and hinted that it may come as early as next year (before Kuroda retires. However, another board member Toyoaki Nakamura said its too early to conduct a review now. Likewise, board member Hajime Takata also said it is too soon to start a policy review. While the timing may be uncertain, the open discussions about a possible BOJ policy review at some point is keeping expectations of an eventual BOJ pivot alive. China and Saudi Arabia upgrade relationships with top-level dialogue; Xi calls for using the renminbi to settle oil and gas trades During his visit to Saudi Arabia last week, China’s President Xi Jinping met with King Salman bin Abdulaziz Al Saul and Crown Prince Mohammed bin Salman. The two sides agreed to upgrade the relationship between the two countries with heads of state meeting every two years and moving established joint committees for trade, tech, security, and other areas from vice-premier to premier level. The two countries have signed a large number of agreements and MOUs from petrochemical, hydrogen energy, information technology, and infrastructure projects to cultural exchanges. Xi reiterates his call for using the renminbi more often to settle trades in crude oil and natural gas but it is not clear how well his call has been received by Saudi Arabia and the other oil-exporting countries at the China-Arab summit last week. China’s CPI softened to 1.6% Y/Y; PPI stayed at -1.3% Y/Y China’s CPI inflation decelerated to 1.6% Y/Y in November from 2.1% Y/Y in October, in line with expectations as food inflation slowed and consumer demand was weak during the lockdown. In the PPI, price increases in the raw materials sector decelerated while the price declines the in mining and processing sectors slowed in November.     Sign up for our Outrageous Predictions 2023 webinar - APAC edition: Wed, 14 Dec, 11.30am SGT For a global look at markets – tune into our Podcast. Source: Market Insights Today: Hot US PPI brings focus to CPI/Fed meeting; HK/China stocks on watch – 12 December 2022 | Saxo Group (home.saxo)
The China’s Covid Containment Continued To Negatively Impact The Output At The End Of 2022

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

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

Big Week Ahead: Focus For This Week Will Still Be The US CPI And The Fed Decision

Saxo Bank Saxo Bank 12.12.2022 09:19
Summary:  Big week ahead keeping investors on edge as US CPI is likely to soften but the PPI release from Friday has awakened the case for an upside surprise. Focus quickly turns to the last FOMC meeting of the year with 50bps rate hike widely priced in but significant wage pressures laying the case for higher-for-longer. We discuss what to watch in the updated dot plot and Chair Powell’s press conference, and how it can move the markets. Even the middle of December doesn’t seem to be getting any quieter yet, and this week brings a host of Tier 1 economic data and a flurry of central bank meetings that can cause considerable volatility. In addition, we have the China reopening momentum extending further, and hopes of more stimulus measures especially for the property sector. Geopolitics is also taking another turn as Putin continues to threaten the use of nuclear and also risk of a production cut in crude oil is seen as a response from Russia to the G7 price cap that was set last week. It is unlikely that we will get a quiet end to the year. The bigger focus for this week will still be the US CPI (scheduled for release on Tuesday 13 Dec at 9:30pm SGT), where investors are starting to get nervous about an upside surprise especially after Friday’s November PPI report that was above expectations broadly. The market reaction to that PPI report was erased quickly, but that may not be the case for CPI. We can expect a moderation this week on the back of easing supply chain pressures, stable gasoline prices and holiday discounts from retailers to clear inventories. However, the Cleveland Fed CPI model suggests upside risks vs. consensus expectations with a 7.5% Y/Y print for headline and 6.3% Y/Y for the core (vs. consensus of 7.3% Y/Y and 6.1% Y/Y respectively). We believe the narrative really needs to shift from peak inflation to how low inflation can go and how fast it will reach there? Consensus expects 0.3% M/M for both the headline and the core – anything lower than that can cause the markets to rally but will also provoke the Fed to send in a stronger message the following day to convey its message of avoiding premature easing. The Fed meeting next day (Thursday 15 Dec 3am SGT) is broadly expected to deliver a 50bps rate hike, which will mean cumulative hikes of 425bps this year. It is unlikely that the CPI print from a day before could change that. While this is a step down from the four consecutive 75bps rate hikes seen in the last few month, more important for the markets will be to watch for: How high do the terminal rate expectations go? Anything above 5% is still a bearish surprise for the markets, but the dot plot will have to show terminal rates to be in the 5.25-5.50% area to sound a hawkish alarm. If the dot plot signals a peak rate of 4.9%, it could signal to the markets that the Fed is starting to get worried about recession and may soon pause or pivot. Is the decision unanimous? Most of the Fed members recently have conveyed a very similar message. But any split votes, with the more hawkish members Bullard and Powell still preferring a 75bps rate hike, could be a hawkish surprise. Inflation and GDP growth outlook Any signs of upside risks to inflation from China’s reopening or easing financial conditions could be interpreted as hawkish. On the other hand, if the Fed talks about the lag effect of policy rate hikes, that will likely sound dovish. It will also be key to watch how Fed views the incoming data and its thoughts on recession concerns. Powell’s press conference How strong a pushback we get on 2023 rate cuts priced in by the markets. Could Powell open the door to a further step down to 25bps from February? Does he still see the risk of over-tightening to be less severe than the risks of under-tightening?   What to watch? US Dollar USD reversed sharply lower after the softer October CPI print, after a strong 5-month run from the greenback. The positioning is far more balanced now, with the biggest pullback risk seen in sterling which has been one of the biggest gainers (after the NZD) in the G-10 basket since the November 10 release. A more dovish turn by the markets could make EURUSD breach 1.06 resistance and bring 1.08 in focus, while USDJPY could break below the 200-dma at 135.16. S&P500 and NASDAQ100 S&P500 failed to break above the trendline resistance around 4,100 earlier this month but broke below trendline support at 3,992 last week. Next key support level for S&P500 is at 3,906 before 3,900 comes into view. A dovish surprise could bring a break above 4,000 again. Meanwhile, bear trend for NASDAQ100 could resume if it closes below 11,450. Source: Macro Insights: Pivotal week ahead with US CPI and Fed meeting on the radar | Saxo Group (home.saxo)
Rates and Cycles: Central Banks' Strategies in Focus Amid Steepening Impulses

U.S. Treasury Bond Yields Rose On Friday, Crude Oil Started The Week With Gains

Saxo Bank Saxo Bank 12.12.2022 09:26
Summary:  Sentiment is off to a cautious start this week after US treasury yields rebounded on Friday, pressuring equity market sentiment and supporting the US dollar. This week should prove a volatile one, with the November US CPI data point up tomorrow, one that has triggered huge swings in markets nearly every month for the last several months, this time with an FOMC meeting to follow on Wednesday and ECB and other central bank meetings up on Thursday.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equity markets rolled over again on Friday after US treasury yields jumped on a hotter-than-expected PPI release on Friday, taking the S&P 500 Index back toward the key support here, which comes in between 3900 and 3900 for the cash index, with the equivalent area around 11,430 in the Nasdaq 100 Index. Markets may be in for a fresh down-draft if US yields rise farther this week, whether due to the CPI release tomorrow, the FOMC meeting on Wednesday, or for any other reason. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) Ahead of two key events, the FOMC meeting in the U.S. and the Central Economic Work Conference (CEWC) in China, investors in Hong Kong and mainland Chinese stocks took profits and saw the Hang Seng Index nearly 2% lower and the CSI300 sliding 0.8%. Meituan (03690:xhkg) declined nearly 7% and Country Garden Services (06098:xhk) plunged almost 17%. The CEWC will set out the blueprint for the macroeconomic policies in China for 2023 but will likely not release specific growth targets which be for the National People’s Conference in March. USD rebounds slightly as US treasury yields bounce back The US dollar rebounded on Friday and overnight as US treasury yields bounced back after the release of hotter than expected November PPI data on Friday. USDJPY was one of the bigger movers intraday, rebounding from sub-136.00 levels and trading above 137.00 this morning. EURUSD eased away from the recent cycle high of 1.0595 and was trading near 1.0515 this morning. Markets should be prepared for the risk of significant volatility on the CPI release tomorrow, with the market likely lease prepared for surprisingly firm core CPI readings – the surprisingly soft October CPI data released November 10, for example, triggered some 600 pips of USDJPY downside intraday. Crude oil (CLF3 & LCOG3) focus on Russia, China Covid cases and US pipeline closure Crude oil has started the week trading higher after plunging sharply last week on demand concerns from a weakening macro backdrop as well as thin liquidity leaving short sellers in control. No signs yet of calmer conditions ahead of year-end with multiple uncertainties still unresolved: The Keystone pipeline supplying Canadian oil to refiners on the US Gulf Coast remains shut with no date set for a restart. The market awaits news from Russia on whether it will make good on its threat to cut supply to price cap supporters. Meanwhile in China, surging virus case counts are raising concerns about a slowdown in demand. Focus on US CPI, FOMC and oil market reports from OPEC and IEA. Gold (XAUUSD) trades softer ... ahead of US CPI data on Tuesday and the FOMC rate decision on Wednesday. This after Friday’s stronger than expected US PPI, suggesting inflation is not cooling enough, helped trigger profit taking and another rejection at $1808, a key level of resistance. Ahead of the key data print, the current strength of the market would be tested on a break below $1765, a level where support was found on several occasions last week. US 10-year treasury benchmark rebounds above 3.50% (TLT:xnas, IEF:xnas, SHY:xnas) After teasing below the key 3.50% level for a couple of days last week, the 10-year treasury yield benchmark surged back higher to 3.59% Friday after higher-than-expected November PPI data (see more below) before easing a few basis points overnight. The US November CPI print tomorrow data will likely spark considerable volatility all across the curve, especially given the market’s strong expectation that inflation will fall back sharply already by late next year. What is going on? Stronger-than-expected US PPI suggests inflation not cooling enough Headline PPI rose 7.4% in November Y/Y, above the expected 7.2% albeit down from the upwardly revised 8.1% for October. The core (ex-food and energy) Y/Y was also above expectations at 6.2% (exp. 5.9%), but cooler than the prior upwardly revised 6.8%. on a M/M basis, headline rose 0.3% while core was stronger at 0.4%, beating expectations. While the PPI data continued to show a peak in inflation in the Y/Y terms, but the downward surprise remains limited and may not be enough to support the Fed pivot expectations. Attention now turns to the US CPI data on Tuesday to see if a similar inflation story is seen for December ahead of the FOMC rate decision on Wednesday. Preliminary University of Michigan survey for December was also strong across the board, as the headline rose to 59.1 from 56.8, and above the expected 56.9. The headline was supported by current conditions and the forward-looking expectations both lifting to 60.2 (prev. 58.8, exp. 58.0) and 58.4 (prev. 55.6, exp. 56.0), respectively. Bank of Japan board members continue to differ on timing for ending YCC All eyes are turning to who could be the possible replacement of Bank of Japan Governor Kuroda in April 2023. One of the contenders, Takehiko Nakao, said that subtle changes in policy framework should be considered as the leadership is changed next year. This comes after board member Naoki Tamura called for a policy review last week and hinted that it may come as early as next year (before Kuroda retires. However, another board member Toyoaki Nakamura said it’s too early to conduct a review now. Likewise, board member Hajime Takata also said it is too soon to start a policy review. While the timing may be uncertain, the open discussions about a possible BOJ policy review at some point is keeping expectations of an eventual BOJ pivot alive. UK power prices hit a new record on freezing temperatures The Monday price for UK power surged to a record on Sunday with the Met Office having issued snow and ice warnings throughout the country through to Thursday. The combination of low wind generation and surging demand for heating saw the day-ahead price for power double and reach a record £675/MWh (€785/MWh). The UK power grid operator has ordered two out of three coal-fired plants kept in reserve for emergencies to fire up in case they are needed on Monday.  German day-ahead power prices jumped 33% to €434/MWh, the highest since September 13 while the French contract rose 40% to €465/MWh on Epex Spot.  In the US meanwhile, natural gas prices jumped 12% on the opening today, thereby extending a four-day surge to $7/MMBtu, after a powerful Pacific storm knocked out power to thousands across California and is forecast to deliver heavy snow and blizzard conditions from Montana to Minnesota in coming days. What are we watching next? US November CPI data point tomorrow and FOMC meeting Wednesday The market is aggressively pricing for inflation to drop back sharply this year, with inflation swaps suggesting inflation will be below 2.5% by year-end, even more aggressive than the Fed’s inflation forecast of 2.8% headline and 3.1% core PCE inflation by year-end. This leaves the “surprise side”, as we saw with the Friday US November PPI release, any data that suggests hotter than anticipated inflation, particularly for the core month-on-month ex Food and Energy reading (expected at +0.3%). Meanwhile, due to the market’s anticipation of quickly retreating inflationary pressures and a softening economy, it is pricing the Fed to begin cutting rates as soon as Q4 of this year, something the FOMC forecasts will likely push back against, although the market will likely lean on incoming data more than Fed guidance, which now that the Fed is seen decelerating the pace of hikes to 50 basis points on Wednesday, is only given credence for the next few meetings. Some argue that this could be the Fed’s last rate hike of the cycle, with the “dot-plot” of Fed policy forecasts on Wednesday also likely to push back strongly against that notion with an end-2023 forecast rate of above 5.0% (which would require another 75 basis points of hiking beyond this week’s 50 basis point move, which will take the rate to 4.25-4.50%. Putin threatening to curb crude exports Vladimir Putin said Russia may lower crude output in response to the G-7 price-cap and added the country won't sell to price-cap participants. The price of Russian crude in Asia appears to be holding well above the $60 cap as it finds enough shipping and insurance capacity. While the crude oil prices last week have remained in the grip of technical traders and seen little impact from the price cap decision, there could be more volatility in store this week as Russia’s response is awaited which could range from production cuts to retaliatory measures. In Australia this week the focus will be consumer confidence and employment data There are a couple of economic read outs that could move the ASX200 (ASXSP200.1) needle this week. Weakening confidence is expected; starting with Consumer Confidence for December (released on Tuesday), followed by Business Confidence for November. Employment reports are due on Thursday for November, with payrolls growth of +17k jobs, down from the rise of 32.2k in October. So focus will be on the AUD and a potential pull back if the data is weaker than expected. Several central bank meetings this week The U.S. Federal Reserve (Wednesday), the Bank of England (Thursday) and the European Central Bank (Thursday) are expected to hike interest rates by 50 basis points each this week. Less than two weeks ago, Fed Chairman Jerome Powell said a December rate-hike slowdown is likely. But the hawkish tone should remain based on the latest Non Farm Payroll and Producer Prices reports which indicated that inflation remains high and broad-based. In the eurozone, this is a done-deal that the central bank will hike rates by 50 basis points. Pay attention to the updated economic forecasts (Is a recession the new baseline for 2023?) and to any indication regarding the expected quantitative tightening process. In the United Kingdom, the money market overwhelmingly believes (78%) that the Bank of England will hike its rate by 50 basis points to 3.5% this week. Only a minority (22%) foresees a larger increase, to 3.75%. Earnings to watch This is a quiet period in the earnings season, though a couple of interesting names are reporting this week, with former high-flyer Adobe up on Thursday. Adobe has something to prove as the US software company has seen a negative share price reaction on its past five earnings releases. Trip.com, China's leading online travel agency, reports on Wednesday and investors will judge the result on the company's outlook for Q4 and ideally 2023 as China's reopening is raising the expected travel demand in China for 2023. Read more here. Monday: Oracle Tuesday: DiDi Global Wednesday: Lennar, Trip.com, Nordson, Inditex Thursday: Adobe Friday: Accenture, Darden Restaurants Economic calendar highlights for today (times GMT) 0800 – Czech Nov. CPI 2330 – Australia Nov. Westpac Consumer Confidence Index 0030 – Australia Nov. NAB Business Conditions survey Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – December 12, 2022 | Saxo Group (home.saxo)
Assessing 'Significant Upside Risks to Inflation': Insights from FOMC Minutes

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

Swissquote Bank Swissquote Bank 12.12.2022 10:04
Friday’s US PPI print was soft, but not soft enough to meet market expectations. The US dollar spiked following the data, closed the week on a strong footage in America and opened the week on a strong footage in Asia. Trend and momentum indicators turned positive last week, and the dollar could gain more field before two important events that will mark the trading week: US November CPI on Wednesday, and the FOMC decision on Wednesday. Interest rates It's important to remember that there is a gap between what the Fed says it will do, and what the market thinks, and prices the Fed will do, even a tiny hawkish message could already weigh on the mood before Xmas. Elsewhere, the European Central Bank (ECB), the Bank of England (BoE), the Swiss National Bank (SNB) and Norges Bank are all due to raise interest rates this Thursday, and most of them are expected to follow the Fed with a 50bp hike. How could it impact the euro, sterling and the franc? Watch the full episode to find out more! 0:00 Intro 0:31 US PPI softened but not enough 1:10 US CPI & FOMC decision will mark the week! 6:15 Then, ECB is expected to hike 50bp 7:26 BoE is expected to hike 50bp 8:36 And SNB is also expected to hike 50bp … but a hawkish Fed statement and the dot plot could boost the USD appetite before Xmas. Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #USD #CPI #inflation #data #FOMC #Fed #ECB #BoE #SNB #rate #decision #EUR #GBP #CHF #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
The Commodities Digest: US Crude Oil Inventories Decline Amidst Growing Supply Risks

US Inflation Data May Affect The Type Of Fed Decision, Which Will Be An Important And Long-Lasting Event

InstaForex Analysis InstaForex Analysis 12.12.2022 10:23
The Fed will start its two-day monetary policy meeting on Tuesday, during which the members will recap the past year and make its forecasts for GDP, labor market, employment and interest rates for the coming years. It will be an important and long-running event as it will determine, at least for the first quarter of next year, the bank's overall view of the economy. Tomorrow's release of consumer inflation data in the US will not go unnoticed either as expectations are a 7.3% rise in CPI y/y and 0.3% m/m. But if the figures show a decline, inflationary pressures will ease, which is good for the economy. This may give the Fed a strong reason to reduce the rate hike after Wednesday's 0.50% increase. In the event of such a scenario, a strong rally in stock markets will occur, accompanied by a decline in dollar and Treasury yields. But if the CPI data exceed expectations, demand for equities will dip, while dollar will surge Forecasts for today: USD/JPY The pair remains trading within the range of 135.80-138.00. It will not go out until the release of the US consumer price index. USD/CAD The pair is trading within the range of 1.3535-1.3700. It will not go out until the release of the US consumer price index and the Fed monetary policy meeting.     Relevance up to 07:00 2022-12-14 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/329494
Rates and Cycles: Central Banks' Strategies in Focus Amid Steepening Impulses

Assessment Of US Treasuries Has Also Improved As Interest Rates Have Risen

Ed Perks Ed Perks 11.12.2022 09:27
Yield is set to be a more important component of total return for investors during the next few years, according to Franklin Income Investors. Harnessing the power of duration Yield is set to be a more important component of total return for investors during the next few years as the “Fed Put” exerts less influence on markets. Ed Perks, CIO of Franklin Income Investors, analyzes the move higher for rates and spreads and shares his expectations for yields and total returns across the capital structure during 2023. The investment landscape heading into 2023 is very different to 12 months ago, when there really was no alternative to equities, and investors were locked into a desperate search for yield across all asset classes. The US Federal Reserve’s (Fed’s) singular focus on controlling inflation during 2022 resulted in an aggressive cycle of rate rises, which in turn tightened financial conditions, leading to a sharp rise in yields and spreads on fixed income assets. A year ago, yields on high-quality credit did not seem attractive to us, prospects for total returns were poor, and bonds were not acting as a diversifier. Today, we believe the same assets offer better total return potential than equities,1 while the positive correlation with stocks is also breaking down, allowing fixed income to offset equity market volatility. As a result, Franklin Income Investors (FII) continues to invest with a preference for fixed income, moving closer to a 60/40 split in favor of bonds over equities. Moving forward, our allocation decisions will be driven by what happens with interest rates and inflation during 2023. We believe the move higher in rates is likely almost done, but we expect a long pause from the Fed before any pivot, meaning our attention will be focused on the effect rate hikes have on the economy and inflation.The uncertainty lies in whether the lagged effect of tightening financial conditions and a more challenging growth environment results in a real pullback in fundamentals . Improved total return potential within fixed income Allocation within the fixed income asset class will also depend upon where markets go, although investment-grade (IG) credit is currently our preferred asset class in terms of total return, income and risk management. In a positive economic scenario, we believe these assets have the potential to make double-digit returns as rates move lower and spreads narrow, while they should also outperform other risk assets should fundamentals deteriorate. If IG corporate bond yields move back toward 6%, then, in our view, investors should consider increasing holdings in that sector at a faster pace, taken from either equities, high-yield (HY) bonds or US Treasuries.2 Yields on IG credit Have Become Incrementally More Attractive Relative to Equities Exhibit 1: Yield Spread Between US Equities and US IG CreditNovember 25, 2020–November 25, 2022   Source: Bloomberg, as of November 25, 2022. Past performance is not an indicator or guarantee of future results.   However, our assessment of US Treasuries has also improved as interest rates have risen, given they currently offer attractive yields and downside protection should a recession increase equity market volatility. When 10-year Treasury yields were around 2% they were unattractive to us, but extending duration to lock in yields at 4% is much more compelling from an income perspective. This means US Treasuries will form a core part of FII’s ongoing strategy into 2023. Elsewhere, the HY bond sector is, in our view, more resilient than many investors believe, absent a significant negative impact on corporate earnings. Most HY issues won’t need to be refinanced in the next few years, and therefore a recession in 2023 with a modest pullback doesn’t overly concern us. As a result, while the investment community focuses on whether spreads are wide enough to justify a move into credit, we see opportunities at current yields, which have shot up to levels not seen for 15 years. We don’t think spreads are likely to rise significantly, which means we are very comfortable being in the credit space, particularly at such low prices. Against this background, we believe it is a relatively straightforward call to add selectively to HY credit at the expense of higher volatility equity holdings that, in a recessionary scenario, should underperform credit. In a worst-case scenario, a prolonged period of higher rates or further tightening would eventually put pressure on over-levered companies that need to refinance their debt. Under those circumstances, it is possible to engage with public companies to help them refinance their debt on a private basis, however, we believe the opportunities for healthy returns in the public markets are currently so attractive that private investments would likely not be adequately compensated for the additional illiquidity premium. Managing equity uncertainty We still see opportunities for selective investment in equities to maximize yield and total return while navigating increased volatility. For equities to rally, we believe it would take a favorable trajectory around inflation and economic growth, while earnings would also need to remain relatively robust. We would also want to see the Fed pause rate hikes, move into a position to normalize rates, and get back to a neutral setting. Alternatively, there could be further downside for equities if the economy feels the impact of tightening in 2023 and earnings suffer. In our opinion, equity-linked notes (ELNs) offer a way to manage this uncertainty, while expanding the universe of stocks available for investment. ELNs enable investors to derive income from exposure to equities that offer little or no dividend and can be used in conjunction with common stocks to access both yield and price upside potential. These instruments can also be used to smooth volatility and hedge exposure. The power of duration In summary, we believe the investment environment during 2023 promises to provide much greater potential for yield and total return than we saw at the turn of 2022. In our analysis, locking in attractive yields through duration is the best way to achieve income goals, while investing in fixed income assets at attractive prices should deliver robust returns if rates fall and spreads narrow due to looser Fed policy. Additionally, we think higher-quality bonds offer significant downside protection should any recession prove deeper than expected. Elsewhere, in our opinion, broad equity exposure remains important should an improvement in economic sentiment trigger an equity market rally. Endnotes Exhibit 1 Exhibit 1  WHAT ARE THE RISKS? All investments involve risks, including possible loss of principal. The value of investments can go down as well as up, and investors may not get back the full amount invested. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in an investment portfolio adjust to a rise in interest rates, the value of the portfolio may decline. Investments in lower-rated bonds include higher risk of default and loss of principal. Changes in the credit rating of a bond, or in the credit rating or financial strength of a bond’s issuer, insurer or guarantor, may affect the bond’s value. In general, an investor is paid a higher yield to assume a greater degree of credit risk. The risks associated with higher-yielding, lower-rated debt securities include higher risk of default and loss of principal. Treasuries, if held to maturity, offer a fixed rate of return and fixed principal value; their interest payments and principal are guaranteed. Investments in equity-linked notes (ELNs) often have risks similar to their underlying securities, which could include management, market, and, as applicable, foreign securities and currency risks. In addition, ELNs are subject to certain debt securities risks, such as interest rate and credit risks, as well as counterparty and liquidity risk. Investments in equity index-linked notes (ILNs) often have risks similar to securities in the underlying index, which could include management risk, market risk and, as applicable, foreign securities and currency risks.
Monitoring Hungary: Glimmering light at the end of the tunnel

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

ING Economics ING Economics 12.12.2022 12:31
A heavy event risk calendar this week stands to define the core themes for 2023. First and foremost is the question of how quickly US inflation decelerates (CPI on Tuesday) and how the Fed will respond (FOMC Wednesday.) A whole host of central bank meetings around the world, including the ECB on Thursday, will provide insights on how long policy stays tight USD: How long does policy need to stay tight? A pivotal week for FX and global asset markets lies ahead of us. The week will play a major role in determining whether central banks (particularly the Federal Reserve) need to keep policy tighter for longer, or can (as the market prices) start to relax a little over inflation and can consider rate cuts in the second half of next year to ensure a soft landing. The two key event risks here are tomorrow's US November CPI reading and Wednesday's FOMC meeting - including the release of a fresh set of dot plots. Going into these event risks the market is pricing the Fed tightening cycle peaking in the 4.90/5.00% area next spring and then 50bp of rate cuts being delivered in the second half. And consensus is for another relatively soft 0.3% month-on-month core CPI release tomorrow, which would tend to support the market's pricing. We look at a range of Fed scenarios in our FOMC preview. As noted previously here, December is typically a soft month for the dollar and probably a more dovish set out of outcomes and a weaker dollar does the most damage to positioning, which is probably still long dollars. However, we do feel that market consensus still underappreciates the risk of inflation staying higher longer and also is dangerously second-guessing the Fed in terms of 2H23 rate cuts. The Fed has said that it feels there is good forward guidance value in its dot plots and it may choose to get across its current message of tight policy staying in place for longer through those dot plots. Our rates team also sees upside risks to US 10-year yields from the 3.50% area, with outside risk to the Fed discussing outright US Treasury sales (rather than just roll-offs) if it does think the long end of the curve is too stimulative. Notably, the correlation between US 10-year yields and G10 dollar crosses has picked up substantially since the soft October CPI release on 10 November. The long end of the curve is therefore going to be a key battleground for the dollar. Event risks this week will therefore determine whether 2023 starts with a focus on the inflation battle being won and the prospect of stimulative, reflationary policy coming through - a dollar negative. Or whether sticky inflation ties the hands of central bankers, the US yield curve remains steeply inverted and the dollar continues to perform well in a challenging risk environment. We do see the latter scenario as more likely, but this week should certainly give one of the scenarios a big lift. There is very little on the US calendar today and we would expect DXY to go into tomorrow's CPI release near its current 105 levels. Chris Turner EUR: A big week for central bank meetings in Europe This week sees central bank meetings in the eurozone, Switzerland and Norway, where 50bp hikes are expected in the former two and a 25bp hike in the latter. Please see our full European Central Bank preview here and our Swiss National Bank preview here. On the former, we note there is still a slight risk of the ECB doing 75bp rather than 50bp - which would probably help the euro. But this of course comes after the US CPI/FOMC risk. Given the 10% EUR/USD correction off the late September lows, our preference would be that EUR/USD struggles to hold any gains over 1.06 this week and could end the week lower should US events oblige.  Chris Turner GBP: BoE to hike 50bp this week This week's highlight will be the Bank of England meeting on Thursday. Please see our full preview here. We expect the BoE to revert to a 50bp hike (55bp hike priced) as it tries to balance high inflation against growing evidence of a prolonged downturn - with little signs of stimulus.  Our game plan assumes that GBP/USD struggles to hold any gains over 1.23, while EUR/GBP should find support in the 0.85/0.86 area. A winter of discontent should see sterling underperform should central bankers need to keep rates tight(er) into a recession.  Chris Turner CEE: Asymmetric response to global developments A busy week at the global level will be accompanied by several data points from the Central and Eastern Europe region. This week's headline number will be November inflation in the Czech Republic. We expect inflation to accelerate from 15.1% to 15.9% year-on-year, slightly above market expectations. The number will have the market's attention not only because of the Czech National Bank meeting next week but also because of the surprising slowdown in inflation in October when government measures against high energy prices came into play. After this number, we can then expect more headlines coming from the CNB given Thursday's start of the blackout period. Also today, Hungary's assessment is expected to be discussed at the European Council level. However, early rumours suggest that the European Commission's conclusion remains unchanged. November inflation in Romania will be published on Tuesday. We expect an increase from 15.3% to 16.6%, above market expectations. Although we have already seen inflation slowing in previous months, this result would thus raise the peak again. We do not expect another rate hike from the National Bank of Romania in January, but either way, it will be a close call, and tomorrow's number could be key. In the second half of the week, we will then see secondary data across the region such as the current account balances in Poland and the Czech Republic and the final inflation estimate in Poland, including the core number. In the FX market, this week we will be watching the impact of global events on the region. Our baseline scenario of a stable EUR/USD should not bring too much change for the region, but risks both ways are significant and higher volatility compared to previous rather quiet weeks in the CEE FX market can be expected. As we mentioned earlier, interest rate differentials have fallen significantly over the past weeks in the region leaving FX vulnerable to global shocks. Also, the gas story is creeping back and with higher gas prices we see growing signs of a renewed relationship with FX. The region's reaction would thus be asymmetric in the direction of weaker FX in our view, if the US dollar ends up as a winner this week. The Hungarian Forint will be following a separate story in addition to the EU developments and the newly lifted fuel caps. Given the negative rumours, more pain for the forint can be expected and the question is whether EUR/HUF will make another march towards the 430 level as it did in October, which led the central bank to an emergency rate hike in the middle of that month. In our view, the long positioning has fully unwound, and the market is leaning towards the short side again, but we don't think that the negative outcome of the EU story is fully priced in, so it is likely that we will test new highs this week. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
ISM Business Surveys Signal Economic Softening and Recession Risks Ahead

Euro Holds Above $1.05, USD/JPY Pair Rose Above 136

Kamila Szypuła Kamila Szypuła 12.12.2022 14:19
This week is one of the most macro-packed so far this year, with four major central banks holding their final policy meetings of the year, plus consumer inflation data from the United States that could be instrumental in determining the outlook for U.S. interest rates and the dollar. The U.S. Federal Reserve, the European Central Bank, the Bank of England and the Swiss National Bank will all release rate decisions. Overall, risk assets came under pressure on Monday despite further signs from China that it may be moving away from its very restrictive Covid-19 policy. Read next: Rivian Break Down Of Joint Venture Negotiations With Mercedes | Amgen Inc. Begins Action to Acquire Pharmaceutical Company Horizon Therapeutics| FXMAG.COM Euro Holds Above $1.05 Ahead of Key Policy Meetings A package of positive readings from Great Britain appeared. Against the yen the dollar rose 0.2% EUR/USD EUR/USD has been rising since reaching a 20-year low of 0.9536 in October. The rate reached the level of 1.0595, but was unable to break the breakout point and the previous high at 1.0615 and 1.0638 respectively. It is currently trading around the 1.0560 level with an upside bias. The euro is weaker today as the US dollar gains ahead of a crucial week of central bank meetings and data. There are no key macro economic events for the EUR/USD pair today. The European Central Bank is expected to deliver a dialed-down 50 bps rate hike on Thursday. Meanwhile, all eyes turn to CPI numbers from the US due on Tuesday GBP/USD The overall look of the cable market looks bearish. The GBP/USD pair is currently trading close to the level it closed last week at 1.2239. On the daily chart, we can see that the price of the cable has increased to this level. Trading on the daily chart shows the price around 1.2280. The British pound was subdued in reaction to the breaking of British GDP this morning, however, after the start of the European session, the reaction may be more positive. Other reports were also positive with only Industrial Production (MoM) (Oct) dropping to 0.0%. Source: investing.com GBP/USD daily chart AUD/USD The Australian dolar was last down 0.4% at $0.6772. Today, the AUD/USD pair reached 0.6795 during the day and then started to fall. On the daily chart, we can see that the pair is trading at 0.6756. USD/JPY USD/JPY started the week with gains. The pair rose from 135.0740 – the last week close level - to 136.8440 - current trade. This means that the Japanese yen is negatively compared to the US dollar. In other words against the yen the dollar rose 0.2% Today there were reports of the Japanese PPI, which was higher than expected. Year on year PPI reached 9.3% and PPI m/m 0.6% However, they did not support the yen. The last statement of the representatives of the Bank of Japan still plays a role. Bank of Japan Governor Haruhiko Kuroda recently said it was too early to discuss the possibility of reviewing the central bank's monetary policy framework. However, an analyst close to policy makers suggested that the BoJ may drop the 10-year bond yield cap as early as next year. Source: investing.com, dailyfx.com, finance.yahoo.com
Sterling Slides as Market Anticipates Possible Final BOE Rate Hike Amidst Weakening Consumer and Housing Market Concerns

Recession Is A Possibility In The US, But It's More Likely In The UK And The EU

InstaForex Analysis InstaForex Analysis 13.12.2022 08:41
On Monday, the movements of the euro and the pound were comparable, although the news background was only present in the UK and absent from the US and the EU. However, both instruments initially decreased (even at night), increased, then again decreased. The beginning of the new week turned out to be calm, but the market may face several unexpected decisions and events. This week will feature various events, as I've mentioned in previous articles, that have the potential to impact the market's mood significantly. Of course, the Bank of England, ECB, and Fed meetings are first and foremost. I previously stated over the weekend that it would be appropriate for the ECB and the Bank of England to continue raising interest rates by 75 basis points, which is the same rate as at the previous meeting. But several studies and economist surveys indicate that all three central banks can raise interest rates by 50 basis points. A few weeks ago, such a turn of events might have warranted some skepticism, but not anymore. Analysts' and other agencies' predictions typically come true. It rarely happens that the market correctly predicts the central bank's future course of action. This is because a few weeks before the meeting, the bank's representatives start preparing the market for this decision. This is the situation, at least in the case of the Fed. Members of the ECB and the Bank of England made significantly fewer comments, but even in them, one could detect the hesitation to increase the rate by another 75 points. In Europe and the UK, there are concerns about a recession. In the USA, people are also afraid of it. However, based on the state of these nations' economies, neither the United States, the European Union, nor Britain has much fear of it. If not, how else can we explain the sluggish pace of tightening monetary policy in the EU and Great Britain at a time when inflation hasn't even started to decline? In America, Finance Minister Janet Yellen said on Monday that the American economy could face a recession in 2023. However, she believes that it is not a bad thing because there is maximum employment in the nation. She pointed out that the country did not currently require such high growth rates because the economy recovered quickly from the pandemic. The Fed will continue to take all necessary measures to ensure that inflation declines and economic growth are slow because bringing inflation to target levels is of far greater importance. The most crucial factor, according to Yellen, is preventing job losses. After inflation slows down, economic growth can resume. Recession is thus a possibility in the US, but it's more likely in the UK and the EU. The US dollar should take advantage of this opportunity. I conclude from the analysis that the upward trend section's construction has grown more intricate and is almost finished. As a result, I suggest making sales with targets close to the estimated 0.9994 level, or 323.6% Fibonacci. The likelihood of this scenario is increasing, and there is a chance that the upward portion of the trend will become even more extended and complicated. The construction of a new downward trend segment is predicated on the wave pattern of the Pound/Dollar instrument. I cannot advise purchasing the instrument at this time because the wave marking permits the construction of a downward trend section. With targets around the 1.1707 mark, or 161.8% Fibonacci, sales are now more accurate. Thus, I advise sales with targets located near the estimated 0.9994 mark, which corresponds to 323.6% Fibonacci   Relevance up to 06:00 2022-12-14 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/329623
ECB's Tenth Consecutive Rate Hike: The Final Move in the Current Cycle

Rates Spark: The Predominant View Remains That Inflation Is On Its Way Down And Should Allow The Fed To Slow

ING Economics ING Economics 13.12.2022 08:55
The US November CPI report released today will skew the way markets deal with the Fed’s communication tomorrow. A higher print would be most market-moving. Source: Shutterstock US CPI to skew the way the market reacts to the Fed tomorrow The upside to yields we expected into this week’s US CPI release and central bank meetings is materialising, but it is still limited and unlikely to amount to much of a change in market narrative. The predominant view, judging by market moves in recent weeks, remains that inflation is on its way down and should allow the Fed to slow, and eventually stop, its hiking cycle at the coming meetings. Data on that front is encouraging. Consumer inflation expectations in the University of Michigan and New York Fed surveys is, globally, on its way down, and the price components of surveys such as the ISM are also suggesting the direction of travel is lower. There is no guarantee that inflation continues to converge on a linear path towards the Fed’s target The problem of course is that there is no guarantee that inflation continues to converge on a linear path towards the Fed’s target. One key worry, for instance, is that after an initial drop, inflation upside resumes. In that context most, including us, expect the Fed to continue striking a cautious tone at this and subsequent meetings. Since the summer, this has resulted in the Fed pushing back against instances of easing of financial conditions. Lately, that pushback has been less effective, due to more encouraging data. Today’s CPI release should be no exception. A core monthly print at 0.3% could take the edge off Powell’s hawkish tone, but we think it is a higher reading that would have the most market impact, as it would wrong-foot almost two months’ worth of bond rally. It is still too early to talk about a change in the market’s economic outlook. Most telling market moves, the richening of 5Y on the curve and the flattening of the 2s10s slope, have merely stopped, rather than reversed. In addition to the uncertainty about the sign of the inflation surprise today, and about the strength of the Fed’s pushback, one needs to add uncertainty about the market’s reaction. The speed of the moves since October make a retracement most likely, before rates converge lower and before the curve re-steepens in the course of 2023. Consumer inflation expectations support the current dovish narrative Source: New York Fed, ING Today's events and market view Italian industrial production and Germany’s Zew surveys are the two main releases in the European morning. Consensus is for the expectations component of the latter to continue its bounce back from very depressed levels. Italy will auction 2Y, 3Y and 7Y debt. The US Treasury will sell 30Y T-bonds. Both headline and core US CPI are expected at 0.3% MoM which is an improvement on the 2021 and 2022 average but still too high to be consistent with inflation at 2% annualised. Any deviation to consensus is likely to skew market expectations ahead of tomorrow’s Fed meeting but the bar is high for market to price a 75bp hike in our view. NFIB small business activity completes the list of releases for today. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
FX Daily: Upbeat China PMIs lift the mood

China’s New Aggregate Financing Increased Less Than Expected | Tesla And Rivian Shares Fell

Saxo Bank Saxo Bank 13.12.2022 09:09
Summary:  U.S. equities had a broad-based rally ahead of the CPI data with energy leading the gains. USDJPY bounced, approaching 138, as US yields moved higher. Crude oil prices rose snapping a 5-day losing streak amid supply worries from Keystone pipeline. Traders took profits in Hong Kong and Chinese stocks, selling Chinese property, technology and EV names. All eyes on November US CPI now where a softer print is generally expected but room for an upside surprise remains. What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) advanced ahead of the CPI report Softer prints in the one, three, and five years ahead inflation expectation numbers in the New York Fed’s Consumer Expectations Survey on Monday boosted risk-on sentiments ahead of the release of the most watched CPI report on Tuesday. The S&P500 bounced from its 100-day moving average, gaining 1.4%. All 11 sectors of the benchmark advanced, with energy, utilities, and information technology leading the gains. Valero Energy, surging 5.2%, was the best performer in the S&P500. The tech-heavy Nasdaq 100 rose 1.2%. Tesla (TSLA:xnas) shed 6.3%, falling to the stock’s lowest level in two years on concerns about suspending output in stages at his Shanghai factory ahead of the Lunar New Year and Musk pledged more Tesla shares for margin loans. US Treasury yields (TLT:xnas, IEF:xnas, SHY:xnas) rose after a weak 10-year notes auction In a thin-volume session ahead of the CPI report on Tuesday and the FOMC on Wednesday, yields on Treasuries were 1bp to 3bps higher. The auction of USD32 billion of 10-year notes, awarded at 3.625%, 3.7bps cheaper than at the time of the auction, was the worst since 2009.  The one, three, and five years ahead consumers’ inflation expectations in the New York Fed’s Consumer Expectations Survey fell to 5.2%, 3%, and 2.3% in November from 5.7%, 3.1%, and 2.4% respectively in October. The yields on the 2-year notes and 10-year notes added 3bps each to 4.38% and 3.61% respectively. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) consolidated ahead of key events Ahead of two key events, the FOMC meeting in the U.S. and the Central Economic Work Conference (CEWC) in China, investors in Hong Kong and mainland Chinese stocks took profits and saw the Hang Seng Index 2.2% lower and the CSI300 sliding 1.1%. Chinese property developers and management services, technology, and EV stocks led the charge lower. Country Garden Services (06098:xhk) tumbled 17% after the property services company’s Chairman agreed to sell more than HKD5 billion worth of shares at a 10.9% discount. Longfor (00960:xhkg), The Hang Seng Tech Index dropped by 4%, with Meituan (03690:xhkg) declining by 7%. Li Auto (02015:xhkg) tumbled 12% after reporting larger losses and a large gross margin miss. In A shares, property and financials stocks were top losers while pharmaceuticals gained. FX: USDJPY heading to 138 ahead of US CPI release The US dollar remained supported ahead of the big flow of key data and central bank meetings later in the week. The modest run up higher in US Treasury yields, along with higher oil prices, brought back some weakness in the Japanese yen. USDJPY reached in sight of 138 and the US CPI release today will be key for further direction. EURUSD remained capped below the key 1.06 handle, but a break of that if it was to happen will open the doors to 1.08. NZDUSD eying a firmer break above 0.64 but would possibly need help from CPI for that. Crude oil (CLF3 & LCOF3) prices gain further on China’s easing while Keystone pipeline remains shut Crude oil prices rose on Monday after a week of heavy losses on demand concerns and fading China reopening. Prices were underpinned by further easing of China’s restrictions despite concerns earlier in the week from a rapid surge in cases. Despite reports that the Keystone pipeline was being partially reopened, it remains completely shut on Monday which suggests a potential drop in storage levels at Cushing, Oklahoma, the WTI delivery hub. WTI futures rose to $74/barrel, while Brent touched $78.50. The market awaits news from Russia on whether it will make good on its threat to cut supply to price cap supporters, while the focus will also turn to US CPI today and the FOMC decision tomorrow, as well as the oil market reports from OPEC and IEA.   What to consider? Stronger UK GDP growth but clouded energy outlook, expect more volatility Some respite was seen in UK’s growth trajectory as October GDP rose 0.5% M/M after being down 0.6% M/M last month’s due to the holiday for Queen’s funeral and a period of national mourning. However, the UK may already be in a recession and the outlook remains clouded which suggests there isn’t enough reason for Bank of England to consider anything more than a 50bps rate hike this week. Energy debate continues to run hot and create volatility in gas prices, after weaker wind generation led to talks of refiring the reserve coal plants, but the request was cancelled later on Monday as wind generation rose. The situation continues to highlight the vulnerability of the energy infrastructure due to lack of baseload, and a bigger test probably lies ahead in 2023. Focus will be on energy companies amid the cold snap in the northern hemisphere with coal plants on standby. Agriculture commodities also a focus Australia’s ASX200 (ASXSP200.1) is expected to have a positive day of trade on Tuesday, as well as Japan’s market, while other Asia futures are lower. In Australia, consumer and business confidence are due to be released. In equites, focus will be on energy commodities and equities, given weather forecasts show a deep chill is descending on the northern hemisphere, and threatening to erode heating fuel stockpiles. Natural gas futures surged, while Oil rose 3% $73.17 a barrel. Energy stocks to watch include Australia’s Woodside, Beach Energy and Santos, Japan’s Japan Petroleum Exploration, Eneos, JGC, Chiyoda and Hong Kong-listed PetroChina, CNOOC and China Oilfield Services. Separately, coal futures are also higher, with Asia set to face a coal winter, and coal plants were previously asked to be on high alert in the UK, with snow blanketing parts of the UK. For coal stock to watch, click here. Separately, wheat prices rose 2.8% on expectations supply could wane; so keep an eye on Australia’s wheat producers GrainCorp, and Elders. Elsewhere, Australian beef output is poised to ramp up in the first half of next year, as the herd continues to rebuild. Australia’s Rural Bank agriculture outlook expects increased slaughter rates, and beef production to rise 5% in the first half, (mind you that’s well below average). So keep an eye on Elders, which helps sell and buy livestock, and Australian Agricultural Co – Australia’s largest integrated cattle and beef producer. EV car makers dominate headlines; revving up competition, despite concerns demand could soften Tesla shares fell 6.3% Monday, to its lowest level since November 2020, making it the worst performer by market cap. TSLA shares have fallen about 54% this year. TSLA is reportedly suspending output at its Shanghai electric car factory in stages, from the end of the month, until as long as early January, amid production line upgrades, slowing consumer demand and Lunar New Year holidays. Most workers on both the Model Y and Model 3 assembly lines won’t be required in the last week of December. Rivian shares also fell 6.2% on reports its scrapping plans to make electric vans in Europe with Mercedes. Instead, Rivian will focus on its own products. While Mercedes-Benz says it will continue to pursue the electrification of its vans and its shares closed almost flat in Europe. VW shares were also lower in Europe, despite it announcing plans to increase market share in North America to 10% by 2030 from 4%. VW wants to produce more electric SUV models in the US; and produce ~90,000 VW’s ID.4 model in 2023 in America. NY Fed consumer expectations survey shows slowing inflation, but.. NY Fed’s Survey of Consumer Expectations indicated that respondents see one-year inflation running at a 5.2% pace, down 0.7 percentage point from the October reading. Expectations 3yrs ahead fell to 3.0% from 3.1% and expectations 5yrs ahead fell to 2.3% from 2.4%. However, it is worth noting that inflation expectations remain above fed’s 2% target and unemployment and wage data was reportedly steady. Softer US CPI to offer mixed signals and considerable volatility Last month’s softer US CPI report was a turning point in the markets and inflation expectations have turned markedly lower since then. Consensus is looking for another softer report in November, with headline rate expected at 7.3% YoY, 0.3% MoM (from 7.7% YoY, 0.4% MoM) while the core is expected to be steadier at 6.1% YoY, 0.3% MoM (from 6.3% YoY, 0.3% MoM). While the case for further disinflationary pressures can be built given lower energy prices, easing supply constraints and holiday discounts to clear excess inventory levels, but PPI report on Friday indicated that goods inflation could return in the months to come and wage inflation also continues to remain strong. Easing financial conditions and China’s reopening can be the other key factors to watch, which could potentially bring another leg higher in inflation especially if there is premature easing from the Fed. Shelter inflation will once again be key to watch, which means clear signs of inflation peaking out will continue to remain elusive. China’s aggregate financing and RMB loans weaker than expectations In November, China’s new aggregate financing increased less than expected to RMB1,990 billion (Bloomberg consensus: RMB2,100bn) from RMB908 billion in October. The growth of total outstanding aggregate financing slowed to 10.0% Y/Y in November from 10.3% in October. New RMB loans also came in weaker than expected at RMB1,210 billion (Bloomberg consensus: RMB1,400bn; Oct: RMB615.2bn). Despite the push from the authorities to expand credits, loan growth remained muted as demand for loans were sluggish. Japan and the Netherland joining the U.S. in restricting semiconductor equipment exports to China According to Bloomberg, Japan and the Netherland have agreed in principle with the U.S. to join the latter in restricting the exports of advanced chipmaking machinery and equipment to China. The decisions have yet to be confirmed but it is expected that announcements will be made in the coming weeks.     Detailed US CPI and FOMC Preview – read here. Sign up for our Outrageous Predictions 2023 webinar - APAC edition: Wed, 14 Dec, 11.30am SGT For our look ahead at markets this week – Read/listen to our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: Market Insights Today: US CPI day, expect considerable volatility – 13 December 2022 | Saxo Group (home.saxo)
BRICS Summit's Expansion Discussion: Impact on De-dollarisation Speed

The Fed Does Not Fear A Recession Or Prolonged Bear Market In Equities

Saxo Bank Saxo Bank 13.12.2022 09:19
Summary:  The Fed is moderating the pace of rate hikes into 2023 but inflation is likely to be stubbornly elevated. The combination of these creates an environment in which Treasury Inflation-protected securities (TIPS) could potentially be an attractive investment option. Declines in real interest rates will see TIPS prices higher and their principal value and coupon amounts (while the coupon rates are constant) will rise together with the consumer price index. The Fed is poised to downshift as it believes that it must have got to somewhere after running so fast As our previous Fixed Income Update suggests, the modus operandi of the Fed has arguably shifted to risk management which aims at balancing the risks of inflation and the yet-to-be-fully-felt impact of monetary tightening on the real economy. Fed Chair Powell signals in his speech at the Brookings Institution on November 30. 2022 that being sufficiently restrictive, in his mind, is likely just “somewhat higher” than the 4.50%-4.75% (mid-point 4.625%) terminal rate in the FOMC’s September projections and he argues for “moderating the pace” of rate increases and “holding policy at a restrictive level”, not keep hiking, “for some time”. Powell acknowledges the fact that the employment, wage growth, and core services ex-housing inflation are all too strong to confidently foretell a victory in fighting inflation anytime soon and admits that the Fed has “a long way to go in restoring price stability”. Nonetheless, resorting to the notion of impact lags of monetary policy, Powell argues that it “makes sense” to downshift rate increases. This may mean that after a 50bp increase this Wednesday, as being well telegraphed and fully priced in, and probably another 50bps to 75bps in total in the February and March 2023 meetings. Powell has apparently on purpose been preparing the market that the Fed may pause even without seeing inflation falling significantly towards the 2% target as he and the November FOMC minutes emphasized the time lags of monetary policies and the importance of financial stability. Since August 2020, the Fed has adopted a new set of a new monetary policy framework that redefines its 2 percent inflation goal not as a ceiling but as inflation averaging 2 percent over time, and the unspecific “average over time” gives the Fed room to maneuver. The Fed may remain behind the inflation train for a prolonged period Alice looked round her in great surprise. “Why, I do believe we’ve been under this tree the whole time! Everything’s just as it was!” “Of course it is,” said the Queen, “what would you have it?” “Well, in our country,” said Alice, still panting a little, “you’d generally get to somewhere else—if you ran very fast for a long time, as we’ve been doing.” “A slow sort of country!” said the Queen. “Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!” “I’d rather not try, please!” said Alice."  Lewis Carroll, Through the Looking-Glass. After running as fast as it can with 375bp hikes including four 75bp hikes, since March 2022, the Fed ends up in a situation where inflation rates are not accelerating further but stay at elevated levels and are not coming down. Inflation rates as represented by the key measures on which the Fed is focusing are more or less at the same place as when the Fed started raising rates nine months ago (Figure 1). In his Brookings Institution speech, Powell highlighted the personal consumption expenditure core services ex-housing index being a key indicator for the future path of inflation because he is least confident for this component to fall, as opposed to prices of core goods and costs of housing services.   Figure 1. U.S. inflation rates; Source: Saxo, Bloomberg Likewise, the three measures of wage growth to which the Fed refers are at basically the same place as the Fed start raising the Fed Fund target rate in March 2022 (Figure 2). Elevated wage growth rates tend to fuel inflation, and high inflation raises demand for higher wages. Figure 2. U.S. wage growth; Source: Saxo, Bloomberg While the Fed may not have yet caught up with the runaway inflation train even after running very fast since March this year, it is signaling that it wants to switch to a low gear and hope that the cumulative rate hikes working through the proverbial impact lags, plus the ongoing quantitative tightening will work their wonder in bringing down inflation. The 2-year yield has hit a floor and may bounce As inflation remain elevated, the Fed can downshift the pace of rate hikes but does not have room to pause or cut rates in the next few meetings. Therefore, three-month T-bill rates (currently at 4.23%) will become a floor to the 2-year yield. Unless the Fed’s next move is a rate cut, which will not be the case, 2-year yields will unlikely fall below the yield of 3-month Treasury bills. As illustrated in Figure 3, during the five times over the past 30 years when 2-year yields fell below 3-month yields, the next move by the Fed was cutting rates. When the Fed was not about to cut rates, yields on the 2-year notes did not fall below those of the 3-month bills. When 2-year notes are yielding only 4.33%, they offer little investing value. While we are expecting bonds to be a valuable asset class to have in a portfolio in 2023, we caution investors to be patient and look for a better entry level. Figure 3. 3-month T-bills vs 2-year T-notes spread; Source: Saxo, Bloomberg Without a recession, the value at the long end of the yield curve is stretched At Saxo, it is our view that the U.S. is not entering into a recession. Without a recession that drags down inflation and pushes up unemployment rates substantially and therefore brings about a series of rate cuts, the term premium is unlikely to stay so negative. In other words, investors will demand higher yields to compensate for the risks of owning long-term bonds. This is particularly true when the interest rate volatility is high. Higher implied volatility of treasury yields demands higher term premiums, i.e. higher long-term yields relative to short-term yields. Figure 4 plots the 3-month Treasury yield versus the 10-year Treasury yield spread against the ICE BofA Merrill Lynch Option Volatility Estimate (MOVE) Index. The divergence between the inversion of the yield curve and the elevated level of the MOVE index is unusual and may point to pressure for yields on 10-year notes to go up. Figure 4. 3-month T-bills vs 10-year T-notes spread, Implied volatility of Treasury yields; Source: Saxo, Bloomberg Powell does not want to see bond yields rising too fast and too much from here The Fed does not fear a recession or prolonged bear market in equities. It may welcome both as they help the Fed strive to dampen the development of a wage-price spiral and tighten financial conditions. It is the functioning of the Treasury market that is the elephant in the room and keeps Powell up at night. In the Fed’s own words in its November FOMC minutes, the U.S. Treasury market is important “for the transmission of monetary policy, for meeting the financing needs of the federal government, and for the operation of the global financial system. The FOMC participants noted that “the value of resilience of the market for Treasury securities was underlined by recent gilt market disruption.” In its Global Financial Stability Report Oct 2022, the IMF warns about poor market liquidity in government bond markets as quantitative tightening “leaving more of these bonds in private hands, which could translate into a shallower pocket to absorb shocks and therefore higher liquidity premiums and lower market liquidity.” As the total amount of outstanding Treasury securities has surged by seven times from USD3.2 trillion in 2002 to USD23.7 trillion in November 2022, the average daily turnover of the Treasury market has less than doubled during the same period.  As a result, the average daily turnover as a percentage of the amount of outstanding Treasury securities has declined from 11.6% to 2.6% over the past 20 years (Figure 5). Figure 5. Average daily turnover of Treasury securities as % of outstanding Source: Saxo, Securities Industry and Financial Markets Association Using the deviation of the quoted prices of individual securities from the fair-value curve as a proxy for market liquidity (Figure 6), the liquidity of the Treasury market has drastically deteriorated and stays currently at an elevated level similar to those in March 2020 when the Fed decided to come to the rescue and start a new round of open-ended buying of Treasury securities, i.e. quantitative easing.   Figure 6. Bloomberg U.S. Government Securities Liquidity Index; Source: Saxo, Bloomberg Both the Fed and the Treasury Department will do yield curve control if needed What if inflation does not come down and raising interest rates not “somewhat higher” but much higher, together with quantitative tightening, risk draining market liquidity and breaking the Treasury securities market? Not speculating on the political dynamic between the Fed, the White House, and Congress, the Federal Reserve Act of 1913, under which the Fed operates, provides that: The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.                                                                           Section 2A. of the Federal Reserve Act The notion of moderate long-term interest rates is a goal imposed on the Fed by law, though the Fed has certain leeway to decide on what “moderate” is. The Fed usually talks about a “dual mandate” of monetary policy without mentioning the third one because the Fed considers that “an economy in which people who want to work either have a job or are likely to find one fairly quickly and in which the price level (meaning a broad measure of the price of goods and services purchased by consumers) is stable creates the conditions needed for interest rates to settle at moderate levels”, without the need to define what “moderate levels” are. It may not be the case when bond investors become fed up with the elevated inflation rates and a Fed not willing to run any faster than what it has done to keep up with inflation in a liquidity-strained Treasury market. It was alarming when Treasury Secretary Janet Yellen warned publicly about “a loss of adequate liquidity in the [U.S. Treasury securities] market” in October. As the Fed is busy trimming its holdings of Treasury securities at a pace of USD95 billion a month as qualitative tightening, Secretary Yellen is worried enough to prepare to open her wallet and buy back Treasury securities. In October, the Treasury Borrowing Advisory Committee asked around primary dealers about their responses if the Treasury Department putting in place a debt management program to buy back long-term treasuries and said in its report in November 2022 that the Treasury Department “should continue to gather information as to the benefits and risks” of bond buybacks. The move highlights the Treasury Department’s concern about its costs and even abilities to fund the U.S. Federal Government’s budget deficits through issuing Treasury securities and the amount of federal debt held by the public as a percentage of U.S. GDP has ballooned to nearly 100% this year and is heading towards 110% by 2032 (Figure 7), surpassing the peak at the end of the Second World War. It was noteworthy to remind our readers that from 1942 to 1951, the Fed implemented yield curve control and capped the Treasury long-term bond yield at 2.5% to help the Treasury Department finance the federal government at low interest rates and bring debt down. Figure 7: U.S Federal Debt Held by the Public; Source: Congressional Budget Office (2022) Options for Reducing the Deficit, 2023 to 2032. P.12. file:///C:/Users/WENW/OneDrive%20-%20Saxo%20Bank%20AS/Documents/research/bonds/58164-budget-options-large-effects.pdf Elevated inflation and Fed downshift: TIPS may do well in this environment The total return on Treasury inflation-protected securities (TIPS) tends to outperform that of nominal bonds when real yields are falling and the Consumer Price Index for All Urban Consumers (CPI-U) is rising or simply stays at elevated levels higher and more persistently than previously expected. TIPS are quoted and traded in real yields that can be positive or negative. When the real yield rises, the price of TIPS falls; when the real yield falls, the price of TIPS rises. The most unique feature of TIPS is the principal value varies and is indexed to the CPI-U. The index ratio is calculated by the CPI-U index value published three months before the settlement date divided by the CPI-U index value as of the issuance date of the TIPS. For days during the month, linear interpolation of the monthly CPI-U indices is used. The Treasury Department publishes the updated index ratios for all TIPS issues on its website. When the CPI-U index value rises, i.e. inflation is positive, the principal value of TIPS will rise by the same percentage. When the CPI-U index value falls, i.e. inflation is negative, the principal value of TIPS will fall. The coupon rate of a TIPS is constant and does not change over the life of the bond. However, the coupon payment will change over time proportional to the change in the principal value. Therefore, the principal and coupon cash flows, that the investor receives, are protected from inflation. What is not protected is a rise in the real yield of TIPS that reduce the quoted price of the bond. When inflation is positive and even increasingly positive but the real yield is rising fast, the increase in the inflation-indexed principal may not be sufficiently large to offset a decline in bond price and the investor ends up with a loss in total return. From March, the month the Fed started raising rates, to October 2022, the TIPS yield swung dramatically from negative to positive as the Fed raised interest rates aggressively. The 10-year TIPS yield soared from minus-1.0% on March 1, 2022, to positive 1.6% on October 31, 2022, a 2.6% or 260bp movement which caused the 10-year TIPS to fall 21.4% in price. The rise in principal value contributed 5%. The net loss over that eight months was 16.5%. Rising inflation is not enough to generate a positive return for TIPS investors if the Fed aggressively pushes up real interest rates like it did this year. Many investors asked why TIPS lost money in most of 2022 through October and the 260bps rise in the real yield is the answer. The investment environment has become more favorable for TIPS since November 2022 when the Fed signaled to the market that it will downshift the tightening pace even before inflation falls substantially. In Figure 8, the green, light blue, and dark blue lines are breakeven inflation rates implied by the difference between yields on nominal Treasury note yields and the yields on TIPS, which are real yields. The bond market is pricing in future inflation at very near to the Fed’s 2% target as investors believe that the Fed will be able to bring down inflation towards 2%. In a combination of stubbornly high inflation and the Fed’s downshift in the pace of tightening, the line of least resistance for breakeven inflation is going upward, approaching the elevated actual inflation and away from 2% rather than falling below 2%.  Figure 8. Breakeven inflation rates implied versus CPI-U % change Y/Y; Source: Saxo, Bloomberg The breakeven inflation is the difference between nominal Treasury yields and TIPS yields. As inflation turns out to be more persistent into 2023, nominal bond yields are likely to bounce from this current trough level and rise to test the October 4.34% high in yield. However, given the Fed is mindful of the liquidity in the Treasury securities market and not to disrupt its smooth function, the rise in yields will be measured and much behind the rate of inflation. The aggressive pace of raising interest rates was something for 2022 and will unlikely be repeated in 2023. In this environment, for the breakeven inflation to rise, TIPS yields will probably need to fall. That will give TIPS a sweet spot of elevated inflation and at the same time declining real yield. Currently, 5-year TIPS are at 1.44% and 10-year TIPS are at 1.31% (Figure 9) and have room to fall in yield and rise in price. On top of that, the principal of TIPS is rising at the same rate as inflation as it is indexed to the CPI-U. Current inflation assumptions used for index factor calculation are around 8% p.a. Figure 9. Yields on 5-year and 10-year TIPS; Source: Saxo, Bloomberg In Figure 10 below, a list of TIPS is shown for illustration purposes.    Figure 10: Examples of TIPS on the Saxo trading platform for illustration purposes, not as recommendations; Source: Saxo Key Takeaways: Inflation is not coming down as much as the market is hoping for in 2023 Despite elevated inflation, the Fed is going to moderate its tightening pace The Fed and the Treasury Department are mindful of keeping long-term interest rates at moderate levels Nominal bond yields may bounce from the current low levels but be slower than inflation TIPS benefit from a fall in persistently higher-than-expected inflation and a fall in real yields Elevated inflation and a cautious Fed in low gear may present a sweet spot for TIPS   Source: Fixed Income Update: Elevated inflation and Fed downshift could potentially be a sweet spot for Treasury Inflation-protected Securities (TIPS) | Saxo Group (home.saxo)
Supply Trends Resurface: Analyzing the Impact on Market Dynamics

The Aussie Has Shown The Weakest Momentum Among The G10 Currencies

InstaForex Analysis InstaForex Analysis 13.12.2022 10:10
Tensions over what signals the Fed will show are rising due to a recent article that said officials are divided on how long rates should increase. According to the note, some expect a steady decline in inflation in the coming months, so the rate hike should be stopped as soon as possible. Others, however, fear that inflation will not fall adequately next year, so they call for rates to be raised further, or at least held high longer. The US inflation report for November will be published today, but so far businesses are not yet seeing any threats of higher inflation. In fact, yields on 5-year TIPS bonds have been falling since March 2022. Another increase in inflation will cause another uncertainty to the economy, which will ramp up demand for dollar, while reducing risk appetite. NZD/USD A further rise in government spending is likely to increase the risk of tougher policy in New Zealand. This means that interest rates could be raised above forecast, which the RBNZ estimates is at 5.5%, while the ANZ bank sees 5.75%. If that happens, the country will fall into recession much faster than expected, but bond yields will be higher, which would strengthen expectations of a yield spread. Positioning on NZD continues to be bearish, but the performance is still minimal and close to neutral. Net short positions increased by 97m to -411m during the week, however, the estimated price shows no intention to turn downwards yet, which means that the direction of capital flows is more inclined to a rise. NZD/USD is trading in a narrow range, near the resistance level of 0.6460/80. Bulls do not have enough strength to trigger a breakout, but it could hit 0.6240/50 as long as the Fed shows a more hawkish view on its monetary policy. AUD/USD Business confidence turned negative in November, falling below zero for the first time since November 2021. Fortunately, conditions remained fairly high at +20p. But with activity persisting, there is little sign of any reversal in inflation. Cost growth remained largely unchanged at elevated levels on both the labor and input costs, while retail prices continued to rise at a rapid pace. Overall, there is growing concern that the strength of the economy will converge in 2023. This indicates that companies are becoming increasingly pessimistic due to the slowdown in global economy, weaker consumption, rising inflation and higher rates that are lowering real household incomes. That is why it was not a surprise that net short positions in AUD declined by 272 million to -2.713 billion during the week. Bearish performance persists, but the medium-term trend is in AUD's favor. The settlement price is above the long-term average, pointing upwards, which suggests that attempts to go higher will continue. Even so, AUD has shown the weakest momentum among the G10 currencies over the past week due to both volatility in the Fed's monetary policy outlook and growing worries over whether China is willing to cut their restrictions. Hitting 0.6880 and 0.6910/30 are possible, but only if the Fed gives hawkish signals on Wednesday evening. The strength of AUD is also not enough for a sustained rise.   Relevance up to 07:00 2022-12-18 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/329635
US stocks gain on hopes of a softer inflation print released later today

US stocks gain on hopes of a softer inflation print released later today

Ipek Ozkardeskaya Ipek Ozkardeskaya 13.12.2022 11:02
European equities traded in the red at the start of the week, but equities in the US rebounded as investors are hanging on to hope of slower inflation and reasonably hawkish Federal Reserve (Fed) by their fingernails.    Today and tomorrow will tell whether they are right being optimistic or not.   The latest US CPI data will reveal whether inflation in the US eased, and by how much. It's highly likely that we will see a number below the 7.7% printed a month earlier. But a number below 7.7% won't be enough as analysts expected it to ease all the way down to 7.3%.   Last Friday, the PPI figure showed that the US factory gate prices eased in November, but not as much as penciled in – leading to some disappointment among investors. Today, a similar disappointment could erase yesterday's 1.43% rebound in the S&P500 and could easily send the index below its 100-DMA. Read next: Microsoft (MSFT) rose 2.89% after announcing it will purchase a 4% stake in London Stock Exchange Group| FXMAG.COM  But if, by any chance, we see a softer CPI figure, then the S&P500 could easily jump above its 200-DMA, and even above the ytd descending channel top.   But, but, but...  Today's US CPI data, unless there is a huge surprise, will probably not change the Fed's plan to hike the interest rates by 50bp this week. Activity on Fed funds futures gives 77% chance for a 50bp hike, and a slim chance of 23% for another 75bp hike.   What will probably change is where investors see the Fed's terminal rate, and for how long.   More importantly, it will give us an idea on how the market pricing for the Fed's terminal rate will clash with the dot plot projections that will come out tomorrow, and that will, in all cases, hammer any potentially optimistic market sentiment.   Therefore, even if we see a great CPI print and a nice market rally today, it may not extend past the Fed decision on Wednesday.   Energy up.  European stock investors are uncomfortable this week due to the icy cold weather, that will get the countries to tap into the natural gas, and other energy supplies.   The US nat gas prices jumped more than 30% since last week due to a powerful Pacific storm bringing cold and snow to the norther and central plains in the US.   In the UK, power prices hit another ATH yesterday. Read next: An incoming cold spell in the US has seen the cost of US gas surge 27% during the past three trading session while (...) Dutch TTF gas contracts remain below €150| FXMAG.COM   Happily, we haven't seen a significant rise in the European nat gas futures, which in contrary kicked off the week downbeat.   But crude oil rallied as much as 2.60% on Monday as Russia said that the EU's $60 cap on its oil could lead to supply cuts, as Goldman said that Chinese reopening could boost demand by 1mpd - which would mean a $15 recovery in crude's price - and as a key pipeline supplying the US closed following a spill discovered last week.   I think that the oil rebound due to these three factors could be short-lived and may offer interesting top selling opportunities for medium term bears looking for a further dip in oil prices to below $70pb. Because, the Russia is not harmed by $60pb currently, US supplies will be restored and  the Chinese reopening may not be smooth due to potential disruptions in economic activity, because people are sick.   Don't count on strong UK GDP  The British GDP grew more than expected last month and that was mostly due to the rebound in activity after Queen Elizabeth's death slowed activity earlier. But strikes across the country are so severe that they could wipe half a billion pounds off the hospitality industry's pre-Xmas earnings. PM Rishi Sunak thinks that military staff could help cover for striking workers.   Cable consolidates gains below 1.23 but is at the mercy of the US dollar. The Bank of England (BoE) is expected to hike by 50bp at this week's MPC meeting, but the hike will certainly be accompanied by dovish statement as the UK economy is not strong enough to withstand a Fed-like tightening in the middle of an energy, and cost-of-living crisis.
The Commodities Digest: US Crude Oil Inventories Decline Amidst Growing Supply Risks

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

Swissquote Bank Swissquote Bank 13.12.2022 10:37
European equities traded in the red at the start of the week, but equities in the US rebounded as investors are hanging on to hope of slower inflation and reasonably hawkish Federal Reserve (Fed) by their fingernails. US CPI Today and tomorrow will tell whether they are right to be optimistic or not. If, by any chance, we see a softer CPI figure, then the S&P500 could easily jump above its 200-DMA, and even above the ytd descending channel top. But, but, but… today’s US CPI data, unless there is a huge surprise, will probably not change the Fed’s plan to hike the interest rates by 50bp this week. Therefore, even if we see a great CPI print and a nice market rally today, it may not extend past the Fed decision on Wednesday. US In energy, US nat gas prices jumped more than 30% since last week due to a powerful Pacific storm bringing cold and snow to the norther and central plains in the US. UK In the UK, power prices hit another ATH yesterday. European nat gas futures Happily, we haven’t seen a significant rise in the European nat gas futures, which in contrary kicked off the week downbeat. Crude Oil But crude oil rallied as much as 2.60% on Monday on several factors that could however not lead to sustainable gains in the mid-run. Watch the full episode to find out more! 0:00 Intro 0:29 US CPI: possible scenarios 2:50 But the Fed may not care much about the data 4:10 Opportunity to sell the latest crude oil rally? 6:17 Is it time for Chinese stocks to recover… sustainably? 8:03 UK grows more than expected, but… 8:43 Binance may have processes $10bn illegal funds. Bitcoin stable. 9:11 Amgen buys Horizon Therapeutics, Microsoft takes 4% stake in LSE Ipek Ozkardeskaya  Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #USD #CPI #inflation #data #FOMC #Fed #rate #decision #dotplot #enery #crisis #natgas #crudeoil #Russia #China #Covid #reopening #HangSeng #Alibaba #Amgen #HorizonTherapeutics #Microsoft #LSE #acquisition #Bitcoin #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH      
Bank of England Confronts Troubling Inflation Report; Fed Chair Powell's Testimony Echoes Expected Path

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

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

Saxo Bank Podcast: Market Speculators And Hedgers Are Revving Up For Another Blast Of Volatility

Saxo Bank Saxo Bank 13.12.2022 13:41
Summary:  Today, we highlight the absurd levels of volatility around recent US CPI releases ahead of today's US November CPI data point, noting signs that market speculators and hedgers are revving up for another blast of volatility in the wake of today's release. At the same time, we suggest that the reaction function may be difficult as the FOMC meeting follows hot on the heels of this release the following day. Elsewhere, we look at precious metals and copper levels, whether regulators will (or should) approve mergers like the Novozymes-Christian Hansen attempt, earnings to watch for the rest of the week and more. Today's pod features Peter Garnry on equities, Ole Hansen on commodities, with John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: https://www.home.saxo/content/articles/podcast/podcast-dec-13-2022-13122022
The USD/JPY Price Reversed From The Lower Limit

The Japanese Yen Stabilized Below 138 To The US Dollar

Kamila Szypuła Kamila Szypuła 13.12.2022 14:34
The dollar was stable on Tuesday ahead of the release of the US inflation data and the last Federal Reserve meeting this year, and investors waited for an updated interest rate outlook. US stocks rose on Monday as investors gained confidence in experts' forecasts of a 7.3% increase in the US consumer price index in November. If this forecast comes true, it will be the fifth consecutive decline and the lowest level in 11 months. Even if this would still leave inflation well above the Fed's 2% target, it may be enough justification to hold back the pace of monetary policy tightening EUR/USD The rate increased slightly to 1.0543 from 1.0538. The EUR/USD daily range is 1.05281 - 1.06287 Today's data from Germany on CPI met expectations, holding the level of 10%. Source: investing.com The EU ZEW economic sentiment index improved to -23.6 in December from -38.7 in November, data released on Tuesday showed, but it still points to more pessimism than optimism. Thursday's meeting of the European Central Bank remains the focus of the week, at which an interest rate hike of 50 basis points is expected. Read next: The Huge Order Boeing 787 Dreamliners By United Airlines | Former FTX CEO Sam Bankman-Fried Was Arrested| FXMAG.COM GBP/USD The pound was broadly stable on Tuesday as gains from the UK employment data were offset by caution ahead of a key US consumer inflation reading. Also, today's UK data could ignite the cable rally fuse should the US CPI data be bound. The release of employment data showed that unemployment met estimates, while wages and the employment rate improved. The number of employees on the payroll increased by 107,000. to a record level of 29.9 million. The number of job vacancies recorded a fifth straight decline, reflecting the uncertainty stemming from economic pressure on recruitment. Wage growth turned out better than expected, with both total and regular wages increasing by 6.1% y/y, which is the fastest rate in history outside of the pandemic. The forecast for core US inflation YoY is 6.1% while overall inflation YoY is expected to come in at 7.3% compared to October’s print of 7.7%. Sterling recently rose 0.2% to $1.2296 ahead of the Bank of England's (BoE) policy decision on Thursday. Last week it hit a nearly six-month high at $1.2345. The Bank of England meets Dec. 15, when a 50 basis point rate increase is expected. USD/JPY USD/JPY hit a 32-year high of 151.95 in October, the day the Bank of Japan intervened for the second time to prevent the yen from depreciating. From this peak, the price is in a downtrend channel. The general mood of the pair is bullish. The Japanese yen stabilized below 138 to the dollar. Price is now approaching the upper band of the channel but is struggling to break above the breakpoint and recent high of 137.67 and 137.86 respectively. USD/JPY Pair slipped to 137.3270 from 137.6498 In a recent announcement, Mana Nakazor, a potential candidate for Vice Governor of the Bank of Japan next year, said the central bank should change its policy statement to give itself more room to adjust interest rates. She suggested that the Bank of Japan should "admit that interest rates may go up or down depending on economic developments" and that he should signal that "massive monetary easing will be over". The Bank of Japan is expected to maintain its monetary policy stance at its next meeting on December 19-20. Source: investing.com, dailyfx.com, finance.yahoo.com
Canada's Inflation Expected to Ease in May, Impacting BoC's Rate Decision

Inflation shrinks, crude prices under pressure, supply chain is getting better and let core goods prices decrease

FXStreet News FXStreet News 13.12.2022 15:50
US inflation has come out below estimates, triggering an initial fall in the Dollar. The Greenback has been fighting back, in fear of a hawkish Fed decision. There are reasons to be optimistic about prices moving forward. Inflation is falling – there is no doubt about it. The Core Consumer Price Index (Core CPI) has come out at 0.2% in November, even lower than 0.3% in October. On an annualized basis, November's figure represents 2.5%, far below 6% YoY. Underlying prices are clearly falling. While the knee-jerk reaction was the correct one – stocks jumped and the Dollar fell – the reaction is relatively limited to previous events. Why? The Federal Reserve announces its decision tomorrow. I see this relative Dollar stnregh – EUR/USD jumped 350 pips last time, this time under 100 – as temporary. I expect the Greenback to continue falling, and not only due to these figure, but what is seen beneath. There are reasons to be optimistic. First, headline inflation is set to continue decline as oil prices have come under renewed pressure since the data was compiled. Once falling crude costs reach the pump, America could see another downgrade in prices. Read next: John Hardy (Saxo Bank): I don’t think any single inflation print will unsettle the BoE here, just look at the huge recovery in sterling from the lows | FXMAG.COM When it comes to Core CPI, there are additional reasons to become optimistic. The unsnarling of supply chains have already pushed the prices of core goods down, but there is more in store, especially as the entire world now shifts back to services 0 even China is exiting its draconian policy. Another leg down in cookware, sports equipment and computer chips is still in the pipeline. Another bright spot is the shelter component – or rents. Higher Fed interest rates and rising costs of other things have brought leases down, and these reach official statistics with an even bigger lag. Moving house or renegotiating a contract is an annual ritual at best. Shelter inflation – roughly 40% of CPI – is set to decline. The Fed is aware of these two factors and will be pleased by the data. It takes it into account. The only unnerving part is services-ex-shelter, which is related to wages. That is "sticky" 0 wages do not fall that fast and the data does not provide that much comfort, at least not now. Nevertheless, the fall in other inflationary factors will eventually drag service-sector price rises down. That implies that any recovery in the Dollar may prove temporary. One reason to fade the upmove is the short-term wait for the Fed on Wednesday. Yet beyond the decision, this is probably the Greenback's last stand.
The Challenge to the Dollar: De-dollarisation and Geopolitical Shifts

The Fed Is Expected To Lift Its Federal Funds Rate Target By 50bps

Saxo Bank Saxo Bank 14.12.2022 08:48
Summary:  U.S. equities and bonds faded the initial hype after softer CPI prints and ended the volatile session with muted gains. USD sold off and USDJPY dipped below 135 at one point. Crude rallied for the second day in a row, rising 3% as supply issues remained. A 50bp hike at today’s FOMC is cemented and the market’s focus will be on the dot plot about the Fed’s rate projections for 2023 and Powell’s comment at the press conference. What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) jumped at the open before paring most of the gains After a strong opening, soaring at much as 4% in the S&P 500 and 3.9% in Nasdaq 100, the U.S. market spent the rest of the day pulling back from the intraday highs. S&P500 finished the volatile session at 4019.65, up 0.7%, and Nasdaq 100 closed at 11834.21, 1.1% higher.  A large portion of the early surge was in ETFs. A huge USD3.9 trillion notional value of options expiring this Friday may tend to pin the benchmark S&P 500 as well. All sectors with the S&P 500, except consumer staples, advanced. The interest rate-sensitive real estate sector was the top gainer, rising 2%, which was followed by the energy sector which was boosted by a 3% rise in the crude oil price. Meta Platforms (META:xnas) gained 4.7% as Republican Senator Rubio is seeking a pass a bi-partisan bill to ban Tik Tok from operating in the U.S. Moderna (MRNA:xnas) soared 19.6% on news of positive trial data from an experimental skin cancer vaccine in collaboration with Merck (MRK:xnys). Merck climbed 1.8%. Airlines were notable laggards on Tuesday. A 3% drop made airfares one of the largest items contributing to the softness in the CPI report. In addition, Alsska Air (ALK:xnys) warned about slowing corporate travel and JetBlue (JBLU:xnas) which was more leisure travel-focused, mentioned weaker bookings in Q4. US Treasury yield curve (TLT:xnas, IEF:xnas, SHY:xnas) bull steepened on soft CPI data Immediately after the release of the soft CPI data which increased the chance of further downshift to a 25bp hike instead of 50bps in February, the whole yield curve shifted down with the 2-year at one point shedding 24bps to 4.13% and the 10-year 20bps richer to as low as 3.41%. The money market curve now prices the terminal rate at around 4.82% in 2023, down from 4.98%. The long-end however did not manage to keep their gains after some large block selling in the 10-year contracts and a weak 30-year auction. The 10-year gave back nearly half of the gain to close the session 11bps richer at 3.50%. The 2-10-year curve steepened to 72bps. The yield on the 30-year long bonds finished the day only down 4bps at 3.53%. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) Hang Seng Index advanced by 0.7% after Hong Kong lifted all travel restrictions on visitors arriving in the city and relaxed the QR code scanning requirements for residents.  Catering and retailer stocks outperformed. Cosmetic chain operator Sa Sa (00178:xhkg) jumped 14.2%. Local developers and commercial landlord stocks rose by 3% to 4%. Cathay Pacific climbed 3.2%. Macau casino operators gained between 1% and 4%. Shares of the semiconductor industry jumped on media reports suggesting that the Chinese Government is going to spend RMB 1 trillion to support the industry. SMIC (00981:xhkg) gained 9.7% and Hua Hong Semiconductor (01347:xhkg) soared 17.4%. In A-shares, the CSI300 index was little changed. Farming, textile, and transportation stocks outperformed. FX: USDJPY dipped below 135 before a recovery in Asian hours The US dollar sold off on Tuesday following the softer November CPI print in the US saw US yields plunge lower. AUDUSD was however seen paring some of the gains in early Asian trade and slid below 0.6840 amid concerns on China’s Covid cases ramping up further which also led to the postponement of the Central Economic Work Conference. USDJPY took a brief look below 135 after the CPI release but some of the move was erased later. EURUSD surged to 1.0673 and remains supported above 1.0620 ahead of Fed meeting today and ECB meeting tomorrow. Crude oil (CLF3 & LCOF3) pauses after two days of gains Crude oil prices gained further on Tuesday after a softer-than-expected US CPI print for November spurred hopes that the Fed will slow down its pace of rate hikes. Supply side issues were also supportive. TC Energy Corp has yet to submit a restart plan for the Keystone pipeline following a leak last week, and plans have been delayed by bad weather. Russia’s President Putin is planning to sign a decree banning the sale of Russian oil through any contract that specifies the recipient as a nation that joined the G7 price cap. OPEC urged caution as its members implement the recent 2mb/d production cut. It now expects to see a finely balanced market in Q1 2023, instead of the deficit implied by its forecasts a month ago. It sees demand increasing by 2.2mb/d next year to average 101.77mb/d. Demand concerns may pick up further in Asia today as Covid cases in China continue to rise and impede the reopening trade, but caution will prevail ahead of Fed meeting later today.   What to consider?   Another softer US CPI print is still not enough The November CPI report was cooler-than-expected across the board, highlighted by the headline cooling to 7.1% from 7.7% (exp. 7.3%), with a M/M gain of 0.1%, slowing from the prior 0.4% and beneath the expected 0.3%. Core metrics saw Y/Y print 6.0% vs 6.3% prior and beneath the 6.1% expectation, while the M/M saw a 0.2% gain, lower than the prior and expected 0.3%. The market pricing has shifted towards a 25bps rate hike for February after we potentially get a 50bps today, while the terminal rate forecast has drifted lower to 4.82%. If we dig into the details, the disinflation is clearly driven by goods and energy, while services prices continue to rise further. This means wage pressures will continue and provides room for the Fed to continue to beat the drum on rates being higher-for-longer.  December FOMC and dot plot may have little new to offer, so focus remains on Powell’s press conference The Fed is expected to lift its Federal Funds Rate target by 50bps to 4.25-4.50%, according to the consensus as well as the general commentary from Fed officials signalling a downshift in the pace of rate hikes. The updated economic projections will also be released, and are expected to show a higher terminal rate than the September projections (4.6%), as has been alluded to by Chair Powell at the November FOMC and in remarks made in December. Easing financial conditions and expected China stimulus could mean Fed continues to chase the inflation train from the back into the next year as well, so Powell’s press conference remains key to watch. There will have to be a lot of focus on pushing out the rate cuts of ~50bps that are priced in for next year, and emphasise that the Fed will not ease prematurely if Powell and committee want to avoid further easing of financial conditions. China’s Central Economic Work Conference is reportedly postponed According to Bloomberg, which cites unnamed sources, the Chinese Communist Party is postponing the Central Economic Work Conference that was previously scheduled for this week due to the spread of Covid-19 inflections in Beijing. No signs, however, show that the Chinese authorities are reversing the recent trend of relaxing pandemic restrictions. New Zealand forecasts a recession starting Q2 2023 New Zealand Treasury Department issued 2022 half-year economic and fiscal update, forecasting three quarters of negative GDP growth from Q2 2023. Overall, the forecast calls for 0.8% contraction in 2023. Still, comments from RBNZ this morning suggested inflation focus will continue to drive more rate hikes, even as spending slows and unemployment levels increase as more people join the workforce over the coming year, partially helped by improving migration levels. Bank of Japan’s Tankan shows weakening business sentiment Sentiment among Japan's large manufacturers deteriorated slightly in the three months to December amid concerns over the global economic slowdown. The main index for sentiment among large manufacturers was +7, compared with +8 in Q3, according to the Bank of Japan's quarterly Tankan survey. Non-manufacturers still took a more positive view as the economic reopening gathered momentum, and large non-manufacturer index rose to 19 in Q4 from 17 previously.     Detailed FOMC Preview – read here. Sign up for our Outrageous Predictions 2023 webinar - APAC edition: Wed, 14 Dec, 11.30am SGT For our look ahead at markets this week – Read/listen to our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: Market Insights Today: Softer-than-expected US CPI puts the focus on FOMC dot plot and Powell’s comments – 14 December 2022 | Saxo Group (home.saxo)
US Inflation Slows as Spending Stalls: Glimmers of Hope for Economic Outlook

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

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

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

ING Economics ING Economics 14.12.2022 10:41
While US CPI seems to have collapsed, a lot of this is from exceptional factors. The real underlying number is closer to 0.4% MoM in services. Bond yields will test further lower, but there is a limit to that (c.3.25%). A reversion higher (to 3.75%) remains a risk as we move into the first quarter. Look for 50bp from the Fed today, and more to come in Q1. US inflation not as straightforward as seems Falls in real rates and inflation expectations were seen post the CPI number. This solidifies the remarkable recent move in the 10yr from 4.25% to 3.5%, and now approaching 3.4%. The terminal fed funds rate discount has also been shaved lower. It was comfortably discounting a peak at 4.75-5%. It is still in that range, but now toying with pulling that lower, to 4.5-4.75%. The 10yr is more than100bp below this still, which is quite a yield discount. It limits the room for a big move to the downside from here. The marketplace has done a remarkably good job at anticipating this number It feels like the marketplace has done a remarkably good job at anticipating this number, but as always we need to see some repeats before we can conclude that the inflation fighting job is done. The 20bp fall in the 2yr yield to sub-4.2% reflects the same theme, and is now at a sizeable 75bp discount to the market discount for the terminal funds rate. The bond market is trading as if the Fed delivers 50bp today, and then they are done. In all probability the Fed is not done, but if this number proves to be the beginning of a theme of low inflation prints, its increasingly likely that any hikes in the first quarter will be insurance ones, a far cry from the panic stations of previous months that saw consecutive 75bp hikes. Real yields have led the move lower in USD rates Source: Refinitiv, ING Downside to 10Y yields is more limited from here The market has been increasingly sensing this, with the 5yr trading remarkably rich to the curve now, and the 2/10yr segment showing the beginning of a tendency to steepen / dis-invert (from a state of deep inversion). Despite all of this, it is questionable how much room there is to the downside for yields. Anything below 3% for the 10yr looks too low here.  Market rates could still decide to trend higher. Yesterday’s 10yr auction did suggest some resistance to buying at these levels. It will be interesting to see whether the Fed might frustrate things with any suggestion of bond selling (hard QT) going forward. The rationale would be to limit the ability for long yields to go too low too fast, and to downsize it's balance sheet. The inflation flight is still on On the CPI report itself, the 0.2% MoM outcome was largely pulled there by exceptionally large moves in certain components (e.g. used car prices). 60% of the index is "services less energy services", and that is running at a steady 0.4% MoM (which annualises to 6% inflation). That will be tougher to shift lower fast. The inflation flight is still on, the Fed is set to hike, and the bond market could well get a fright at a CPI report not too far from here. For that reason, a hawkish 50bp hike is still expected from the Fed today. They could even contemplate some discussion of bond selling, or even simply entertaining that posibility. That would reverse things quite quickly, allowing the Fed to get more value from the delivered hike. Leaving the market braced for another hike in February 2023 is also probable. European rates have less room to fall, with domestic inflation still not under control Source: Refinitiv, ING European rates struggle to join the US party A striking feature of the post-US CPI bond rally is how sterling-denominated bonds struggled to follow their USD peers higher (lower in yields). The underperformance of EUR bonds relative to Treasuries was less spectacular but speak to an important theme as we head into 2023: it looks like the Fed is getting a grip on inflation much earlier than its European peers, and so US rates are in a better position to outperform until more tangible evidence of lower inflation emerges in the UK and eurozone. It is much less clear European inflation has seen a peak yet In the case of UK bonds, their underperformance was made worse by stronger labour and GDP data this week, and by a warning from Andrew Bailey against second round inflation effects. We see hawkish risk at both the Bank of England (BoE) and European Central Bank (ECB) meetings on Thursday. The difference with the US is that there is a greater chance that these hawkish warnings have a market impact as it is much less clear that European inflation has seen a peak yet. Today's events and market view The main release this morning is eurozone industrial production although this comes on the back of national measures which have taken the surprise out of the eurozone-wide measure. Spain’s CPI reports is a final reading, and Italian unemployment completes this list. US data has a few interesting releases too, including import prices and mortgage applications, but it is the FOMC meeting that will attract the most attention, especially after the second consecutive surprise slowdown in CPI in November (see above). With regards to primary markets today the German debt agency will announce its issuance plans for 2023. There is a significant upside risk to this year’s 230bn in bond issuance. To what degree the higher funding needs feed through to the bond target also depends on what other sources the agency will tap into, i.e. bills, repo or cash reserves. In any case, the market should expect more collateral. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
All Eyes On Capitol Hill, Jerome Powell Will Appear Before The Senate Banking Committee

There Was A Strong Rally Ahead Of The Announcement Of The Fed's Decision On Monetary Policy

InstaForex Analysis InstaForex Analysis 14.12.2022 11:11
The latest consumer inflation data in the US indicated a noticeable decline, which caused a strong drop in dollar, an increase in demand for equities and a decline in government bond yields. The report noted that CPI in the US fell from 7.7% to 7.1% y/y in November and decreased from 0.4% to 0.1% m/m. Although this is much lower than expected, the figure really impressed investors, so there was a strong rally ahead of the announcement of the Fed's decision on monetary policy. More importantly, the central bank will also reveal its forecasts for future inflation, GDP and unemployment, which will give investors an indication of how long the rate hike cycle will last and how deep a possible recession could be. In addition, Fed Chairman Jerome Powell has a speech scheduled, in which he is likely to discuss their assessment of the economy and future plans for monetary policy. So far, markets believe that his statements will be hawkish, but some are expecting a softer one where the Fed will say that it will be ready to stop raising rates sooner rather than later. If things go that way, a rally will be seen in all markets, accompanied by a weaker dollar. Forecasts for today: EUR/USD The pair is currently consolidating below 1.0655. If the Fed says positive statements, it could hit 1.0785. USD/CAD The pair is trading above the level of 1.3520. A rise in oil prices and a decline in dollar could take it to 1.3400.   Relevance up to 07:00 2022-12-16 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/329751
It Was Possible That Tesla Would Move Closer To Resistance

Tesla Trades At Cheapest, Crude Oil Rallied More Than 2.50%

Swissquote Bank Swissquote Bank 14.12.2022 11:19
Yesterday’s inflation report in the US filled investors with joy and further hope that inflation in the US may have peaked this summer and we will be heading lower from here, and that the Federal Reserve (Fed) will adopt a softer monetary policy stance and hike, yes, by 50bp today, but certainly not more than another 25bp in February. Powell  But Powell could also stress the fact that inflation remains significantly high compared with the 2% policy target, and that relaxing the tightening measures prematurely is not a good idea. US Dollar In the FX, the US dollar index fell following the softer-than-expected CPI print, and hit a fresh low since summer. Markets The softer US dollar, and stronger euro sent the European indices to fresh highs since summer. The DAX flirted with the June peak, and the Eurostoxx50 traded at the highest level since FebruaryCrude oil rallied more than 2.50% yesterday, on hope that the Fed could slow down the rate hikes, and not push the US into a deep recession to fight inflation. The FTX drama In cryptocurrencies, the FTX drama continues with the arrestation of Sam Bankman-Fried in the Bahamas, news that investors withdrew $3.7 billion worth of funds from Binance since last week, and that Binance reportedly stopped the stablecoin USDC withdrawals. Bitcoin But Bitcoin couldn’t care less. The price of a coin advanced more than 3% yesterday, showing that the FTX drama has been priced in and out and further drama should not hit the coin harder. Watch the full episode to find out more! 0:00 Intro 0:27 How does the Fed will about falling US inflation? 5:24 US dollar falls, majors & global equities rally 6:45 Crude oil tests short-term resistance 7:35 Bitcoin up despite unideal sector news 8:33 Tesla trades at cheapest ever PE Ipek Ozkardeskaya  Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #FOMC #Fed #rate #decision #dotplot #USD #CPI #inflation #data #EUR #GBP #JPY #XAU #crudeoil #DAX #EU50 #Bitcoin #SamBankmanFried #FTX #Binance #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
USD/JPY Weekly Review: Strong Dollar and Yen's Resilience in G10 Currencies

The Market May Have Moved On To A Cool Calculation

Conotoxia Comments Conotoxia Comments 14.12.2022 11:27
Yesterday, financial markets seemed to rejoice at the fact that inflation in November in the US was less than expected. Although CPI is still above 7 percent, and was previously a level rather favorable for falling stock prices, the opposite is now true. Why? It seems to be because of, for the time being, a permanent reversal of price growth dynamics. Following the release of yesterday's data, the dollar index seems to have weakened this morning after falling to around 104 points. Today, investors seem to be awaiting the Federal Reserve's decision on interest rates. The market expects the Fed to scale back its aggressive monetary tightening campaign, but may point to a higher peak for rates in the future, i.e. the hikes may be smaller (interest rate volatility may decrease), but they may last longer and end up not at 4.75-5 percent, but at least at 5-5.25 percent. As a result, uncertainty may have already set in on Wall Street, where after yesterday's first strong upward reaction, the indexes then turned back. After the euphoria, the market may have moved on to a cool calculation that while the pace of hikes may be slower, in the end it is probably better to have a lower interest rate than a higher one. It indicates the level of the investment risk-free rate, and the higher it is, the lower stock valuations could be. Source: Conotoxia MT5, US500, Daily Conference and projections in focus Today, traders will be closely watching Fed Chairman Jerome Powell's press conference after the decision announcement for clues on future rate hikes. The Fed's latest macroeconomic projections may also provide additional information. Going back to yesterday's data, the annual U.S. inflation rate slowed to 7.1% in November 2022, down from 7.7% in October and below market expectations of 7.3%. Other central banks on target Later in the week, we will learn the decisions of equally important central banks. Investors thus may remain cautious in their actions, as the European Central Bank, the Bank of England and the Swiss National Bank would take the stage, with monetary policy decisions to be made as early as Thursday. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75,21% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.     search   g_translate    
Analysis Of Tesla: A Temporary Corrective Rally Should Not Come As A Surprise

Saxo Bank Podcast: Look At Tesla Posting New Cycle Lows, Equity Market Upside Fading Quickly And More

Saxo Bank Saxo Bank 14.12.2022 13:06
Summary:  Today we look at yesterday's reaction to the softer than expected US November CPI data, with equity market upside fading quickly even as the reaction in US yields and the US dollar was stickier. We also discuss today's upcoming FOMC meeting, with the Fed facing a tough task if it wants to push back against easing market conditions and policy expectations today. We also look at Tesla posting new cycle lows and concerns for the stock and EV market, Apple, Inditex, crude oil, precious metals, and more. Today's pod features Peter Garnry on equities, Ole S Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: FOMC will have a hard time moving the needle today | Saxo Group (home.saxo)
UK Public Sector Borrowing Sees Decline in July: Market Insights - August 22, 2023

The Australian Dollar Held Above $0.68, Today The Fed Will Make Its Last Decision Of The Year

Kamila Szypuła Kamila Szypuła 14.12.2022 14:08
Dollar bears have come out of hibernation. After gaining 16% in the first 10 months of the year, the dollar index, which measures the dollar against a basket of currencies, lost 5% in November. It has since fallen another 1%, reflecting a smaller-than-expected increase in consumer prices in November. Fed ahead In currency markets, the dollar fell again after tumbling against a range of major currencies on Tuesday. The dollar is also facing more headwinds. The Federal Reserve is expected to reduce the scale of future interest rate hikes, which would allow other central banks to close the interest rate gap that attracts investment to the United States. US interest rates, which are the lower bound on both government and corporate bond yields, range from 3.75% to 4%, which is well above rates in other major economies such as the Eurozone where the deposit rate is 1.5%, or Japan, where interest rates are actually negative. Today the Fed will make its last decision of the year. Futures pricing shows markets expect the Fed will slow the pace of hikes. The latest rate hike is expected to raise rates by 50 bp this time. Fed officials say interest rates will go up. They want investors to focus on trajectory, not pace, and are signaling that interest rates could peak above market-expected 4.8% and stay there for most of 2023. If the Fed sticks to the "higher for longer" mantra central banks in Europe, the UK and China will struggle to catch up given the volatile state of their economies. EUR/USD The EUR/USD benefited from the release of inflation data, breaking the level above 1.06. The euro rose by 0.9% yesterday, and the pan-European Stoxx 600 index saw gains of 1.29%. However, the European Central Bank is also getting ready for a 50bps rate hike tomorrow. In Europe, the ECB will announce its latest monetary policy decision tomorrow. Both the Fed and the ECB are expected to raise interest rates by 50 basis points, keeping the rate differential between them the same, but central banks may differ in their forecasts for the coming months. Differences in the forecasts of the two central banks for the coming months will determine where EUR/USD will trade in the short to medium term. Read next: "Candid Stories" - Instagram like BeReal? Supermarkets Are Doubling The Number Of Their Own Product Lines | FXMAG.COM GBP/USD Yesterday, GBP/USD opened the prospect of a move towards 1.2750 after breaking 1.2300. The pound rose by 0.82% against the dollar yesterday to reach a 6-month high. The upward price movement was due to newly released inflation data from the US. Today, decisions on monetary policy will be announced by the Fed, and on Thursday, next to the ECB, the Bank of England. The Bank of England will have to contend with the biggest drop in living standards in history as the energy crisis, fiscal austerity and lack of growth eat into British household budgets. After positive GDP data on Monday, UK Chancellor Jeremy Hunt warned that the economy could get worse before it got better. While yesterday's employment figures were largely positive, they indicated a slowdown in employment as firms prepare for a tough start to 2023. The Bank of England released its Financial Stability Report yesterday, warning that 2023 will be a tough year for British households due to a combination of falling real incomes, rising mortgage costs and higher unemployment. AUD/USD The Aussie Pair benefited from lower-than-expected US inflation. Yesterday, the pair was trading low in daily levels in the 0.6733-0.6793 range. Today, the quotes are higher above 0.68, oscillating close to the highest levels in three months The lack of events on the Australian market makes the AUD/USD pair dependent on reports and events from America. USD/JPY The Japanese yen held its recent advance to below 136 per dollar. Yesterday, the USD/JPY traded above 137. The decline will occur after the release of US inflation data. The drop took place from the level of 137.2760 to the level of 135.3800. Currently, the pair is trading at a price of 135.0040.   Source: finance.yahoo.com, investing.com, dailyfx.com
"SD/JPY Nearing Intervention: Japanese Officials Prepare for Action

USA: Federal Reserve goes for 50bps, dollar unlikely to reach 1.05

ING Economics ING Economics 14.12.2022 22:16
A 50bp hike takes the policy rate to 4.25-4.5%. There is clearly some discomfort at the Federal Reserve that recent declines in Treasury yields and the dollar are undermining its efforts to bring inflation under control. Consequently, it will keep the hikes coming and acknowledge this will mean a 'sustained period' of below-trend growth and job losses Federal Reserve Chair Jerome Powell speaks during a news conference on 14 December 2022 4.25-4.5% Target range for the Fed Funds Rate   50bp with a hawkish twist The Federal Reserve voted unanimously to raise the Fed Funds target rate range by 50bp to 4.25-4.5%, in line with market expectations. The text repeats that officials anticipate that “ongoing increases” in the Fed Funds rate will be “appropriate”, while its forecast update has the central projection being for the Fed funds rate to end 2023 at 5.1% and 4.1% for 2024. They were 4.6% and 3.9% previously. Two consecutive undershoots of inflation have led the market to believe we are getting very close to the peak for interest rates, and rate cuts will soon be on the agenda. The Fed clearly isn’t willing to make that call. Read next: Poland: ING expects GDP deficit in 2022 can reach 4.2%| FXMAG.COM There are some big upward revisions to the central bank's inflation forecasts. Remember the Fed focuses on the core personal consumer expenditure deflator and not the core CPI which was published yesterday. Core CPI is more impacted by used cars and has a different definition of medical care costs, both of with contributed significantly to the downside CPI miss. The core PCE deflator is likely to be stickier than core CPI with the Fed revising up its core PCE estimate to 3.5% for the end of 2023 versus 3.1% previously, with 2024 revised up to 2.5% from 2.3%. The Fed is seemingly predicting only a modest downturn in activity next year with the unemployment rate rising to 4.6% from the current level of 3.7% with the economy continuing to expand, albeit at just 0.5% year-on-year between the fourth quarter of 2022 and the fourth quarter of 2023. Federal Reserve projections Source: Federal Reserve, ING Another 50bp hike in February – the Fed wants more evidence that inflation is slowing This relative hawkishness likely stems from concern that the recent steep falls in Treasury yields and the dollar are undermining the Fed’s interest rate hikes by loosening financial conditions – the exact opposite of what the Fed wants to see as it battles to get inflation lower. Indeed, comments from Fed Chair Jerome Powell emphasise that the bank wants financial conditions to “reflect the policy restraint that we’re putting in place”. After all, inflation is indeed still running well above target, the jobs market and wage pressure remain hot, and activity data is pointing to a decent fourth-quarter GDP report after a healthy 2.9% growth rate in the third quarter. While the market may view inflation as being in its death throws, the Fed certainly does not. For the Fed to relax it will want to see substantial evidence that inflation is slowing, not just one or two months where core inflation has come in less than the market was expecting. We must remember that to get inflation to 2% YoY over time we need to see month-on-month readings averaging 0.17% MoM. We are not there yet as the chart below shows – and remember it is the core PCE deflator that the Fed pays the most attention to. Given this situation, we remain happy with our call for a further 50bp rate hike at the 1 February Federal Open Market Committee meeting. US core CPI MoM still tracking above the required 0.17%MoM level Source: Macrobond, ING A pause in the second quarter before cuts in the third Nonetheless, the Fed is raising interest rates at the most rapid pace since the early 1980s and stress is showing up in two key areas. The Conference Board’s measure of US CEO confidence is at its lowest since the depths of the Global Financial Crisis. If CEOs are truly this pessimistic it bodes poorly for corporate profits, job hiring and business Capex. Secondly, the housing market is under real stress with demand falling sharply in response to higher mortgage rates with prices and the number of transactions reversing sharply.  We think the downturn will be more painful than the Fed is currently anticipating and that recessionary forces will dampen price pressures while the composition of the US inflation basket, which is heavily weighted to shelter and vehicles, will facilitate a far faster drop in annual inflation readings than in any other major economy. Historically the Fed has on average only waited six months between the last rate hike in a cycle and the first rate cut. In this regard, the Fed has a dual mandate which includes an employment dynamic on top of price stability. This offers the Fed even greater flexibility versus other central banks which only have an inflation target, to respond with stimulus, and we believe it will from the third quarter of 2023 onwards. Market rates: Under pressure to back off now and test higher in the months ahead Markets need to re-think the sustainability of the bond rally seen in the past month. Nominal and real rates are up, but not by very much. With no sense as of yet that the Fed is done, we continue to call for market rates to move higher. We likely have seen the highs at 4.25%, although our models in fact call for a peak with a 5% handle, and the anomaly here is how big the discount is between the 10yr yield and the likely peak in the funds rate. The 50bp fall in the US 2yr yield between this FOMC and the previous one correlated with a steady ratchet lower in the market discount for the terminal Fed funds rate. This also ratcheted lower the upward pressure on the 10yr yield, which tends to be influenced by where the funds rate peaks. It still leaves us with a conundrum, where the current 10yr yield looks quite low relative to the likely terminal funds rate. If the 10yr stays here, the discount would be in excess of 100bp, which is quite large relative to the past few decades. We think the 10yr can narrow that discount in the coming month or so. Powell had little to say of any materiality on the bond-buying unwind. There had been a small probability attached to the possibility that the Fed could have considered consideration of outright bond selling (as opposed to the less impactful ongoing bond roll-off). The rationale could have been to mute, or even reverse, the significant fall in long-end yields seen in the past month, done with a view to re-tightening financial conditions. In the event, the Committee is not looking into this just yet. It remains an option, however, especially should the Fed require an overall tightening in liquidity circumstances to push in the same direction as the higher rates policy does. The Fed also remains relaxed with the ongoing volumes going back to them on their reverse repo facility. Recently this has ticked back up again towards the $2.2tr area, partly as the US Treasury curbs bills issuance in an effort to smooth the rise into potentially hitting the debt ceiling by mid-2023. But that aside, the bond roll-off programme has done so more than cause the volume of cash going back to the Fed to plateau. The repo market would like to see it fall. But from the Fed’s perspective this is a facility that’s doing its job; mopping up liquidity at 5bp above the funds rate floor. So, no change in the Fed’s tune on this. But 2023 should see these volumes ultimately wind lower, albeit slowly over the course of the year. FX: Fed reality-check can slow the dollar's descent Today’s hawkish hike from the Fed can deliver some support to the free-falling dollar. Heavy losses from early November were built on the Fed declaring the all-clear on inflation and being in a position to cut rates in the second half of 2023. That may be the case, but the Fed is not ready to declare that today. The short-term market reaction of some modest bearish inversion of the US curve should act as a brake on the most recent down leg of the dollar. We had been concerned this week that the short end of the curve was beginning to crumble – which could have seen the dollar sell off a further 2-3%. Instead, the Fed holding onto rate hikes in 1Q23 and to some degree pushing back against the scale of expected easing – 200bp of cuts had been priced in by the end of 2024 – can help the dollar stabilise. It is probably a little dangerous to call EUR/USD back to 1.05 immediately since there is still a small chance the ECB surprises with a 75bp hike tomorrow and the dollar seasonally struggles in December. Yet today’s communications have not fed the dollar bears and we suspect investors will not want to chase the dollar too much lower into year-end. EUR/USD closing back below 1.06 for a couple of days would be the first sign that the rally had lost momentum.  Read this article on THINK TagsUS Recession Powell Interest rates Federal Reserve Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Canada's Inflation Expected to Ease in May, Impacting BoC's Rate Decision

Fed Chair Powell bears in mind inflation prints, but they seem to be insufficient for FOMC

Ipek Ozkardeskaya Ipek Ozkardeskaya 15.12.2022 08:19
We knew that the Federal Reserve (Fed) Chair Jerome Powell would not tell investors 'Ho ho ho, inflation is now 7%, we will stop tightening policy and hiking the rates. So, you can buy stocks, bonds, cryptocurrencies, meme stocks, whatever you find. Merry Xmas!'   No, he was not going to do that, and he did not.   As expected, the Fed raised its interest rates by 50bp to 4.25/4.50% range, the dot plot showed that the Fed officials' median forecast for the peak Fed rate rose to 5.1%.   Plus, the distribution of rate forecasts skewed higher, with 7 officials out of 19 predicting that the rates could rise above 5.25%   Moreover, the inflation forecast for next year was revised higher DESPITE the latest decline in inflation.   And the median rate forecast for 2024 was revised higher to 4.1%.   In summary, the FOMC message was very clear: the Fed is not ready to stop hiking rates - even though they will be hiking by smaller chunks.  Jerome Powell said yesterday that the last two CPI reports were 'a welcome reduction in the monthly pace of inflation', however, 'it will take substantially more evidence to have confidence' that the job is done.   Crystal clear. No pause, no cut, no softening in sight.   Waking up from a dovish dream  US equities woke up from a dovish dream with a cold shower yesterday.   What's interesting is, some investors still wanted to ignore the hawkish Fed comments and buy the dips, because the new Fed trade is no longer about how high the Fed rate will go but 'how soon the Fed will start cutting the rates again'.  But that reasoning has limits, as it ignores the additional pain that the stock markets should endure due to an eventual recession – the trigger for rate cuts expectations - which could trigger a fresh wave of sharp selloff. As a result, the S&P500 closed the session 0.60% lower, and there is a stronger case building for a deeper downside correction toward and below the 100-DMA, 3930, than a ytd trend reversal with a third, and successful push above the 4100 resistance. The falling earnings expectations and slowing economic activity is the next challenge for stock investors as the risk of another, and a sharp selloff is still very much alive. Same for Nasdaq. The index closed 0.80% lower after the Fed decision, and will likely re-test the support at 11430/11450, and eventually clear it.   Read next: The Australian Dollar Held Above $0.68, Today The Fed Will Make Its Last Decision Of The Year| FXMAG.COM So for those who wanted to see Santa come around this Xmas: he will probably be stuck somewhere in the snow.  USD rebound should remain limited  The US dollar index rebounded from the lowest levels since summer, yet the dollar appetite will likely remain soft, and the rallies will likely be seen as interesting opportunity to sell the top against other majors, given that the Fed's hawkishness has been wildly priced since mid-2021, and a further downside correction would not be surprising, even though it's somewhat counterintuitive to rush back to majors like the euro, which deals with a terrible energy crisis and faces a severe recession if it's not already in one, the pound, which is hammered by economic and political disasters in the UK, amplified by the Brexit's consequences, and the yen, where the BoJ refuses to take a policy action, letting inflation run hot by keeping rates in the negative territory...  Not the same 50bp...  Today, the European Central Bank (ECB), the Bank of England (BoE) and the Swiss National Bank (SNB) are also expected to hike the rates by 50bp to tame inflation in Europe.  But the ECB's and especially the BoE's 50bp hike will likely sound more dovish than the Fed's 50bp hike.  The ECB is expected to revise its inflation forecast higher – which justifies a rate hike, but pull its growth predictions lower – which doesn't make a rate hike seem 'that' right.   If the ECB officials could spit out a date for the start of the QT, that would be a good thing.   The tighter ECB policy – and if all goes well, a softer US dollar - is expected to give further support to the single currency in the coming months, and help the pair extend gains toward the 1.10 mark.   And the euro recovery is one thing that could tame a part of inflationary pressures, making the raw material and energy costs more affordable for European businesses and households.  Across the Channel, the BoE is also expected to hike by 50bp, but try not to boost the BoE hawks. Data released yesterday showed that inflation in Britain slowed to 10.7% in November, which is not a victory, but the economic difficulties in Britain will likely keep the BoE's hands tied.  And finally in Switzerland, the National Bank is also expected to raise the rates by 50bp to keep up with the others. The strong franc has been the SNB's best arm in its fight against inflation. And a 50bp in Switzerland - where the inflation is around 3%, which makes it three times lower than inflation in Europe and around two times lower than inflation in the US - is a bigger hike in real terms, and should further support the franc. The dollar-franc is expected to fall to 0.88/0.90 range in the continuation of the actual bearish trend.
Despite The Improvement In The Outlook Due To Falling Energy Prices, The Economic Environment In Britain Remains Difficult

There Are Now Many More Uncertainties Surrounding The Bank Of England

InstaForex Analysis InstaForex Analysis 15.12.2022 08:30
The Fed meeting took place (and ended) last night, but the Bank of England meeting, whose outcomes will be made public to the market in a few hours, is now more crucial. How come? Since so many analysts, banks, and businesses in the financial sector had been discussing the Fed meeting's outcomes, the market was prepared for them. Additionally, the FOMC members themselves have stated time and time again that December will see a slowdown in interest rate growth. Only Jerome Powell's performance was intriguing. However, there are now many more uncertainties surrounding the Bank of England, and the direction of future monetary policy is obscured. Read next: From the fundamental point of view, these facts may become a game changer, sending the EUR/USD pair to the parity level | FXMAG.COM A lot of market participants believe that the Bank of England is unable to raise interest rates to a level that is "restrictive." As a result, the UK's inflation rate can return to 2% for a very long time. Given the recent slowdown, it might reach this level in the US within a year. Many people think that the British regulator will need to increase the rate even further, so it might need to be prepared. Andrew Bailey predicts that household debt will rise in the coming year. Real-world mortgage payments will rise. In the UK, wages are increasing much more slowly than other prices. Payments may become a significant issue for 70% of British people with "mortgages" in 2023. Many might start selling their homes, and landlords might raise the rent. The British economy will experience these issues in addition to a two-year recession. Long-term high inflation is expected, so the Bank of England may only raise interest rates by 50 basis points today. While the British regulator's decision will be good for economic growth, it will also lead to many other inflationary issues. Since there is no discernible difference in the rate of economic growth if people's real incomes are falling by double-digit percentages, economic growth is not currently a top priority. If we use the Fed's strategy to combat inflation, the rate should increase by 75 points for at least another couple of meetings. This might lend the Briton even more support. However, the "hard scenario" cancellation could result in the instrument's long-awaited collapse. Read next: Given the peculiarities of the US labor market and the high labor mobility, the acceptable unemployment rate is considered to be 5.0%| FXMAG.COM Additionally, I'd like to point out that although British inflation has started to fall, it has only retreated from its 41-year high. Only after three to four months will it be possible to accurately assess this decline and determine how much more the Bank of England should raise interest rates to slow price growth to levels close to 2%. The Bank of England controls the British pound's future in the interim. Due to a rate increase of only 50 points, the market might see a significant decline in demand for the pound sterling. Since both instruments have been circling and creating a descending set of waves for several weeks, this is the scenario I am hoping for. I'm also hoping for a drop in demand for the euro currency after a 50-point increase in the ECB rate. I conclude from the analysis that the upward trend section's construction has grown more intricate and is almost finished. As a result, I suggest making sales with targets close to the estimated 0.9994 level, or 323.6% Fibonacci. You should wait for a strong sales signal because the upward section of trend could become even more extended and complicated. The likelihood of this happening is still high. The construction of a new downward trend segment is predicated on the wave pattern of the Pound/Dollar instrument. I cannot advise purchasing the instrument at this time because the wave marking permits the construction of a downward trend section. With targets around the 1.1707 mark, or 161.8% Fibonacci, sales are now more accurate. The wave e, however, can evolve into an even longer form Relevance up to 05:00 2022-12-16 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/329860
Weekly Commitment of Traders update - Buying of crude oil moderated, ICE gas oil net long reduced to a 30-month low

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

Saxo Bank Saxo Bank 15.12.2022 08:50
Summary:  The widely expected 50bps rate hike by the Fed came along with hawkish revision of the dot plot in which the terminal rate projection was increased to 5.1% from September’s 4.6%. Equities and bonds fell but the reaction faded later at Chair Powell’s presser where he hinted that policy is close to “sufficiently restrictive”. Dollar ended the day lower. Meanwhile, China’s plan to go ahead with the Central Economic Work Conference despite the surge in cases boosted sentiment. Crude oil prices were firmer on IEA expecting higher prices next year. A plethora of G10 central banks, including the BoE, ECB, SNB, & Norges Bank, meet today. What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) erase part of the post-FOMC announcement declines Equity markets were in a whipsaw falling sharply after the announcement of a 50bps rate hike which was accompanied by a hawkish shift in the dot plot which brought the terminal rate projections to 5.1% for end-2023 from 4.6% at the September meeting. Some of the decline was however reversed later as Chair Powell press conference went underway. Fed Chair Powell started the press conference with a hawkish tone in which he noted there is still some ways to go and the Fed needs to see substantially more evidence to have confidence inflation is on a sustained downward path back to target, although there was some reprieve after Powell stated during the Q&A that he thinks policy is getting to a pretty good place and close to sufficiently restrictive. S&P 500 ended the session down 0.6% and Nasdaq 100 was down close to 0.8%. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) edged higher in a lackluster session Hong Kong and Chinese stocks edged up higher. The Bloomberg story speculating about a delay in China’s annual Central Economic Work Conference due to a surge in Covid inflections in Beijing did not worry investors much. Investors were encouraged by signs that the Chinese authorities were not reversing course despite outbreaks after the easing of restrictions. China will stop reporting infections without symptoms as mandatory testing has been dropped. Hang Seng Index climbed 0.4%. CSPC Pharmaceutical (01093:xhkg), rising 6.5%, was the best performer in the benchmark index. Hengan (01044:xhkg), Sunny Optical (02382:xhkg), Techtronic Industries (00669:xhkg), Li Ning (02331:xhkg), and Baidu (09888:xhkg) were other outperformers, gaining between 3% and 6%. Previously battered Chinese educational services providers soared while online healthcare names pulled back from recent strength on profit-taking. Alibaba Health (00241) slid 7%. In A-shares, CSI 300 gained 0.3%, with semiconductor, tourism, lodging, and Chinese liquor stocks advancing. FX: Hawkish Fed unable to provide a lasting bid to the dollar The USD eventually settled lower on Wednesday following the FOMC rate decision and the press conference by Chair Powell. Initial positive reaction following the upside adjustment in the dot plot was erased as Chair Powell said he thinks policy is getting to a pretty good place and policy is getting close to sufficiently restrictive. GBPUSD tested the critical 1.2450 with UK CPI also coming in softer than expected at 10.7% and cooled from the prior 11.1%. EURUSD got in close sight of 1.0700 while USDJPY fluctuated between 135-136. Crude oil (CLF3 & LCOG3) extended the rally on IEA outlook Crude oil prices surged higher again on Wednesday with the IEA warning that prices may rise next year as sanctions squeeze Russian exports. It expects its output will fall by 14% by the end of the first quarter. It also increased estimates for global demand by 300kb/d, in a nod to China’s reopening. Overall crude consumption is expected to rise 1.7mb/d next year to average 101.6mb/d. A weaker US dollar despite the Fed’s hawkish shift in the dot plot also underpinned, while the unexpectedly large increase in US inventories was shrugged off. WTI futures rose above $77/barrel while Brent touched $83.  Read next: Given the peculiarities of the US labor market and the high labor mobility, the acceptable unemployment rate is considered to be 5.0%| FXMAG.COM What to consider? FOMC sets the terminal rate forecast at 5.1%, above market expectations The Fed voted unanimously to lift the Federal Funds Rate target by 50bps to 4.25-4.50%, as expected, downshifting the pace of rate hikes. While the statement was broadly unchanged, the updated economic projections showed Fed Funds at 5.125% by December 2023 and core PCE still at 3.5% by that time. That implies 75bps of more tightening in this cycle, which will be seen in 2023, but the markets are still pricing in a peak rate of 4.87%. After that point, the dot plot is far more distributed, but the median projects the Federal Funds Rate target at 4.1% by the end of 2024, suggesting 100bps of rate cuts. Equities did see a negative reaction to the upside surprise in terminal rate projections, but this may remain short-lived as markets remain focused on incoming data. Bond markets had little reaction to the Fed’s updated dot plot. Dollar fell. Australia employment report better-than-expected Australia’s November employment rose 64k, higher than the +19k estimate and more than the revised +43k gains for October. Jobless rate was steady at 3.4% and participation rate came out higher to return to the record highs of 66.8% (vs. estimate 66.6%). The strength in the labor market will continue to provide room to the Reserve Bank of Australia to continue with its modest rate hikes, after it has already downshifted to a smaller rate hike trajectory. A weak set of Chinese activity data is expected Economists surveyed by Bloomberg are forecasting that China’s retail sales shrank sharply by 3.9% Y/Y in November. The potential weakness is likely attributed to poor performance of auto sales, dining-in activities, and sales during the “double-11” online shopping festival in the midst of Covid-19 lockdowns during the best part of November. November auto sales in China fell by 9.2 %Y/Y and by 10.5% M/M. Courier parcels processed on Nov 11 fell 20.7% Y/Y. The growth in industrial production is expected to fall to 3.7% Y/Y in November from 5% to 3.7%, following a weak November NBS manufacturing PMI and soft high-frequency data of steel production. Year-to-date fixed asset investment is expected to edge0 down to 5.6% from 5.8%, dragged by stringent pandemic control practices. ECB also likely to downshift to a smaller rate hike The European Central Bank (ECB) is also expected to slow down its pace of rate hikes to a 50bps increase this week. Headline inflation eased slightly in November, coming in at 10.0% YoY (exp. 10.4%), but was overshadowed by an unexpected rise in core inflation 6.6% YoY (exp. 6.3%, prev. 6.4%). While there is likely to remain some split in ECB members at this week’s meeting, the central bank’s Chief Economist Lane remains inclined to take into account the scale of tightening done so far. There is also uncertainty on the announcement of quantitative tightening. Bank of England may remain more divided than the other major central banks The Bank of England is also expected to follow the Fed and the ECB and downshift to a smaller rate hike this week, but the decision will likely see a split vote. A host of key data, including GDP, employment and inflation will be due this week in the run up to the BOE decision, and significant positive surprises could tilt the market pricing more in favour of a larger move which also creates a bigger risk of disappointment from the central bank. Headline annualised inflation advanced to 11.1% Y/Y in October, while the core rate remained at an elevated level of 6.5%. Consensus expects inflation to cool slightly to 10.9% Y/Y in November, but the core to remain unchanged at 6.5% Y/Y. Wage pressures are also likely to be sustained, and the cooling in the labor market will remain gradual. The U.S. is adding China’s top memory chips maker to the trade blacklist The U.S Department of Commerce is reportedly moving Yangtze Memory Technologies, a leading memory chip maker in China, together with 30+ other Chinese companies, from the Unverified List to the Entity List, after the expiry of a 60-day period for the company to answer requests for information about its business and customers. The Entity List is the official export control blacklist that restricts companies from access to American technologies. Read next: From the fundamental point of view, these facts may become a game changer, sending the EUR/USD pair to the parity level | FXMAG.COM New Zealand Q3 GDP comes in above expectations A big positive surprise in NZ Q3 GDP which came in at 2.0% Q/Q sa vs expectations of 0.9% and higher than last quarter’s revised 1.9%. With the possibility of a recession in 2023 highlighted yesterday, this print suggests that there is a substantial amount of work left to be done by the Reserve Bank of New Zealand to dampen demand in order to curb inflation. Bank of Japan policy review speculation gathers further pace Some reports suggested that the BOJ could review policy next year, after pay growth and any slowdown in the global economy are closely examined. The results of spring wage negotiations come in mid-March, after Governor Haruhiko Kuroda's final policy meeting, so an assessment would probably be done after he departs. The review could reaffirm the existing ultra-loose framework, but possibility of some tweaks to the yield curve control policy remains as inflationary pressures remain a concern.   For our look ahead at markets this week – Read/listen to our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: Market Insights Today: FOMC’s hawkish dot plot; more G10 central bank meetings ahead – 15 December 2022 | Saxo Group (home.saxo)
Serious liquidity crisis? According to Franklin Templeton, a massive, but unlikely deposit flight from Credit Suisse would have to happen

The Swiss National Bank Is Expected To Hike Another 50bp | The BOJ Could Review Policy Next Year

Saxo Bank Saxo Bank 15.12.2022 08:55
Summary:  The FOMC meeting and accompanying economic and Fed Funds projections saw the Fed attempting to bolster its inflation fighting credibility with forecasts of a weaker economy and higher inflation and policy projections than in September. But after some back-and-forth churning, the market decided it was largely a non-event, with very minor shifts in the USD and US yields. Today, we have four more G10 central banks on the menu.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) The market initially took the hawkish FOMC rate and inflation projections at face value last night, plunging sharply, if briefly, before rebounding slightly into the close. The trading ranges for the main indices are generally sandwiched in a narrow zone between important support and resistance. In the case of the S&P 500, the upside range high is clearly marked at just above 4,100, while the downside support level comes in the 3,900-20 area. FX: The USD merely churned around with little conviction on latest hawkish Fed blast The new FOMC monetary policy statement and economic and policy projections (more below) were hawkish as the Fed raised the median policy forecast for the end of next year to above 5%, but after a volatile reaction, traders decided they were unimpressed and the US dollar largely fell back to where it was trading ahead of the meeting as only the shortest part of the yield curve was marked slightly higher in recognition of the Fed’s hawkishness and risk sentiment stabilized. If the market is willing to ignore Fed guidance, what should we expect from the market’s treatment of today’s central bank meetings? Watching USDJPY cycle lows and the 200-day moving average where the pair is sticky (currently near 135.65) and the cycle top in EURUSD just ahead of 1.0700 after yesterday’s stab at posting new highs. Crude oil (CLF3 & LCOG3) Crude oil trades softer ahead of the reopening of a key pipeline in the US and following a strong session on Wednesday where prices found support after the IEA warned that prices may rise next year as sanctions squeeze Russian exports. It expects its output will fall by 14% by the end of the first quarter. It also increased estimates for global demand by 300kb/d, in a nod to China’s reopening and more gas-to-oil switching. Overall crude consumption is expected to rise 1.7mb/d next year to average 101.6mb/d. China’s reopening and a weaker US dollar despite the Fed’s hawkish shift in the dot plot also underpinned prices, while the unexpectedly large 10mb increase in US inventories and signs of slowing demand for gasoline and diesel were shrugged off. Both Brent and WTI are now facing resistance at the 21-day average, at $83.25/b and $77.80/b respectively. Gold (XAUUSD) was little changed after the FOMC raised its terminal rate forecast ... and Fed Chair Powell said the central bank isn’t close to ending its battle against inflation. Supported by ten-year US yields holding steady around 3.5%, the most inverted yield curve in four decades on recession angst and the dollar trading near a six-month low. However, following a 180-dollar rally during the past five weeks and after struggling to break resistance around $1808 this week, the metal increasingly looks ripe for a period of consolidation which may see it drift lower towards $1745, the 38.2% retracement of the run up since early November. A correction of this magnitude may setup an eventual and potential healthier and robust attempt to break higher. US treasury yields underwhelmed by FOMC meeting (TLT:xnas, IEF:xnas, SHY:xnas) The FOMC accompanying projection materials saw the Fed projecting significantly higher inflation for 2023 than expected, and a higher median Fed Funds rate projection just north of 5%. This sparked a sharp reaction in Treasury yields, with the 2-year rising more than 10 basis points briefly before sawing that move in half, while the 10-year yield only rose about 5 bps before wilting back just below 3.50%. Incoming data will set to the tone from here as the market was largely unmoved by the Fed’s rather bold rate projections of its policy rate and inflation for 2023 in last night’s FOMC meeting. Read next: Given the peculiarities of the US labor market and the high labor mobility, the acceptable unemployment rate is considered to be 5.0%| FXMAG.COM What is going on? FOMC sets the terminal rate forecast at 5.1%, above market expectations The Fed voted unanimously to lift the Federal Funds Rate target by 50bps to 4.25-4.50%, as expected, downshifting the pace of rate hikes. While the statement was broadly unchanged, the updated economic projections showed Fed Funds at 5.125% by December 2023 and core PCE still at 3.5% by that time. That implies 75bps of more tightening in this cycle, which will be seen in 2023, but the markets are still pricing in a peak rate of 4.87%. After that point, the dot plot is far more distributed, but the median projects the Federal Funds Rate target at 4.1% by the end of 2024, suggesting 100bps of rate cuts. Equities did see a negative reaction to the upside surprise in terminal rate projections, but this may remain short-lived as markets remain focused on incoming data. Bond markets had little reaction to the Fed’s updated dot plot. The dollar fell. Australia employment report better-than-expected Australia’s November employment rose 64k, higher than the +19k estimate and more than the revised +43k gains for October. The jobless rate was steady at 3.4% and participation rate came out higher to return to the record highs of 66.8% (vs. estimate 66.6%). The strength in the labor market will continue to provide room to the Reserve Bank of Australia to continue with its modest rate hikes, after it has already downshifted to a smaller rate hike trajectory. New Zealand Q3 GDP comes in above expectations A big positive surprise in NZ Q3 GDP which came in at 2.0% Q/Q sa vs expectations of 0.9% and higher than last quarter’s revised 1.9%. With the possibility of a recession in 2023 highlighted yesterday, this print suggests that there is a substantial amount of work left to be done by the Reserve Bank of New Zealand to dampen demand in order to curb inflation. What are we watching next? The Bank of England may remain more divided than the other major central banks The Bank of England is also expected to follow the Fed and the ECB and downshift to a smaller rate hike this week, but the decision will likely see a split vote. A host of key data, including GDP, employment and inflation will be due this week in the run up to the BOE decision, and significant positive surprises could tilt the market pricing more in favour of a larger move which also creates a bigger risk of disappointment from the central bank. Headline annualised inflation advanced to 11.1% Y/Y in October, while the core rate remained at an elevated level of 6.5%. Consensus expects inflation to cool slightly to 10.9% Y/Y in November, but the core to remain unchanged at 6.5% Y/Y. Wage pressures are also likely to be sustained, and the cooling in the labor market will remain gradual. ECB is also likely to downshift to a smaller rate hike The European Central Bank (ECB) is also expected to slow down its pace of rate hikes to a 50bps increase this week. Headline inflation eased slightly in November, coming in at 10.0% YoY (exp. 10.4%) but was overshadowed by an unexpected rise in core inflation of 6.6% YoY (exp. 6.3%, prev. 6.4%). While there is likely to remain some split in ECB members at this week’s meeting, the central bank’s Chief Economist Lane remains inclined to take into account the scale of tightening done so far. There is also uncertainty on the announcement of quantitative tightening. Bank of Japan policy review speculation gathers further pace Some reports suggested that the BOJ could review policy next year, after pay growth and any slowdown in the global economy are closely examined. The results of spring wage negotiations come in mid-March, after Governor Haruhiko Kuroda's final policy meeting, so an assessment would probably be done after he departs. The review could reaffirm the existing ultra-loose framework, but possibility of some tweaks to the yield curve control policy remains as inflationary pressures remain a concern. Norges Bank and Swiss National Bank also up this morning The Swiss National Bank is expected to hike another 50 basis points, taking its policy rate to 1.00%, with little anticipation of pointed guidance coming into this meeting as Swiss inflation has peaked at 3.50% for the cycle and was 3.0% for the most recent print. The Norges Bank, meanwhile, seems more interested in signaling that policy tightening is set to cease and may indicate that today’s expected 25 basis point hike to 2.75% could be the last for now as it is concerned about weakness in the “mainland” (non-oil & gas) economy after the worst Regions Survey outlook since the global financial crisis. Earnings to watch The big name reporting today is Adobe Inc., the former high-flyer that trade north of 700 before rolling over to below 300 on the rise in interest rates and as its steady pace of top-line growth decelerated in recent quarters. The stock closed yesterday at 339. Many highly-valued growth stocks have been extremely sensitive to both execution for the current quarter and revenue expectations for the coming quarter, so traders should brace for this earnings report after market hours today. Today: Adobe Friday: Accenture, Darden Restaurants Read next: From the fundamental point of view, these facts may become a game changer, sending the EUR/USD pair to the parity level | FXMAG.COM Economic calendar highlights for today (times GMT) 0830 – Switzerland SNB Policy Rate Announcement 0900 – Switzerland SNB press conference 0900 – Norway Norges Bank Deposit Rate announcement 1200 – UK Bank of England Rate Announcement 1315 – Eurozone ECB Rate Announcement 1315 – Canada Nov. Housing Starts 1330 – US Dec. Empire Manufacturing 1330 – US Nov. Retail Sales 1330 – US Weekly Initial Jobless Claims 1330 – US Dec. Philadelphia Fed Business Outlook 1345 – Eurozone ECB Press Conference 1415 – US Nov. Industrial Production 1530 – EIA's Natural Gas Storage Change 1900 – Mexico Rate Announcement 0001 – UK Dec. GfK Consumer Confidence Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source:Financial Markets Today: Quick Take – December 15, 2022 | Saxo Group (home.saxo)
BSP Maintains Rates Amid Moderate Inflation; Eyes Further Tightening if Needed

The US 10-Year Treasury Bond Yields Probe A Two-Day Downtrend

TeleTrade Comments TeleTrade Comments 15.12.2022 09:29
US Dollar Index rebounds from six-month low, snaps two-day downtrend. Fed announced 50 bps rate increase, showed readiness to keep it higher for long. A reassessment of Fed’s rate bias seems favoring US Treasury yields and the greenback. Multiple central bank announcements, US Retail Sales eyed for fresh impulse. US Dollar Index (DXY) remains mildly bid around 104.00 as it prints the first daily gains in three during the early Thursday morning in Europe. In doing so, the greenback’s gauge versus the six major currencies traces the firmer US Treasury bond yields amid sluggish market sentiment. That said, the DXY initially failed to cheer the US Federal Reserve’s (Fed) 0.50% interest rate hike and the readiness to keep it higher for long as traders didn’t find anything new from the statements or Fed actions that were unexpected. However, a reassessment of the Federal Open Market Committee’s (FOMC) moves highlights upward revision of inflation forecasts and a cut in the growth forecasts, as well as the 5.1% terminal rate, as the key hawkish actions and propelled the US Treasury bond yields and the DXY. Read next: Given the peculiarities of the US labor market and the high labor mobility, the acceptable unemployment rate is considered to be 5.0%| FXMAG.COM That said, the US 10-year Treasury bond yields probe a two-day downtrend near 3.50% while the two-year US bond yields also extend recovery from the monthly low while printing the first daily positive in three near 4.25%. Also likely to have stopped the US dollar’s downside could be the cautious mood ahead of the multiple central bank announcements, including from the Swiss National Bank (SNB), European Central Bank (ECB) and the Bank of England (BOE), etc. Amid these plays, the S&P 500 Futures remain directionless while the Asia-Pacific shares grind lower. Moving on, the aforementioned central bank announcements will join the US Retail Sales for November, expected -0.1% MoM versus 1.3% prior, to direct short-term DXY moves. Technical analysis A one-month-old descending support line, close to 103.50 by the press time, joins the oversold RSI conditions to tease DXY bulls. Read next: From the fundamental point of view, these facts may become a game changer, sending the EUR/USD pair to the parity level | FXMAG.COM Also read: US Dollar Index Price Analysis: Monthly support teases DXY bulls amid oversold RSI
Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

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

Swissquote Bank Swissquote Bank 15.12.2022 10:46
As expected, the Fed raised its interest rates by 50bp to 4.25/4.50% range, the dot plot showed that the Fed officials’ median forecast for the peak Fed rate rose to 5.1%. Forecasts Plus, the distribution of rate forecasts skewed higher, with 7 officials out of 19 predicting that the rates could rise above 5.25%. Moreover, the inflation forecast for next year was revised higher DESPITE the latest decline in inflation. Read next: Given the peculiarities of the US labor market and the high labor mobility, the acceptable unemployment rate is considered to be 5.0%| FXMAG.COM And the median rate forecast for 2024 was revised higher to 4.1%. In summary, the FOMC message was very clear: the Fed is not ready to stop hiking rates - even though they will be hiking by smaller chunks. Today's decisions Today, the European Central Bank (ECB), the Bank of England (BoE) and the Swiss National Bank (SNB) are also expected to hike the rates by 50bp to tame inflation in Europe. Watch the full episode to find out more! 0:00 Intro 0:36 Powell dashes dovish Fed hopes 2:40 Stocks fell, and could fall lower 4:30 USD gained, but may not gain much 5:33 ECB to hike by 50bp 7:27 BoE to hike by a dovish 50bp 8:50 SNB to hike by 50bp, as well! But a 50bp hike is not the same for all, as they don’t have the same inflation levels! Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. Read next: From the fundamental point of view, these facts may become a game changer, sending the EUR/USD pair to the parity level | FXMAG.COM #ECB #BoE #FOMC #Fed #SNB #rate #decision #dotplot #USD #EUR #GBP #CHF #CPI #inflation #growth #forecasts #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
Hawkish Fed Minutes Spark US Market Decline to One-Month Lows on August 17, 2023

The Fed Has Slowed The Rate Of Rate Hikes, But Don't Expect The Fed To Change Its Policy Immediately

InstaForex Analysis InstaForex Analysis 15.12.2022 11:04
The euro and the British pound declined after yesterday's statements by Fed Chairman Jerome Powell that the central bank had yet to complete its anti-inflationary campaign to raise interest rates. Borrowing costs are now expected to be slightly higher than economists predict next year. "We still have some ways to go," Powell said at a news conference on Wednesday in Washington after the Federal Open Market Committee raised the key interest rate by 50 basis points from the range of 4.25%-4.5%. According to new projections from policymakers, rates will hit their highs at 5.1% next year and then fall to 4.1% in 2024, a higher level than previously thought. Powell claims that the size of the rate hike at the next meeting in February 2023 will depend on incoming data - leaving the door open for another move of half a percentage point or a step down to a quarter point. More importantly, Powell spoke out against the Fed changing its policy next year - bearing in mind the fact that rates could be lowered in the second half of 2023. "It will become appropriate to slow the pace of increases as we approach the level of interest rates that will be sufficiently restrictive to bring inflation down to our 2% goal," Powell said during the press conference. Against this backdrop, demand for risky assets waned and stock indices sagged as investors speculated that the Fed would halt rate hikes after the latest inflation data, which continued to decline for the third month in a row. Traders were also betting that borrowing costs would reach around 4.8% in May, followed by a 50 basis point cut in the second half of 2023. A couple of weeks ago, Powell signaled plans to moderate the pace of rate hikes and delivered on that promise, but one would not expect the Fed to immediately reverse its policy after several declines in the annual rate of inflation. The central bank cut the pace of rate hikes after four consecutive hikes by 75 basis points, the sharpest increase since Paul Volcker led the central bank in the 1980s. It will take time for the regulator to achieve its goals and it does not intend to retreat from them. Given that the economy has so far coped very well even with such a high cost of borrowing, we do not have to worry about a recession. With the inflation rate going down like that, we can probably avoid a serious problem. Yesterday, Powell made it clear that higher rates would affect the economy. The Fed's growth projections for 2023 were revised up by 0.5%. The 2022 GDP estimate was also raised slightly to 0.5%. As for the unemployment rate, the central bank raised its forecast to 4.6% next year from 3.7% in November. EUR/USD As the EUR/USD pair, demand for the euro has weakened and now everything will depend on the US retail sales data and the EuropeanCentral Bank's decision on monetary policy. To continue rising, the euro needs to break above 1.0670, which will spur the trading instrument to break through the new December high at 1.0720. Above this level, it would be easy to climb to 1.0740. In case of a decline in the trading instrument, only a drop below the support of 1.0625 may increase the pressure on the pair and push it to 1.0580, opening the way to the low of 1.0540. GBP/USD As for the GBP/USD pair, it is moving within the sideways channel. After yesterday's upward spurt, bulls reduced their appetite because of the statements of Jerome Powell and now everything depends on the Bank of England and its decisions. Now bulls need to break through 1.2395 to continue the uptrend. Settling above this level, the price may return to the area of 1.2440. After that, the British pound may soar to the area of 1.2490. The pressure on the trading instrument may return if bears take control over 1.2340. This is likely to push the pound/dollar pair back to 1.2290 and 1.2240 Relevance up to 08:00 2022-12-16 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/329911
Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

Saxo Bank Podcast: Market Reaction To Fed Decisions And Today's Heavy Central Bank Calendar And More

Saxo Bank Saxo Bank 15.12.2022 11:13
Summary:  Today we look at the FOMC waxing about as hawkish as one could expect with higher inflation and rate projections for next year, especially relative to market expectations. And yet, despite some churning, US yields and the US dollar reacted very modestly to the meeting. Still, this morning has seen some sudden USD strength and weak risk sentiment - could this be due to forward liquidity concerns rather than anything the Fed delivered yesterday? Thoughts on precious metals, crude oil, today's heavy central bank calendar and more also today's pod, which features Ole Hansen on commodities and John J. Hardy hosting and on FX. Read next: Given the peculiarities of the US labor market and the high labor mobility, the acceptable unemployment rate is considered to be 5.0%| FXMAG.COM Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.  Read next: From the fundamental point of view, these facts may become a game changer, sending the EUR/USD pair to the parity level | FXMAG.COM Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com. Source: Market shrugs off FOMC. Another agenda now? | Saxo Group (home.saxo)
The Price Of Gold Depends On The US Dollar, Better Than Expected Pending Home Sales Data From The US May Raise The US Dollar And Affect The Gold

The Decline Of Gold Quotes Looks Quite Logical In Response To The Hawkish Fed

InstaForex Analysis InstaForex Analysis 15.12.2022 11:18
You can disbelieve the Fed as much as you like, but going against it is like death. Gold perfectly understands this, reacting sensitively to monetary policy. And if the lion's share of FOMC officials predicts that the federal funds rate will rise by 75 bps in 2023, to 5.25%, and not by 50 bps, as the futures market expected before, then it would be nice for the bulls on XAUUSD to fix part of the profit on longs. Inflation is still very high by historical standards, the Fed's work is not yet done, and all this means that a stable upward trend in precious metals should not be expected. There will be serious pullbacks. Fed forecasts for the federal funds rate In fact, FOMC members are human beings first and foremost, and human beings make mistakes. At the end of 2021, the Committee predicted an increase in the cost of borrowing by 75 bps, to 1%, but in fact the rate rose to 4.5%. Twelve months ago, there was hope that inflation would slow down on its own without much intervention from the central bank. Now the dominant idea is that prices can be reduced to 3%–4%, but further movement towards the target looks very problematic. If not impossible. Read next: Given the peculiarities of the US labor market and the high labor mobility, the acceptable unemployment rate is considered to be 5.0%| FXMAG.COM In any case, the current 7% CPI is still very high, and it is inappropriate to say that the Fed's job is done. The further trajectory of the federal funds rate will depend on new data. Its 50 bps hike in February is not out of the question, which brings back investor interest in the disgraced U.S. dollar. Gold is anti-dollar and usually goes down when the American currency goes up, so the decline of the XAUUSD quotes looks quite logical in response to the hawkish rhetoric of the Fed. Dynamics of the U.S. dollar and gold What's next? In my opinion, the fall of the USD index has gone too far, and it would be nice for the precious metal to go for a correction amid profit-taking on longs by speculators. If the nearest U.S. macro statistics convince of the strength of the economy, the chances for the federal funds rate to rise to 5% in early February will increase, and the U.S. dollar will strengthen. On the contrary, worsening data will benefit Treasury bonds. Rising prices for these papers leads to a decrease in yields and turns on the green light before EURUSD and gold. Read next: From the fundamental point of view, these facts may become a game changer, sending the EUR/USD pair to the parity level | FXMAG.COM A lot depends on the main currency pair. The share of the euro in the structure of the USD index is 57%. At the moment, EURUSD remains stable due to the expectations of the ECB's "hawkish" rhetoric at the December 15 meeting. If the market is disappointed, the pair will collapse, dragging XAUUSD with it. Technically, on gold's daily chart, the "bears" are trying to implement the Anti-Turtles reversal pattern and the inside bar. If their opponents fail to catch the lower boundary of the latter at $1,796 per ounce, it will be an evidence of their weakness and a reason to form short positions. They can be increased later on a breakout of supports at $1,789, $1,783 and $1,777. At the same time, I wouldn't be too keen on selling. As the precious metal quotes move down, we're looking for an opportunity to fix profits and reverse. Relevance up to 08:00 2022-12-20 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/329899
Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

Rates Spark: Central Banks This Week Have Made Clear That Their Job Is Not Done Yet

ING Economics ING Economics 16.12.2022 08:35
The pace of hikes has slowed, but central banks have warned that more needs to be done. The ECB has been unusally clear in its pushback against market pricing. In the near term markets will have to question the sustainability of the recent rally. But look ahead into 2023 as a whole and lower yields still look like the right macro move Source: Shutterstock Slower hikes, but more needs to be done Despite having slowed the pace of hikes, central banks this week have made clear that their job is not done yet. To what degree that message got across to markets though not only depended on the determination conveyed by officials' communication, but also on the data backdrop against which those actions took place. Central banks this week have made clear that their job is not done yet US bonds for instance looked more comfortable sticking to their gains despite Fed Chair Powell signaling that rates would have to rise further. The latest two inflation prints coming in lower than expected - mind you, they are still far too high – allows the US market to have more conviction that the peak in inflation has been straddled, and now concerns shift to the downturn ahead as softer economic data undermines the Fed’s message. The Bank of England  still warned it could act forcefully after yesterday's 50bp. But as our economist writes, the Bank also showed signs of more caution given the balancing act it has to perform between mitigating the risks of a tight jobs market on the one hand, against mounting concerns about the housing market and the health of corporate borrowers on the other. The ECB managed to land a hawkish punch on the EUR front-end, the Fed and BoE failed to Source: Refinitiv, ING ECB offers clear pushback against market pricing The ECB is communicating against a backdrop where inflation is proving stickier - President Lagarde had a less arduous task of convincing markets from the onset than her US counterpart. Nonetheless, she was unusually strongly worded in her hawkishness, signaling further “significant” rate increases at “a steady pace”. She later clarified that this meant more 50bp rate hikes for “a period of time”. Summing it up she said that the ECB needs to do more than the market is pricing. It doesn’t get any clearer and money markets have ratcheted up their hike discount accordingly, with the terminal rate shifting up 27bp to 3.1%. That said, pricing in 123bp over the next three meetings, not quite the series of 50bp hikes, also shows markets still grappling with the tension between inflation and recession. Markets still grappling with the tension between inflation and recession To drive home the hawkish message the ECB also surprised markets by providing a concrete start date for quantitative tightening. We don’t have all technical details yet, but the 15bn on average per month that will roll off from March next year through the end of the second quarter represent roughly 50% of the overall amount maturing in that period. It is a faster start than we had anticipated and signals a readiness to pick up speed. The impact in EUR sovereign spreads over Bunds was a widening of the 10Y Italy/Bund spread by more than 10bp. It ended above 200bp for the first time since mid-November.  The QT announcement led to widened sovereign spreads but rates implied volatility is still declining Source: Refinitiv, ING Final words for the year This week’s central bank meetings point to higher rates in the short term as markets will have to question the sustainability of the recent rally, also given technical headwinds from resuming supply early next year. 2023 as a whole is shaping up to be a year of turning points. We look for market rates to peak out and drop and curves to re-steepen as rate cuts are contemplated, especially in the US. Another theme that has crystalized amid the flurry of central bank meetings is our call for a convergence of US and EUR rates. Read more about what we expect for 2023 in our rates outlook which we published in November. With that we conclude our daily coverage for this year. We wish you Happy Holidays and a successful New Year! Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Gold Stocks Have Performed Very Well Under Pressure

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

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

European Stocks Posted Their Biggest Drop In Months

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

Podcast: Craig Erlam Reviews The Latest Market News With Jonny Hart

Craig Erlam Craig Erlam 16.12.2022 09:49
OANDA Senior Market Analyst Craig Erlam reviews the latest market news with Jonny Hart. They discussed the Fed, ECB and BoE interest rate decisions as well as the latest moves in oil. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
"Global Steel Output Rises as Chinese Production Surges, Copper Market Remains in Deficit

There Will Probably A Rally Today And For The Remaining Two Weeks Until The End Of The Year

8 eightcap 8 eightcap 16.12.2022 09:55
Pressure returned on markets due to negative sentiment that followed the Fed's decision on interest rates. Most likely, players wanted to lock in gains on assets at more interesting prices, so even though the rate hike and latest economic statistics in the US were not surprising, they did their best to trigger a collapse, using recession fears as an excuse. Of course, it could also be because the Fed said they expected a slightly higher average interest rate level, but that was not new, as is the economic data that was lower than expected. Nevertheless, it is unlikely that yesterday's decline is a sign of a global reversal as an important leading indicator, which is US treasuries, did not show a strong increase. Stock markets are also beginning to grow since today's European session, and this may continue until the US trading session. It seems that the gold market is climbing as well, while dollar is declining smoothly. There will probably a rally today and for the remaining two weeks until the end of the year, which will not only recover yesterday's losses, but will also lead to a noticeable increase in risk appetite, accompanied by a weaker dollar. Forecasts for today: EUR/USD The pair halted at 1.0655, but stabilization in markets and increased drisk appetite could push it towards 1.0785. USD/CAD The pair is trading within the range of 1.3525-1.3700. If market sentiment improves, it could stay at 1.3525.   Relevance up to 08:00 2022-12-19 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/330015
The ECB Has Made It Clear That Rates Will Remain High Until There Is Evidence That Inflation Is Falling Toward The Target

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

Swissquote Bank Swissquote Bank 16.12.2022 12:28
The European Central Bank (ECB) raised its interest rates by 50bp as expected yesterday, and President Christine Lagarde said that the ECB will raise the rates by another 50bp at the next meeting. Then by another 50bp in the meeting after that. And another 50bp in the meeting after that. Then another one! Markets European yields spiked during Madame Lagarde’s speech. The DAX and the CAC fell more than 3%. The S&P500 slipped below its 100-DMA, as Nasdaq fell below its 50-DMA. The EURUSD spiked to 1.0736, the highest level since April. EU The significant hawkish shift in ECB’s policy stance, and the determination of the European leaders to shot inflation to the ground should continue giving some more support to the euro, therefore, price pullbacks in EURUSD could be interesting dip buying opportunities for a further rally toward the 1.10 mark. US And if the US dollar strengthened yesterday, it was certainly due to a heavy selloff in stocks and bonds that ended up with investors sitting on cash. Other than that, the data released in the US yesterday was not brilliant! The retail sales fell by most in a year; holiday shopping apparently didn’t help improve numbers. The Empire Manufacturing index tanked from 4.5 to -11, versus -1 expected by analysts. Both data hinted at a slowing economic growth in the US, which should normally boost recession fears and keep the Fed hawks at bay. And that could mean a further downside correction in the dollar in the run up to Xmas. Netflix In Individual stock news, Netflix slumped more than 8.5% on news that its new ad-supported versions didn’t kick off well, as most people preferred keeping ads away when they were in the middle of the Meghan and Harry drama! Watch the full episode to find out more! 0:00 Intro 0:35 Surprise hawkishness from Christine Lagarde 3:09 … sent sovereign bonds & stocks tumbling 5:13 … should help the euro recover 7:01 … at least against the British pound 8:14 Netflix falls as ad-supported versions sees weak demand Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #hawkish #ECB #Lagarde #speech #BoE #FOMC #Fed #SNB #rate #decisions #USD #EUR #GBP #CHF #DAX #CAC #SMI #EuroStoxx50 #Netflix #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
Mexican Rate Spread: Tight vs. Central Bank's Rate Spread and Implications for Dis-inversion

The Cable Market (GBP/USD) Held Back Bearish Enthusiasm, The ECB President Christine Lagarde Gave Support To The Euro

Kamila Szypuła Kamila Szypuła 16.12.2022 13:51
The dollar was little changed on Friday after jumping in the previous session as traders analyzed a string of central bank rate hikes and grappled with the prospect that borrowing costs could still rise. This week has been hot in central bank events. The Fed raised its key interest rate by 50 basis points on Tuesday. Jerome Powell's speech at the press conference sparked volatility in the market.Further tightening is excellent news for the US dollar. Yesterday, the ECB and the BoE also followed the Fed and raised rates by 50 bp. GBP/USD Thursday's Bank of England rate hike of 0.5 percentage point pushed base rates to highs not seen since 2008 (3.5%). But even that wasn't enough to prevent GBP/USD from its biggest daily drop in six weeks The markets interpreted the move as a "dovish" increase in interest rates, even though six of the nine members of the Monetary Policy Committee in London voted for it, and another member wanted stricter action. This division does not suggest that the Bank is willing to refrain from further rate hikes. Thursday's close of the day showed that GBP/USD fell convincingly below the uptrend line that had previously held back bearish enthusiasm for five weeks. This puts clear downward pressure on the pair. The pound fell on Friday against the euro and the U.S. dolar. Sterling fell 0.2% to $1.2160 against the dolar, versus the euro , the pound exchanged hands at 87.39 pence, 0.2% lower on the day. EUR/USD EUR/USD touched a post-ECB high of 1.0736 yesterday before consolidating gains around the 1.0650 area. The technical set-up for the pair remains positive. Yesterday the European Central Bank raised interest rates by 50 bp as expected. Thus, the rate level reached 2.50%. This level was last seen in 2008. The ECB expects it to increase further. The European Central Bank (ECB) will raise interest rates "significantly" in the coming months to fight entrenched inflation, The ECB President Christine Lagarde said yesterday, sending a hawkish signal to the market. This signal turned out to be crucial for the strength of the euro. The ECB's hawkish stance, if fully realized, suggests that the single currency has room to grow in the coming weeks. Read next: Knorr-Bremse Strengthens Its ESG Measures In Partnership With Deutsche Bank | Arizona Is Attractive For The EV Market | FXMAG.COM USD/JPY Against the Japanese yen, the dollar fell 0.54% to 137.01 on Friday. The Japanese yen held above 137 per dollar, facing renewed pressure after the US Federal Reserve offered a more hawkish outlook on its policy. The yen clearly depreciated after the Fed meeting. However, it may fall as the Bank of Japan meeting approaches early next week (19-20/12) AUD/USD The Australian dollar fell sharply to around $0.67, facing renewed pressure as major central banks presented a more hawkish monetary policy outlook than markets anticipated, adding to fears of a potential recession next year. In the European session, it will fall even more and is below $0.67. Moreover, the latest data showed that consumer inflation expectations in Australia hit a seven-month low in December, while the country's unemployment rate remained at 3.4% in November. Investors also reacted to data showing that Australian private sector activity contracted for the third straight month in December. Source: investing.com The RBA has now raised the cash rate for eight consecutive months and said it expects further tightening to bring down inflation. Source: finance.yahoo.com, investing.com, dailyfx.com
WTI Oil Shows Signs of Short-Term Uptrend Amid Medium-Term Uptrend Phase

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

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

The Japanese Authorities May Be Considering A Policy Review In 2023 | Elon Musk Is Seeking New Investors For Twitter

Saxo Bank Saxo Bank 19.12.2022 09:01
Summary:  A chorus of hawkish Fed speak and weakening US PMI data, together with global tightening concerns elevating further last week, continued to weigh on risk sentiment. The Japanese yen will remain in focus amid BOJ policy review chatter as the central bank meets this week. Musk’s Twitter saga continues, weighing further on Tesla. China’s reopening concerns also remain as the Covid waves spreads rapidly, but a steady economic growth focus by the authorities is seen. Oil and gold start the week being bid. What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) retreated for the third day on concerns about the Fed’s rate path in 2023 On Friday, the U.S, stock market continued to slide for the third day in a row since Fed Chair Powell’s hawkish leaning comments on the post-FOMC presser on Wednesday. Remarks from several other Fed officials reiterating that the Fed may have a long way to go and may need to raise rates beyond the 5.1% peak projected added to the risk-off sentiment. S&P 500 shed 1.1% and Nasdaq 100 declined 0.9%. All sectors within the S&P 500 lost, with real estate, consumer discretionary, and utilities falling the most. Ford Motor (F:xnys) was the biggest losing stock within the S&P500. The automaker dropped nearly 7% on Friday after it announced a price increase for its electric truck due to rising material costs and supply chain issues. Tesla (TSLA:xnas), falling 4.7%, was the second biggest laggard with the Nasdaq 100, following Moderna (MRNA:xnas) which declined 6.7%. Adobe, gaining 3% after reporting an earnings beat, was the best performer within Nasdaq 100, followed by Meta (META:xnas) which rose 2.8% on an analyst upgrade. US Treasury yield curve (TLT:xnas, IEF:xnas, SHY:xnas) steepened as the 2-year yield fell and the 10-year yield rose The 2-year notes were well bid and finished the Friday session 6bps richer at 4.18%. The 2-year notes are now yielding not only less than the 3-month Treasury bills but also the lower bound of the Fed Fund target rate. Softer than expected S&P Global US manufacturing as well as services PMI added fuel to the demand for the front end of the Treasury curve. Hawkish comments from the Fed’s Williams, Daly, and Mester might have contributed to the selling in the long end of the curve. Yields on the 10-year notes rose 4bps to 3.48%. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) Hong Kong and mainland Chinese stocks had a morning session on Friday. Hang Seng Index opened lower on the back of tumbling overseas markets overnight despite the positive news from the US accounting regulatory body removing the delisting risk of Chinese companies listed in the U.S. bourses for now. Stocks had a rally on market chatter of reopening of the border between Hong Kong and the mainland earliest next month before the gains waned and the Hang Seng Index was 0.4% higher. The front page editorial at the mouthpiece People’s Daily this morning is upbeat about growth in China but it does not catch much attention from investors. Leading Chinese property developers outperformed, gaining 2% to 6%.  In A-shares, CSI300 was modestly lower, driven by profit-taking in semiconductor names and weaknesses in autos. Real estate and educational services outperformed. In the evening, a readout was released setting out the key results of the Central Economic Work Conference. FX: Dollar starts the new week on a weaker footing as JPY gains on 2023 policy review speculations The US dollar ended last week lower again, albeit modestly, with majority of weakness against the NOK. EURUSD also took a brief look above 1.07 on ECB hawkishness but is heading below 1.06 this morning as peripheral spreads remain a concern and continue to cast doubts on how far ECB’s hawkishness can run. USDJPY had a volatile week as a drop below 135 was not maintained despite US yields remaining capped. A fresh bout of strength in coming to JPY this morning on reports of Japan PM Kishida considering a tweak in BOJ’s 2% inflation goal next year (read below). GBPUSD also reversed back below 1.2200 after a look above 1.2400 last week. AUDUSD traded close to 0.67 to start the new week, with one eye on RBA minutes due this week but another on China reopening delays resulting from a large number of workers calling in sick. Crude oil (CLF3 & LCOG3) prices advance on China’s growth push and US refilling SPR Oil prices started the week on a firmer footing, with WTI rising towards the $75/barrel mark and Brent heading back towards $80. While there are unconfirmed reports of massive number of cases and fatalities in China from the spread of Covid, the government’s official message continues to stress upon the need to expand consumption as the key economic priority for 2023. This helps paint a better demand outlook for oil, as global demand slowdown concerns continue to mount. Moreover, it was reported that the US is starting to replenish the Strategic Petroleum Reserve (SPR), starting with a 3-million barrel, fixed-price purchase.   What to consider? Hawkish Fed speak continues A number of Fed speakers on Friday continued to highlight the case for higher-for-longer inflation as investors give too much weight to peaking inflation in the US. Fed’s Daly (non-voter in 2023) said she was prepared to hold peak rates for more than 11 month if necessary, and highlighted the core services ex-housing inflation which is still quite elevated. Mester (non-voter in 2023) said she expected the Fed to hike more than its median forecast, and the Fed will need to maintain rates for an extended period once hikes are done. Williams (2023 voter) said it is possible that Fed hikes more than terminal rate forecast. US flash PMIs send warning signals Flash December PMIs for the US slumped to fresh lows, sending more warning signals about the economic momentum going into 2023. Manufacturing PMI came in at 46.2, below last month’s 47.7 and the expected 47.8, while the services PMI receded to 44.4 from 46.2 previously. Markets have however understood the Fed’s message on hiking rates into a possible recession, and do not take bad news as good news anymore. Japan PM Kisihda hinting at altering inflation goal for central bank Reports suggested that Japan PM Kishida plans to revise a ten-year-old accord with the BOJ and will consider adding flexibility to the agreement's 2% price goal. Kishida will discuss the matter with the next central bank governor, who'll take office in April. Furthermore, some more comments from officials this morning continued to signal that the authorities may be considering a policy review in 2023, and more hints are awaited at the BOJ meeting tomorrow. Ex-BOJ Deputy Governor Yamaguchi said that the BOJ must stand ready to tweak YCC next year if Japan's economy can withstand overseas economic risks, while also warning that once inflation expectations become entrenched, it is very hard to control them. China’s Central Economic Work Conference emphasized economic stability and had a conciliatory tone towards platform companies The Chinese Communist Party held its annual Central Economic Work Conference (CEWC) on Dec 15 and 16 to formulate China’s macroeconomic policy frameworks for 2023. According to the readout released, the CEWC emphasized policy priorities as being economic stability and high quality of development. Fiscal policies will be expansionary and monetary policies will be forceful and precise. The focus is however more on quality than quantity and the choice of words tends to imply “best effort” rather than hard targets. Mainland economists are expecting the GDP growth target, which will not be released until the two-session meetings in March 2023, to be around 5% for 2023. While there will be supportive measures to ensure stability in the housing markets, the rhetoric of “housing is for living in, not for speculation” is once again in the readout. Domestic consumption is a key focus. In industrial policies, weak links in manufacturing technology, energy, mining, agriculture, new energy, AI, biomanufacturing, green and low carbon, quantum computing, and the digital economy are priorities. Encouragingly, the CEWC removes last year’s “preventing the disorderly growth and expansion of capital” from its readout this year and instead pledges “support to platform enterprises in leading development, creating employment, shining in competing globally” and “support the development of the private sector and private enterprises”. EU considering cutting the proposed natural gas price The EU nations are likely to discuss cutting the gas price cap by almost a third today after the EUR275 per megawatt-hour was proposed last month. As energy crisis continues to threaten a fresh surge in inflation and growth slowdown in the region, it is also stretching government budgets to maintain popularity. But this will eventually be inflationary again, as price caps hardly work effectively. Elon Musk hinting at stepping down from Twitter Elon Musk is seeking new investors for Twitter at the same price he paid when he took the company private in October, Semafor reported. Musk is asking on Twitter the question that “should I step down as head of Twitter? I will abide by the results of this poll”. He said he is going reverse his prior decision to suspend the Twitter accounts of several journalist and reinstate them based on the results of a Twitter survey. Meanwhile, Musk's actions are weighing heavily on Tesla shares — and the selloff may continue.   For a global look at markets – tune into our Podcast. Source: Market Insights Today: Fed’s hawkish speak; BOJ’s policy review hints – 19 December 2022 | Saxo Group (home.saxo)
Supply Trends Resurface: Analyzing the Impact on Market Dynamics

The Situation Around Inflation And The US Dollar May Have An Impact On The Aussie Pair

TeleTrade Comments TeleTrade Comments 19.12.2022 09:36
AUD/USD struggles to defend bulls during the first positive day in three. Risk appetite remains mixed as hopes of more stimulus from China, Covid woes test sentient amid light calendar. Hopes of Australia-China diplomatic ties also underpin AUD/USD rebound. Reserve Bank of Australia Meeting Minutes, Federal Reserve’s preferred inflation data will be crucial for Australian Dollar traders. AUD/USD seesaws around the 0.6700 round figure as a short-term moving average defends the Australia Dollar buyers during early Monday morning in Europe. In doing so, the Aussie pair portrays the cautious optimism in the market amid sluggish moves and a light calendar. However, broad US Dollar weakness allows the pair buyers to cheer the first daily gains in three. China-linked news favor AUD/USD buyers. Be it a likely restoration of the Aussie-Sino ties or China’s readiness for more stimulus, AUD/USD has reasons to defend the latest recovery moves. In this regard Reuters said, “Australian Foreign Minister Penny Wong will visit China this week, Prime Minister Anthony Albanese said on Monday, signaling an improvement in diplomatic relations between Beijing and Canberra.” The news also stated that China President Xi Jinping and his senior officials on Friday pledged to shore up China's battered economy next year by stepping up policy adjustments to ensure key targets are hit. Alternatively, doubts over China’s economic growth and the reliability of the latest easing in Covid policy seem to challenge the AUD/USD pair buyers. It’s worth noting that the People’s Bank of China's (PBOC) defense of easy money policy also keeps the Australia Dollar firmer, due to the strong trade links between Australia and China. US Dollar fails to cheer hawkish Federal Reserve talks US Dollar Index (DXY) picks up bids from intraday low but prints 0.15% daily loss around 104.60 as traders struggle for clear directions. The reason could be linked to the hawkish comments from the US Federal Reserve (Fed) officials and softer US PMIs for December. Federal Reserve Bank of Cleveland President Loretta Mester and New York Federal Reserve President John Williams recently favored higher rates. On the other hand, the US S&P Global Manufacturing PMI dropped to 46.2 from 47.7 in November, as well as the market expectation of 47.7. Further, S&P Global Services PMI declined to 44.4 in December's flash estimate from 46.2 in November and market expectation of 46.8. AUD/USD traders await Reserve Bank of Australia Meeting Minutes, United States Inflation data In its latest monetary policy meeting, the Reserve Bank of Australia (RBA) announced 25 basis points (bps) rate hike and showed readiness for more. However, the RBA Governor Philip Lowe appeared less convinced of the hawkish move and hence the AUD/USD pair traders will pay more attention to confirm the dovish bias over the RBA, which in turn could weigh on the Australian Dollar. On the other hand, the Federal Reserve’s (Fed) preferred version of inflation, namely Friday’s US Core Personal Consumption Expenditures (PCE) - Price Index, expected 4.6% YoY and 5.0% prior, will be important for the AUD/USD pair traders. Should the inflation number appear softer, the US Dollar may have more downside to trace, which in turn could weigh on the Aussie pair. Additionally, Australia’s Mid-Year Economic and Fiscal Outlook will be important as economic fears gain momentum, which if confirmed could weigh on the AUD/USD prices. AUD/USD: Technical analysis AUD/USD bears mark another retreat from the 200-SMA, after an early November rebound from the stated key Simple Moving Average (SMA). Not only the U-turn from the 200-SMA, around 0.6680 by the press time, but an impending bull cross on the Moving Average Convergence and Divergence (MACD) indicator also keeps the AUD/USD pair buyers hopeful. However, a successful run-up beyond the previous weekly start of around 0.6730 appears necessary for the Australia Dollar buyers. Following that, a one-week-old horizontal hurdle surrounding 0.6815 appears as the last defense of the AUD/USD pair bears, a break of which could propel the quote towards a convergence of the five-week-old ascending trend line and the monthly top, close to the 0.6900 round figure. On the flip side, a break of the 200-SMA level surrounding 0.6680 could fetch the Australia Dollar towards the late November swing low near 0.6585. In a case where the AUD/USD bears break the 0.6585 support, the November 08 peak of 0.6551 appears the key challenge before activating a south run towards the previous monthly low near 0.6272. AUD/USD: Four-hour chart Trend: Recovery expected
Warsaw Stock Exchange SA Approves Dividend Payout: Neutral Impact Expected

HSBC:"The ‘Safe Haven’ USD Will Likely Weaken Further From Here”

TeleTrade Comments TeleTrade Comments 19.12.2022 09:48
The Federal Open Market Committee (FOMC) voted unanimously to hike by another 50 bps. Economists at HSBC still expect a final 50 bps rate hike by the Fed in early 2023 but do not expect rate cuts until 2024. They look for USD weakness during 2023. No rate cuts until 2024 “A slower hiking pace and a recognition that the Fed is in the late stages of the tightening cycle are part of why we expect further USD downside in 2023.” “If slowing US inflation allows the Fed to pare back its hawkishness further and global growth avoids an onerous slowdown, the ‘safe haven’ USD will likely weaken further from here.” “We still think that the FOMC will raise its policy rate by a final 50 bps in February 2023, while admitting upside risks. The FOMC is expected to deliver 50 bps of rate cuts in 2024 (25 bps in Q2 2024 and 25bp in Q3 2024), bringing the federal funds target range back down to 4.25-4.50% by the end of 2024.”  
Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

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

InstaForex Analysis InstaForex Analysis 19.12.2022 10:18
A crucial week has come to an end. I anticipated that it would move around the two instruments I frequently review. Today, it is certain that no rearrangement has taken place: Over the past week, the expected peak of wave e has been updated on the EUR/USD instrument. Therefore, it was once more about strengthening the euro rather than the end of the upward trend section. The proposed wave e has already taken on a very elaborate and extended form. The market's indirect readiness to begin constructing a descending set of waves is only indirectly indicated by an unsuccessful attempt at the level of 200.0%. There were no surprises as central banks increased their rates by 50 basis points. It is impossible to predict the future of the rates of the three banks because of the current course of action, which prevents an accurate forecast for the beginning of 2023. So let's take a closer look at it. ECB. The rate rose by 50 points to reach 2.5%. According to Christine Lagarde, at least a few more increases of 50 points will be required. The market still needs to be clearer about one thing: will the ECB increase the rate as much as necessary to get inflation back to 2%, or will it only do so up to a certain point, which might not be sufficient to achieve the inflationary goal? The European regulator also announced the introduction of a program of quantitative tightening in 2023. I think the market was expecting more "hawkish" results, so I believe these statements offered little support for the euro. The Bank of England. They did not say anything and increased the rate by 50 basis points. There needs to be more information about inflation or the PEPP's upcoming tightening. Regarding the British regulator, the market is still asking the same question. The UK's inflation rate dropped by 0.4%, but this is only the indicator's first decline. The Bank of England rate is currently 3.5%, and it is currently 10.7%. The British economy is experiencing serious issues, which Jeremy Hunt, Andrew Bailey, and Rishi Sunak openly discuss. If the regulator raises the rate like the Fed, that is, as much as it needs to, then everything is fine. However, the Bank of England may raise the rate differently, given these issues. The Fed. They are prepared to increase the rate, and from this point forward, meetings will decide whether an increase is necessary. Although the rate is expected to rise to 5.1% according to the consensus forecast, some FOMC members have already stated that it may now rise higher than anticipated. As a result, only the American regulator publicly states that it will tighten monetary policy as much as is required. This should increase demand for American currency. Additionally, a set of corrective waves has long been a presumption in wave analysis. I'm still waiting for both instruments to stop working. The upward trend section's construction has grown more intricate and is almost finished. As a result, I suggest making sales with targets close to the estimated 0.9994 level, or 323.6% Fibonacci. It would be best if you waited for a strong sales signal because the upward section of trend could become even more extended and complicated. The likelihood of this happening is still high. The construction of a new downward trend segment is predicated on the wave pattern of the pound/dollar instrument. Since the wave marking permits the construction of a downward trend section, I cannot advise purchasing the instrument. With targets around the 1.1707 mark, or 161.8% Fibonacci, sales are now more accurate. The wave e, however, can evolve into an even longer form Relevance up to 05:00 2022-12-20 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/330117
The British Pound Is Showing Signs Of Exhaustion Of The Bullish Force

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

Peter Jacimovic Peter Jacimovic 19.12.2022 10:29
Central banks-issuers of G10 currencies seemed to have conspired by raising the main interest rates by 50 bps, but the weakest link was the BoE. Andrew Bailey's statement that inflation in Britain has reached its peak and two MPC members who voted to keep the cost of borrowing at the same level provoked the second best daily EURGBP rally of the year. Sterling weakened against the U.S. dollar by 1.5%, against the Swiss franc by 1%. Dynamics of Central Bank Rates Despite the slowdown in consumer prices from 11.1% to 10.7% in November, it was premature to talk about victory over inflation. And although the head of the central bank tried in every possible way to smooth over the phrase about the peak of CPI with statements about the stability of inflationary pressure and about further decisive measures to tighten monetary policy, he failed. Futures market lowered its forecast for the repo rate ceiling to 4.52% by August, British bond yields declined, and GBPUSD quotes collapsed. While the Fed and the ECB signaled that they were ready to raise rates higher than investors expected, the Bank of England, on the contrary, did not convince that it could reach the peak predicted by the derivatives market. Should we be surprised at the weakening of the pound? GBPUSD could continue its pullback lower as investors adjust their BoE borrowing cost expectations for 2023, Credit Agricole said. Dynamics of expectations for the repo rate In comparison, the ECB has made it clear that it is going to add 50 bps to the deposit rate one or more times in the future, causing derivatives to raise their ceiling forecast to 3.7%. The Fed, in its forecasts, openly stated that the cost of borrowing is likely to rise to 5.25%. Different rates of monetary restriction pushed up the EURGBP quotes and dropped the GBPUSD pair. Curiously, the UK and the Eurozone economies are considered weak, but the latest data signal their greater resilience than previously thought. The ECB used this to support the euro, the BoE ignored it, sinking the pound. An additional driver of the weakening of sterling against the U.S. dollar was a portion of disappointing statistics for the United States, including retail sales, industrial production and business activity. The markets saw the specter of a recession in this, began to sell risky assets and buy safe haven assets, which accelerated the pullback of GBPUSD. As long as global risk appetite continues to fall, and the Bank of England does not begin to repent of its mistake about the peak of inflation, the pair will continue to be under pressure. Technically, on the daily chart, the GBPUSD has clearly worked out the pair's buying strategy from 1.2325, followed by a reversal and the formation of short positions on the rebound from the pivot point at 1.2425. The inability of the "bears" to overcome the support at 1.2065–1.2075 is a reason for profit taking. On the contrary, its successful assault will allow to increase the shorts in the direction of 1.198 and 1.184 Relevance up to 06:00 2022-12-24 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/330119
Nasdaq 100 Faces Bearish Breakdown Below Ascending Wedge and RSI Momentum Indicator

Demand For US Currency (USD) Increased As A Result Of The Fed's Monetary Policy Decision

InstaForex Analysis InstaForex Analysis 20.12.2022 08:30
A recession in the second half of 2022 was widely discussed. Overall, the entire year has proven to be very full of noteworthy events. Unfortunately, not all of them had the plus sign. The currency market, however, is unconcerned with the type of signal that one event or another had. We trade up if "plus" and down if "minus." Only the movement's direction is up for debate. The ongoing military conflict between Russia and Ukraine took up the majority of the first half of the year. Not because there aren't any battlefield events anymore, but rather because they no longer qualify as "shock" content, the media has recently stopped covering them all. Despite how absurd it may sound, the world is already accustomed to the military conflict in Ukraine, especially considering that it is not the first such conflict to occur since the Second World War. The dollar actively increased during the first half of the year against the backdrop of market anti-risk sentiment. Demand for US currency increased as a result of the Fed's aggressive interest rate hikes. Together, these two elements gave the dollar strong support. However, by the end of the year, when it became apparent that the conflict in Ukraine was taking on the appearance of being a protracted one that could last for years, the European Union and the United States would not cave to Russia and would continue to support Ukraine, and that sanctions on both sides, despite hurting the economies of both, did not alter either side's position, the interest in the conflicts around the world started to wane a little. The market has already stopped retaliating violently when one of the parties makes a move on the battlefield or when missiles are fired at cities, military installations, storage facilities, or infrastructure. No one is surprised anymore by the recession. The USA, the UK, and the European Union are the most likely locations. The only remaining query is how durable and strong. Despite this, the market is no longer concerned about it now that the issue has already been thoroughly explored. Additionally, economic growth is no longer interesting because it is obvious that all economies will experience a slowdown. Only inflation is still up for debate. Since inflation is declining quickly and, more importantly, steadily, the United States is in a leading position in this area. However, this is also detrimental to the dollar because the Fed is finding it harder and harder to justify raising interest rates. As a result, demand for the euro and the pound may remain high over the next three to six months because the ECB and the Bank of England will need to raise their interest rates faster than the Fed. This presumption, however, does not eliminate the requirement to first construct a corrective set of waves and only then to construct a new upward section of the trend. I currently view this scenario as the primary one. I conclude from the analysis that the upward trend section's construction has grown more intricate and is almost finished. As a result, I suggest making sales with targets close to the estimated 0.9994 level, or 323.6% Fibonacci. Although there is a strong likelihood that the upward portion of the trend will become even more extended and complicated, there is currently a signal to turn lower. The construction of a new downward trend segment is predicated on the wave pattern of the pound/dollar instrument. Since the wave marking permits the current construction of a downward trend section, I am unable to advise purchasing the instrument. With targets around the 1.1707 mark, or 161.8% Fibonacci, sales are now more accurate. Wave e is likely finished, though it could take on an even longer form Relevance up to 06:00 2022-12-21 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/330244
The US Dollar Index Price Is Looking Higher From Here Soon

The Bulls Of US Dollar Index Should Remain In Control

InstaForex Analysis InstaForex Analysis 20.12.2022 08:32
Technical outlook: The US dollar index dropped through the 103.35 lows during the early Asian session on Tuesday before pulling back sharply. The index is seen to be trading close to 114.15 at this point in writing as the bulls are looking to push through the 105.50 initial resistance. The index has tested the backside of its resistance trend line at 103.56, which acts as strong support now. The US dollar index has rallied swiftly through the 104.50 high after printing a low close to 103.00 over the last week. Furthermore, the price has now taken out its initial resistance trendline and is trading into the buy zone. Ideally, the bulls should remain in control from here and push prices through 105.50, 107.00 and higher in the next few trading sessions. The US dollar index has got enough momentum to push through 110.50 in the near to medium term. If prices break above 110.50, it could confirm further upside towards 114.70 and higher as the bulls remain in control. On the flip side, a bearish turn from 110.50 might indicate that the index is heading further downward below 103.00 going forward. It is looking higher from here in the near term though. Trading idea: Potential bullish turn against 102.00 Good luck!   Relevance up to 07:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/305533
The USD/JPY Price Seems To Be Optimistic

The USD/JPY Pair Is Likely To Extend The Latest Weakness

TeleTrade Comments TeleTrade Comments 20.12.2022 09:31
USD/JPY drops more than 3.0% to refresh multi-day bottom after Bank of Japan tweaks Yield Curve Control (YCC) policy. Chatters surrounding Japan’s budget, Treasury bond buying also entertain Yen traders. BOJ Governor Kuroda shows readiness to ease policy if needed, USD/JPY stays pressured. Risk aversion fails to underpin US Dollar as Federal Reserve appears less hawkish. USD/JPY bears the burden of the Bank of Japan’s (BOJ) surprise policy tweak during early Tuesday, despite the latest rebound. While portraying the Yen trader’s mood, the quote initially slumped to the lowest levels since early August before the recent bounce from 132.66 to 133.60. Even so, the quote remains 2.75% in the red as we write. Bank of Japan surprises markets with YCC move, drowns USD/JPY Bank of Japan (BOJ) held its benchmark rate unchanged at -0.10% and kept the short-term interest rate target at -0.1% while directing 10-year Japanese Government Bond (JGB) yields toward zero. In doing so, the Japanese central bank matched the market expectations and should have kept the USD/JPY intact. The surprise factor, however, was the BOJ’s alteration of the Yield Curve Control (YCC) and the bond issuance announcements. “The BOJ will expand the range of 10-year Japan government bond yield fluctuations from its current plus and minus 0.25 percentage points to plus and minus 0.5 percentage points,” reported Reuters. Following that, the Yen pair plunged to the multi-day low of 132.66 ahead of bouncing back beyond 133.00. The BOJ not only affected the USD/JPY prices but also roiled the risk appetite and propelled the Treasury bond yields across the board, which in turn allowed the US Dollar to pare intraday losses. BOJ Governor Haruhiko Kuroda defends Yen buyers Having witnessed the BOJ-inflicted slump in the USD/JPY prices, Governor Haruhiko Kuroda allowed the Yen traders to lick their wounds while defending the easy money policies for one last time. In doing so, BOJ’s Kuroda highlights the need for a 2.0% inflation target, as well as shows readiness to ease monetary policy if needed. “Today's decision on yield curve control is not an exit of yield curve control or change in policy,” said BOJ’s Kuroda per Reuters. Also read: BoJ’s Kuroda: Necessary to achieve 2% inflation target sustainably, stably in tandem with wage growth US Dollar fails to cheer risk-off mood Despite the risk-aversion wave, the US Dollar Index (DXY) remains mildly offered near 104.40, down for the second consecutive day. The reason for the USD/JPY pair’s weakness could be linked to the Federal Reserve’s (Fed) less hawkish bias, as informed via the latest monetary policy meetings, as well as the softer US Purchasing Managers’ Indexes (PMIs) for December. Also likely to have weighed on the US Dollar are the strongly hawkish statements from the European Central Bank (ECB) officials, as well as upbeat German data. Risk catalysts will be crucial for Yen sellers Looking forward, USD/JPY pair bears need to pay close attention to the risk catalysts and the bond market moves for near-term directions amid a light calendar. Also important will be the US Building Permits and Housing Starts could join Germany’s Producers Price Index (PPI) data to direct immediate moves. However, major attention will be given to the Fed’s preferred inflation gauge, namely Friday’s US Core Personal Consumption Expenditure (PCE) – Price Index for December, expected 4.6% YoY versus 5.0% prior. USD/JPY technical analysis USD/JPY extends a downside break of the 200-DMA, as well as an upward-sloping trend line from early August, towards refreshing the multi-day low. Given the impending bear cross on the Moving Average Convergence and Divergence (MACD) indicator, as well as the downbeat Relative Strength Index (RSI), located at 14, not oversold, the USD/JPY pair is likely to extend the latest weakness. However, the RSI (14) is near the oversold territory and hence signals limited downside room, which in turn highlights the 78.6% Fibonacci retracement level of the May-October upside, near 131.70. Also acting as the downside filter is the August month low near 130.40 and the 130.00 round figure. In a case where the USD/JPY rebounds from the current level, the support-turned-resistance line from August, around 134.15 by the press time, could challenge intraday bulls. Following that, the 200-DMA hurdle surrounding 135.75 will be crucial to watch for the Yen buyers. Above all, a two-week-old horizontal resistance area near 138.00 could restrict the USD/JPY buyers from entering the ring. USD/JPY: Daily chart Trend: Limited downside expected
There Are Risks That An Increase In The Price Of Oil May Provoke China To Limit The Export Of Diesel Fuel

Fears About A Global Recession Are Pushing Brent Oil Down

Marek Petkovich Marek Petkovich 20.12.2022 11:13
Even though the world's leading central banks are slowing down the rate of monetary policy tightening, they continue to raise rates. Even as signs emerge that economies are either moving toward recession, as in the case of the United States, or are already in recession, as in the case of the eurozone and Britain. The fact that monetary tightening continues cannot but affect oil prices. Recession will lead to a reduction in global demand, which in the context of stable supply leaves the downward trend for Brent in force. If the latest "dove" in the face of the Bank of Japan takes a step towards abandoning its ultra-loose monetary policy, widening the boundaries of the target range of yields, what should we expect from the rest? If inflation suddenly picks up in 2023, the Fed and companies will have no choice but to keep raising rates. Recession will become a reality, global oil demand will decline, and the Brent bulls will be left fooled. Dynamics of recession probabilities in the world's leading economies Their recent activity was associated with China's departure from the zero-COVID policy, with the U.S. decision to start buying oil to replenish strategic reserves after their reduction by 180 million barrels, as well as with the weakening of the U.S. dollar. Nevertheless, the rapid opening of China's economy is fraught with an increase in deaths by 1 million and an increase in infections to 10 million at its peak. If people actively get sick, productivity will decrease, supply chain problems will worsen, which will affect the entire global economy. No one knows exactly how the situation in China will develop, and uncertainty increases the chances of Brent consolidation. On the one hand, the drop in business confidence in China, according to a World Economics survey, has fallen to its lowest level since January 2013, which undermines domestic demand in the largest consumer of oil. On the other hand, Xi Jinping promised to focus on the economy, which is encouraging for Brent fans. So far, there are no particular problems with the proposal. Russia continues to supply oil to India on tankers insured by the EU, which indicates that the established price ceiling of $60 per barrel is observed by counterparties. Contrary to Moscow's loud statements that sales will not be made. The current price of oil seems to suit everyone. Problems may start later if prices fall. Thus, fears about a global recession are pushing Brent down, but U.S. oil purchases to replenish strategic reserves, a weakening U.S. dollar and faith in additional monetary and fiscal stimulus from China are helping to stabilize oil. Technically, on the daily chart of Brent, a 1-2-3 reversal pattern could be activated if the pivot point at $83.35 per barrel is broken. This would increase the risks of a pullback. On the contrary, a drop below $78.45 would be a reason to sell. Relevance up to 08:00 2022-12-25 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/330268
Given the peculiarities of the US labor market and the high labor mobility, the acceptable unemployment rate is considered to be 5.0%

Given the peculiarities of the US labor market and the high labor mobility, the acceptable unemployment rate is considered to be 5.0%

Aleksandr Davidov Aleksandr Davidov 14.12.2022 15:01
When choosing the monetary policy stance, central banks from all over the world take into account just two main factors. These are changes in the general price level in a particular economy and labor market conditions. Both of them are perfect indicators of the overall economic situation. What is more, these indicators allow analysts to predict future economic trends. By altering the key interest rate, monetary authorities attempt to shape these trends so that they develop according to a more favorable scenario. Interest rates have a significant influence on markets. There are several reasons for that. Most large investors, namely various banks and funds, trade by means of the funds received from their depositors and clients. In other words, they use borrowed money instead of their own savings. Notably, both in the US and Europe, such agreements are made at floating interest rates instead of fixed ones. Floating interest rates are based on the key rate. For example, a bank has attracted its client’s funds at the 2.00% interest rate, whereas the benchmark rate totals 3.00%. If the central bank raises the key interest rate to 3.50%, the bank will have to return the funds to its client at an interest rate of 2.25%-2.75%. In other words, the bank’s cost of funds will increase, thus forcing it to reevaluate its positions and reduce or even close some of them. That is why changes in the key interest rate have a considerable influence on all the markets, including the currency, stock, and even commodity ones. Thus, there is no wonder that the upcoming FOMC meeting is of vital importance. Notably, the Federal Reserve is planning to slacken the pace of the key interest rate hike. This decision will have long-term consequences for markets. Now, the likelihood of a soon end of the monetary policy tightening could become even higher. This is how most traders see the current situation. However, there are several peculiarities. Let us start with the fact that inflation began surging in March of 2021. Then, it jumped to 2.6% from 1.7%. However, the US regulator ignored this. In May, the inflation rate reached 5.0%. Fed policymakers explained the inflation growth by tough quarantine measures in China and supply disruptions, which led to shortages. What is more, the regulator reassured people that high inflation was just a short-lived phenomenon.   Such explanations somehow alleviated concerns. In addition, inflation remained stable for another five months. However, in October, it climbed to 6.2%, whereas at the end of 2021, it jumped to a stunning 7.0% by American standards. It was last autumn when the Fed started preparing markets for the key interest rate hike and long-lasting monetary policy tightening, which has begun this year. Read next: From the fundamental point of view, these facts may become a game changer, sending the EUR/USD pair to the parity level | FXMAG.COM Interestingly, aggressive rate hikes did not help the Fed cap soaring inflation. It remained stubbornly high. In June 2022, consumer prices accelerated to a 4-decade high of 9.1%. After reaching that all-time high, inflation started gradually declining. For this reason, analysts believe that the regulator could slow down the monetary tightening cycle as there have been signs of a drop in the CPI. Some of them suppose that the Fed might completely abandon a hawkish stance, which would be great news for investors. However, there has been no steady decline in consumer prices. They are still unacceptably high. Therefore, the central bank keeps raising the key rate. Naturally, a slowdown in inflation may lead to smaller rate hikes but that’s it. This is why the regulator will continue to tighten monetary policy at least until the middle of next year. When assessing economic prospects, analysts pay greater attention to inflation, completely overlooking the labor market. However, the situation with the labor market is rather curious.  Despite galloping inflation and a looming recession, the unemployment rate is almost at its lowest level in fifty years. It clearly signals an overheating of the labor market, which may lead to devastating consequences. The Fed has been strongly committed to ultra-loose monetary policy for quite a long period of time. It bolstered a surge in investment, enabling companies to expand thanks to low borrowing costs. Businesses also took loans and invested, among other things, in the creation of new jobs. The problem is that such investments have a fairly long payback period. If there is a labor shortage, which happens at an extremely low unemployment rate, businesses face a very serious challenge. Companies have attracted the necessary funds for their development but they need to return them later. If they want to get profit from their investment, they should hire more workers. However, it is rather taxing given that it is almost impossible to find suitable employees. Of course, firms can lure employees from other companies with higher salaries. Such an approach increases costs and reduces profits. The payback period becomes even longer. As a result, companies cannot generate profit. At some point, it will be easier for a business to deduct losses and start cutting costs. Otherwise, they will go bankrupt. In turn, it will result in job cuts and mass layoffs. It might become another reason for a protracted and rather deep recession. Thus, the regulator needs to raise rates to avoid such a scenario. Given the peculiarities of the US labor market and the high labor mobility, the acceptable unemployment rate is considered to be 5.0%. Currently, it stands at 3.7%. There are also no signs of its steady growth. It means that there is still a chance that the central bank could hike the interest rate by 75 basis points. Such an increase may catch many market players off guard.  Apparently, investors’ hopes for a pause in the monetary tightening cycle look more like a fantasy. They are constantly looking for dovish signals. Traders still believe that the Fed could move away from aggressive tightening and return the cash rate to the zero level in the near future. However, judging by the labor market situation, there will hardly be any shift from aggressive rate hikes at least until the middle of next year. They will remain at a relatively high level until the labor market stabilizes and there is no risk of overheating. At the start of next year, the Fed may adjust its medium-term plans for monetary policy. Those who have been betting on a dovish stance could be rather disappointed. The comments of Fed policymakers also point to such a scenario. They have mentioned quite often the current situation in the labor market when speaking about monetary policy prospects.
Soft PMIs Are Further Signs Of A Weak UK Economy

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

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

US Dollar: The Bulls Prepare To Break Above The Resistance Level

InstaForex Analysis InstaForex Analysis 21.12.2022 08:44
Technical outlook: The US dollar index dropped through the 103.36 lows on Tuesday before finding support again. The index is seen to be trading close to 103.75 at this point in writing as the bulls prepare to break above the 104.50-60 interim resistance. The near-term projections are towards 105.70 and 107.10 respectively, taking out immediate resistances as marked on the 4H chart here. The US dollar index might have carved a meaningful bottom around 103.00 last week. The index has carved an upswing between 103.07 and 104.50 levels, which has been followed by a corrective drop back towards 103.36 recently. If the above short-term wave structure holds well, the bulls will remain inclined to push through 107.10 in the next few trading sessions. The US dollar index seems to have completed its corrective decline towards 103.36 and bounced off higher producing a Morning Star candlestick pattern. A high probability remains for prices to hold above 103.07 and push higher towards 105.50 and 107.10 in the next few weeks. The possibility remains for a push through 110.50 going forward. Trading idea: Potential rally towards 107.00 against 102.00 Good luck! Relevance up to 06:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/305723
The Commodities: In The Near Term The Oil Market Remains Relatively Well Supplied

OPEC+ Will Remain Proactive And Pre-emptive In Managing The Global Oil Market

Saxo Bank Saxo Bank 21.12.2022 09:27
Summary:  The US equity market found its feet again yesterday, pulling itself off the lowest levels in over a month and closing approximately unchanged as traders mull whether there is more to wring out of this calendar year before capital is put to work in the New Year. The soaring JPY found resistance ahead of 130.00 in USDJPY, with higher US global yields pushing back against further upside after the big reset higher for the yen. Elsewhere, gold has pulled up to cycle highs.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures rebounded yesterday from the intraday lows of 3,803 and the rebound has continued this morning with the index futures trading around the 3,867 level. Nike posted stronger than expected earnings and an optimistic outlook for the new year bolstering the view that US consumer spending is still going strong. Tesla is a key stock to watch today as shares were down 8% yesterday despite a positive session suggesting big flows are adjusting the price to the new reality of lower EV demand and demanding prices input materials for batteries. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) Hong Kong and China stocks started the session firmer but fizzled out and were about flat at the time of writing. Chinese property developers continued to trade weak after recent rounds of placements and headlines in state-owned media reiterating the “housing is not for speculation” rhetoric. Tech names outperformed with Hang Seng TECH Index climbed 0.6%. In A-shares, consumption, lodging, and banking stocks gained while solar, auto and machinery underperformed. FX: JPY finds resistance as global yields reset higher There is some irony at work here as global yields jumped on the Bank of Japan decision to reset the yield cap on 10-year JGB’s to 0.50% yesterday, in that global yields reset higher. But if the BoJ is seen standing pat with its new policy, any further rise in yields can also serve to push back against follow-on JPY strength after the one-off reset (for now, at least.) that fell short of taking 130.00 to the downside in USDJPY before a significant bounce from yesterday’s lows. Elsewhere, the USD is mixed and not the focus, stuck in a tight range versus the euro, but with EURUSD having run out of upside momentum. Elsewhere in G10, the Aussie rallied against a weak NZD as another New Zealand confidence survey, the ANZ Consumer Confidence, slipped badly to 73.8 versus 80.7 and far and away the worst reading of the survey since its inception in 2004. Crude oil (CLG3 & LCOG3) holds onto its recent gains ... supported by a drop in US crude stocks, data pointing to a notably drop in Russian seaborne oil shipments this month and Saudi Arabia warning that OPEC+ will remain proactive and pre-emptive in managing the global oil market. Having been vindicated in the necessity of their November production cut as demand slowed, the comment from the Saudi oil minister points to a soft floor under the market below which additional cuts could be implemented if necessary to support the price. The risk of large price swings as liquidity dries up ahead of yearend cannot be ignored with focus today on EIA’s stock report. Crude oil prices were slightly higher, with WTI futures above $76/barrel and Brent futures above $80. Gold (XAUUSD) and silver (XAGUSD) surged higher on Tuesday ... after the Bank of Japan surprised the market by revising its yield-curve-control policy. The move saw the dollar weaken sharply against the Japanese yen while an accompanying rise in bond yields played no role as a potential headwind. Silver reached an eight-month high before running into some profit taking while gold closed saw its highest close since June above $1800. The extent of the move surprised the market and may signal some trigger happy investors not waiting for the new year to get involved amid expectations for an investment metal friendly 2023.  Yields on US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) surged on the hawkish BOJ surprise From the Intermediate through the long-maturity Treasuries sold off on the Bank of Japan’s decision to move its cap on 10-year Japanese government yields to 0.5% from 0.25%. Large block selling came in the five-year and 10-year futures contracts. The 10-year yield jumped 10bps to 3.68%, the highest close this month. Yields on the 2-year, anchored by the Fed’s rate path, finished the session unchanged. The 2-10-year yield curve steepened by 9bps to 58bps. The housing data released on Tuesday was mixed. Housing starts shrank by 0.5% M/M, less than the -1.8% expected but housing permits were down 11.2% M/M in November, much weaker than the -2.1% consensus in the Bloomberg survey. What is going on? Tesla shares slide another 8% even as Musk promises new Twitter CEO Tesla CEO Elon Musk promised to abide by the results of a Twitter poll to step down as the Twitter CEO, and yet the prospect of fewer distractions for Musk failed to help Tesla’s shares, which stumbled badly yesterday, also as two analysts cut their targets for the company. One could speculate that Elon Musk has engineered an escape route out of Twitter because things are deteriorating fast at Tesla and that Tesla is ultimately more important for his personal wealth and other money losing assets. Results from Nike and FedEx beat expectations Nike reported results from FY23 Q2, that ended on Nov 30, beating analyst estimates on sales and margins. Adjusted EPS came in at $0.85, well above the $0.65 forecasted by analysts. Although inventories increased by 43% y/y, the management attributed the buildup to “abnormally low levels” resulting from supply chain disruption a year earlier. Nike’s management gave an upbeat assessment of the holiday season sales momentum. FedEx reported FY23 Q2 Adjusted EPS at $3.18, beating the $2.8 expected. The positive surprise resulted from a combination of price increases and cost cuts despite a decline in package volume. The logistics giant guided an additional $1bn of projected cost cuts in fiscal 2023. Housing weakness continues in the United States Housing starts were mostly flat in November (minus 0.5 % month-over-month) while building permits continued to tumble (drop of 11.2 % month-over-month). Permits are now at their lowest level since June 2020. Many analysts consider that such a drop is consistent with an imminent recession. However, there are other signals showing the U.S. economy is still very resilient despite several headwinds (such as widespread inflation, tight labor market and high level of private debt). Nonetheless, we agree that the evolution of the housing market in the coming months will determine the pace of economic activity in the United States in 2023. This is the most important economic sector to monitor at the moment. What are we watching next? US Dec. Consumer Confidence This survey of US consumer confidence tends to correlate most closely with the labor market prospects in the US historically, although the impact of the massive inflation spike this year was felt in this survey during the spring and summer months despite the strong jobs market as confidence dropped from 128.9 in late 2021 to as low as 95.3 in July, before stabilizing, perhaps on gasoline prices in the US retreating sharply after June. The November survey came in at 100.2, a four-month low, and is expected flat at 101 for the December release later today. Earnings to watch Today’s US earnings focus is Micron and Carnival. Analysts expect Micron to report FY23 Q1 (ending 30 November) negative revenue growth of 46% y/y and adjusted EPS of $-0.01 down from $2.10 a year ago. The memory chip industry is going a tough period with falling prices and lower demand. Carnival is still cruising the high wave of travel and leisure post the pandemic with FY23 Q4 (ending 30 November) revenue expected to increase 205% y/y but still delivering negative earnings with adjusted EPS expected at $-0.87 improving from $-1.72 a year ago. Today: Toro, Micron Technology, Cintas, Carnival Thursday: Paychex, CarMax Friday: Nitori Economic calendar highlights for today (times GMT) 1100 – UK Dec. CBI Reported Sales 1330 – US Q3 Current Account 1330 – Canada Nov. CPI 1500 – US Nov. Existing Home Sales 1500 – US Dec. Consumer Confidence 1530 – EIA's Weekly Crude and Fuel Stock Report Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: Financial Markets Today: Quick Take – December 21, 2022 | Saxo Group (home.saxo)  
Saxo Bank Podcast: The Bank Of Japan Meeting And More

The Rally In The Japanese Yen (JPY) Will Help Moderate The Relative Inflation Risks For Japan

Saxo Bank Saxo Bank 22.12.2022 08:57
Summary:  Risk sentiment bounced yesterday after December US Consumer Confidence came in far stronger than expected, jumping to an eight-month high. And yet, US Treasury yields fell gently all along the curve yesterday, in part as the same US confidence survey showed inflation expectations dropping more quickly than expected and on a strong 20-year US treasury auction. In FX, the Aussie has rebounded sharply on hopes for stimulus measures in China and a friendly diplomatic tone in recent talks between Australian and Chinese leaders.   Note: This is the final Saxo Market Quick Take until Monday January 2, 2023. What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures rallied 1.5% yesterday closing above the 50-day moving average as positive earnings from Nike helped lift sentiment yesterday and provided a positive assessment of the US consumer. Equity trading will slowly enter hibernation as the holiday period approaches so expect little price action today and tomorrow. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) rallied on stimulus rhetoric and talk of shortening quarantine The Hang Seng Index rallied 2.4% and CSI 300 climbed 0.4% as of writing, after China’s State Council, the People’s Bank of China, and the China Securities Regulatory Commission separately released meeting readout or statements to pledge to implement the decisions from the recent Central Economic Work Conference to boost the economy, support the property sector, and the internet platform companies. Adding to the risk-on sentiment is market chatter about the shortening of quarantine to three days. Mega-cap China internet stocks surged 3% to 6%. Leading retail and catering stocks jumped by 2% to 11%. FX: choppy markets as USD starts day on a weak footing Some gentle back and forth in FX yesterday as the USD put on a show of rallying, while most of the action has been in the crosses and the greenback has eased back lower after a strong session for risk sentiment yesterday and lower US treasury yields helping USDJPY back lower after its traumatic sell-off and broad JPY rally on Tuesday’s surprise tweak of BoJ policy. The biggest mover to the upside has been the Aussie, which is enjoying the more friendly diplomatic tone with China and has suddenly rallied in the crosses, especially in AUDNZD, on more rhetoric overnight from China on its intent to boost growth. Crude oil (CLG3 & LCOG3) rally extends on US inventory data Crude oil closed at the highest level since December 5 after the US DoE inventory reports showed a nearly 6M barrel draw on crude oil stocks, while gasoline inventory levels rose nearly 2.5M barrels, a half million more than expected, and distillates inventories fell –242k vs. A rise of 1.5M barrels expected. Gasoline and distillate stocks have been generally building of late, but the latter remains slightly below the inventory range of the past 5 years. Gold (XAUUSD) and silver (XAGUSD) remain near recent highs ... after surging in the wake of the Bank of Japan policy tweak on Tuesday and despite yields easing lower yesterday in the US. BOth 2020 and 2021 saw gold ending the year on a strong note and then sharp follow-on rallies in January were quickly reversed. Yields on US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) remained subdued despite surge in US Consumer Confidence US Treasury yields eased lower all along the curve yesterday despite a large and unexpected surge in US Consumer Confidence as that same survey’s drop in inflation expectations may have received more attention. Later in the day, a strong US 20-year auction, where bidding metrics were the firmest since this spring. End-of-year portfolio rebalancing may obscure the next bigger move for treasuries until we roll into the New Year. What is going on? Mixed U.S. data: weaker home sales, higher consumer confidence, lower inflation expectations Economic data were mixed. The 1-year-ahead inflation expectation in the Conference Board Consumer Confidence survey softened from 7.1% in November to 6.7% in December, the lowest since September of 2021. On the other hand, Headline consumer confidence as well as the present situation and expectations components rose in the Conference Board Consumer Confidence survey. The headline consumer confidence improved to 108.2, (vs consensus 101.0; Nov: 101.4), the highest level since April this year. Elsewhere, the annualized rate of existing home sales fell -7.7% in November, the 10th consecutive month of declines as the historic surge in US mortgage rates this year continues to pressure the US housing market. Micron shares down 2% as glut in memory chips continues The US memory chip manufacturer delivered last night a positive surprise on FY23 Q1 (ending 1 December) adjusted EPS at $0.04 vs est. $-0.88 and announced a 10% headcount reduction to reduce costs. The real negative surprise was the Q2 revenue outlook of $3.6-4bn vs est. $3.9bn and the Q2 adjusted gross margin of 6-11% vs est. 17.8% suggesting significant pricing headwinds compared to market expectations. Micron is also drastically reducing its 2024 capex plans. China and Australia seek to improve the relationship between the two countries During a phone call to mark the 50th anniversary of the official diplomatic relationship between China and Australia, China’s President Xi told Australian Prime Minister Anthony Albanese that China would seek to “promote a sustainable development of the China-Australia comprehensive strategic partnership”. Meanwhile, Australian Foreign Minister Penny Wong told reporters that China and Australia agreed to continue high-level dialogue on issues including the removal of China’s trade sanctions on Australian goods. What are we watching next? Japan’s November Inflation data up tonight After an historic move in the JPY this week, the market will be watching the latest batch of Japan’s CPI data, which has surged to multi-decade highs recently and is expected in at +3.9% YoY for the headline and +2.8% YoY ex Fresh Food and Energy. The rally in the JPY by some 12% from its lows of two months ago will help moderate the relative inflation risks for Japan. US PCE inflation data for November out tomorrow This is arguably the last interesting macro data point out of the US until the first week of the New Year. The PCE data is expected to show that core inflation will drop sharply to 4.6% YoY vs. 5.0% in October, while the headline is expected in at 5.5% versus 6.0% in October. Hotter than expected inflation readings will be an interesting test for markets in coming months as the market has a strong view that the Fed is poised to halt rate hikes as soon as Q2 of next year and will be cutting by year end, despite the Fed “dot plot” projections suggesting the Fed will have a policy rate at the end of next year of above 5% (versus 4.25%-4.50% now). Earnings to watch The earnings calendar is winding down for the year, with payroll and HR-services company Paychex reporting today before the market opens and struggling US used car seller and servicer CarMax, which is trading near its lows for the year, likewise reports before the market open today. Today: Paychex, CarMax Friday: Nitori Economic calendar highlights for today (times GMT) 1100 – Turkey Rate Announcement 1330 – US Weekly Initial Jobless Claims 1530 – US Weekly Natural Gas Storage Change 2330 – Japan Nov. CPI Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app:   Source: Financial Markets Today: Quick Take – December 22, 2022 | Saxo Group (home.saxo)
Tokyo Raises Concerns Over Yen's Depreciation, Considers Intervention

US Dollar Index (DXY) Is Expected To Fall Further

TeleTrade Comments TeleTrade Comments 22.12.2022 09:36
US Dollar Index takes offers to refresh intraday low, breaks one-week-old ascending trend line. Bearish MACD signals allow sellers to aim for the previous weekly low, also the lowest level in six months. 100-SMA, weekly top add to the upside filters even if buyers manage to cross support-turned-resistance line. US Dollar Index (DXY) retreats towards the weekly low, marked the previous day, taking offers to refresh the intraday low near 103.83 during early Thursday in Europe. In doing so, the greenback’s gauge versus the six major currencies breaks a one-week-old ascending support line, now resistance near 103.92, while approaching the six-month low marked in the last week. It’s worth noting that the bearish MACD signals and a U-turn from 104.93 during early weekdays also favor the DXY sellers to approach the multi-day low surrounding 103.40. During the fall, the weekly bottom near 103.80 and horizontal support around 103.60 could test the US Dollar Index bears. Additionally, the DXY’s sustained weakness past 103.40 will highlight the 103.00 round figure ahead of directing bears toward the May 2022 low near 101.30. On the contrary, the previous support line around 103.92 precedes the 104.00 round figure to restrict short-term US Dollar Index rebound. Following that, the 100-SMA and the weekly top could challenge the DXY bulls around 104.75 and 104.95 in that order. Also acting as an upside filter is the 105.00 round figure, a break of which could welcome DXY bulls targeting the monthly high of 105.82. US Dollar Index: Four-hour chart Trend: Further downside expected
The USD/IDR Pair Is Expected A Further Downside Movement

Indonesia: Bank Indonesia Will Need To Match Fed Rate Hikes To Help Maintain Indonesian Rupiah (IDR) Stability

ING Economics ING Economics 22.12.2022 11:34
Bank Indonesia hikes rates by 25bp, as expected.  BI set to continue tightening in early 2023. Indonesia's central bank governor Perry Warjiyo 5.5% 7-day Reverse Repurchase rate   As expected BI hikes again but downshifts to less aggressive tightening In a move widely anticipated by market participants, Bank Indonesia (BI) has hiked policy rates by 25bp to 5.5%.  Price pressures have abated somewhat, as evidenced by the recent slip in headline inflation and we believe that inflation in Indonesia may have peaked.  The softer inflation reading - combined with the general outlook for growth challenges in 2023 - convinced the central bank that a less forceful rate hike should be rolled out today.  A similar downshift in the pace of tightening from global central banks also allowed BI to implement the 25bp increase in policy rates today.    BI rolls out 25bp rate hike as inflation pressures ease Source: Badan Pusat Statistik Rate hikes set to continue in early 2023 Despite the pullback in the pace of tightening, we believe BI will continue with the current tightening cycle next year.  BI believes that the Fed will continue to hike rates in the first half of 2023 and we could see BI following suit with rate hikes of their own.  The IDR has come under some pressure to close out 2022 and we believe BI will need to match Fed rate hikes to help maintain FX stability.  With BI’s policy rate at 5.5%, IDR should move sideways to close out the year - with investors monitoring the fallout from the recent bond buyback announcement from the national government.  Read this article on THINK TagsIDR Bank Indonesia Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Warsaw Stock Exchange SA Approves Dividend Payout: Neutral Impact Expected

The US Dollar Is Expected To Rise During The American Trading Session

InstaForex Analysis InstaForex Analysis 22.12.2022 14:26
Almost at the end of an active trading week (ahead of the Christmas holidays), the dollar remains under pressure. At the same time, the dollar index (DXY) does not leave attempts to update new (since the end of June) lows. Last week, DXY futures touched the 103.40 mark, the lowest since June 29, and this week they again came close to it three times (Tuesday, Wednesday, Thursday). As of writing, DXY was at 103.69, 26 points above today's low. Market participants are still under the impression of the Fed meeting, which ended last week. As we know, Fed officials decided to reduce the pace of monetary policy tightening, raising the interest rate by 0.50% (after raising the rate by 0.75% in June, July, September, November). And although Federal Reserve Chairman Jerome Powell tried to dispel doubts that market participants had about the tough prospects for monetary policy and the dollar strengthened the day after the meeting, in general, the dollar index continues to develop downward dynamics that originated in October. As we noted in one of our recent reviews, many economists are already predicting the Fed will cut the size of the rate hike again in early 2023, moving on to 0.25% hikes in February and March. And this is a harbinger of a deeper drop in DXY. The first signal for new short positions will be a breakdown of the local support level and 50 EMA on the weekly chart of the DXY index (CFD #USDX in the MT4 trading terminal), passing through 104.50, and the 104.00 "round" support level. As you can see, both support levels have been broken, and the sellers of the dollar and DXY index are trying to gain a foothold in the zone below the 104.00 mark to push it lower towards the 100.00 "round" support level. A breakdown of the 98.40 key support level will finally break the DXY bullish trend. As for today's economic calendar, a whole block of important macro statistics for the United States will be released at 13:30 GMT. In addition to the final releases on GDP, price indices for the 3rd quarter (the data should confirm the growth of indicators), the weekly report on the state of the U.S. labor market will be published with data on the number of jobless claims. The state of the labor market (together with GDP and inflation) is a key indicator for the Fed in determining the parameters of its monetary policy. Initial and continuing claims for benefits are expected to remain at pre-pandemic lows, which is also positive for the dollar, indicating the stability of the U.S. labor market. In view of this, we should expect the dollar to rise during the American trading session. However, we also need to be prepared for its decline, especially if the data does not live up to expectations, or revised for the worse. Tomorrow, market participants will closely follow the publication (also at 13:30 GMT) of data on orders for durable goods in the U.S. and Americans' personal income/spending data. All these are important indicators for the dollar. In other words, an active increase in volatility is expected at the end of the week, giving us some interesting trading opportunities.     search   g_translate     Relevance up to 11:00 2022-12-23 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/330542
Oanda Podcast: US Jobs Report, SVB Financial Fallout And More

Goldman Sachs Said The US Economy Could Avoid A Recession

InstaForex Analysis InstaForex Analysis 23.12.2022 08:00
Although macroeconomic data are improving after the Fed's sharp increase in interest rates, signs are showing that the biggest blow to the economy is yet to come. Fed Chairman Jerome Powell has stressed several times that the full impact of this year's rate hike remains to be seen, so it is not clear whether there will be a recession or not, and if there is, they are not sure if it will be deep or not. Nevertheless, the Fed said real GDP will hit 0.5% in 2023, the PCE index will slow to 3.1% and the federal funds rate will peak at 5.1%. Big banks have already anticipated what is going to happen next year, with some considering a soft landing as their best case scenario. Goldman Sachs said the US economy could avoid a recession since there are good reasons to expect positive growth in the coming quarters. They forecast core inflation to slow to 3% next year, the unemployment rate to rise by 0.5%, and the US economy to grow by 1%. However, the bank noted an obvious downside risk with a recession probability of 35% next year. Morgan Stanley predicts that the US economy will break out of recession, but the landing wil not be soft as "job growth slows significantly and the unemployment rate continues to rise". Risks are also present because of interest rates, which will remain elevated for most of the year. Credit Suisse believes the US will be able to avoid an economic slowdown next year as inflation slows and the Fed pauses its rate hikes. The bank forecasts the US economy to grow by 0.8% in 2023. JPMorgan is the one that warned that a recession is very likely next year due to the over-tightening of central banks. Similarly, the Bank of America predicts a recession in the first quarter of 2023, with GDP falling by 0.4%. It predicts unemployment to rise to 5.5% by 2024, and inflation to fall to 3.2%. UBS also predicts a recession, citing high interest rates and near-zero growth in the US next year and in 2024. Wells Fargo expects a recession in the third quarter next year as a sharp rise in rates hurts demand. Capital Economics expects a moderate recession in the US next year and the Fed to be forced to cut rates by the end of 2023. According to their forecasts, GDP will grow by 0.2% over the next year and core inflation to slow to 3.2%. Relevance up to 09:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/330522
Market Insights with Nour Hammoury: S&P 500 and Bitcoin Projections for H2 2023

US Inflation Is Cooling, Japan Headline CPI Ticked Up To 3.8% Y/Y

Saxo Bank Saxo Bank 23.12.2022 08:55
Summary:  Summary: S&P500 shed 1.5% and Nasdaq 100 tumbled 2.2% following an upward revision to the U.S. Q3 GDP data that dashed investors’ optimism of goldilocks of moderation of inflation and a potential soft landing. Among today’s several economic data releases from the U.S., all eyes will be on the November PCE report which has the most potential to shape expectations on the Fed’s policy path. This is the last Market Insights Today for 2022. Our first edition for 2023 will be on 3 January. We would like to wish all our readers a joyous festive season and happy New Year.   What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) reversed and fell on upward revision in Q3 GDP U.S. equities reversed the gains from the previous session and tumbled on an upward revision in the Q3 GDP to 3.2% from the previously reported 2.9%. Coming in at 216K, the initial jobless claims increased less than the 222K expected. Investors were whipsawed by the hope of goldilocks of moderation of inflation and a soft landing and the fear of the persistent strength in the labor market and the economy preventing the Fed from lifting its foot from the brake. A day after the hope on Wednesday, investors succumbed to fear on stronger than expected economic data that were taken as bad news for the market. S&P500 fell by 1.5% and Nasdaq 100 shed 2.2% on Thursday. All 11 sectors within the S&P 500 declined, with laggards of consumer discretionary, information technology, and energy falling over 2% each. Tesla (TSLA:xnas), plunging 8.9% was once again the top loser in the S&P 500 as well as the Nasdaq 100. Please refer to Peter Garnry’s notes on more about the harsh reality that Tesla is facing. Following the gloomy demand outlook from Micron (MU:xnas), the semiconductors were sold off, with Lam Research (LRCX:xnas) falling 8.7%, Applied Material (AMAT:xnas) down 7.8%, Nvidia (NVDA:xnas) down 7%, and Advanced Micro Devices (AMD:xnas) down 5.6%. US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) cheapened on strong economic data Q3 GDP was revised up to 3.2% from the previously reported 2.9%. The personal consumption component was revised up to 2.3% from the previously reported 1.7% on firmer services consumption. The quarterly core PCE in the Q3 GDP report was revised up to 4.7% from the previously reported 4.6%. The monthly PCE and core PCE for November are scheduled to release today. The stronger-than-expected GDP revision saw yields on the 2-year Treasuries 6bps cheaper to 4.27%. The long-end’s reaction to the data was muted with yields on the 10-year 2bps higher to 3.68%. The demand in the 4-week and 8-week bill auctions was good while the demand in the 5-year TIPS auction is relatively subdued. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) rallied on stimulus rhetoric and talk of shortening quarantine The Hang Seng Index rallied 2.4% and CSI 300 climbed 0.4% as of writing, after China’s State Council, the People’s Bank of China, and the China Securities Regulatory Commission separately released meeting readouts or statements to pledge to implement the decisions from the recent Central Economic Work Conference to boost the economy, support the property sector, and the internet platform companies. Mega-cap China internet stocks surged, with Alibaba (09988:xhkg) up 4.1%, Tencent (00700:xhkg) up 4.1%, Meituan (03690:xhkg) up 6.8%, and Bilibili (09626:xhkg) up 9.6%. Adding to the risk-on sentiment is market chatter about the shortening of quarantine to three days. Leading retail and catering stocks soared. Xiabuxibu (00520:xhkg) jumped 15.7% and Haidilao (06862:xhkg) rose by 7.6%. Li Ning (02331) surged 7.4%. Educational services providers continued to rise in anticipation of potential loosening restrictions over the sector. FX: US dollar little changed versus major currencies The U.S. dollar tread water in thin trading ahead of a busy economic calendar today in the U.S. with the closely watched PCE deflators, plus personal spending, durable goods, new home sales, and the U. of Michigan Consumer Sentiment Survey. USDJP and EURUSD were nearly unchanged at 132.30 and 1.0600 respectively. GBPUSD was moderately lower at 1.2030, down 0.4% and AUDUSD was down 0.5% to 0.6670. What to consider? Japan’s November CPI in line with expectations Japan’s national CPI released this morning came in basically in line with expectations. The headline CPI ticked up to 3.8% Y/Y from 3.7% in October but below the 3.9% consensus forecast. CPI excluding fresh food and CPI excluding fresh food and energy were as expected, being at 3.7% Y/Y (vs consensus: 3.7%, Oct: 3.6%) and 2.8% Y/Y (vs consensus: 2.8%, Oct: 2.5%) respectively in November. US November PCE may be on course for further easing for now US inflation is cooling, but we argue that the debate at this point needs to move away from peak inflation to how low inflation can go and how fast it can reach there. Fed’s preferred inflation gauge, the Core PCE, will continue t,o remain in focus especially after Powell has highlighted it a key metric recently at both the Brookings Institute and the December FOMC press conference. However, PCE may now slow as rapidly as CPI with the two key restraining components – goods and energy – likely to play a smaller part in PCE. Expectations are for a November reading of 5.5% Y/Y reading vs a previous reading of 6.0% Y/Y while the core is expected to come in at 4.6% Y/Y from 5.0% Y/Y in October. Still, risks to inflation remain tilted to the upside going into 2023 as financial conditions have been easing and China’s reopening brings a fresh wave of inflation risks. For our look ahead at markets this week – Read/listen to our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: Market Insights Today: U.S. stocks reversed and fell on upward Q3 GDP revision ahead of today’s November PCE deflator – 23 December 2022 | Saxo Group (home.saxo)
For What It Is Worthy To Pay Attention Next Week 23.01-29.01

Saxo Bank Podcast: Discussing These Pressing Wish List Items For The New Year

Saxo Bank Saxo Bank 23.12.2022 11:32
Summary:  In this Special Edition of the podcast, we discuss what investors are hoping to see in 2023 after the most traumatic year for "balanced" portfolios in modern memory. Items on the Wish List include hopes for a soft landing, easing pressure from central banks as inflation fades, a weaker US dollar, Chinese demand returning and more. But is this what investors will get? Discussing these pressing wish list items for the New Year on this special edition podcast are Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Read next:Migration Of Sports From Traditional Television To Streaming Is Chugging Ahead- The NFL Sunday Ticket On YouTube| FXMAG.COM Source: Podcast: Special Edition - Investors' Wish List for 2023 | Saxo Group (home.saxo)
ECB's Tenth Consecutive Rate Hike: The Final Move in the Current Cycle

The Fed Might Not Make It To 5% Because The Data Is "Weakening Too Quickly"

InstaForex Analysis InstaForex Analysis 23.12.2022 11:43
Billionaire and DoubleLine Capital CEO Jeffrey Gundlach said he believes the Fed will raise interest rates by another 50 basis points in February, which could make it peak at 5% next year. However, the central bank won't be able to hold it at that level as they will be forced to cut it. "You get to 5%, repeat that, then think the market will start to fall," he said. "The bond market expects the federal funds rate one year from now to be the same as that at the December meeting, which makes me wonder why bother with these hikes at all?". Gundlach also warned that the Fed might not make it to 5% because the data is "weakening too quickly". Meanwhile, Gainesville Coins precious metals expert Everett Millman said such a rapid Fed rate hike is usually not conducive to stable policy. "The US economy will fluctuate a lot because of this," he said. "I think the pause in rate hikes will come sooner than predicted. The damage will be more obvious next year," Millman added. The Fed always works with hindsight, which makes its job much more difficult. "It's hard for them to see problems in the economy until it's too late. They can bring the rate up to 5% because they want to create the illusion that they are coping with inflation," Millman noted Relevance up to 09:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/330640
Nasdaq 100 Faces Bearish Breakdown Below Ascending Wedge and RSI Momentum Indicator

Poor Stock Market Performance Meant That For Many Investors The Dollar Was A Safe Currency This Year

InstaForex Analysis InstaForex Analysis 23.12.2022 14:13
The US dollar was one of the winning trades of 2022, peaking in September at a 20-year high, gaining about 20% against a basket of currencies. But will it dominate next year amid a slower interest rate cycle, recession fears and other external factors such as China's reopening? The current year for the U.S. dollar began with bullish sentiment, which intensified when the Federal Reserve began an aggressive tightening cycle in March. Since then, the Fed has raised a total of 425 basis points, bringing the federal funds rate to a range of 4.25–4.5%. The Fed has been one of the main drivers of the U.S. dollar. On top of that, the poor stock market performance prompted many investors to use the dollar as a safe-haven currency. Since the beginning of the year, the U.S. Dollar Index (DXY) has risen to a near 20-year high above 114 in September. Looking to 2023, the Fed remains hawkish despite a slightly smaller 50 basis point increase this month compared to a 75 basis point increase in the previous four meetings. At the December press conference, Fed Chairman Jerome Powell said: "We've raised 425 basis points this year, and we're into restrictive territory. It's now not so important how fast we go. It's far more important to think about what is the ultimate level. And ... how long do we remain restrictive? That will become the most important question." The key question for the U.S. dollar next year is how long the Fed will need to maintain higher rates. According to the Fed's latest economic forecasts, the average federal funds rate forecast for next year is 5.1%, with GDP projected at 0.5% and PCE inflation slowing to 3.1% in 2023. Strong dollar by the beginning of 2023 Many analysts see the future in USD trading early to mid next year, with central bank meetings and inflation data setting the tone for 2023. "FX markets are assuming that central banks can signal the all-clear on inflation and deliver gentle easing cycles to ensure soft landings in 2023. We suspect the reality will not be quite as kind to financial markets," said ING's FX strategists Chris Turner and Francesco Pesole. "We back a stronger dollar into early 2023." Wells Fargo views 2023 as the dollar's "last hurrah" before the start of a bearish trend. "The greenback can experience a bout of renewed strength into early 2023. With the Fed likely to deliver more hikes than markets are priced for, a hawkish Fed should support the greenback," said Wells Fargo 2023 Outlook. "We believe the Fed is likely to deliver more interest rate hikes than financial markets are priced for, and indeed more tightening than many other central banks." However, by the middle of next year, the outlook is changing as the U.S. economy begins to slow down, putting pressure on the dollar. "Starting in the middle of next year, we believe growth differentials between the United States and major foreign economies should start to favor international G10 countries, and these growth dynamics should be a contributing force to a sustained dollar depreciation," Wells Fargo said. "We expect the United States to enter recession only during the second half of next year." Relevance up to 10:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/330654
The Challenge to the Dollar: De-dollarisation and Geopolitical Shifts

The View Of ING Economists Of Recession And The Fed Rate Cuts

TeleTrade Comments TeleTrade Comments 27.12.2022 11:31
In the view of economists at ING, recession will accelerate inflation's slide and allow the Federal Reserve to respond with rate cuts before 2023 is out. Recession risks mount as businesses pull back “We're likely to see the jobs market and the outlook for business capital expenditure deteriorate markedly over the next couple of quarters. While the US entered a technical recession in the first half of 2022, this was tied to legacy supply chain issues which led to volatility in trade and inventories. A recession will feel much more ‘real’ this time around.” Inflation set to hit 2% “Corporate pricing power already appears to be waning based on survey evidence. The deteriorating activity story will help dampen price and wage pressures further. The composition of the US inflation basket, which is heavily skewed toward housing and vehicles – accounting for more than 40% by weight – is also important for our call that inflation will hit 2% by the end of the year.” The Fed will respond early and fast with rate cuts “With the Fed continuing to suggest the risk of doing too little outweighs the risk of doing too much, it appears prepared to accept a recession to ensure inflation is defeated. Given this situation, there is some upside risk to our forecast of 100 bps of rate hikes from here on. But given the prospect of recession and sharply lower inflation, the Fed will be in a position to cut interest rates in the second half of the year.”  
The USD/CHF Pair Returned To Its Previous Three-Day Recovery

The USD/CHF Pair Returned To Its Previous Three-Day Recovery

TeleTrade Comments TeleTrade Comments 27.12.2022 13:23
The US dollar accelerates its downtrend and reaches levels below 0.9300. Hopes of a slowdown in Fed tightening are hurting the USD. News that China is easing covid restrictions further has boosted market mood. The US Dollar resumed its near-term downtrend against the Swiss Franc on Tuesday, with the pair extending its pullback from last week’s highs at 0.9345 to levels below 0.9300. The pair drops about 0.5% so far today, retracing the previous three day’s recovery. Hopes of Fed easing are hurting the Dollar US macroeconomic figures released last Friday have boosted hopes of a slowdown on the Federal Reserve’s monetary tightening path in 2023, which has hurt demand for the Greenback. The US Core Personal Consumption Expenditures Price Index, a gauge closely observed by the Fed to assess inflationary trends, eased in November for the third consecutive month, suggesting that the price pressures might have started a deceleration trend. Furthermore, consumer spending remained practically unchanged from the previous months. These figures pave the way for the Federal Reserve to ease its tightening path. On the other hand, Chinese authorities have announced the end of COVID-19 restrictions for inbound travelers. The National Health Committee assured that from January 8, quarantines for visitors to China will be scrapped, which has boosted risk appetite in an otherwise quiet post-Christmas market, adding selling pressure to the safe-haven USD.
Bitcoin price may be stealing the show soon. We could say that this week Bank of Japan decision draws more attention than usually

The Bank Of Japan Must Maintain The Easy Policy As The Japanese Economy Is In A Critical Phase

TeleTrade Comments TeleTrade Comments 28.12.2022 08:56
USD/JPY has slipped marginally to near 134.00, however, the upside is still favored amid uncertainty in the market. Federal Reserve might look for returning to policy easing led by the recent decline in retail demand and economic activities. The expression of loose monetary policy continuation in the Bank of Japan’s summary of opinions has weakened the Japanese Yen. USD/JPY may display more upside after a Rising Channel breakout and bullish signs from the momentum oscillator. USD/JPY pair has sensed long liquidations after a vertical rally around 134.40 in the early European session. The asset has corrected marginally to near 134.10, however, the corrective move seems healthy for the major as the market sentiment is still risk-averse. The Japanese yen pair is expected to resume its upside journey for recapturing the critical resistance of 135.00 ahead. Meanwhile, S&P500 futures are displaying a subdued performance as the market participants are getting anxious amid the festive mood. The 500 United States stock basket witnessed selling pressure on Tuesday led by weakness in technology stocks and a decline in International Trade Deficit. The return on 10-year US Treasury bonds has trimmed below 3.85% but is still showing promising signs of recovery ahead. The US Dollar Index (DXY) is struggling to surpass the crucial resistance of 104.00, however, the upside is still favored amid uncertainty in the global market towards the rapid reopening approach of the Chinese administration. Federal Reserve might return to policy easing sooner Recent decline in the United States Durable Goods Orders and Personal Consumption Expenditure (PCE) Price Index have delivered an expression of a slowdown in inflation expectations further. A sheer decline in the demand for durable goods, and consumption expenditure by households are critical for a decline in inflationary pressures. And now, a decline in Tuesday’s International Deficit as firms are restricting themselves from expanding operations due to higher interest obligations is going to compel the Federal Reserve to return to policy easing context sooner. On Tuesday, the US Census Bureau reported that Exports of goods for November were $168.9 billion, $5.3 billion less than October exports while Imports of goods for November were $252.2 billion, $20.8 billion less than October imports. This indicates a decline in overall economic activities, which might result in lower employment opportunities in the CY2023. United States economy is far from recession Market participants have been debating over the United States economy getting into recession and a higher Unemployment Rate to achieve price stability. As the Federal Reserve is hiking interest rates dramatically, economists have been compelled to trim Gross Domestic Product (GDP) projections and firms get restricted from executing of expansion plans. Thomas M. Mertens, a Researcher from the Federal Reserve (Fed) Bank of San Francisco’s Economic Research Department came out with a recession predictor based on macroeconomic time series, particularly the jobless unemployment rate. He cited that no predictors indicate an upcoming recession over the next two quarters currently. And, the jobless rate does not currently signal an impending recession. Bank of Japan’s Summary of Opinions favors easy monetary policy ahead In the Summary of Opinions by the Bank of Japan, the central bank cleared that widening of the yield band was meant to address distortion in 10-year Japanese Government Bonds (JGBs) pricing but this is not a step toward an exit from ultra-easy policy, as reported by Reuters. The expression from the Bank of Japan’s summary of opinions indicates that the central bank must maintain the easy policy as the Japanese economy is in a critical phase in hitting the price goal. No doubt, the economy is showing signs of wage rises, and a positive economic cycle but it is appropriate to maintain an easy policy for time being. USD/JPY technical outlook USD/JPY is on the verge of kissing the horizontal resistance plotted from the December 14 low around 134.52. The US Dollar is extremely strong as the asset has delivered a breakout of the Rising Channel chart pattern formed on an hourly scale. The pair has scrolled above the 200-period Exponential Moving Average (EMA) at 133.88, which indicates that the long-term trend has turned bullish. Meanwhile, the Relative Strength Index (RSI) (14) has shifted into the bullish range of 60.00-80.00, which signals that the upside momentum has been triggered.     search   g_translate    
Nasdaq 100 Faces Bearish Breakdown Below Ascending Wedge and RSI Momentum Indicator

Receding Hopes Of The US Economic Slowdown Keeps DXY Bulls Hopeful

TeleTrade Comments TeleTrade Comments 28.12.2022 09:03
US Dollar Index retreats from intraday high, struggles to defend DXY bulls after snapping two-day downtrend. San Francisco Fed’s Researcher rules out US recession, mixed data probe hawkish Fed concerns. Receding optimism for China unlock announcements jostle with boring performance of yields to restrict DXY moves. US Dollar Index (DXY) takes offers to reverse the early day gains around 104.20 as European traders brace for Wednesday’s work amid the holiday mood. The sluggish markets also take clues from the lack of major data/events, as well as mixed concerns surrounding China and the Federal Reserve (Fed). However, receding hopes of the US economic slowdown keeps DXY bulls hopeful. Earlier in the day, a Researcher from the Federal Reserve Bank of San Francisco’s Economic Research Department ruled out odds favoring the US economic slowdown for at least the upcoming two quarters. Talking about the day, Monday’s US economic releases mentioned that the Good Trade Balance for November improved to $-83.3B versus $98.8B prior. However, the US S&P/Case-Shiller Home Price Indices for October dropped to 8.6% YoY versus 9.7% expected and 10.4% previous readings. Elsewhere, the US raised doubts about China’s latest Covid-linked moves and probes the risk-on mood. The dragon nation initially ruled out the quarantine requirement for inbound travelers before stating that the nation will resume citizens' applications for ordinary passports for tourism and visits abroad from January 8, 2023. Even so, a US Official mentioned, per Reuters, that the US government may impose new COVID-19 measures on travelers to the United States from China over concerns about the "lack of transparent data" coming from Beijing. While portraying the mood, the US Treasury yields remain stable while the stock futures print mild gains. Moving on, a light calendar and lack of major macros may allow the DXY traders to pare recent gains. That said, the US Pending Home Sales for November which holds the market consensus of 0.6% versus -4.6% previous readings will decorate the calendar and should be eyed amid a lack of major data/events for fresh impulse. Even so, major attention will be on the concerns surrounding Fed and China, not to forget the US Treasury bond yields. Technical analysis Despite the latest failure to defend DXY bulls, Tuesday’s bullish Doji candlestick suggests further recovery unless the quote drops back below the recent low of 103.88.    
Pound Sterling: Short-Term Repricing Complete, But Further Uncertainty Looms

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

InstaForex Analysis InstaForex Analysis 30.12.2022 11:54
The foreign exchange market is expected to move quite sharply in 2023 as two mutually directed processes - fighting inflation and trying to slow or prevent the onset of recession in each of the currency zones - follow similar scenarios, but in different conditions. Let's look at the balance of short and long positions in speculative positioning in the long-term, based on CFTC reports. To clearly see how large speculators build their strategy, let's consider the ratio of long and short positions for each of the currencies against the U.S. dollar. We will convert the long and short volumes for each of the currencies using a simple formula: divide the difference between long and short positions by the sum of long and short positions and normalize them between -100 and +100. We will sum up the result in the table. The interpretation of the results is as follows. If the line is above zero, the positioning is bullish, if it is below then it's bearish. The direction of the line whether it's up or down shows the dynamics of the speculators' sentiment over time. As follows from the table, the euro shows the most stable and consistent growth in regards to sentiment. The bullish bias is evident, i.e. long-term expectations on the futures market are in favor of the euro, which suggests that EURUSD will continue to rise during the first weeks of the new year. The New Zealand dollar unexpectedly took second place. The positioning was bearish for a long period, but in the last week a sharp growth of longs and a decline in shorts became evident. This means that the market sees the prospect of the kiwi strengthening against the current levels, the long-term target might be in the resistance area at 0.6680/6720. All other currencies are still in the bearish area (below zero) and are quite close to each other. Nevertheless, the movement in favor of growth in longs and a decline in shorts (upward direction of the lines) is noticeable for all currencies, except for the Canadian dollar. This synchronism allows us to conclude that the foreign exchange market is focused on a scenario of a gradual transition of demand from the dollar to other currencies. Sentiment is determined by a number of factors, and the most important one is inflation expectations in each of the currency areas. As the chart below clearly shows, the spread between the Federal Reserve's discount rate and inflation has been growing most steadily for the dollar since August, which means that the US central bank has been the most consistent among all major central banks in stopping the inflation surge and achieving a noticeable result. And if so, then the market sees the Fed's policy as not only the end of the rate growth cycle, but also a reversal to its decline earlier than the other currencies, that is, long-term expectations for the yield spread suggest a fall in the dollar's position. But the European Central Bank and the Bank of England face an urgent need to continue to tighten policy because the actions they have taken by the end of 2022 did not produce a noticeable result. Inflation remains strong, and as the winter progresses, as sharply higher energy rates begin to factor in, inflation will remain high, real yields will be much lower than in other countries, and they will be forced to continue policy tightening longer than the Fed forecast. This means that in dynamics, long-term yield spread expectations will shift in favor of the euro and the pound. For the euro, we just see a steady bullish repositioning (see the first chart), the pound lags behind, but the projections for the BoE's actions are firmly bullish. Forecasts for the ECB and the BoE's further actions are hawkish, and unlike the Fed, the end of the tightening cycle and a pivot to monetary policy easing are seen much further into the future, meaning that over the long term, the yield spread will start to grow in their favor. Read next: Japan Is Trying To Maintain Cover For LNG Vessels In Russian Waters, How Digital Money Could Look Like According To The IMF| FXMAG.COM We expect both currency pairs, EURUSD and GBPUSD, to resume growth in the first weeks of the new year. Long-term targets for EURUSD are 1.0940 and 1.1270, for GBPUSD we can expect attempts to rise to the area of 1.2750/60. It is necessary to take note that the Bank of Canada is likely to strengthen its hawkish stance since its efforts haven't produced any noticeable result yet. And also the Bank of Japan, as the dynamics of yield on the yen remains negative, which puts the yen in a losing position in the long term due to the risk of increased capital outflow from the country. As for the Australian dollar, there is no clarity yet. The dynamics in the futures market is minimal, the Reserve Bank of Australia is behaving very cautiously and does not allow the aussie to deviate either to one or the other side of the market trends. The U.S. dollar, according to the CFTC reports, is close to exhausting its growth potential, the Fed's role as a flagship is nearing its end. The dollar stands a good chance of continuing to weaken across the currency market spectrum in the first weeks of 2023.     Relevance up to 07:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/331172
German Ifo Index Continues to Decline in September, Confirming Economic Stagnation

The New Year Could Be Just As Difficult As The Previous One, Which May Cause Investors To Focus More On Alternative Assets

InstaForex Analysis InstaForex Analysis 30.12.2022 12:00
2022 will be remembered as one of the worst in recent history for the traditional 60/40 portfolio. Both bonds and stocks suffered huge losses this year because the Federal Reserve raised interest rates at the fastest rate possible to combat inflation. Since the Fed will keep interest rates high until the end of 2023, the new year could be just as challenging as the previous one, which means investors should focus more on alternative assets such as private equity, private credit and real estate. According to Yieldstreet fund manager Michael Weisz: The U.S. is already in a recession and conditions will only get worse as the Federal Reserve maintains its aggressive monetary policy. In this environment, investors are finding it increasingly difficult to accumulate wealth. The Federal Reserve is tightening interest rates and reducing market liquidity. There are reasons why endowment funds, pension funds and investment firms have significant exposure to alternative assets. Private markets have outperformed traditional markets and also help reduce the volatility in investors' portfolios. Regarding how big a position investors should seek to build... According to Weisz: real estate, private equity and private credit should make up about 40% of the portfolio and could eventually rise to 50%. Read next: TC Energy Corp Has Announced That It Is Aiming To Fully Reactivate The Keystone Oil Pipeline System After The Largest Reported Spill In The Pipeline's History| FXMAG.COM "Pension funds and endowments invest up to 55% of their assets in private markets and that is what retail investors should try to achieve," he said. Investors should diversify their alternative assets exposure into three categories. First, there's private credit and equity. Investors should look for short-term assets with cash flow. There are a lot of variables and unknowns about how the macroeconomic backdrop is going to shape, and having a shorter duration credit provides a little more flexibility. The second tranche is real estate. 2022 was a terrible year for U.S. housing markets as new home buyers faced higher home prices and rising mortgages. Although home prices are expected to fall in 2023 due to weaker demand, the housing market is still a solid option for long-term investments. "In the housing market, the highs of the last cycle traditionally prove to be the lows of the new cycle," he said. The housing sector is likely to outperform commercial real estate. The third tranche of an investor's updated portfolio will be alternative assets such as art and other collectibles that gain value over time. Relevance up to 09:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/331206
India’s Investing In Program For The Green Hydrogen Industry | Covid Situation In China Is Getting Serious

Main Problem There Was A Response To The Global Pandemic

XTB Team XTB Team 30.12.2022 12:26
Admission You could say that high inflation was the theme of the turbulent decade of the 1970s. It was a bitter lesson for investors - inflation meant the need to introduce higher rates interest rates, which led to a bear market in the markets. In turn, the period of decreasing inflation in subsequent ones two decades brought a great bull market. Since then, developed economies have not been witnessed such high levels of inflation - until recently. No wonder it's growing. The level of inflation around the world caused anxiety in the markets. In last year's report, we warned against the risk of inflation. Now that these risks come materialized, we analyze what this means for equities, commodities and currencies. Why is inflation so important? A low and stable level of inflation is a desirable phenomenon. It is a kind of lubricant for the mechanism economic growth that helps with business planning and management costs. Without inflation, the prices of some goods or services would fall, which would be a challenge enterprises affected by this phenomenon. However, as soon as the rate of inflation rises too much - problems arise in the economy. Rising inflation primarily introduces uncertainty. Enterprises cannot plan their budget effectively, meanwhile households do not know exactly how much their income is worth. Mortgages stop become expensive, currencies lose competitiveness and the stock market suffers from higher rates interest. The consequences of this state of affairs are many - simply too few investors remember them. The last episode of high inflation seems far away, but it may be closer than many think. How did we get to where we are? Before we delve into the parallels to the inflationary saga of the 1970s, let's examine how we arrived at the point where inflation is well above central bank targets. If you read any book on economics, you will learn that price is a function of supply and demand. It sounds simple in theory, but the interdependencies in the global economy are so complex as to be almost four decades of low inflation have sown seeds of doubt, resulting in an increasing number of policy makers began to claim that expansionary monetary policy would not increase inflation. Some of the factors that have helped keep inflation low over the years have begun disappear before the pandemic. Globalization processes have been slowed down and reversed in reaction to the Sino-American "trade wars". Climate policy, although often needed (and perceived as misguided by some), began to raise costs for companies. Main problem however, there was a response to the global pandemic. Net QE: Fed + ECB + BoJ (USD billion) Fed FUNK ECB While enterprises were paralyzed by restrictions and restrictions, the demand was there stimulated by money printing and generous fiscal spending in the form of benefits for the unemployed, checks for individuals and subsidies for businesses. High demand and limited supply had to translate into an increase in prices - there was simply no other way. Even worse, banks central governments ignored the first signs of rising inflation, calling them "transient." This it delayed the response to price increases and allowed price pressures to become more anchored. As in the 70s “There was a massive inflationary spiral in the mid-1970s that ended in the early 1980s.” The return of the terrible 70s? We associate the 70s with bell-bottom jeans, colorful shirts, disco music and american muscle cars. This is because, after a while, we often only remember things good and pleasant ones, and we eliminate the bad ones from memory. Perhaps that is why the 70s are associated with high inflation only to economists. The challenge in economic analysis is the fact that the processes taking place in the economy are ongoing very long. The effect of this is that in order to find a similar situation, you often have to look a lot back in time (not to mention the fact that any statistical test requires a large number of observations). This is the case with inflation around the world - to make For any reference to the past, we have to travel back in time almost 50 years! Nothing no wonder such comparisons are controversial. The current economy is completely different more technology and services, less agriculture and industry. Demographics have also changed labor market regulations. But at the same time, the number of similarities is striking. So anyway can we draw any conclusions from that situation?
Equity Markets Rise, VIX at 12 Handle After ECB Rate Hike and US Economic Resilience

Comparing The Current Economic Situation To That Of The 70s

XTB Team XTB Team 30.12.2022 12:35
Back to the 70s Even superficially assessing the current situation, there are similarities to the first half of the 1970s considerable. The war (then in the Middle East) and the resulting rise in oil prices characterize both periods. Surprisingly, even the scale of the raw material price increase was similar. In 72-74 it was 182% as measured by the GSCI price index, while now (April 2020 to June this year) it is 199%. However, there are more similarities. Let's start with the positives. In 1974, the peak in the commodity market also marked a peak inflation (for several consecutive years). The Commodity Price Index peaked in November 1974 and it was then that the highest level of inflation in the United States was recorded. Core inflation (without energy and food prices) reached its peak 3 months later. Imposition on the commodity price index and annual inflation show a clear correlation. The US inflation shock of 1974 2021/22 US inflation shock GSCI CPI y/y Core CPI y/y The fall in commodity prices in 1974 helped bring inflation down to lower, though still unsatisfactory, levels. Source: Macrobond, XTB Research It would seem that this supports the market's expectations of a fall in inflation, confirmed recently by a much lower level of the ISM Prices Paid Index. However, it is worth noting that this drop occurred before the peak of the GSCI index, and the inflation relation itself seems to be stronger with the GSCI index. Therefore, the transaction prices component of the ISM is rather of secondary importance to us. It is worth noting, however, that it is not about the peak level of inflation itself, but about its return to the target, that is 2%. In the 1970s, the Fed did not yet have an inflation target (it was introduced only in 1995), but we can clearly see that core inflation before the shock did not exceed 3%, while after 1974 it did not fall below 6%, and from 1978 it started to grow again. Why? Custom recession The labor market is often cited as the cause of inflation in the 1970s. Big role unions meant pressure to increase wages, and higher wages allowed for the acceptance of higher prices. It is worth noting, however, that wage growth at the peak of inflation (approx. 5.5%) in the US was similar to today's, and lower in real terms (data for 2020 and the first half of 2021 are a deviation from the trend due to temporary layoffs low paid workers). Prices started rising in 1975 and this helped anchor inflation at higher levels. Inflation vs Wages, 1974 Inflation vs Wages, 2021/22 Salaries y/y CPI y/y Core CPI y/y Wage growth was one of the factors anchoring inflation at higher levels in the 1970s and should be watched closely today as well. The publication of the NFP report is usually held on the first Friday of each month. Source: Macrobond, XTB Research The fact that inflation began to fall along with commodity prices was the result of a deep recession triggered both by price increases and Fed policy. A weakening economy usually eases the pressure and therefore inflation often falls in line with weaker macroeconomic readings. In In the 1970s, inflation rose with weaker macroeconomic readings, because weaker economic data was the result of higher inflation. It's the same today. Why Didn't the Fed Beat Inflation? In short, he feared the recession. Let's start with the Federal Reserve anyway she was in a better position then. In 1972, no time was wasted whining about temporary inflation, but interest rates were aggressively raised (from 5 percent to 13 percent in just two years). However, a sharp economic downturn and a rise in the unemployment rate caused the white flag to be waved and in just a few months the main Fed interest rate returned to its baseline. This revived the economy, but with it inflation and wage pressures. Fed inflation and interest rates, 1974 Fed inflation and interest rates, 2021/22 Fed interest rates CPI y/y Core CPI y/y The Fed capitulated completely in 1974. The rapid retreat from monetary tightening allowed economic and market recovery, but it perpetuated higher levels of inflation. Will the FOMC headed by Jerome Powell do the same? Source: Macrobond, XTB Research This time, the Fed only started raising rates just before inflation peaked. So it won't surprisingly, the cumulative effect of tightening will be much smaller, and the possible pivot in monetary policy much more risky in terms of inflation persistence the American economy. What now? In the realities of a strong labor market and high dynamics of price growth, the Fed can ignore it persistent inflation at your own risk. As proved above, too fast relaxation monetary policy caused another spike in inflation in the 1970s and the Fed – despite promising signals from the commodities market - may consider a very similar scenario. Reserve Federal now has two options: Option 1 - PIVOT. This is what the markets expect. Investors hope the Fed will back off path of monetary policy tightening and will allow economic recovery. this scenario would most likely lead to a return to inflation, but it would be a worry for the markets for later. Pivot Fed could have a positive impact on US indices, oil, precious metals or cryptocurrencies, and negative on the dollar. Option 2 - fighting inflation. This is what the Fed is constantly communicating: we want to make sure that inflation it will fall to the level of 2% and will remain there, argue the members of the Reserve. The question is - whether The Fed will be able to continue to tighten monetary conditions in the face of potentially painful economic downturn? If the answer is yes, it may be negative signal for US indices, oil, precious metals and cryptocurrencies, and positive for US dollar.
Oanda Podcast: US Jobs Report, SVB Financial Fallout And More

2022 Was One Of Only Five Instances Since 1948 Where Both US Stocks And US Bonds Were Down Simultaneously In A Calendar Year

Franklin Templeton Franklin Templeton 31.12.2022 10:14
Don’t stand on the sidelines in 2023 For investors, 2022 is a year to forget. Surging inflation and central bank interest-rate hikes have conspired to undermine stocks, bonds, real estate, cryptocurrencies, and many commodities. Little wonder that investors are peering into 2023 with trepidation, concerned that more of the same could be in store. While we see risk of further downside in some market segments during the first half of 2023, most notably in global equity markets, we also envision a year of select opportunities. Crucially, in our view, investors who remain committed to disciplined diversification and prudent risk allocations should be rewarded, as the typically negative correlations between asset classes seen historically will likely return in 2023. Storm before the calm Given the resolute commitment of central banks—above all the Fed—to force inflation down, our base case is that inflation has peaked and will further recede in 2023. But the cost of achieving lower inflation will be high. Every US tightening cycle since 1979—the year then-Fed Chair Paul Volcker took the reins of monetary policy—precipitated an episode of considerable financial stress. Whether cause or effect, the Latin American sovereign defaults in the 1980s, the 1987 stock market crash, the savings and loan crisis of the early 1990s, the Mexican debt crisis of 1995, the Asian financial crisis and Russia/Long-Term Capital Management defaults of 1997–98, the collapse of the “dotcom” bubble in the early 2000s, and the global financial crisis (GFC) of 2008 all followed periods of Fed tightening. All those tightening episodes produced strong returns for US Treasuries once inflation began to decline. But most of them also produced sharp declines in global equity markets—some brief and others longer-lasting—as monetary policy tightening took its toll on the financial system and corporate profitability. The key takeaway, in short, is “don’t fight the Fed.” Bonds will likely rally as the Fed achieves its goals, whether the economic landing is soft or hard. Equities are less likely to perform as well as fixed income unless the landing is soft. Otherwise, falling profits will offset falling bond yields and equities are unlikely to advance. That outcome is also a recipe for elevated equity volatility. The implication is that the risk/reward profile favors fixed income over global equities at the outset of 2023. That assessment need not prevail for all of 2023, but may be decisive in the first half of the year. Again, at the risk of repetition, the critical insight is that for bonds to perform well, only interest rates must fall. For equities to perform well, everything else—risk premiums and profits—must also line up. Yet, when central banks firmly apply the brakes, the wheels often come off, with unpleasant consequences for equity investors. It’s back! Less correlation As wretched as 2022 was for both stocks and bonds, we believe 2023 holds out the promise of renewed potential for benefiting from diversification. 2022 was one of only five instances since 1948 where both US stocks and US bonds were down simultaneously in a calendar year. Suppose, for instance, that our preceding assessment is correct. Tighter monetary policy brings down inflation but produces increased financial risk and a profits recession. In that case, bond market strength will cushion stock weakness. Alternatively, if the Fed miraculously pulls off a soft landing of lower inflation without a financial stress or an earnings recession, then both stocks and bonds can rally. It is difficult to overstate the conclusion—now is not the time to jettison diversification. Rather, we think investors ought to consider extending back toward less-liquid investments and diversi- fying not only stocks and bonds, but seek to find more ways to diversify for potential longer-term benefits.
The South America Are Looking For Alternatives To The US Currency

The US Dollar Is Trading On Its Back Foot Despite A Solid Back Up In US Treasury Yields

Saxo Bank Saxo Bank 02.01.2023 10:51
Summary:  Equity markets churned back and forth in the last week of 2022 and we start 2023 off with a holiday for UK and US markets today as traders get their bearings in the New Year. The US dollar is trading on its back foot despite a solid back up in US treasury yields in the final weeks of 2022 and ahead of the first important macro data this Friday in the form of the December US jobs report.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) It is a US holiday today so US equity markets will be closed. US equities fell the most in 2022 since 2008, ending a year that saw inflation and interest rates coming back to haunt excessive equity valuations. The first two weeks of the year are going to be very exciting to see whether last year’s momentum in commodities and defence stocks continues or new trends in our theme baskets will start to emerge. Stoxx 50 (EU50.I) First day of trading under way in Europe with STOXX 50 futures up 0.7% despite several recent remarks from ECB members that policy rates must remain high or go even higher to curb inflation. STOXX 50 futures remain in a tight trading range established since mid-December with the 3,782 level being the key level to watch on the downside and the 3,875 level on the upside. FX: USD trades near multi-month lows as 2023 gets under way Interesting to see the USD weakness despite a solid surge in US treasury yields, especially at the long end of the yield curve, as 2022 drew to a close. The first week or two of this year will be needed to see if some portion of the USD’s weakening was down to end-of-year effects. USDJPY trades not far above the important 130.00 level as investors anticipate that the new Bank of Japan leadership change in April will finally bring some tightening, while the market still predicts that the Fed will quickly reach its “terminal” high in the policy rate and eventually ease policy before the year is over. But will the first data points of the year, starting with this Friday’s December US jobs data, support this view? Crude oil (CLG3 & LCOH3) Crude oil futures ended a volatile 2022 close to unchanged after having traded within the widest range since 2008. Another volatile year undoubtedly lies ahead with multiple uncertainties still impacting supply and demand. The two biggest that potentially will weigh against each other in the short term remain the prospect for a recovery in Chinese demand being offset by worries about a global economic slowdown. Covid fears, inflation fighting central banks, lack of investments into the discovery of future supply, labour shortages and sanctions against Russia will also play its part in the coming months. Ahead of yearend, hedge funds raised bullish Brent crude oil bets by the most in 17 months. At 144k contracts, however, it remains around half the five-year average. Gold (XAUUSD) and silver (XAGUSD) ended 2022 on a high note Having closed 2022 near unchanged despite massive headwinds from a stronger dollar and surging treasury yields, the outlook for 2023 looks more price friendly with recession and stock market valuation risks, an eventual peak in central bank rates combined with the prospect of inflation not returning to the expected sub-3% level by yearend all adding support. In addition, the de-dollarization seen by several central banks last year, when a record amount of gold was bought look set to continue, thereby providing a soft floor under the market. As always, the dollar and yield movements will be a key focus while in the short term the market will look ahead to Wednesday’s FOMC minutes and Friday’s US job report. Yields on US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) start the year near multi-week highs US Treasury yields backed up higher as 2022 drew to a close, particularly at the longer end of the yield curve, helping to steepen the yield curve from its most inverted levels in some four decades earlier in December, but still starting the year with an inversion for the 2-10 yields of around –50 basis points as market participants figure that a recession is on the way this year that will see the Fed chopping rates by year end. The 10-year yield level to watch to the upside is perhaps the 4.00% area ahead of the 4.34% high from October, which is a 15-year high. Read next: Walmart Has Ambitions To Become An E-Commerce Leader| FXMAG.COM What is going on? 2022 was the worst year for combined stock and bond portfolios in modern memory The year of 2022 was so unusual as bonds failed to provide any diversification in what investors have traditionally seen as “balanced” portfolios of, for example, 60 percent stocks and 40 percent bonds. An FT article calculated that 2022 was the worst year, in nominal terms, for combined equity and stock portfolios, since 1871. China official December Non-manufacturing PMI plunges to 41.6 ... as December was the month (December 7 seen as the major turning point) that China finally backed away from its zero Covid policy, ironically meaning that in the short term, activity levels have plunged as the virus spreads rapidly throughout the country rather than due to official restrictions on activity. In a New Year’s address, President Xi Jinping discussed the “new phase of Covid response”. Hedge funds increased commodities exposure ahead of year-end Speculators went on a buying spree ahead of yearend with broad demand lifting the combined net long across 24 major commodity futures contracts by 16% to a six-month high of 1.4 million lots. Except for natural gas all other contracts saw net buying led by Brent crude which saw the net long jump by the most in 17 months. The other main contributors were gas oil, gold, grains led by corn, as well as sugar and cocoa. Combined with the prospect of a recovery in demand from China, continued dollar weakness ahead of yearend may have played a role supporting demand. Speculators exited 2022 with the biggest dollar short since July 2021, but it is worth noting the bulk being against the euro where the €18.5 billion long is the biggest in 23 months. What are we watching next? US Data this week relative to market expectations for Fed policy The market continues to express the view that inflationary pressures will decelerate and that the labour market will loosen up sufficiently for the Fed to begin chopping rates before year-end. Last week’s US Consumer Confidence survey for December showed a strong surge in confidence, a development that is at odds with past patterns for the survey if the country is tilting into a recession. Further strong US data for December and the next month or two would be an interesting challenge of the market expectations. This week sees the release of the December ISM manufacturing survey on Thursday and the December jobs report on Friday. Earnings to watch The earnings calendar is light in the first week of the new year, but in a couple of weeks the first Q4 earnings releases will begin to be released. The Q4 earnings season will continue its focus on margin pressures related to input costs on employees and raw materials including energy. Thursday: Walgreens Boots Alliance, Conagra Brands, Lamb Weston, Constellation Brands, RPM International Friday: Naturgy Energy Economic calendar highlights for today (times GMT) 0815-0900 – Eurozone Final Manufacturing PMI UK Markets Closed US Markets Closed 0145 – China Dec. Caixin Manufacturing PMI Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – January 2, 2022 | Saxo Group (home.saxo)
ECB's Tenth Consecutive Rate Hike: The Final Move in the Current Cycle

The Minutes Of The FOMC's December Policy Meeting Shed Additional Light On The Fed's Policy Outlook For 2023

TeleTrade Comments TeleTrade Comments 02.01.2023 13:25
Previewing this week's upcoming events from the US, TD Securities analysts said that they expect the minutes of the FOMC's December policy meeting shed additional light on the Fed's policy outlook for 2023. Job creation likely gained momentum in December "Note that the Committee signalled expectations of a substantially higher terminal rate for 2023 despite implementing a downshift in the pace of rate increases to 50bp at the December meeting. We are of the view that the terminal rate will reach a range of 5.25-5.50% by the May FOMC meeting." "Job creation likely gained momentum in December, with payrolls strengthening at the close of the year in the latest indication of still tight US labor-market conditions. The UE rate likely fell as well to 3.6%, while we expect wage growth to remain high at 0.4% m/m after accelerating to 0.6% in Nov. Separately, we look for the ISM services index to have slowed back to October levels."  
FX Daily: Asymmetrical upside risks for the dollar today

The US Dollar Index Holds Near Six-Month Lows

TeleTrade Comments TeleTrade Comments 02.01.2023 13:41
Ulrich Leuchtmann, Head of FX and Commodity Research at Commerzbank, notes that EUR/USD stays near 6-month highs to start the new year and the US Dollar Index holds near six-month lows Eurozone is facing a recession "USD weakness remains the dominating subject on the FX market. Because the market still does not believe the Fed’s affirmations that it will not cut the key rate. It has revised its expectations a little since the last FOMC meeting, but not substantially." "This mistrust must not surprise, as the FOMC members have been incorrect with their forecasts too many times in the past. I still remember very clearly their – in retrospect – absurd dots from 2009 and the following years." Read next: Twitter Did Not Pay $136,260 Rent, Microsoft Reported Its Worst Quarterly Results In Years| FXMAG.COM "In contrast all those who celebrated New Year’s eve in a T-shirt in Europe are likely to feel less concerned about a shortage of gas. This factor that had been putting pressure on the euro, which had already eased in Q4, is thus disappearing even more quickly." "Of course, the Eurozone is facing a recession. However, if this is one that is “only” due to a tightening of monetary policy it will not be as damaging for the EUR exchange rates as a recession caused by a shortage of gas would have been." "And in comparison to the US where the real economy is having to deal with a much more aggressive Fed monetary policy the FX market seems to consider the ECB's policy as not that unattractive any longer." "Our colleagues in macro research like to refer to the long-term risks of inflation of the more cautious ECB interest rate policy. These dangers are not likely to be concrete enough for the FX market yet. It will take some time yet before it prices these in. I am not sure whether that will become an issue this year or whether that is more likely to become the subject of my outlook for 2024."
The British Pound Is Showing Signs Of Exhaustion Of The Bullish Force

FX: The US Dollar And Sterling (GBP) Starting Off The Year In Worst Shape

Saxo Bank Saxo Bank 02.01.2023 14:08
Summary:  The year is starting off with the US dollar on its back foot even as US treasury yields rose into year end as the market continues to believe that we are nearing the end of the Fed rate hike cycle, with easing to follow, while the ECB has grown increasingly hawkish and the Bank of Japan is seen further adjusting its policy mix under new leadership from early Q2. Will the first key data of 2023 on Friday play well with the market’s strong convictions? Today's Saxo Market Call podcast.Today's Market Quick Take from the Saxo Strategy Team FX Trading focus: USD stumbles into the New Year, with sterling also on its back foot. The JPY has risen to the top of the heap on the anticipation of a further shift in BoJ policy after Governor Kuroda’s exit in early April. Even with US yields backing up into year – particularly at the longer end of the curve – the market continues to express view is that the Fed is set for peak policy rates at the March or May FOMC meeting, followed by eventual cuts as soon as Q4. This has been the case for some time, with the only new information available in the last days of 2022 a particularly strong US Consumer Confidence reading for December that is rather out of synch with an anticipated dip into recession in the US. End-of-quarter and end-of-year flows may have been behind the surge in treasury yields and the weakening of the greenback, so we will need at least this week for a sense of how things are shaping up, and the most interesting test of the market’s conviction would be another batch of stronger than expected jobs and especially earnings data and another strong ISM Services print this Friday. Another important factor for the US dollar in the opening weeks to a couple of months of this year is the debt ceiling fight and how much brinksmanship the weak GOP majority in the US House is willing to engage in. As the ceiling approaches, the US Treasury runs down its general account with the Fed, currently at $400+ billion and capable of being run down to $100 billion or less, which is a net boost to USD liquidity. Once the ceiling is inevitably raised, with or without concessions from the Biden administration, the opposite effect swings into gear as the Treasury then builds its account again, sucking liquidity out of the market. EUR and especially JPY strength. The drivers (and some of the irony) of sharp JPY strength are discussed with the look at the USDJPY chart below. The driver of a strong euro into year-end was ECB President Lagarde finally getting religion on the inflation fight here very late in the cycle. The strongest evidence of how the market sees a divergence in the Fed vs. ECB forward is in something like the far forward 3-month short-term-interest rate contracts, which suggest that by the end of 2024, the Fed policy rate will be little more than 50 basis points above the ECB’s policy rate, at something like 3.50% for the Fed and just under 3.00% for the ECB. This has narrowed from well over 100 basis points in early November and something like 180 basis points early in 2022. A factor tempering the upside euro potential is concern that the ECB won’t be able to deliver as much as it would like for the market to believe it is capable of without triggering an ugly new aggravation of peripheral spreads as a weak economy like Italy’s can’t fund itself at 3% without QE. Italian Prime Minister Meloni has already http:been out complaining against the ECB’s communication style and the ESM. Read next: The First Trading Day Of 2023: GBP/USD Is Trading 1.2051, USD/JPY Pair Below 131, The Aussie Pair Is Around 0.68 And EUR/USD Above 1.0680| FXMAG.COM Chart: USDJPY USDJPY tanked into year-end, nearing the recent cycle lows even as US long treasury yields climbed into year-end. For most of 2022, long US yields were a very reliable coincident indicator, but the market has its sights next year on the decelerating Fed hikes that it eventually sees turning into rate cuts, while the Bank of Japan is seen further tinkering with its policy in the direction of tightening, particularly once Governor Kuroda’s replacement is found after his early April exit. Ironically, the anticipation of a BoJ shift is resulting in enormous QE to enforce the current regime. When yields were on the rise last year and the US 10-year yield first hit the current level of 3.85% in late September, the USDJPY rate was near 145.00. From here, the current USDJPY trajectory can only find support from a follow through from the BoJ in the direction of tightening (incrementalism remains a risk there) and a world that is diving into a classic disinflationary recession, with the Fed continuing to get marked lower. The challenge for this assumption would be a far stronger than expected global economy, with resilient US activity for another couple of quarters and inflation and a fresh surge in energy prices. Source: Saxo Group Overnight, we got a miserable official Non-manufacturing PMI for December from China as the end of Zero Covid early last month is likely reaching peak impact now and through the next few weeks, followed by a likely strong resurgence in Chinese demand. How the Chinese policy and its economy shapes up on the other side of the early Lunar New Year holiday (January 23) will be an important factor in how 2023 shapes up. Table: FX Board of G10 and CNH trend evolution and strength.The US dollar and sterling starting off the year in worst shape. The latter may be a durable theme this year as the Bank of England is set for QT – a tricky proposition for a twin deficit country that will have to find buyers of its paper outside of the country. Elsewhere, the outsized JPY strength is the most prominent development as this year gets under way. It looks excessive relative to the recent rise in global bond yields. CAD is paying for the Bank of Canada’s dovishness, but oil is a bit resurgent. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs. Note that the “ATR heat” is fading to light orange (second quintile of last 1000 observations) for about half of the pairs tracked here as volatility has eased in recent weeks. Will be watching USD and JPY pair status over the coming week or two for developments, which are often important on calendar year rolls, as emphasized for EURUSD in my most recent FX Update. Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights US Markets Closed 0145 – China Dec. Caixin Manufacturing PMI Source: FX Update: USD stumbles into the New Year. | Saxo Group (home.saxo)
Oanda Podcast: US Jobs Report, SVB Financial Fallout And More

An Overall Bullish View Maintain On Commodities, U.S. Economy May Turn Out To Be More Resilient Than The Market Is Expecting

Saxo Bank Saxo Bank 03.01.2023 08:38
Summary:  Both stocks and bonds declined substantially in 2022 on the surge of inflation and monetary tightening in the U.S. Looking ahead to 2023, the U.S. economy may turn out to be more resilient than the market is currently expecting and inflation is not falling to 2% but staying at or above 4%. Commodities may have another bull run and the U.S. equity market may register positive returns driven by the tangible industries in 2023. China’s reopening from Covid containment and support to its property sector benefit Chinese stocks as well as boost demand for commodities globally. What’s happening in markets? Nasdaq 100 (NAS100.I) dropped 33% S&P 500 (US500.I) slid 19% in 2022 U.S. equities were closed on Monday. Last Friday, Nasdaq 100 edged down 0.10% to finish the year of 2022 with a 33.1% decline, its worst since 2008. S&P500 was off 0.3% on Friday and slid 19.4% on the year. In 2022, energy stood out as the lone gaining sector with the S&P500 and rose a stunning 59%. All the other 10 sectors declined and communication services, down 40.4%, consumer discretionary, down 37.6%, information technology, down 28.9%, and real estate, down 28.5%, were the laggards. Throughout the year, the stock market was driven down by higher interest rates which resulted from the Fed slamming hard on the brake after waking up to the fact that the inflation genie had been out of the bottle. Stocks bounced from their October lows in November as the Fed’s hawkish rhetoric peaked and investors started positioning for a pause of the Fed in tightening in Q2 2023 but the rally lost momentum in December. The outlook for equities remains challenging as inflation may not be falling as much as investors are hoping for in 2023. For a detailed review of 2022 from a wider perspective of the structural shifts beyond interest rates, we refer you to our Head of Equity Strategy, Peter Garnry’s brilliant article, Equites in 2022: a fork  in the road for globalization. You can also find the technical analysis of major equity indices from Kim Cramer Larsson, Saxo’s Technical Analyst, on his note, Quarter Technical Outlook – S&P 500, Nasdaq 100, DAX, FTSE 100, FTSE 250 and Hang Seng Index. For a summary of Peter and Kim’s views on the equity outlook for 2023, you can listen to this special edition of the Saxo Market Call here. US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) had a huge down year not seen for decades The U.S. Treasury market was closed on Monday. In 2022, yields on the 2-year soared 372 basis points to 4.43% from 0.72% in 12 months. Yields on the 10-year jumped 237 bps to 3.87% from 1.51%. The iShares 20+ Treasury Bond ETF (TLT:xnas) plunged 32.7% in 2022. The sharp rise in yields and decline in prices in Treasury notes and bonds meant that investors had few placed to seek safety and the popular 60-40 portfolio, which protected investors well in the Great Financial Crisis in 2008 did not work this time in 2022 as both bonds and stocks were dragged down by the rise in inflation and therefore interest rates. As yields have risen to levels that provide more meaningful returns and the Fed has signaled a shift to a data-dependant risk management mode of operation, we argue that bonds will be a valuable component again in diversified investment portfolios. Nonetheless, as inflation, while its growth may be slowing, will likely stay at elevated levels, there are likely to be opportunities again for investors to pick up bonds at yields higher than the current levels in 2023. Treasury inflation-protected securities (TIPS) look attractive at 1.6% real yields plus inflation compensation (currently at 7.68% p.a.; likely to fall towards 4% in 2023) in the form of indexation of the principal to the consumer price index. For details, please refer to our recent Fixed Income Updates: Bonds to shine in 2023 as the U.S. economy slows and the Fed moves into a risk management mode, and Elevated inflation and Fed downshift could potentially be a sweet spot for Treasury Inflation-protected Securities (TIPS). Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) rallied since November 2022 on China’s shift in Covid containment policy The Hong Kong and China equity markets were closed for holiday on Monday. Over the year of 2022, the Hang Seng Index was down 15.5% and the CSI300 Index slid 21.6%. Over the past two months, stocks traded in Hong Kong and mainland China rallied as the China has effectively abandoned its stringent Dynamic Zero-Covid policy and moved to reopen the economy despite the surge in cases of infection. While it is inevitable to see further surges and more widespread in inflection at the initial stage of opening, the outlook for the Chinese economy has brightened for 2023.  In addition to the reopening, China has intensified its effort to support the distressed property sector and given property developers access to credits and equity financing which had been denied to them for the most part of 2022. The Chinese authorities have also shifted to more friendly gesture towards private enterprises, in particular the internet platform companies in the recent Central Economic Work Conference.  This new development, together with improvement in the credit impulse since last summer, the outlook for Hong Kong and mainland Chinese equities have gained a more positive tendency for 2023. FX: US dollar stumbles into the New Year In his latest note, Saxo’s Head of FX Strategy wrote that the year 2023 is starting off with the US dollar on its back foot even as US treasury yields rose into year-end as the market continues to believe that we are nearing the end of the Fed rate hike cycle, with easing to follow, while the ECB has grown increasingly hawkish and the Bank of Japan is seen further adjusting its policy mix under new leadership from early Q2. Will the first key data of 2023 on Friday, the U.S. employment report, play well with the market’s strong convictions? Commodities’ continue to have a positive outlook in 2023 We maintain an overall bullish view on commodities, especially in energy, industrial metals, and precious metals for 2023 despite the near-term price volatilities that will be driven by the state of the U.S. economy and the development in the reopening of China from Covid containment. Saxo’s Head of Commodity, Ole Hansen, discussed the outlook for commodities in this special edition of the Saxo Market Call podcast. What to consider? U.S. recession is unlikely to come anytime soon as the market is expecting In his latest Macro Digest: Powell just started the next bull run in commodities, and a special edition of the Saxo Market Call podcast: A look ahead at 2023 with Steen Jakobsen, Saxo’s Chief Investment Officer, Steen Jakobsen argues that the U.S. economy is going to run hot in Q1 2023, as opposing to the market’s expectation of a recession. The U.S. services sector and the labor market are resilient and the fall in gasoline prices since last summer is a tailwind to consumer spending. The long-term equilibrium of U.S. inflation is likely to be 4% than 2%. While the growth of the headline inflation may slow somewhat, the structural inflationary force of deglobalization means the long-term equilibrium of inflation in the U.S. will more likely to be at around 4% rather than the 2.25% that the bond market and inflation derivative market are currently pricing in and many other asset prices base their valuation on. The Fed may not be able to deliver rate cuts as the market is hoping to get As the U.S. economy is resilient and not falling into a recession and inflation stays well above the Fed’s on average 2% target, the Fed is unlikely to be able to cut rates in the first half of 2023 or may not even be able to do some in the whole year of 2023. The Fed may pause and become data dependent and focus on risk management including ensuring proper market functioning and the U.S. federal government’s ability to service its mounting debt burdens. In the equity space, the tangibles are likely to do well in 2023 A resilient U.S. economy, elevated inflation, higher costs of capital due to high interest rates and more realistic equity valuation, and China reopening provide the backdrop for the tangible industries, such as defense, mining, energy, and biotech to outperform in 2023. The board equity markets may retrace as the disappointment of Fed easing kicks in but 2023 may turn out to be a positive year for equities driven by the tangible industries and companies that can improve productivity or be innovative. China’s PMIs declined further in December China’s Official NBS manufacturing PMI fell to 47.0 (consensus: 47.8; Nov: 48.0) and non-manufacturing PMI slid to 41.6 (consensus: 45.0; Nov: 46.7), further into contraction. The weakness was board-based and seems to be a result of the surge and widespread of Covid inflections during the initial stage of abandoning stringent containment measures. For a global look at markets – tune into our Podcast. Source: Market Insights Today: – Tangible industries to outperform in the U.S. and China to pick up momentum in 2023 - 3 January 2023 | Saxo Group (home.saxo)
All Eyes On Capitol Hill, Jerome Powell Will Appear Before The Senate Banking Committee

“Continue To Expect A 50 Basis Points Hike In February.”

TeleTrade Comments TeleTrade Comments 03.01.2023 09:09
Strategists at Citigroup are of the opinion that the Minutes of the US Federal Reserve (Fed) December meeting could underscore the divergence between doves and hawks on how high the terminal rate should go. Key quotes "We will also be looking for any guide on what could determine the size of the hike at the February meeting, but would not expect any concrete guidance." “Continue to expect a 50 basis points hike in February.”
UK GDP Already Falling And Continuing To Do So For This Calendar Year, Copper Is Still Within A Tightening Range

UK GDP Already Falling And Continuing To Do So For This Calendar Year, Copper Is Still Within A Tightening Range

Saxo Bank Saxo Bank 03.01.2023 09:36
Summary:  While Japan, the UK and the US have yet to start trading this year, markets are on the move elsewhere, as mainland European stocks put in a strong session yesterday and the Hang Seng in Hong Kong is making a bid at multi-month highs overnight. Despite Japan’s closed markets, the JPY is surging, as are the Chinese renminbi and gold, which rose overnight to a six-month high in USD terms.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures opened 0.7% higher on the first print of the year but have since retreated lower up 0.3% for the session compared to the last day of trading in 2022. The positive sentiment from yesterday’s European equity session and positive trading session in Asia, despite a slightly weaker than estimated China PMI manufacturing figures for December, are carrying over into US equity futures. We still expect equity markets to be quiet and not reveal anything meaningful in terms of information of positioning and flows until early next week. Hong Kong’s Hang Seng (HIF3) and China’s CSI300 (03188:xhkg) On its first day of trading in 2023, Hang Seng Index opened lower but rallied to post a 2% gain as of writing. China telcos, electricity generating companies, pharmaceuticals, autos, and Macao casino operators led the charge higher. It is widely expected that the border between the mainland and Hong Kong will be reopened as soon as January 8, 2023. Investors brushed the weak December NBS PMI reports released during the holiday and the Caixin PMI today and the inevitable surge and spread of Covid inflections during the initial stage of relaxation of pandemic containment in China to focus on the improved economic outlook in mainland China and Hong Kong for 2023. China’s CSI 300 Index gained 0.5%. FX: The action in FX remains firmly centred on Asia … with the Japanese yen surging to new highs overnight versus the rest of G10 currencies as the 130.00 level in USDJPY gave way without much fight and EURJPY is poking below 138.50, its lowest level since September of last year as the market has grown increasingly convinced that the Bank of Japan is set for a further policy tightening this year and despite the ECB’s overt hawkishness. The Chinese renminbi is also off to a strong start in 2023 despite dramatic disruptions to activity on the ground from Covid as a further CNH rally overnight has taken USDCNH to within striking distance of its 200-day moving average near 6.86. The USDJPY performance is particularly interesting, given the tight correlation of USDJPY with US treasury yields over the last 12 months and more, as US yields backed up sharply to end 2022 and have yet to trade this year. Crude oil (CLG3 & LCOH3 ) Crude oil futures fluctuated around unchanged as a new year got underway overnight in Asia. Another volatile year undoubtedly lies ahead with multiple uncertainties still impacting supply and demand. The two biggest that potentially will weigh against each other in the short term remain the prospect for a bumpy recovery in Chinese demand being offset by worries about a global economic slowdown. Covid fears, inflation fighting central banks, lack of investments into the discovery of future supply, labour shortages and sanctions against Russia will also play its part in the coming months. Sentiment, however, did improve ahead of yearend after hedge funds raised bullish Brent crude oil bets by the most in 17 months. Gold (XAUUSD) and silver (XAGUSD) strongly out of the starting blocks Gold trades at a fresh six-month high above $1840 and silver an eight-month high at $24.50 as the positive momentum from December gets carried over into the new year. The US treasury market opens later today but futures are signalling softer yields from where we left off on Friday while the dollar trades soft led by a strong yen. In general, we are looking for a price friendly 2023 supported by recession and stock market valuation risks, an eventual peak in central bank rates combined with the prospect of a weaker dollar and inflation not returning to the expected sub-3% level by yearend all adding support. In addition, the de-dollarization seen by several central banks last year, when a record amount of gold was bought look set to continue, thereby providing a soft floor under the market. In the week ahead we focus on Wednesday’s FOMC minutes and Friday’s US job report. Above $1842, the 50% of the 2022 correction, gold will be looking for resistance at $1850 and $1878 next. Copper jumps despite short-term headwinds HG copper trades up more than one percent at the start of a new trading year, but still within a tightening range, currently between $3.8 and $3.94 per pound. We expect to see a bumpy start to the year with China’s reopening process potentially being delayed by virus outbreaks and companies shutting down early ahead of the Lunar New Year, starting already on January 23 this year.  In addition, the risk of a global economic slowdown as highlighted by the IMF in its latest update may also weigh at the start of a year. Overall, however, the medium term offers further upside driven by reduced mining supply and increased focus on the electrification of the world, a copper intensive process that may offset weakness from the housing sector. Yields on US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) start the year near multi-week highs US Treasuries have just started trading for 2023 this morning in Europe, opening some five basis points lower for the 10-year benchmark at 3.82% after backing up sharply as 2022 drew to a close, particularly at the longer end of the yield curve, helping to steepen the 2-10 portion of the treasury yield curve from its most inverted levels in some four decades earlier in December at around –80 basis points, to closer to –50 basis points as market participants figure that a recession is on the way this year that will see the Fed chopping rates by year end. The 10-year yield level to watch to the upside is perhaps the 4.00% area ahead of the 4.34% high from October, which is a 15-year high. What is going on? ECB President Lagarde out with fresh hawkish rhetoric yesterday … warning of a further rise in borrowing costs to fight inflation - “It would be even worse if we allowed inflation to become entrenched.” Bundesbank president Joachim Nagel was also out yesterday warning of a “significant increase in long-term inflation expectations”. European yields surged in the wake of the December 15 ECB meeting on Lagarde’s hawkish blast at the press conference, with German 2-year yields, for example, rising from 2.13% before that meeting to as high as 2.77% last Friday before easing a few basis points yesterday. Tesla deliveries for Q4 fell short of estimates, despite incentives The company delivered 405.3k vehicles in the fourth quarter, which fell short of consensus expectations for over 420k. Still, the number was a record for quarterly deliveries and strongly higher from the 308.7k vehicles Tesla sold in Q4 of last year. Tesla shares lost 65% last year, though they did surge over 10% off late December lows just ahead of year-end. UK Economy may face worst recession in 2023 An FT poll of over 100 economists suggested that four out of five respondents think that UK growth will fall short of global peers, with GDP already falling and continuing to do so for this calendar year, after the inflationary shocks of the last two years will required that the Bank of England continues to raise borrowing costs and as the new Sunak-Hunt government is bent on stabilizing the country’s debt trajectory with a more austere fiscal regime than its predecessors. Recession will hit a third of the world this year The new year has kicked off with a warning from the IMF head that a third of the global economy will be hit by recession this year. In their latest update Kristalina Georgieva warned that the world faces a “tougher” year in 2023 than the previous 12 months as the US, EU and China are all slowing simultaneously. China could see its annual growth in line with global growth for the first time in 40 years and potentially acting as a drag on instead of a driver of worldwide growth. She did sound more optimistic on the prospects for the US saying it may avoid recession because unemployment is so low. What are we watching next? US data this week relative to market expectations for Fed policy The market continues to express the view that inflationary pressures will decelerate and that the labour market will loosen up sufficiently for the Fed to begin chopping rates before year-end. Last week’s US Consumer Confidence survey for December showed a strong surge in confidence, a development that is at odds with past patterns for the survey if the country is tilting into a recession. Further strong US data for December and the next month or two would be an interesting challenge of the market expectations. This week sees the release of the December ISM manufacturing survey and the December jobs report, both on Friday. US Debt Ceiling issue as the new 118th US Congress convenes today in Washington D.C. The perennial debt ceiling issue was largely skirted over the last couple of years as pandemic priorities may have prevented partisan grandstanding. But Republican lawmakers have promised a fight to extract concessions from the Biden administration. Watching for how hard the Republicans are willing to take this issue as the debt ceiling will be reached by summer of this year. Earnings to watch The earnings calendar is light in the first week of the new year, but in a couple of weeks the first Q4 earnings releases will begin to be released. The Q4 earnings season will continue its focus on margin pressures related to input costs on employees and raw materials including energy. Thursday: Walgreens Boots Alliance, Conagra Brands, Lamb Weston, Constellation Brands, RPM International Friday: Naturgy Energy Economic calendar highlights for today (times GMT) 0855 – Germany Dec. Unemployment Change 0930 – UK Dec. Final Manufacturing PMI 1300 – Germany Dec. CPI 1430 – Canada Manufacturing PMI 1445 – US Dec. Final Manufacturing PMI Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – January 3, 2023 | Saxo Group (home.saxo)
FX Daily: Upbeat China PMIs lift the mood

The Caixin Future Output Index Suggests Firms Are More Optimistic About The Longer-Term Outlook Since Covid-Zero Was Abandoned

Craig Erlam Craig Erlam 03.01.2023 12:40
A mixed start to trading on Tuesday as traders return following the festive break to some rather gloomy forecasts for the coming year. The IMF is among those warning of a tough year, more so than the one we’ve just left, as the simultaneous slowing down of the US, EU, and China takes its toll. Of course, all forecasts at this moment are subject to enormous uncertainty around the war in Ukraine, inflation, interest rates, and China’s Covid response, among others, but it seems almost everyone is going into 2023 with a healthy dose of trepidation. And following a series of nasty shocks last year, who can blame them? There is the potential for surprises this year to be of a more positive nature, of course, but as it stands, the outlook is understandably gloomy and will remain so unless something significant changes, either on the war in Ukraine or inflation. If inflationary pressures remain stubborn – and a strong, successful transition from zero-Covid to zero restrictions could enable that – then central banks will have little choice but to continue tightening monetary policy in order to bring it down. That is something the IMF strongly urged them to do, with stubbornly high inflation deemed a far greater risk over the longer term. As far as the economic calendar is concerned this week, we’re easing ourselves back in today with mostly revised PMIs and other tier-three data. Things will pick up on that front from tomorrow, with the December Fed minutes being released alongside some more significant data and that will continue into the end of the week when we get the first jobs report of the year. Read next: New Record For Electric Car Manufacturer - Tesla Deliveries Increased By 40% Year-On-Year| FXMAG.COM One interesting release this morning came from China, where the Caixin manufacturing PMI painted a less pessimistic picture than the official number over the weekend. While the surveys are different in the kind of firms they cover, it was interesting that the official number pointed to greater concern around the sector at the moment. That said, there does seem to be some promise in the Caixin future output index which suggests firms are more optimistic about the longer-term outlook since Covid-zero was abandoned despite the prospect of near-term difficulties. Range-bound Bitcoin has remained quite stable recently, hovering in the $16,000-17,000 range over the last few weeks. That may come as a relief to the crypto crowd after another rough few months. The new year no doubt has plenty in store for cryptocurrencies but in the short term, the community may just be hoping for no new scandals that will drive investors away. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
China Restricts Gallium and Germanium Exports, Heightening Global Tech War

EUR/USD, GBP/USD And AUD/USD Fell Sharply After The US Dollar Recovered

Kamila Szypuła Kamila Szypuła 03.01.2023 13:23
The US dollar appreciated, mainly due to the minutes from the December meeting of the Federal Reserve. The U.S. central bank raised interest rates by 50 basis points last month after four consecutive increases of 75 basis points in a year, but said it may have to keep interest rates higher for longer to bring inflation under control. Minutes from the December Fed meeting are due to be released on Wednesday, with investors looking for clues as to what rate path is likely to be taken in 2023. The market seems to be struggling to interpret the change in China's Covid-19 strategy. On the one hand, it is predicted that it is likely to unleash the world's second largest economy and its associated supply chains. The Chinese data remains soft and the Caixin manufacturing PMI released today came in with a narrow miss. In December it was 49.0 instead of 49.1 forecast and 49.4 earlier. Moreover, there was a desire from the Chinese side for better relations with the US after their foreign minister said they would look for more open channels of communication. It is worth noting, however, that the exchanges point to a risky market environment, which usually makes it difficult for the US dollar to find demand. USD/JPY The Japanese yen continued to strengthen today with USD/JPY dipping below 130 for the first time since June last year. It has now returned to trading above 130 and is close to 131. The yen, which hit a seven-month high during the Asian trading hours, was recently trading low at 130.45 to the dollar. The pair's decline was mainly driven by a new Japanese yen buying spurt as US equities futures fell at the open and bolstered safe-haven inflows into the yen. Speculation that the BoJ was about to start moving away from its very lax policy flared up in December when the central bank extended the yield cap on 10-year Japanese government bonds (JGB). This was further reinforced by the Nikkei report on Saturday. Read next: The Korea Fair Trade Commission (KFTC) Will Impose A Fine Of $2.2 Million On Tesla Inc| FXMAG.COM GBP/USD GBP/USD drops below the key 1.2000 level for the first time in 4 weeks as the dollar index recovers. Today's morning drop in GBPUSD is due to the recovering dollar index. The risk-positive market environment does not appear to be helping sterling find support so far. As noted above, the decline is attributable to the stronger dollar and not to UK-specific factors, which may also have exaggerated the impact. The UK economy is weighed down by recession fears, high inflation and the cost of living crisis. The Bank of England has raised interest rates nine times since December 2021 to try to bring down inflation, which remains close to a 41-year high. EUR/USD EUR/USD lost traction and fell towards 1.0550 early Tuesday after climbing above 1.0700 on Monday. It's hard to stop the driving force of the pair's recent actions as the market recovers with the US dollar strengthening again. Nevertheless, technical forecasts point to a bearish slope after the sharp decline seen during the European session. Euro still awaits German CPI data release, which may help EUR/USD move towards 1.06. Source: investing.com Read next: New Record For Electric Car Manufacturer - Tesla Deliveries Increased By 40% Year-On-Year| FXMAG.COM AUD/USD The Australian pair fell from above 0.68 to 0.6695 Weaker than expected official Chinese PMI data released over the weekend may have contributed to the decline. The Australian remains supported by expectations that the Reserve Bank of Australia will raise interest rates later this year as part of its ongoing effort to bring down inflation. Markets are currently divided on whether the RBA will deliver another rate hike in February. Australia's trade balance remains at a record high and the AUD/USD exchange rate weakens due to interest rate differentials, and the domestic economy continues to benefit from this. Source: investing.com Source: dailyfx.com, investing.com, finance.yahoo.com
Sterling Slides as Market Anticipates Possible Final BOE Rate Hike Amidst Weakening Consumer and Housing Market Concerns

Forecasts Of Recession And Decline In 10-Year Bonds In The US

InstaForex Analysis InstaForex Analysis 03.01.2023 15:03
Barclays Capital Inc. says 2023 will be one of the worst years for the global economy. Ned Davis Research estimates a 65% chance of a severe global economic downturn, while Fidelity International believes a hard landing is inevitable. Obviously, many agree that as the Federal Reserve continues its most aggressive tightening campaign in decades, a recession will occur which, no matter how mild it is, will force the central bank to consider a dovish tilt in policy even if inflation is at its peak. However, this forecast may be wrong, just like what happened last year, when analysts failed to predict the 2022 cost-of-living crisis and double-digit market losses. Goldman Sachs, JP Morgan and UBS Asset Management, for their part, see the economy thriving as price growth slows, signaling big gains for investors if they get the market right. Deutsche Bank predicts that the S&P 500 index will rise to 4,500 in the first half of the year and then fall by 25% in the third quarter. It will return to 4,500 by the end of 2023 as investors look to rebound. UBS Group expects 10-year bond yields in the US to fall to 2.65% by the end of the year due to renewed demand for safe-haven assets. Meanwhile, investment firms are in no mood to discuss the crypto industry as they have spent the previous years spinning speculations. Now, references to it have all but disappeared in forecasts for 2023   Relevance up to 10:00 2023-01-04 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/331367
ECB's Tenth Consecutive Rate Hike: The Final Move in the Current Cycle

Rates Daily: The Fed And The ECB Will Peak In The First Quarter

ING Economics ING Economics 04.01.2023 08:49
Celebrating the drop in German inflation may be premature and headwinds to bond performance, especially for those denominated in euros, remain. The Fed minutes might not fulfil all of the markets’ dovish hopes Keeping the bubbly in the fridge a little while longer The characteristic ‘pop’ of opening champagne bottles could be heard across Europe when Germany’s statistical office published a dramatically lower set of inflation figures for December 2022 than in the month preceding. More cautious investors may want to keep their bubbly in the fridge a while longer however, lest they face a rising tide of core inflation with the equally characteristic champagne hangover. As our economics team noted, core inflation may have, if anything, accelerated last month. What’s more, the government measures responsible for artificially capping inflation rates may also lengthen the time it takes for it to return to the 2% target. Core inflation may have accelerated last month This makes us uneasy about the drop in market rates yesterday. Yes, 10Y Bund yields are still up more than 60bp since their mid-December trough, and many participants returning from a two-week break may struggle to understand why yields have risen so much. To cut a long story short, the reasons centre on China reopening, Bank of Japan gradually raising the yield cap on Japanese Government Bonds, and European Central Bank (ECB) officials hammering home the message that more tightening will need to be delivered if inflation is to be brought back under control. We would venture that December inflation data so far will do little to assuage their inflation fears, but perhaps better news awaits in the remaining inflation indicators to be published this week, starting with France today, and culminating with the eurozone on Friday. Bund yields reached new highs in late December, and converged to Treasury yields Source: Refinitiv, ING EUR rates the outlier More than a jump in rates over the last two weeks of 2022, what is most notable is the underperformance of EUR-denominated bond markets. The hawkish shift at the ECB explains a great deal of the 10Y Bund bear-tightening 20bp to Treasuries and it was interesting to see Treasuries outperform Bund again on the day of the German inflation downside surprise. Upshot is: the convergence between USD and EUR rates is here to stay although we think the next leg will most likely be driven by a fall in USD rates once Fed cuts come into view. The convergence between USD and EUR rates is here to stay Speaking of the Fed, the minutes of the December meeting are published this evening. Chair Powell is increasingly understood to be one of the most hawkish members of the Federal Open Market Committee (FOMC) but after two subsequent slower inflation prints in October and November, markets chose not to heed his hawkish warning after the last meeting. The minutes will be an opportunity to test that assumption. In short, we think markets go into the release with dovish expectations, which means a hawkish surprise is more likely to move rates. Mind you, if the December meeting is any guide, market reaction should not be dramatic. This should also reduce Treasuries abilities to widen relative to Bund. The US curve re-steepening is set to be one of the most notable moves of 2023 Source: Refinitiv, ING And a brief snyopsis of what we expect as we look through 2023 Despite the easing in inflation pressures, the first quarter will have a strong rate hiking theme. The Fed is still hiking and needs tighter financial conditions. That should force market rates back up. With the ECB on a hiking mission too, upward pressure on Eurozone market rates will also feature. While we see resumed upwards pressure on rates dominating the first quarter, the biggest narrative for 2023 as a whole will be one of significant falls in market rates. The Fed and the ECB will peak in the first quarter, and once there, market rates will have a carte blanche to anticipate future cuts. Larger falls for US market rates are projected later in 2023, reflecting likely subsequent Fed cuts. But with cuts less likely from the ECB, expect a relative steepening of the US curve versus the Eurozone one. This is a classic box strategy where the US curve steepens out (dis-inversion), and the Eurozone one re-steepens by less. By the end of 2023, the US 10yr Treasury yield is back down at 3% and the Eurozone 10yr swap rate at 2.5%. But we should not go below these levels for long. Today's events and market view The events calendar is dominated by business sentiment indices. European services PMIs in the morning will mostly be second readings with the exception of Spain and Italy. French December CPI will follow hot on the heels of the (energy-related) drop in German inflation yesterday. This will be followed in the afternoon by ISM manufacturing. Its price paid sub-index is now well below the 50 ‘neutral’ level. Its fall since the second quarter of 2022 has been one of the indicators forewarning a slowdown in inflation. The employment component on the other hand has dipped besides still tight labour market indicators, although investors might interpret a further drop as an ominous sign ahead of Friday’s US job report. Also on the topic of jobs, job openings will conclude the list of US economic releases. The main event, however, is likely to be the release of the December Fed minutes (see above). There was a dovish bias in the market reaction to the December meeting and a failure to confirm this hunch in the minutes is likely to send Treasury yields up. In sovereign supply, Austria has mandated banks for the launch of a new 10Y benchmark. Germany is scheduled to sell 2Y debt via auction. KFW and EIB also mandated for 5Y benchmarks.  Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Gold Has A Chance For The Rejection Of The Support

The Increase In Stocks Of Specialized Exchange-Traded Funds Is A "Bullish" Factor For Gold

Marek Petkovich Marek Petkovich 04.01.2023 13:10
The start of the year 2023 marked a new paradox for gold. It grew against the background of the strengthening U.S. dollar at the auction on January 3 and continued to rally when the USD retreated. Investors' interest in the precious metal seems so great that they stopped paying attention to the dynamics of the USD index. However, based on a couple of days, it is too early to draw conclusions because XAUUSD now has another ally—the U.S. Treasury bonds. Economic outlook Expectations of a recession in the United States and China's difficult exit from the zero-COVID policy increase the demand for safe-haven assets. Debt yields are falling as prices rise. Real rates are also falling with anchored inflation expectations, reducing the cost of holding gold in an ETF and helping it continue its rally towards at least $1,900 an ounce. Dynamics of gold and U.S. bond yields The combination of geopolitical risks remaining high, fears of an approaching global recession and a slowdown in the rate of monetary restriction by the Fed is creating a tailwind for gold. The armed conflict in Ukraine is unlikely to end in the next 6–12 months, the global economy is less firmly on its feet than in 2022, and central banks are well aware that raising rates as aggressively as last year means exacerbating the recession. The Fed's monetary policy blocked gold's oxygen in 2022 If the Fed's monetary policy blocked gold's oxygen in 2022, it could push it to new heights in 2023. Compare that to +425 bps to the Fed Funds rate last year and the expected +75–100 bps this year. In addition, the markets continue to expect a "dovish" reversal when borrowing costs start to decline after numerous acts of raising them. Let's not discount the potential increase in investment demand for a physical asset. The outflow of capital from ETFs has good opportunities to reverse. The increase in stocks of specialized exchange-traded funds is a "bullish" factor for XAUUSD. So is rising demand for the precious metal from central banks. In the third quarter, they increased their purchases to a record 400 tons, and they do not seem to be going to stop. Thus, fans of gold are full of optimism. However, there are risks that things will not go according to their plan. If the U.S. labor market remains strong and inflation suddenly picks up after several months of slowdown, the dollar will rise from the ashes, damaging the precious metal's reputation. In this respect, the December employment and consumer price data releases are a test for XAUUSD. They may trigger a short-term pullback, although the upward trend is likely to remain in place. Technically, long positions formed on the rebound from the fair value of $1,795 per ounce are now paying off. At the same time, the inability of gold to overcome the $1,856 and $1,875 pivot points or its return below the support at $1,850 are the signs of "bulls' weakness and the reason for partial profit taking or reversal.     Relevance up to 10:00 2023-01-09 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/331439
Gold's Hedge Appeal Shines Amid Economic Uncertainty and Fed's Soft-Landing Challenge

Asia Market: Many Chinese People Have Chosen To Avoid Crowded Places, Therefore, Overall Retail Sales Should Be Weaker

ING Economics ING Economics 05.01.2023 08:29
"Santa rally" despite hawkish FOMC minutes and weak US ISM manufacturing report. ADP jobs numbers are out today ahead of the US non-farm payroll report on Friday. Caixin services sector PMI and Philippine inflation are also due... Source: shutterstock Macro outlook Global Markets: It’s being referred to as a “Santa rally”, though if so, Santa clearly thinks the market players were not especially good boys and girls in 2022 as the S&P500 rose only 0.75% while the NASDAQ gained only 0.69% in what was a very choppy session. The FOMC minutes (see more below) were probably one of the negative factors working on sentiment, though the “higher for longer” message they portrayed didn’t carry much credibility with markets, and the 2Y US Treasury yield dropped almost 2bp, while the 10Y yield fell 5.6bp to 3.68%. Better risk sentiment helped the EURUSD back above 1.06, though only just, and it was a really mixed session for the G-10 currencies. The JPY lost quite a lot of ground in late trading, getting up to 132.31, while the AUD pushed conclusively back above 0.68, maybe helped by indications that China would start to reimport Australian coal after a 2-year ban. Cable also hauled itself back above 1.20.  Apart from the THB, which continues to soar on China re-opening expectations, it was a fairly subdued day for most Asian FX pairs, though most made small gains. The CNY is now at 6.8973. G-7 Macro: Two things stand out from yesterday’s calendar, the FOMC minutes, and the manufacturing ISM index. First, the minutes, stated that no one at the FOMC “anticipated that it would be appropriate to begin reducing the federal funds rate target in 2023", which is in contrast to our house view that they will indeed begin to ease before the end of the year. However, remember when the Fed told us that rates would not rise until at least 2024? You have to take these things with a very large pinch of salt. Moreover, many participants also were concerned that tightening “…could end up being more restrictive than is necessary to bring inflation down to 2%", suggesting that this “no cuts in 2023” view may be more for cosmetic purposes than a decision that is already carved in stone.  The second item, the manufacturing ISM, is covered in detail in this note here by James Knightley. Here, a second consecutive month of contraction, weak new orders and a tumbling prices paid index all suggest that the economy is slowing in a way that could well see the Fed easing later this year, bearing in mind their dual mandate. All we really need to see is some softness in the labour data and the arguments for this should really begin to stack up. But JK also notes that, though we may soon start to see the labour market soften, at the moment, firms are still hiring, and the consensus expectation for 200,000 jobs at tomorrow’s payrolls release looks about right. In Europe, the French CPI data for December echoed the previous day’s German numbers, showing a bigger-than-expected decline in inflation, which for December stood at 5.9%YoY, down from 6.2% (6.7% on a harmonized basis). Today’s highlights include the US ADP employment survey, and the service sector ISM – the last clues to tomorrow’s payrolls lottery.   China: The Caixin service sector PMI should remain below 50 in December and could even fall slightly from November’s 46.7 to 46.0. Extensive easing of Covid measures and surging Covid cases has resulted in anxiety and many residents have chosen to avoid crowded places. As such, retail sales in general should be weaker in December compared to the prior month. This should hit SMEs in the service sector. Some recovery should be seen during the Chinese New Year, starting from 22nd January. After the long holiday, there could be even more daily Covid cases, and then another quiet month for retail. The road to recovery may not be smooth for retailers. Philippines: December inflation is scheduled for release today.  Market consensus for inflation is at 8.2%YoY, an acceleration from the 8.0%YoY in the previous month.  Mounting price pressures, notably across the service sector, suggest that inflation is now more broad-based as pricey fuel costs feed through the rest of the CPI basket.  We do however expect the December reading to be the peak for this current episode and we could see inflation back below 8% as early as 1Q 2023.  The PHP is likely to gain support on expectations for sustained rate hikes by BSP until inflation heads convincingly lower.    What to look out for: US jobs reports Philippines CPI inflation (5 January) Thailand CPI inflation (5 January) China Caixin PMI services (5 January) Singapore retail sales (5 January) US ADP, trade balance and initial jobless claims (5 January) Taiwan CPI inflation (6 January) US non-farm payrolls, ISM services, durable goods and factory orders (6 January) Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The ECB Has Made It Clear That Rates Will Remain High Until There Is Evidence That Inflation Is Falling Toward The Target

Rates Daily: Core Inflation Should Be A Better Predictor Of European Central Bank Policy

ING Economics ING Economics 05.01.2023 08:38
Bond yields continue their plunge on hopes that falling energy prices will help in the fight against inflation. The strength in the US labour market may not last but it is preventing Treasuries from joining the party. The Fed has also reiterated its unfinished rate hike work through the latest minutes. The next big cue comes from Friday's payrolls report. Fed insists on higher for longer in their latest minutes Market reaction to the FOMC minutes was muted. Breakevens, real rates and nominal rates did not do much at all. Although at the margin there has been a tendency for rates to test a tad higher, especially on the front end. The Fed has given a clear bias to continue to hike rates in the months ahead, so that makes a degree of sense. Further out the curve, the market is not paying too much attention, mostly as there is not a whole lot new from the minutes. There is not a whole lot new from the minutes On the technical front, the Fed noted the ease lower in use of the reverse repo facility, and noted that this went hand-in-hand with upward pressure on market repo. The Fed also notes an expectation for this to continue in the months ahead, in tandem with the ongoing bond roll-off from their balance sheet. The Fed also notes that this reflected the move of money market funds away from the reverse repo facility and towards market repo. Our observation here is that this has been quite minor so far. SOFR is struggling to make it much above the reverse repo rate (at 5bp over the fed funds floor, now at 4.30%). But it should gather more pace as we progress further through 2023. As SOFR eases above the Fed’s reverse repo rate in a more material fashion in the months ahead, there should be a larger reduction in cash going back to the Fed on their reverse repo facility. Rates shrugged off hawkish Fed minutes to continue to bet heavily on 2024 cuts Source: Refinitiv, ING The fall in energy prices triggers another 'everything rally' Bund yields are down almost 30bp since the start of the year, which is to say they’ve dropped almost 30bp in three days. As we discussed in yesterday’s Spark, we think the (mostly energy-related) drop in inflation in December is a red herring. Whilst helpful at the margin, we think core inflation should be a better predictor of European Central Bank policy. This drop in yields has been as sudden and relentless as the rise into year-end. Swaption implied volatility is down since its September peak but there are no signs so far that 2023 will prove a calmer year. There are no signs so far that 2023 will prove a calmer year Of course, anyone in search for a cause to explain the bond rally should look farther than backward-looking inflation indicators. The fall in yields has come alongside a collapse in energy prices. That trend is nothing new, explained in Europe by milder weather than normal and in the wider world by fear of a growth slowdown, in particular in China, but also reinforced by a weak ISM manufacturing in the US. This has resulted in another case of ‘everything rally’ where both stocks and safer bonds benefit from hopes that central banks will have an easier job tackling inflation. Students of the late 2022 playbook know that the ‘everything rally’ comes with tighter peripheral spreads. The 10Y Italy-Germany spread for instance has retraced almost half of its 36bp post-December ECB meeting widening. Implied volatility is down as peripheral bonds outperform Source: Refinitiv, ING US labour market strength is tough for Treasuries One area of persistent strength has been US labour market indicators. The ISM employment sub-index rose back above the 50 level, a development that our US economist thinks is hardly sustainable in light of the fall in other components. Together with higher-than-expected job openings, they offer little relief to a Fed concerned about wages feeding into core services inflation, as Fed Chair Jerome Powell is fond of repeating. If current inflation is a guide of how much further the Fed has to hike, recent data points to an imminent end to this hiking cycle. But if the job market is a guide of how long it would take before it decides to cut rates, there is still a protracted period of restrictive monetary policy ahead. A re-steepening of the US curve is on the cards At face value, this means a re-steepening of the US curve is on the cards. And indeed, the US curve has shown signs of re-steepening from very inverted levels. Our own view is that both growth and inflation will soften enough to allow the Fed to loosen policy in the latter half of 2023. Much of the action in recent days, however, has been driven by the duration rally. This means that longer bonds outperformed and the curve flattened. This isn’t necessarily consistent with the data but it seems markets are comfortable with the longer maturity skew in supply, starting today with long-end auctions and syndications from Europe (see events section below). Today's events and market view Portugal and Ireland mandated banks for the launch of new benchmarks which we expect today. Both deals are at the long end, respectively 15Y and 20Y. This will be the second green bond on the Irish curve. They will add to scheduled long-end auction from France, with maturities of 9-43Y. The drip-feed of eurozone inflation data continues today with December CPI from Italy, and PPI for the whole of the eurozone. The US data slate comprises Challenger job cuts, ADP employment, jobless claims, and services PMIs. We think the strength in US albour market indicators and heavy long-end supply will dent the performance of bonds, a bear steepening of yield curves appears most likely into the end of the week. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Supply Trends Resurface: Analyzing the Impact on Market Dynamics

The Australian Dollar (AUD) Was The Best Performer Among Major Currencies Against The Dollar

Saxo Bank Saxo Bank 05.01.2023 08:51
Summary:  European and U.S. equities as well as bonds gained on a large-than-expected decline in the rate of inflation in France. Hong Kong stocks had a strong day in anticipation of more economic stimulus, support to the real estate sector, and relation on regulations over the internet sector in mainland China. The U.S. JOLTS job openings report shows the Fed has more work to do to cool off the labor market. The December FOMC minutes sent mixed signals of warning against an easing of financial conditions and concerns about two-sided risks of under- and over-tightening. What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) ended higher in a choppy session U.S. stocks had a strong start on Wednesday through the morning and then oscillated after the release of the FOMC minutes in the afternoon digesting the hawkish warnings from the Fed about an unwarranted easing in financial conditions and the dovish signal of an increasing number of Fed FOMC members being concerned about two-sided risks. S&P 500 ended the session 0.8% higher and Nasdaq 100 climbed 0.7%. The rally was broad-based as all 11 sectors within the S&P 500 gained. The interest rate-sensitive real estate sector was the best performer while the energy sector was close to flat as crude oil slid nearly 5%. Tesla (TSLA:xnas) rebounded 5%. Micorsoft (MSFT:xnas) plunged 4.4% on analyst downgrades and concerns about the company’s cloud computing business. The next key focus of investors will be the employment report this Friday. US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) gained on softer French CPI prints, and the FOMC minutes showed more Fed officials concerned about two-sided risks Treasuries caught some strong bids in tandem with the European bond markets that rallied on softer-than-expected CPI prints from France. The market pared some gains after a stronger-than-expected JOLTS job openings report and position squaring ahead of the release of the FOMC minutes. Yields, in particular, those in the longer-end segment, fell again after the FOMC minutes. The 10-year finished Wednesday 6bps richer to 3.68% which yields on the 2-year falling only 2bps to 4.35%. The December FOMC minutes highlighted Fed officials’ worries about “an unwarranted easing in financial conditions” due to a misinterpretation by the market of the Fed’s downshift from 75bp to 50bp hike as a pivot. Nonetheless, the minutes showed that “many participants” argued for balancing the two-sided risks of under- and over-tightening in the December meeting. Minneapolis Fed President Kashkari said in an article that he saw rate hikes “at least at the next few meetings”, leading to a terminal rate of 5.375%. Hong Kong’s Hang Seng (HIF3) and China’s CSI300 (03188:xhkg) Hang Seng Index rallied for the second day in a row in 2023, registering an impressive gain of 3.2% and rising to above its 250-day moving average. A pledge of fiscal expansion from China’s Finance Minister fueled investors’ optimism in more economic stimulus measures. Hang Seng TECH Index surged 4.6%, led by Alibaba (09988:xhkg) which soared 8.7% following the news that the Chinese authorities approved an increase in registered capital of the consumer finance unit of Ant Group. Shares of Chinese developers and property management services providers climbed on anticipation of state support, following the state-owned Economic Daily emphasizing the importance of the real estate sector to the economy in its editorial, a recent message from the Financial Stability and Development Committee to support “systematically important” property developers, and Asset Management Association of China’s decision to resume approvals for private equity funds investing in property projects. Longfor (00960:xhkg) and Country Garden Services (06098:xhkg) each jumped more than 11%, being the two biggest gainers within the Hang Seng Index. Sunny Optical (02382:xhkg), a supplier to Apple (AAPL:xnas), plunged 10% on analyst downgrades and a Nikkei report that “Apple has notified several suppliers to build fewer components for Airpods, the Apple Watch and MacBooks for the first quarter, citing weakening demand”. Semiconductors names were among the laggards as China was reportedly going to slow its investment push for developing the country’s chip-making industry due to pressures on its fiscal budget. In A-shares, CSI 300 finished the day little changed, with real estate and financials outperforming and weakness in semiconductors and new energy. FX: AUD gained 1.6% to 0.6840 as China is considering resuming coal imports from Australia The Australian dollar was the best performer among major currencies against the dollar following news headlines saying that China is considering ending its import ban on Australian coal. EUR and GBP also rebounded from the loss the day before and each up about 0.7% against the dollar. The Japanese yen was the laggard among major currencies and weakened to 132 against the dollar. Crude oil fell nearly 5% to USD73.17 WTI crude oil fell 4.9% to US73.17 on concerns of a slowing global economy and higher-than-average temperatures in Europe and the U.S. Read next: The EUR/USD Pair Is Trading Above 1.06 Again, The USD/JPY Pair Is Close To Level Of 131| FXMAG.COM What to consider? FOMC minutes warned about an unwarranted easing in financial conditions while highlighting a shift toward risk management The FOMC minutes sent out mixed messages. FOMC participants worried that the downshift from a 75bp hike to a 50-hike would be interpreted by the market as the signal of a pivot and warned that “an unwarranted easing in financial conditions, especially if driven by a misperception by the public of the committee’s reaction function, would complicate the committee’s effort to restore price stability”. Nonetheless, the minutes showed that “many” participants argued for balancing two risks: the risk “insufficiently restrictive monetary policy could cause inflation to remain above the Committee’s target for longer than anticipated” and the other risk of “the lagged cumulative effect of policy tightening could end up being more restrictive than is necessary to bring down inflation to 2 percent and lead to an unnecessary reduction in economic activity”. That points to a data-dependent risk management approach going forward. Fed’s Kashkari expects the Fed to raise the policy rate another 100 basis points Saying in an article, Minneapolis Fed President Neel Kashkari said that “it would be appropriate to continue to raise rates at least at the next few meetings” and indicated that he saw the ultimate rate going 100 basis points higher to 5.25%-5.50%, in 2023. He suggests that any sign of slow progress that keeps inflation elevated for longer will warrant the policy rate potentially much higher. Softer-than-Expected French CPI A day after a softer-than-expected German CPI report, December CPI in France also came in softer. French December headline CPI decelerated to 5.9% Y/Y from 6.2% in November as opposed to the expectation of a rise to 6.4% Y/Y.  French CPI EU Harmonized slowed to 6.7% Y/Y in December (consensus estimate: 7.3%) from 7.1% in November. U.S. JOLTS job openings stronger than expected U.S. JOLTS job openings declined to 10.46 million in November, above the consensus estimate of 10.01 million, from a revised 10.51 million (previously reported 10.33 million) in October. It implies that the ratio of vacancies to unemployment is 1.74, above the pre-pandemic level and the labor market will be considered by the Fed as being too tight. U.S. ISM Manufacturing Index fell to 48.4, slightly below expectations The ISM Manufacturing Index slid more than expected to 48.4 in December (consensus: 48.5) from 49.0 in November. New orders were weak, falling to 45.2 from 47.2. The price-paid sub-index decelerated to 39.4 in December (consensus: 42.9) from 43.0 in November. For a global look at markets – tune into our Podcast. Source: Market Insights Today: Softer inflation prints from France, solid JOLTS job openings report, mixed messages from the FOMC minutes – 5 January 2023 | Saxo Group (home.saxo)
Russia Look Set To Double Its Exports For The First Half Of 2023

Russia Look Set To Double Its Wheat Exports For The First Half Of 2023

Saxo Bank Saxo Bank 05.01.2023 09:00
  Summary:  Equity markets managed to keep an even keel yesterday, with a lack of direction in US equity markets continuing well into its third week. Late yesterday, the minutes from the last FOMC meeting offered the latest pushback against market expectations for rate cuts as soon as year-end, while gold and especially the JPY eased back lower from their recent strength on treasury yields halting their slide. Tomorrow’s US jobs report for December offers the next test for global markets.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) The US equity market once again chopped back and forth yesterday as the action has been bottled up in a range in the S&P 500 for nearly three weeks. The market may be waiting for the next batch of US data and the impact on treasury yields for choosing a direction, with tomorrow’s batch of data the next important hurdle for markets. The technical focus for S&P 500 traders is the range low and the 61.8% Fibonacci retracement near 3,780 for the March futures contract. For Nasdaq 100 trader, the cycle low near 10, 750 and the nominal intraday lows from last October a bit lower still are the key focus. Ironically, strong US economy data may be the most negative for equity markets in the short run if yields jump. Hong Kong’s Hang Seng (HIF3) and China’s CSI300 (03188:xhkg) Hang Seng Index climbed more than 1% and CSI300 surged nearly 2% as China continue to roll out additional reopening measures and supports to the economy. On Thursday, China announced the much-anticipated gradual reopening of the border between Hong Kong and the mainland starting from January 8, 2023. Internet platform giants Alibaba (09988:xhkg) and Meituan (03690:xhkg), China restaurant chain Haidilao (06862:xhg), beer brewers China Resources Beer (00291:xhkg) and Budweiser (01876:xhkg) were among the top gainers within the Hang Seng Index. In A-shares, baijiu (Chinese white liquor) surged in anticipation of rebound in consumption. Electric equipment, household electronic appliances, and logistics stocks also outperformed. FX: JPY rally reversed, USDCNH testing key levels The US dollar found a modicum of support yesterday as treasury yields stabilized and as the Fed delivered the expected message in its latest set of meeting minutes – a pushback against market expectations for the Fed to cut rates as soon as this year. The next important step for the USD will be on tomorrow’s December jobs report and next Thursday’s December CPI release. USDJPY bounced well above 132.00 after its recent test below 130.00 on signs that the yen’s recent surge may need more support from new developments (a larger drop in global yields in particular) after resetting from 150.00+ in USDJPY terms. The Chinese yuan continued its resurgence on hopes for a boost to Chinese growth on the other side of the current Covid trauma, with USDCNH testing its 200-day moving average near 6.87 for the first time since April. Crude oil (CLG3 & LCOH3) Crude oil found a bid on Wednesday following a two-day tumble of more than 9% tumble on China demand and global growth worries. The bounce has so far primarily been driven by short covering while also signalling an end to selling from funds who bought the market aggressively ahead of yearend. For now, a surge in Covid-19 cases across China is clouding the near-term demand outlook, overshadowing optimism and delaying the timing of when commodity consumption in the world’s top importer will eventually rebound. The API reported a 3.3-million-barrel increase in US crude stocks with gasoline stocks also rising while distillates dropped. The EIA will release its weekly report later today. Gold (XAUUSD) sees increased two-way action after hitting fresh six-month high Gold’s run of gains extended to a fourth day on Wednesday but after touching $1865 some two-way actions emerged potentially signalling traders have started to book profit. Gold, silver and platinum have been favoured by traders during the first days of trading, with momentum from last year being carried over. Driven by recession and stock market valuation risks, an eventual peak in central bank rates combined with the prospect of a weaker dollar and inflation not returning to the expected sub-3% level by yearend. It is worth remembering that traders' conviction at the beginning of a new year always tends to be low for fear of catching the wrong move. At the same time, however, the fear of missing out can also drive a rapid build-up in positioning which subsequently can be left exposed should a change in direction occur. Focus on Friday’s US job report with resistance at $1865 & $1878 while the current strong uptrend may not be challenged unless the price breaks below $1800 Europe’s gas price (TTFMc1) slump continues Europe’s gas prices have fallen by more than 50% during the past month and on Wednesday the Dutch TTF futures contract closed at €65/MWH ($20/MMBtu), the lowest since October 2021. The slump has been driven by a combination of mild weather and at times strong production from renewables as well as reduced industrial consumption resulting in an unusual seasonal increase in inventories. Gas held in storage across Europe is currently 164 TWh above the five-year average and close to a full month of peak winter withdrawals. With LNG imports still strong and demand down by more than 10% the continent has now ended up in a situation, unthinkable just a couple of few months ago, where prices need to stay low in order to divert LNG shipments away from Europe in order not to overwhelm storage facilities. Wheat (ZWc1) tumbles on ample Black Sea supply. The Chicago wheat contract has lost more than 5% during the first trading days to trade near a one-month low. Forced lower by an abundance of low-price wheat from Russia and Ukraine providing stiff competition to U.S. exporters where production has been hit by drought, and recently, by severe cold. Russia, the world's largest wheat exporter, look set to double its exports to a record 21.3 million tons for the first half of 2023. This following a record grain crop of 151.0 million tons last year, including 102.7 million tons of wheat. In addition to strong Russian shipments, European Union soft-wheat exports are running about 6% higher than a year earlier, and Australia’s top shipper loaded a monthly record 2.18 million tons of grain in December. Yields on US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) stabilized after their steep fall to start the year US Treasury yields arrested their descent yesterday after the 10-year benchmark hit 3.66%, rising a few basis points. At the short end of the curve, yield pulled back slightly higher as well, perhaps lifted at the margin by a strong JOLTS survey for November and the ISM Manufacturing survey showing a stronger employment sub-index. The price action was little affected by the FOMC minutes release, which saw the Fed continuing its pushback against market expectations for easing as soon as year-end. Tomorrow’s US data, including the December jobs report and ISM Services Index, offer the next test for the treasury market. Read next: The EUR/USD Pair Is Trading Above 1.06 Again, The USD/JPY Pair Is Close To Level Of 131| FXMAG.COM What is going on? France’s inflation is cooling down BUT… Inflation is cooling down in several eurozone countries. France is the last example. In December, the EU-harmonized CPI rose 6.7 % year-over-year versus expected 7.3 %. On a monthly basis, inflation decreased 0.1 % versus expected +0.4 %. This is positive, of course. But it will likely not be sufficient for monetary policy to shift out of tightening mode just yet. There is a high risk that inflation will increase again in Spring/Summer this year due to higher energy prices. This could be fueled by a deficit in the oil market due to OPEC+ cuts and EU ban on Russian oil and difficulties filling gas inventories for next year in the EU. Therefore, it is too early to believe the peak in inflation is effectively behind us in the eurozone. The FOMC minutes sent out mixed messages FOMC participants worried that the downshift from a 75bp hike to a 50-hike would be interpreted by the market as the signal of a pivot and warned that “an unwarranted easing in financial conditions, especially if driven by a misperception by the public of the committee’s reaction function, would complicate the committee’s effort to restore price stability”. Nonetheless, the minutes showed that “many” participants argued for balancing two risks: the risk “insufficiently restrictive monetary policy could cause inflation to remain above the Committee’s target for longer than anticipated” and the other risk of “the lagged cumulative effect of policy tightening could end up being more restrictive than is necessary to bring down inflation to 2 percent and lead to an unnecessary reduction in economic activity”. That points to a data-dependent risk management approach going forward. Separately, Minneapolis Fed President Kashkari said in an article that he saw rate hikes “at least at the next few meetings”, leading to a terminal rate of 5.25-5.50%. UK Mortgage Approvals plunged in November A clear sign that higher interest rates are impacting the UK housing market, approvals plunged to 46.1k in November, a stunning drop from 59k in October and for wider perspective, a sign of very weak activity relative to the average of well over 60k approvals per month in the years before the pandemic outbreak. Amazon to lay off over 18k employees This was more than previously expected as the company over-expanded its warehouse and logistics infrastructure after the wild increase in demand from pandemic-era stimulus. Shares rose some 1.7% after hours yesterday. US House of Representatives still has no speaker The narrow Republican majority in the House after the mid-term elections last November means that nearly all Republicans must agree on a candidate, with a small cabal of Trumpist-leaning Republicans continuing to block the candidacy of Keven McCarthy, who failed three more votes yesterday in his effort to become the next Speaker of the House. This issue could gain considerable importance for the debt ceiling issue in the US if a more confrontational figure acceptable to the GOP extremists is eventually found. What are we watching next? US data today and tomorrow Today we will get the latest weekly US jobless claims number as this data series has yet to show material weakening in the US labour market, market bets of Fed cuts by year-end notwithstanding. The December ADP Private Payrolls data is also up today, with that data series showing a rather persistent decline in payrolls growth since Q2 of last year. It is expected at +150k after +127k in November. Tomorrow’s calendar is important as the Fed has clearly expressed the most uncertainty on the inflationary pressures from the employment-intensive services side of the economy. This could make the market sensitive to strong surprises in the Nonfarm payrolls change number (expected around +200k, with considerable recent attention on the divergence in this survey relative to the far weaker household survey used to calculate the overall unemployment rate) and average hourly earnings. Ninety minutes after the jobs data, we’ll have a look at the December ISM Services survey after November saw a surprising improvement in the survey to 56.5 after the cycle low of 54.4 in October. Earnings to watch The earnings calendar is light in the first week of the new year, but in a couple of weeks the first Q4 earnings releases will begin to be released. The Q4 earnings season will continue its focus on margin pressures related to input costs on employees and raw materials including energy. Today’s earnings focus is Walgreens Boots Alliance (WBA) and Conagra Brands, with WBA expected to -3% revenue growth y/y for the quarter that ended on 30 November adding to the series of quarters with negative revenue growth. Conagra Brands is expected to deliver 7% revenue growth y/y for the quarter that ended on 30 November as the manufacturer of packaged foods is able to pass on inflation to its customers. Today: Walgreens Boots Alliance, Conagra Brands, Lamb Weston, Constellation Brands, RPM International Friday: Naturgy Energy Economic calendar highlights for today (times GMT) 0900 – Poland Dec. Flash CPI 0930 – UK Final Dec. Services PMI 1000 – Eurozone Nov. PPI 1000 – Italy Dec. CPI 1230 – US Dec. Challenger Job Cuts 1230 – US Fed’s Harker (2023 FOMC voter) to speak 1315 – US Dec. ADP Private Payrolls change 1330 – Canada Nov. International Merchandise Trade 1330 – US Nov. Trade Balance 1330 – US Weekly Initial Jobless Claims 1400 – Poland National Bank Governor Glapinski press conference 1530 – EIA Natural Gas Storage Change 1600 – EIA Weekly Crude and Fuel Stock Report 1830 – US Fed’s Bullard (non-voter) to speak 2330 – Japan Nov. Labor Cash Earnings Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – January 5, 2023 | Saxo Group (home.saxo)
Asia Morning Bites: Inflation Data in Focus, FOMC, ECB, and BoJ Meetings Ahead

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

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

The Last Quarter Of 2022 Was So Favorable For Precious Metals

InstaForex Analysis InstaForex Analysis 05.01.2023 11:30
Fed and precious metals The biggest macro hurdle for precious metals in 2022 was the historic tightening by the Federal Reserve, which posted the fastest rate hike since the early 1980s. Overall, rates rose 425 basis points over the year, rising to a range of 4.25% to 4.5%. Considering the significant headwinds caused by the sharp rate hikes by central banks, particularly the Fed, last year's performance of gold, silver and platinum prices was remarkable. And the last quarter of the year was so favorable for precious metals because the markets began to orient themselves towards the Fed's reversal. Fed At its last meeting in 2022, the Fed slowed growth to 50 basis points but remained steadfast in its fight to bring inflation down, warning markets that there will be more rate hikes into the new year as inflation is not at the right level. "We've raised 425 basis points this year, and we're into restrictive territory. It's now not so important how fast we go. It's far more important to think about what is the ultimate level. And... how long do we remain restrictive? That will become the most important question," Fed Chairman Jerome Powell told reporters after the December FOMC meeting. Powell Regarding the possibility of a soft landing, Powell also noted that the longer the Fed needs to keep rates high, the narrower the runway gets. "I don't think anyone knows whether we're going to have a recession or not. And if we do, whether it's going to be a deep one or not, it's just not knowable," he said. GDP The latest median forecast for next year shows that rates could rise to 5.1%, with the Fed also expecting real GDP to be 0.5% in 2023 and PCE inflation to slow to 3.1%. Markets have already priced in additional rate hikes for February and March. But many analysts predict a pause after that, followed by a potential rate cut towards the end of the year.     Long-term review Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/331523
Brent hits one-month high! Saudi and Russian cuts supporting recent moves

The US Stock Market Is Off To A Low Start Before The Bull Market Resumes

InstaForex Analysis InstaForex Analysis 05.01.2023 11:47
Following the decline that occurred on January 2, which was due to the collapse of TESLA and APPLE shares, stock indices rose as investors focused on the latest economic statistics from the US and the minutes of the December Fed meeting. Data in the Euro area also caused a strong surge not only in local indices, but also in EUR/USD. Conversely, the US indicator was in decline, which should have led to a decline in the US stock market. However, this did not happen, probably due to growing expectations that the Fed will soon stop raising rates. Investors are clearly hopeful that the local equity market will not fall further as they believe that the worst has already happened. It can be said that the US stock market is off to a low start before the bull market resumes. The positioning of short and long positions has reached the strongest divergence in favor of sellers, which can be overcome at any time if the market thinks that it is time to start buying. The upcoming inflation data in the US will be a signal to buy, but only if there is a noticeable decline in the figures. Read next: Samsung Suffers From Weakening Demand, Amazon Will Increase The Total Number Of Layoffs To Over 18,000| FXMAG.COM Forecasts for today: USD/JPY The pair is trading around 132.70. A break above this level, which could happen if there is positive sentiment in the market, will push it to 134.45. WTI Oil found support at 73.00. If this level holds and positive sentiment prevails, a rise to 75.00 can be expected.   Relevance up to 07:00 2023-01-07 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/331508
Hawkish Fed Minutes Spark US Market Decline to One-Month Lows on August 17, 2023

FOMC Minutes Were Hawkish, All Eyes On US Jobs Data, Weaker Energy Gives Hope

Swissquote Bank Swissquote Bank 05.01.2023 12:06
Released yesterday, the FOMC minutes were hawkish enough to get the S&P500 erase early gains, but not hawkish enough to get the index to close in the red. The index closed the session 0.75% higher. Nasdaq gained 0.50%. UD Data Today, we will see what the ADP report tells about new hirings in December. Analysts believe that the US economy may have added around 150’000 new private jobs last month. Note that the latter is not a good indication regarding what’s to come on Friday. Last month, the ADP printed a weak 127’000 figure, while the NFP came in at 263’000. Therefore, even the avalanche of layoff news from big companies, and a soft ADP print may not be enough convince that the US jobs market is cooling. Energy In energy, weaker nat gas prices, combined to the past few days’ recession fears, and news that OPEC output increased in December thanks to the recovery in Nigerian supply from outages – despite the OPEC+ will to cut output to keep prices sustained - pulled the price of American crude 5% lower yesterday. Forex In the FX, the Australian dollar is surfing on the positive Chinese vibes, while the US dollar index couldn’t extent the early week gains, and we are about to see a death cross formation on the daily chart. Read next: Samsung Suffers From Weakening Demand, Amazon Will Increase The Total Number Of Layoffs To Over 18,000| FXMAG.COM The EURUSD is bid around 1.0550, as Cable sees buying interest below 1.20 despite its worse economic fundamentals compared to other G7 economies. One of the most popular trades of the moment is long the Japanese yen against EUR, USD and pound. Watch the full episode to find out more! 0:00 Intro 0:31 FOMC minutes… hawkish as expected 2:58 All eyes on US jobs data 5:54 Weaker energy gives hope, but oil could hold support above $70pb 7:45 Chinese stocks shine, as Aussie gets decent boost from China reopening 10:04 Long yen is among the most popular trades of the momet! Ipek Ozkardeskaya  Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #FOMC #minutes #US #jobs #ADP #NFP #data #USD #EUR #JPY #AUD #China #Covid #reopening #natural #gas #crude #oil #Alibaba #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
UK Public Sector Borrowing Sees Decline in July: Market Insights - August 22, 2023

The Situation Of The Chinese Economy Could Be A Serious Problem For The Australian Dollar In Early 2023.

Kenny Fisher Kenny Fisher 05.01.2023 12:12
The Australian dollar has posted limited losses on Thursday. In the European session, AUD/USD is trading at 0.6822, down 0.17%. Australian dollar soars as China mulls coal imports The Australian dollar rocketed higher on Wednesday, rising 1.6% and hitting a 3-week high. This followed reports that China was considering easing its ban on imports of Australian coal. The ban has been in place since 2020, but relations between Australia and China have improved since the new Australian government took office. The move would bolster the Australian economy, although the Australian government was surprisingly low-key, saying that the coal industry had found alternative markets. China is Australia’s number one trading partner, which means that developments in China have a significant impact on Australia and the direction of the Australian dollar. The sharp U-turn in China’s covid policy, from zero-covid to easing restrictions should give a boost to the Chinese economy in the long term. However, we can expect China’s economy to slow down and even contract in the first quarter, due to the surge in Covid cases which is dampening demand for services and also lowering production as many workers report in sick. This could pose a major headwind for the Australian dollar early in 2023. The Federal Reserve minutes reflected the hawkish message that Jerome Powell had for the markets at the December meeting. FOMC members committed to maintaining a restrictive policy while inflation remained unacceptably high, saying that more evidence was needed to show that inflation was on a “sustained downward path to 2 per cent”. The minutes noted that several members warned against “prematurely loosening monetary policy”. Despite the Fed’s hawkish stance, there is still a dissonance between the Fed’s message and market pricing. The minutes noted that no FOMC members expect any rate cuts this year, while the markets have priced in a possible small reduction by the end of 2023 and have forecast a funds rate peak at 4.5%-4.75%. The Fed, on the other hand, expects rates to hit 5% or higher. Minneapolis Fed President Kashkari said on Wednesday that rates could rise to 5.4% or even higher if inflation doesn’t head lower. Read next: Samsung Suffers From Weakening Demand, Amazon Will Increase The Total Number Of Layoffs To Over 18,000| FXMAG.COM AUD/USD Technical AUD/USD has support at 0.6703 and 0.6620 There is resistance at 0.6841 and 0.6969 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
The US PCE Data Is Expected To Confirm Another Modest Slowdown

The US Unemployment Rate Indicates Strength, But Wages Indicate Softening Inflationary Pressures

ING Economics ING Economics 07.01.2023 10:23
The US added 223,000 jobs and the unemployment rate returned to cycle lows, but there are signs that a turn is coming. A fifth consecutive drop in temporary help employment is a warning signal while softer wage inflation suggests labour market dynamics are shifting. With business surveys pointing to recession, tougher times are coming The US created 223,000 jobs in December 223,000 The number of jobs added in December   Decent jobs gain, but fall in temporary help employment hints at a turn The US economy added 223k jobs in December, a little above the 203k consensus but there was a net 28k of downward revisions to the past two months. meaning we are broadly in line with what was anticipated. The details show the jobs growth was led by the service sector with education and health gaining 78k, leisure/hospitality 67k and trade and transport gaining 27k. Meanwhile construction saw employment rise 28k with manufacturing up 8k. However, we are starting to see falls in some key areas, most notably temporary help, which posted the fifth consecutive monthly fall. This is an important signal as these workers are always the first to be fired in a downturn (as they are the easiest to fire) and are likely to indicate broadening weakness in coming months. Business services fell for the second consecutive month while information services also saw employment fall. US unemployment and CEO confidence - more pain ahead Source: Macrobond, ING Unemployment indicates strength, wages... less so... Elsewhere, we have had quite a lot of revisions within the household survey, which is used to calculate the unemployment rate. It is now reported at 3.5% versus the 3.7% consensus. This is down from a downwardly revised 3.6% in November (initially reported as 3.7%). While a great number, remember that the low unemployment rate masks the fact that more that a third of the working age population are not engaged at all (participation rate is just 62.3%). Then there are the wage numbers. Again there are major revisions, but this time they make the situation look a lot weaker. The annual rate of wage inflation (average hourly earnings) is now 'just' 4.6% whereas the market had been looking for 5%. Last month’s 0.6% month-on-month initial print has been revised down to 0.4% while December's MoM rate came in at 0.3% versus 0.4% expected. So we have a weaker trend materialising it seems. Fed focus moves to next week's CPI As such the report is a fairly mixed bag. Payrolls are broadly in line with expectations, the unemployment rate indicates strength, but wages indicate softening inflationary pressures. Consequently, the focus switches to next Thursday's CPI report. Markets are currently split between whether the Fed will raise rates by 25bp or 50bp at the February Federal Open Market Committee meeting. Given the softer wage situation, if we get another softish core CPI print (0.3% MoM or below) the case for a 25bp hike at the February FOMC versus 50bp is likely to build. More pain ahead for the jobs market That’s the near-term story. Looking further ahead we have to remember that labour data is a lagging indicator – the last thing to turn in a cycle. What we should be focusing on is the economic outlook and that is deteriorating as the Federal Reserve continues to hike interest rates in its battle with inflation. This week’s ISM report showed manufacturing orders contracting for four consecutive months while the Conference Board reports that CEO confidence is at its weakest since the Global Financial Crisis – even weaker than at the worst point in the pandemic. This suggests that businesses will increasingly adopt a defensive stance, which implies a greater focus on costs, including labour. So far the job loss announcements have been concentrated in the tech sector and, more under the radar, the temporary help sector, but we expect that to change over the next twelve months. Read this article on THINK TagsWages US Unemployment Jobs Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Commodities Digest: US Crude Oil Inventories Decline Amidst Growing Supply Risks

The US Economy Expects Another Lower Inflation Reading

Kamila Szypuła Kamila Szypuła 07.01.2023 19:17
The US CPI will be the headline of the publication of the most important economic data next week. This data is especially important because it will affect the future decision of the Fed. Data Non-farm payrolls released on Friday showed that the US economy added 223,000 new jobs in December, up from the +200,000 estimate. In addition, the November printout was revised to +256,000. The unemployment rate fell to 3.5% from 3.6 % and expected 3.7%. These two data points alone should raise markets' fears of a more hawkish Fed as the Fed said it needs jobs to cool down and bring down inflation. In addition, the US ISM Non-Manufacturing PMI for December was 49.6 versus 56.5 previously and expected 55. This was the first drop (below 50) in print since May 2020. Source: investing.com CPI Forecast On Thursday, the US will publish CPI data for December. Expectations are for headline at 6.5% y/y compared to November's reading of 7.1% y/y. Core prices also fell from 6.3% to 6%. Core CPI is expected to fall to 5.7%YoY from 6%YoY in November. Headline inflation has been declining since June, when it peaked at 9.1% y/y, but the core number has been a bit more sticky. If the data are weaker than expected and the US dollar falls. Source: investing.com Some of that optimism has since reset a bit due to more stable wage data, which seems to pose some two-way risk to the narrative that wants the FOMC to slow the pace of rate hikes to 25 basis points at its next meeting February 1. The CPI report provides important insight into price developments but will be supplemented by other inflation readings. The publication of the producer price index (PPI) will show how wholesale prices are developing. Fed The January CPI inflation report is expected to provide more data pointing to a downward trend in inflation. However, annual inflation will remain relatively high, which worries the Fed. Services inflation will be watched closely for signs where inflation rates may stabilize in 2023. The CPI report may provide more evidence that inflation is falling, but not as fast as the Fed wants. Therefore, in February there may be another rate hike by the Fed. The Fed sees inflation coming down but is concerned service inflation is still too high based on wage pressures. It appears the Fed will raise interest rates again in February, but by a smaller amount than for most of 2022. Markets estimate that the Fed will most likely raise interest rates by 0.25 percentage points. However, if the inflation report and other data are not encouraging, the Fed may be inclined to raise interest rates by 0.5 percentage point. The Fed believes that goods inflation and housing costs are likely to fall in 2023, but they fear services costs will continue to rise if the labor market remains relatively hot. Source: investing.com
Hungary's Central Bank to Maintain Base Rate at 13%, Eyes on Effective Rate Amid Forint's Performance

The EUR/USD Pair Ended The Week Trading At 1.0648, The Cable Market (GBP/USD) Managed To End The Week Above 1.20

Kamila Szypuła Kamila Szypuła 07.01.2023 20:00
The dollar offset earlier gains after US employment data showed employers created 223,000 jobs in December, more than economists had forecast, while wage growth slowed this month. Fed futures traders have raised bets that the Fed will raise interest rates by 25 basis points at the end of its two-day meeting on February 1 after Friday's data. An increase of 25 basis points is now seen as a 67% probability, up from 54% before, and an increase of 50 basis points is now seen as a 33% probability. USD/JPY USD/JPY started the week at 130.92, ended the week much higher at 132.0540. The week's high was even higher than the last reading and the pair crossed 134 at that point. The low was shockingly low compared to the high as it was below 130, 129.53 to be exact. EUR/USD The EUR/USD pair started the week and the new year at a high level of 1.07. It ended the week trading at 1.0648. It was a tumultuous week for the pair as they had to struggle many times to keep their trade above 1.06 and thus their low was read below that level. The lowest level was even below 1.05 at 1.0491, the highest later was at the level from the beginning of the trading week, i.e. at 1.0709. Unsurprisingly, drastically lower energy prices in the Eurozone helped to soften the headline measure of inflation, where it improved year-on-year and month-on-month - highlighting the trend of lower prices for EU consumers. EU headline inflation drops from 10.1% to 9.2% YoY. Core inflation rises from 5% to 5.2% YoY. According to estimates, energy price growth, although still the largest contributor to the overall index, fell from 41.5% in October to 25.7% in December. By contrast, price pressures on non-energy or food items are higher, suggesting that high inflation remains quite common. GBP/USD Similarly for the euro, the cable pair also had a difficult week. The pound was exceptionally weak and fell below 1.20. They will start the week at 1.2111 and thus it is the highest reading in this trading week, and the end of the week was at 1.2093. The lowest level of the GBP/USD pair was below 1.1850 (1.1848). AUD/USD The Aussie pair was the best among the major pairs of valises. Throughout the week, AUD/USD traded in a tight range compared to other pairs. The pair's weekly range was 0.6700-0.6875. The pair started the year trading at 0.6821 and finished at 0.6879. The end of the week was close to the week's high at 0.6888. The pair dropped the lowest in the week at 0.6690. The factors contributing to the pair's volatility appear to have been largely external, with Chinese politics, Federal Reserve meeting minutes and US employment figures playing a role. China's efforts to break out of its economically stifling zero-case Covid-19 policy appear to come with several challenges. While official figures show a situation that is under control, anecdotal evidence from hospitals and morgues suggests a more problematic transition. At the moment, Australia's trade surplus remains at record highs and the November figure will be known this Thursday. Source: finance.yahoo.com, investing.com
Saxo Bank Podcast: A Massive Collapse In Yields, Fed's Tightening Cycle And More

Federal Reserve Officials Remain Concerned That Policy Needs To Be More Restrictive For A Long Period Of Time

ING Economics ING Economics 08.01.2023 13:27
In the US, we see a further moderation in the annual rate of inflation, from 7.1% to 6.6%, and expect much sharper falls from early second quarter onwards. For the UK, we expect a negative monthly GDP figure for November, and for now are pencilling in a 0.1% fall in fourth quarter GDP. In the eurozone, we see a further improvement in the trade balance In this article US: Core inflation pressure elevated for now UK: Monthly GDP to point towards second consecutive quarter of negative growth Eurozone: Further improvements in trade balance expected   Shutterstock   US: Core inflation pressure elevated for now It is clear that economic headwinds are intensifying and business surveys are softening as a result. With business leaders becoming more pessimistic, we expect this to translate into weaker hiring and eventual job shedding as companies look to cut costs. Competitive pressures amid a weakening demand environment also suggest that inflation should slow too. However, Federal Reserve officials continue to indicate they think they have more work to do in the battle to get inflation back to the Bank's 2% target. They remain concerned that policy needs to be more restrictive and to stay restrictive for a long period of time to ensure that demand moves into balance with the economy’s supply capacity and price pressures subside. In that regard, the key data point next week is the US CPI report. We expect to see a further moderation in the annual rate of inflation from 7.1% down to 6.6%, but this is still more than three times faster than the Federal Reserve’s 2% target. Fed officials have made it clear they expect goods price inflation to continue softening  -  expect another big drop in used car prices given the steep decline in new vehicle sales as consumers pull away from major purchases and lending criteria becomes stricter. But officials are seemingly focused on services ex housing. The consumer spending story looks OK right now and that is likely to keep core inflation pressures somewhat elevated while. It is too soon for the weakening in the housing market to show up in a clear moderation in the cost of shelter since it typically lags by 12-14 months so that is more of a story for the second quarter into the third. Meanwhile, medical care costs, having fallen for two consecutive months, are unlikely to be quite so helpful in depressing overall inflation. Still, a 0.3% month-on-month print would lead to the annual rate of core inflation hitting 5.7% versus 6% in November. We expect to see much sharper falls in the annual rate of inflation from the early second quarter onwards. Other things to look out for include consumer confidence and small business confidence. Both are likely to remain weak given the impact of falling asset prices, high inflation and more headlines regarding job losses from some big corporate names. Also, look out for comments from officials, including Fed Chair Jerome Powell. UK: Monthly GDP to point towards second consecutive quarter of negative growth The UK’s monthly GDP figures have been a bit all over the place recently, in part because of the Queen’s funeral last September. But strip out the volatility and the economy is clearly weakening, and the constant downtrend in retail sales through last year is one such example. We expect a negative monthly figure for November, after October’s artificial bounce back following September’s extra bank holiday. That, and another such decline in December, would probably be just enough to lock in the second consecutive quarter of negative growth and mark the start of a UK recession that’s likely to last until at least the summer. For now, we’re pencilling in a 0.1% fall for overall fourth quarter GDP when the figures are released next month, and just over a 1.5% peak-to-trough fall in output over several months. Eurozone: Further improvements in trade balance expected The eurozone kicks off the year with new labour market data. October saw unemployment drop once more despite deteriorating economic conditions. The question is how long the labour market can continue its run of improving unemployment rates. If indeed we see unemployment decreasing further, this could unleash more hawkishness from the European Central Bank. Besides unemployment, we also get trade and industry data. Industrial production has been resilient despite the energy shock, but survey data points to weaker activity regardless. The trade balance is important to watch as expensive energy imports have completely flipped the eurozone trade balance from surplus to deficit. October saw an encouraging improvement in the trade balance and the question is whether softening natural gas prices have caused further improvements. This is important for the fair value of the euro/dollar. Key events in developed markets next week Refinitiv, ING TagsUS Eurozone   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
FX Daily: Upbeat China PMIs lift the mood

The Chinese Authorities Are Considering To Relax Restrictions On Highly-Leveraged Property Developers

Saxo Bank Saxo Bank 09.01.2023 08:32
Summary:  U.S. stocks surged over 2% following the ISM services index shrinking to 49.6 and average hourly earnings growth slowing to 0.3% M/M in December from a downward revised 0.4% in November (previously reported 0.6%). Investors became more optimistic about inflation having peaked because of these unexpected weaknesses in services and wages. Yields on 10-year Treasury notes plunged 16 basis points to 3.56%. The dollar fell against all G10 currencies with the Dollar Index shedding 1.1%. Gold and copper advanced. What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) surged more than 2% on slowing wage growth and activities in services in contraction Bad news once again was good news for equities last Friday when the U.S. released slower wage growth in December as well as in November (a downward revision) and the ISM services index plunged unexpectedly by 6.9 points to 49.6 and into the contraction territory.  Investors noted that Fed Chair Powell had emphasized in his recent speeches that the price of core services other than housing, which was driven by wages and service sector activities, is the most important price category to consider for understanding the future evolution of inflation. Despite the higher-than-expected prints in non-farm payrolls and a lower unemployment rate, Nasdaq 100 rose 2.8% and S&P 500 climbed 2.3%. All 11 sectors within the S&P500 gained, with materials, up 3.4%, leading, followed by information technology, and real estate. Tesla recovered from early losses on cutting prices in China and bounced 2% Tesla China has cut again the price of its Model 3 by 13.5% to RMB 20,990 (USD3,350) and Model Y by 10% to RMB 25,990 (USD3,790) in China within three months from the prior price cut.  Following the news, shares of Tesla (TSLA:xnas) plunged as much as 7.7% in early trading but recovered throughout the day and managed to finish the Friday session 2% higher. Costco (COST:xnys) surged 7.2% on strong December sales Costco reported U.S. comparable sales rose 6.4% in December 2022, above the 5% expected by street analysts. The strong holding sales performance saw the bulk retailer’s share price advance 7.2% last Friday. US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) soared with yields on the 10-year notes 16bps richer to 3.56% Treasuries were bid following the growth in average hourly earnings slowed to 0.3% M/M and 4.6% Y/Y from a revised down 0.4% M/M (previously reported 0.6%) and 4.8% Y/Y (previously reported 5.1%). Yields oscillated for a while as investors weighed the soft wage growth against the solid payrolls and fall in unemployment rates. Decisive declines in yields came after the release of the ISM Services Index which unexpectedly collapsed to 49.6 in December from 56.5 in November, indicating contracting activities in the service sector. A service sector in contraction may help cool down inflation in core services excluding housing which is the focus of Fed Chair Powell. Yields on the 2-year notes fell by 21bps to 4.25% and those on the 10-year notes became 16bps richer to 3.56%. What should you be watching today in equities across APAC; Copper, gold, iron ore The Australian share market (ASXSP200.I) opened 1% higher today, following the stellar close of US shares. This week we could also see some money deployed that was removed from the market from the end of US financial year two weeks ago. In terms of key pockets of potential gains to watch; Commodity stocks could likely to do well as there is room for the Fed to not be as hawkish. The copper price rose 2.4% to its highest level since November, which will could likely boost copper stocks today and this week, and spot gold price jumped 1.8% to a range it last traded in June last year. Also keep an eye on coal stocks this week, as coal demand usually peaks in January and Chinese authorities are in discussion on a partial end to the Australian coal ban. So keep an eye on Whitehaven Coal and New Hope. Meanwhile, iron ore equities may be possible laggards. Vale, Champion Iron, Fortescue Metals, BHP and Rio will be on watch as the Iron ore price (SCOA) has fallen 1.3% from its five month high as buying of iron ore is expected to grind lower as China heads to lunar new year holidays. Hong Kong’s Hang Seng (HIF3) and China’s CSI300 (03188:xhkg) Hong Kong stocks consolidated in a choppy session. Shares of Chinese developers surged in the morning session, following China’s central bank and bank regulator jointly issued a directive to allow banks in cities with declining home prices to lower mortgage interests below the floor dictated current policies. Adding to fuel the rally in property developers was the comment from China’s Minster of Housing and Urban-Rural Development in an interview with the People’s Daily, pledging support to the financing needs of developers and reports suggesting that China is considering relaxing the “three red lines” that constraining highly leveraged developers from getting new financing. Stocks however turned to the south after the lunch break. President of the China Society of Economic Reform said the Chinese Government will roll out “some forceful measures” to redistribute income and “establish a mechanism to regulate wealth accumulation” in order to advance “common prosperity”.   Hang Seng Index finished last Friday 0.3% lower. Alibaba Health (00241:xhkg), Meituan (03690:xhkg), and Haidilao (06862:xhkg) were among the biggest losers with the Hang Seng Index. EV stocks fell, following the news that Tesla China has cut again the price of its Model 3 and Model Y in China within three months from the prior price cut. In A-shares, China’s CSI300 advanced by 0.3% with solar names, lithium battery makers, electric equipment, non-ferrous metal, petrochemicals, and basic chemicals leading. FX: the dollar declined versus G10 currencies on Friday The USD posed a bullish breakout from the three-week range at the start of 2023 but aggressively snapped back after a disappointing PMI release on Friday as 10-year yields dipped back towards 3.55%. NOK, AUD and NZD were the biggest gainers against the USD on Friday, with AUD also benefitting from China reopening. AUDNZD remains supported above 1.0800 with USDCNH testing support at 6.8200 on the Chinese reopening wave with extra vigour via strong PBoC midpoint fixes and measures aimed at propping up the ailing real estate sector. USDJPY slid to 132 with BOJ Governor Kuroda sticking to dovish intentions but PM Kishida once again saying over the weekend that he will have 'discussions' with new BOJ governor. The Aussie dollar flagged a bullish signal, crossing above the 200-day moving average The US dollar suffered its longest streak of weekly falls in two months. So that’s supporting other currencies higher. In particular, the commodity currency, the Aussie dollar broke above its 200-day moving average, which could be seen as a bullish sign. The Aussie dollar trades at two-month highs of 68.85 US cents. What's also supporting the Aussie dollar is that China’s reopening is expected to add considerably to Australia’s GDP. Some economists predict a 0.5% addition to GDP in a year once Chinese students and tourists return. JPMorgan thinks over the next two years Aussie GDP will grow near 1% thanks to inbound Chinese students and holiday makers likely returning. Crude oil (CLG3 & LCOH3) remains volatile amid China’s chaotic reopening The first week of 2023 was tough for crude oil, with global demand concerns weighing and China outlook remaining mixed. Despite removing most virus-related restrictions, a surge in cases across the country could stifle economic activity. Meanwhile, the IMF warned that a third of the global economy could be in recession in 2023. Supply side concerns are also seen with European sanctions on Russian oil having kicked in, while OPEC has reiterated that it is willing to step in with further production cuts. WTI futures traded slightly higher to $74/barrel in Asian morning while Brent was close to $78.90. Gold (XAUUSD) advanced over 2% on weaker USD Gold is off to a positive start in 2023, and a further boost was seen on Friday after the mixed jobs report and weakness in ISM services saw a plunge in the USD. However, demand ahead of Lunar New Year is likely to stay strong, and central banks are also active in the physical market. People’s Bank of China bought another 30 tonnes of gold in December 2022, following 32 tonnes in November, boosting the country's stash of gold to 2,010 tonnes. Speculation remains rife that these are steps for China to move away from dollar-based trading as geopolitical tensions remain high. Gold prices are testing $1870 this morning and support at $1808 will be key to hold to maintain the uptrend. US CPI data due this week remains key. Copper getting in close sight of $4 as China stimulus continues Copper is leading a rebound in base metals as China looked to support its property sector. Beijing may allow some firms to add leverage by easing borrowing caps and push back the grace period for meeting debt targets. These were part of the “three red lines” policy that contributed to the downturn in recent years. HG Copper broke above resistance at the 200-day at $3.8525, and will be targeting the $4 per pound next.  Read next: The U.K. Economy Is In Trouble, Fall Of GDP Is Expected!| FXMAG.COM What to consider? US macro: Big miss in ISM services overshadows NFP gains The ADP report from last week had set up expectations for a stronger NFP print on Friday, and while the headline came in stronger and with a drop in unemployment but the market instead focused on significantly slower wage growth and the reaction was dovish, with the US dollar sagging. Still, the report doesn’t change the fact that US labor market remains tight and WSJ’s Timiraos also noted that Friday’s employment report does little to clarify how much the Fed will raise interest rates at its next policy meeting. Nonfarm payrolls showed US employers added 223,000 jobs last month, from a downwardly revised 256,000 in November, with the unemployment rate hitting a cycle low of 3.5% again. Wage growth however slowed to 4.6% YoY (0.3% MoM) in December from a revised 4.8% YoY (0.4% MoM) in November, keeping the market reaction to the overall jobs report mixed, before the big disappointment from ISM services which surprisingly dipped into contraction for the first time since May 2020 to 49.6 vs. expected 55. The forward-looking sub-indicator, new orders, fell 10.8 pts to 45.2 but details were still mixed with 11 of the 18 services sector remaining in expansion. Fed speakers continue to highlight inflation concerns A host of Fed speakers were on the wires on Friday, and key message was the need for more rate hikes still despite signs of price pressures cooling. Cook (voter) said inflation is "far too high" and "of great concern" despite recent encouraging signs, while Bostic (non-voter) said the Fed needs a target rate above 5% and he expects Fed to hold at a peak policy rate for an extended period, "well into 2024". Barkin, another non-voter, touched more on inflation saying that that the Fed is still resolute on inflation, and needs to stay on the case until inflation is sustainably back to the 2% goal. Retiring member Evans however called for a slower pace of rate hikes. The eurozone inflation is cooling down It was largely expected that the eurozone inflation would cool down in December. But the first estimate is actually much lower than forecasted, at 9.2 % versus prior 10.1 % in November. This is a positive development and it goes in the right direction, of course. But this is still a high number. Looking at the main components, energy had (without surprise) the highest annual rate in December at 25.7 %), followed by food, alcohol and tobacco (13.8 %), non-energy industrial goods (6.4%) and services (4.4%). What is worrying is that core CPI continues to increase at 5.2 % versus prior 5.0 % and expected 5.1 %. This will push the European Central Bank (ECB) to keep hiking interest rates in the short-term. But the peak in interest rates is getting closer (Mario Centeno) and the eurozone macroeconomic outlook is not that bad actually (if there is a recession underway, it is at the mild end according to the ECB chief Philip Lane). Alibaba’s Jack Ma cedes his control of Ant Group According to a statement released by the company on 7 January, Jack Ma terminated his acting-in-concert arrangement with other individuals. Under the new structure, 10 individuals, including Mr. Ma, have independent voting rights in the management of the company, as opposed to the prior arrangement that gave Mr. Ma indirect control of 53,46% of the voting rights. Mr. Ma’s stake in Ant Group is reduced to 6.2% from 10.6%. China’s government think-tank said China is launching measures to regulate wealth accumulation President of the China Society of Economic Reform, which is under the National Development and Reform Commission (NDRC), said in a reform forum that the Chinese Government is launching “some forceful measures” to redistribute income, increase taxes, social security, and transfer payments, and “establish a mechanism to regulate wealth accumulation” in order to advance “common prosperity”. Establishing a mechanism to regulate wealth accumulation was first mentioned in President Xi’s work report delivered at the Chinese Communist Party’s 20th National Congress as a means to advance common prosperity. China is reportedly considering to relax the three red-line policy that restrained developers from borrowing According to Bloomberg, the Chinese authorities are considering to relax restrictions on highly-leveraged property developers from increasing their borrowings. The uplift of the restrictions would be important addition to the recent support measures to the real estate sector in China. The three red lines that were introduced in 2020 restrict developers’ ability to borrow if their debts have gone beyond the stipulated limits relative to assets, net debt, or cash. For our look ahead at markets this week – Read/listen to our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: Market Insights Today: Contraction in US ISM services and soft wage growth overshadows strong jobs numbers – 9 January 2023 | Saxo Group (home.saxo)
Polish Inflation Declines in July, Paving the Way for September Rate Cut

UK’s November GDP Will Likely Signal The Start Of Recession, The Q4 Earnings Season Starts Next Week

Saxo Bank Saxo Bank 09.01.2023 08:37
Summary:  Volatility back in focus this week with US CPI on the radar, after jobs report showed a strong headline but softening wage growth. Economic concerns in the US are increasing but it still isn’t enough for the Fed to shift focus from inflation which is likely to remain about three times the Fed’s 2% target, and Fed Chair Powell’s comments this week will also be key. China’s December CPI is expected to come in modestly higher, with PPI less negative as well. Australia’s November CPI will key for further direction in AUDUSD. UK’s November GDP will likely signal the start of an incoming official recession, and Q4 earnings season kicks off with bank earnings in focus this week.         US CPI remains the most key data point to watch, Fed Chair Powell speaks as well There is enough reason to believe that we can get some further disinflationary pressures in the coming weeks. Economic momentum has been weakening, as highlighted by the plunge in ISM services last week into contraction territory, particularly with the forward-looking new orders subcomponent. An unusually warm winter has also helped to provide some reprieve from inflation pains. Bloomberg consensus forecasts are pointing to a softening in headline inflation to 6.5% YoY, 0.0% MoM (from 7.1% YoY, 0.1% MoM prev) while core inflation remains firmer at 5.7% YoY, 0.3% MoM (from 6.0% YoY, 0.2% MoM). Still, these inflation prints remain more than three times faster than the Federal Reserve’s 2% target. Fed officials have made it clear they expect goods price inflation to continue to ease, expecting another big drop in used car prices. But officials are seemingly focused on services ex-housing which remains high. So even a softer inflation print is unlikely to provide enough ammunition for the Fed to further slow down its pace of rate hikes. Fed Chair Jerome Powell this week as well, and his tone will be key to watch. Volatility on watch if US CPI sees a big surprise The last two months have shown that big swings in US CPI can spark significant volatility in the equity markets, given the large amounts of hedging flows and short-term options covering. With a big focus on CPI numbers again this week, similar volatility cannot be ruled out. Volume might be thin still this week as many are still on holidays, so moves in equities could be amplified in either direction. Meanwhile, FX reaction to CPI has been far more muted, but some key levels remain on watch this week. A higher-than-expected CPI print could keep expectations tilted towards a 50bps rate hike again in February, while a miss could mean expectations of further slowdown in Fed’s tightening pace to 25bps in February could pick up which can be yield and dollar negative. EURUSD looks stretched above 1.0650 and key levels to watch will be 1.0500, while USDJPY needs to close below 130.38 to extend the downturn further. USDCNH remains key to watch as well as it gets closer to test 6.8000 amid China reopening and easing in property sector. AUDUSD is also flashing a bullish signal after breaking above the key 0.69 this morning with China reopening momentum underpinning. The Aussie dollar flags a bullish signal, crossing a key level. Could inflation add to the rally? After the US dollar suffered its longest streak of weekly falls in two months, the commodity currency - the Aussie dollar broke above its 200-day moving average, which is seen by some as a bullish sign with the Aussie dollar (AUDUSD) trading at two-month high of 0.69 US cents. What's also supporting the currency is that China’s reopening is expected to add considerably to Australia’s GDP. There’s a potential 0.5% addition to GDP in a year once Chinese students and tourists return. Plus there is likely to be an extra boost to GDP from the anticipated pick up in commodity buying from China. Extra hot sauce could even come from China potentially buying Australian coal again. JPMorgan thinks over the next two years, Aussie GDP will grow 1% alone thanks to inbound Chinese students and holiday makers likely returning. The next catalyst for the currency is inflation, CPI data out on Wednesday Jan 11. Core or trimmed CPI is expected to have risen from 5.3% YoY to 5.5% YoY. If CPI come in line with expectations, or above 5.3% YoY, you might also think the AUD rally could be supported.  China’s CPI expected modestly higher, PPI less negative Economists surveyed by Bloomberg had a median forecast of China’s December CPI at an increase of 1.8% Y/Y, edging up from 1.6% in November, mainly due to base effects, as food prices are likely to be stable and higher outprices in the manufacturing sector might be offset by a fall in services prices. PPI in December is expected to be -0.1% Y/Y, a smaller decline from -1.3% Y/Y in November, benefiting from base effects. The decline in coal prices was likely to be offset by an increase in steel prices. Growth in new RMB loan and aggregate financing expected to slow in China The Bloomberg survey consensus is forecasting a modest decline in new RMB loans to RMB1,200 billion in December from RMB1,210 billion in November despite the Chinese authorities have been urging banks to lend to the real estate sector. New aggregate financing is expected to slow to RMB1,850 billion from RMB1,990 billion, primarily dragged by a decline in bond issuance from local governments. UK November GDP to signal an incoming recession UK’s monthly GDP numbers are due this week, and consensus expects a contraction of 0.3% MoM in November from +0.5% MoM previously which was boosted by the favourable M/M comparison vs. September, which was impacted by the extra bank holiday for the Queen’s funeral. The economy is clearly weakening, and another quarter of negative GDP print remains likely which will mark the official start of a recession in the UK. Start of the US earnings season The Q4 earnings season starts next week with major US banking earnings most notably from Bank of America, JPMorgan Chase, and Citigroup. Analysts remain muted on US banks with earnings expected to show another quarter of negative earnings growth compared to a year ago. For the overall Q4 earnings season we expect to see more industries experiencing margin compression than industries experiencing expanding margins. This will continue to be a headwind for earnings growth. Analysts did not see the margin compression coming in Q3 and judging from current estimates they have not materially revised down their expectations. That means that the Q4 earnings season and beyond could be paved with more disappointments. The list below shows the most important earnings releases next week. Tuesday: Albertsons Thursday: Fast Retailing, Seven & I Friday: DiDi Global, Aeon, Bank of New York Mellon, Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, UnitedHealth, BlackRock, Delta Air Lines, First Republic Read next: The U.K. Economy Is In Trouble, Fall Of GDP Is Expected!| FXMAG.COM Key economic releases & central bank meetings this week Monday 9 January U.S. Manheim used vehicle index (Dec) Germany Industrial production (Nov) Eurozone Sentix Investor Confidence (Jan) Eurozone Unemployment rate (Nov) Japan: market closed for holiday Tuesday 10 January France Industrial production (Nov) Japan Tokyo-area CPI (Dec) Fed's Bostic speaks in a moderated discussion Fed's Daly interviewed in WSJ Live event Fed Chair Powell speaks at Riksbank event Wednesday 11 January Australia retail sales (Nov) Australia CPI (Nov) U.S. MBA mortgage applications (Jan 6) Thursday 12 January Australia trade (Nov) U.S. CPI (Dec) China CPI & PPI (Dec) Fed's Harker discusses the economic outlook Friday 13 January U.S. U of Michigan Consumer Sentiment (Jan, preliminary) Eurozone: Industrial production (Nov) UK: Monthly GDP (Nov) Japan: Money supply (Dec) China: Imports, exports and trade balance During the week: China: Aggregate financing, new RMB loans, money supply (Dec) Source: Saxo Spotlight: What’s on the radar for investors & traders for the week of 9-13 Jan? US/China/Australia inflation, UK GDP and the start of Q4 earnings season | Saxo Group (home.saxo)
Sterling Slides as Market Anticipates Possible Final BOE Rate Hike Amidst Weakening Consumer and Housing Market Concerns

The Market Is Betting On A Shallow Recession In Some Parts Of The World

Saxo Bank Saxo Bank 09.01.2023 09:58
Summary:  Markets jumped higher on Friday after a mixed December jobs report from the US, mostly reacting a bit later in the session to the very weak December ISM Services survey, which suggests a rapidly decelerating services sector. US rates plunged all along the curve and the USD tanked as the market lowered Fed rate hike expectations, and risk assets rallied, with a further tailwind from China’s huge policy shifts in recent weeks.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) On Friday, it seems the market was looking past the strong labour market data focusing on the miss on the ISM Services Index in December at 49.6 vs 55. This bolsters the view that bad news is good news as it will cause the Fed to halt its monetary tightening sooner rather than later. Our view is still the same that inflation will remain stickier than what the market expects and thus even a mild slowdown in the economy will not lead to substantially lower interest rates. When the market recognizes this, it will begin to price equities more on slowing growth not offset by lower interest rates. Nevertheless, the US equity market is picking up momentum with S&P 500 futures extending their gains up 0.2% trading around the 3,924 level and above the upper level of the recent trading range. If momentum extends and the news flow remains supportive then the 3,950 level could quickly come into play. Hong Kong’s Hang Seng (HIF3) and China’s CSI300 (03188:xhkg) Alibaba (09988:xhkg), surging 7.6%, was the best performing stock within the Hang Seng Index on Monday, following Ant Group announcing a new arrangement in which Alibaba’s founder Jack Ma cedes his indirect control of Ant Group. The new arrangement, which apparently has the blessing of the Chinese authorities, signals that Alibaba and its affiliates may be close to an end of the government-imposed reorganization and return to relative normal business.  Separately, Chairman of the China Banking and Insurance Regulatory Commission said that the rectification of the financial arms of internet platform companies had basically finished. Hang Seng Index surged 1.4% as of writing. China’s CSI300 gained 0.7% with non-ferrous metal, education services, and poultry farming leading. FX: USD sells off on weak ISM Services survey The US dollar sold off after a mixed jobs report delivered not signal, but then a shocking drop in the December ISM Services (more below) took down US treasury yields sharply all along the curve. By this morning’s trade, the move sent EURUSD back above 1.0675 and within reach of the 1.0700+ highs from December, while AUDUSD jumped to new cycle highs above 0.6900 on the weaker greenback together with surging metals prices on China’s policy shift (more below.). Despite the big drop in yields, USDJPY reacted less than other USD pairs as the strong rally in risk sentiment saw flows focusing on more pro-cyclical currencies, like AUD, NZD and NOK. Crude oil (CLG3 & LCOH3) remains volatile amid China’s chaotic reopening The first week of 2023 was tough for crude oil, driven by global growth concerns, a very mild winter across the Northern Hemisphere dampening demand, and a mixed outlook for China. Despite removing most virus-related restrictions, a surge in cases across the country has hit the short-term demand outlook while at the same time setting the economy on a path to recovery. Meanwhile, the IMF warned that a third of the global economy could be in recession in 2023. Supply side concerns are also seen with European sanctions on Russian oil having kicked in, while OPEC has reiterated that it is willing to step in with further production cuts. Short-term resistance being the 21-day moving at $75.65 in WTI and $81.15 in Brent. Gold (XAUUSD) surged higher on weak US ISM Gold’s already positive start to 2023 received a further boost on Friday after the mixed jobs report and very weak ISM services (see below) triggered a plunge in yields and the dollar. Total ETF holdings reached a one-month high while central banks remain active with the PBoC saying that it bought another 30 tonnes of gold in December 2022, following 32 tonnes in November, boosting the country's stash of gold to 2,010 tonnes. Speculators started the new year by boosting their net futures long to a seven-month high, supported by the current strong momentum and a general gold friendly outlook for 2023 driven by recession risks and peak dollar and yields. The next major hurdle for gold being $1896, the 61.8% retracement of the 2022 correction, with a break above confirming the change in direction that has been under way since November. Copper trades near key $4 level as China stimulus continues Copper jumped to a six-month high in Asia on Monday, driven by a general rebound in base metals as China looked to support its property sector. Beijing may allow some firms to add leverage by easing borrowing caps and push back the grace period for meeting debt targets. These were part of the “three red lines” policy that contributed to the downturn in recent years. Copper has advanced since November after lockdown protests led to an abrupt change in direction towards reopening the economy following months of fruitless lockdowns. The change in direction set by the government has bolstered the outlook for demand beyond the first quarter. Having broken above its 200-day moving average on Friday, now support at $3.8475, HG copper almost touched the key $4 level overnight. US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) soared with yields on the 10-year notes 16bps richer to 3.56% Treasuries were bid Friday following the news of slowing average hourly earnings. Yields oscillated for a while as investors weighed the soft wage growth against the solid payrolls and fall in unemployment rates. Decisive declines in yields came after the release of the shockingly wevak December ISM Services Index (more below on the ISM and US jobs report), indicating contracting activities in the service sector. Two-year yields fell 21bps to 4.25% and those on the 10-year notes dropped some 16 bps to 3.56%. What is going on? Asian and EM equities enter bull market The leading MSCI indices tracking these two segments of the global equity market have entered a bull market up 20% since their lows in October fueled a more positive narrative. The market is betting on a shallow recession in some parts of the world, while inflation keeps coming down, and on top of a successful kickstart of the Chinese economy. All three wishes may not be able to be fulfilled simultaneously and our view is that the market is getting too excited about growth too early as a lot of uncertainty persists. Eurozone inflation is cooling off It was largely expected that the eurozone inflation would cool in December. But the first estimate was much lower than forecasted, at 9.2 % versus 10.1 % in November. This is a positive development and goes in the right direction, but this is still a high number. Looking at the main components, energy had (without surprise) the highest annual rate in December at 25.7 %), followed by food, alcohol and tobacco (13.8 %), non-energy industrial goods (6.4%) and services (4.4%). What is worrying is that core CPI continues to increase at 5.2 % versus prior 5.0 % and expected 5.1 %. This will push the European Central Bank (ECB) to keep hiking interest rates in the short term. But the peak in interest rates is getting closer (Mario Centeno) and the Eurozone macroeconomic outlook is not as bad as feared (if there is a recession underway, it is at the mild end according to the ECB chief Philip Lane). US macro: big miss in ISM services overshadows NFP gains The ADP report from last week had set up expectations for a stronger NFP print on Friday, and while the headline came in stronger than expected at ´+223k and the unemployment rate dropped back to the cycle low of 3.5%, the market instead focused on significantly slower wage growth than expected. The Average Hourly Earnings in December slowed to 4.6% YoY (0.3% MoM) from a revised 4.8% YoY November, keeping the market reaction to the overall jobs report mixed. Ninety minutes later, the December ISM services survey saw a shocking drop into contraction for the first time since May 2020 at 49.6 vs. expected 55 and 56.5 in November. The forward-looking New Orders sub-index fell over 10 points to 45.2 but details were still mixed with 11 of the 18 services sectors remaining in expansion. AUDUSD jumps to new 4-month high, clears 200-day moving average With the US dollar suffering its longest streak of weekly drops in two months, the Aussie dollar broke above its 200-day moving average for the first time since last April, and traded above 0.6900 for the first time since last August. Also supporting the currency is that China’s reopening is expected to add considerably to Australia’s GDP. There’s a potential 0.5% addition to GDP in a year once Chinese students and tourists return, and an anticipated rise in commodity exports to China, especially coal after a prior ban, could add an extra boost to GDP. JPMorgan thinks that over the next two years, Aussie GDP will grow 1% alone thanks to inbound Chinese students and holiday makers likely returning. The next catalyst for the currency is inflation (CPI) data out on Wednesday Jan 11. Core or trimmed CPI is expected to have risen from 5.3% YoY to 5.5% YoY. Fed speakers continue to highlight inflation concerns A host of Fed speakers were on the wires on Friday, and key message was the need for more rate hikes still despite signs of price pressures cooling. Cook (voter) said inflation is "far too high" and "of great concern" despite recent encouraging signs, while Bostic (non-voter) said the Fed needs a target rate above 5% and he expects Fed to hold at a peak policy rate for an extended period, "well into 2024". Barkin, another non-voter, touched more on inflation saying that that the Fed is still resolute on inflation, and needs to stay on the case until inflation is sustainably back to the 2% goal. Retiring member Evans however called for a slower pace of rate hikes. Read next: Plans To Sell FTX Assets Met With Opposition From US Trustee Andrew Vara| FXMAG.COM What are we watching next? How long will market celebrate any additional signs of a slowing US economy? The market’s primary focus on Friday after a very weak US ISM Services survey was the celebration of lower US treasury yields as weak data drives expectations that the Fed can ease its policy tightening more quickly than previously expected, but typically, a weaker economy would mean falling earnings and a credit crunch, which drives markets lower. Only hopes for a benign “soft landing” can continue to see the market celebrating signs of a weakening economy, if that is indeed what we get. This week includes very little in the way of important US data outside of Thursday’s December CPI (perhaps less focus there than previously, given we have seen a number of softer inflation-related data of late). Q4 Earnings season begins this Friday with the largest US financial institutions reporting and the reports and guidance coming over the following couple of weeks will bear close watching. Earnings to watch The Q4 earnings season kicks off this Friday with banking earnings from Bank of America, JPMorgan Chase, and Citigroup with consensus expecting earnings to continue contracting among US banks before coming back to growth this year. The key uncertainty is credit quality in 2023 as it is linked to the degree of a recession or maybe no recession at all in the US economy. With higher interest rates level expectations are that banking revenue will slowly begin to accelerate and if high interest rates persist for an extended period, the longer-term growth for banks could be quite attractive. Overall, the Q4 earnings season is likely going to see an extension of value and tangible companies performing better than intangible-driven companies. Tuesday: Albertsons Thursday: Fast Retailing, Seven & I Friday: DiDi Global, Aeon, Bank of New York Mellon, Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, UnitedHealth, BlackRock, Delta Air Lines, First Republic Economic calendar highlights for today (times GMT) 1000 – Eurozone Nov. Unemployment Rate 1200 – Mexico Dec. CPI 1330 – Canada Nov. Building Permits 1530 – UK Bank of England Chief Economist Huw Pill to speak 1730 – US Fed’s Bostic (non-voter) to speak 1730 – US Fed’s Daly (non-voter) to speak 2000 – US Nov. Consumer Credit 2330 – Japan Dec. Tokyo CPI Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – January 9, 2023 | Saxo Group (home.saxo)
All Eyes On Capitol Hill, Jerome Powell Will Appear Before The Senate Banking Committee

Fed Ensues Its Annual Voting Rotation But The Bar For Cutting Rates In 2023 Will Still Remain High

Saxo Bank Saxo Bank 09.01.2023 10:05
Summary:  As the FOMC voting rotates, the new set of voters in 2023 will likely see a dovish tilt. Hawkish members like Bullard, Mester and George will not be voting this year, being replaced by Goolsbee, Logan and Harker. Kashkari, who is currently hawkish, will also be voting in 2023. Still, broad consensus is likely to remain on Fed policy unless economic conditions deteriorate materially and labor market starts to loosen in H2. Going into 2023, the focus for the Fed will squarely remain on inflation, despite the recent softening. A tight labour market meanwhile continues to provide room to the Fed to continue hiking rates well above 5%. However, it will be key to watch how the Fed’s voting committee changes could potentially affect policy direction. A number of the hawkish Fed members will not be voting this year as the Fed ensues its annual voting rotation. James Bullard of the St. Louis Fed, Loretta Mester of the Cleveland Fed and Esther George of the Kansas City Fed, all of whom have favored sharply higher interest rates to help curb inflation, will lose their votes. Boston’s Susan Collins, a newcomer who’s considered to be neutral, will also lose her voting seat. Charlie Evans of the Chicago Fed and Esther George of the Kansas City Fed are retiring in early 2023. Charlie’s successor has been named. Austan Goolsbee, who will have a voting role at his first meeting in 2023, will replace him. He is expected to be dovish. Goolsbee will be joined by newcomer Lorie Logan at the Dallas Fed, who is also a centrist. Philadelphia Fed president Patrick Harker will rotate into a voting position. Minneapolis’s Neel Kashkari, who is currently an arch hawk after being an uber dove for many years, will also be voting in 2023. While H1 should continue to see a broad consensus within the Fed’s board with inflation remaining a key concern, disagreements may start to flow in from H2 if economic conditions deteriorate materially and labor market starts to loosen. The bar for cutting rates in 2023 will still remain high, however, as any recession in the US – if one was to occur – will be short and shallow.   Source: Fedspeak Monitor: Fed’s 2023 voting committee has a dovish tilt, but broad consensus likely to stay | Saxo Group (home.saxo)
Pound Sterling: Short-Term Repricing Complete, But Further Uncertainty Looms

European Inflation Fell, US Jobs Data Pleased Investors

Swissquote Bank Swissquote Bank 09.01.2023 11:38
Friday’s jobs data in the US, and more specifically, the market reaction to Friday’s jobs data helped stock markets to record their best boost since more than a month on Friday. Friday’s jobs report However, Friday’s jobs report was rather… mixed, and spurred a lot of discussions and debates regarding whether the data was soft enough to convince the Federal Reserve (Fed) officials that the inflation battle is over, or it was strong enough to make them further scratch their heads. US markets US markets, however, gave a strong positive reaction to Friday’s jobs data. Both the US 2 and 10-year yields fell more than 4% after the data, pulling the US dollar index lower along with them. The S&P500 jumped around 2.30%, while Nasdaq 100 rallied near 2.80%. Gold Gold reached our $1880 per ounce medium term target, boosted by lower US yields, which made the opportunity cost of holding the non-interest-bearing gold lower, and increased appetite. Fed, US CPI data and Jerome Powell speach Activity on Fed funds futures now price in a 25bp hike at the next FOMC meeting at around 75%, but the Fed has not hesitated to disappoint markets since last year to cool down the optimism and send the stocks to turmoil. So the dovish pricing in Fed expectations make the latest gains a bit bitter-sweet, as the slightest news, or hints that the Fed would not step back from its hawkish tone could vanish the latest rally. So, this week’s US inflation data will be key in either giving the bulls a further boost or bringing back the bears with revenge. Jerome Powell will speak on Tuesday, and the US CPI data will be released on Thursday. On the corporate calendar, the earnings season will kick off with big bank earnings due Friday. Watch the full episode to find out more! 0:00 Intro 0:32 Strong NFP, soft wages… US jobs data pleased investors 03:36 But did it please the Fed? 4:59 Thu’s US inflation data is crucial for market mood 6:02 European inflation fell, but… 7:21 Crude oil flirts with $75pb 8:18 Bitcoin, Ethereum advance 8:36 Earnings season kicks off ! Ipek Ozkardeskaya  Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #US #jobs #NFP #wages #unemployment #inflation #data #dovish #Fed #expectations #USD #EUR #XAU #Bitcoin #Ethereum #earnings #season #banks #JPMorgan #WellsFargo #Citigroup #Blackrock #Tilray #BBBY #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
Silver's Retreat to $22 per Ounce: Assessing the Path to Historic Highs

Silver Has Great Potential At Current Price Levels

InstaForex Analysis InstaForex Analysis 09.01.2023 12:52
With precious metals gaining momentum at the end of the year, Main Street investors raised their forecast of gold and silver for the new year. Data has shown that gold ended the year unchanged, while silver is up almost 3%. Spot gold started at around $1,828 an ounce last year and ended just above $1,822 an ounce, while spot silver opened at $23.28 an ounce and ended at $23.93 an ounce. In a survey conducted quite recently, 37.5% chose gold as the best performing asset for 2023, while 36.8% chose silver. The third most favored asset was copper, with 8% of votes, followed by oil and Bitcoin, which has 4.7% votes each. Platinum and lithium have 3.7% votes. Palladium was the least popular choice, garnering just 0.9% of the vote. Wall Street investors are also optimistic about gold and silver as it is well positioned for growth since the US is entering economic recession. DoubleLine Capital CEO Jeffrey Gundlach said he believes the Fed will move another 50 basis points in February, pushing the rate to peak at 5% in 2023. But once the Fed reaches 5%, rates will certainly be cut, Gundlach warned. Read next: After The Correction, Jacek Ma's Share In Shareholder Votes Will Fall To 6.2%| FXMAG.COM ANZ strategist Daniel Hynes also believes market sentiment is shifting in favor of gold. "With the Fed pause likely to be followed by a reversal, gold has already started to appreciate," added Wells Fargo head of real asset strategy John Laforge. The company sees gold hitting $1,900 to $2,000 in 2023. Many analysts are even more optimistic about silver in the new year. Laforge, for instance, said that with the price returning to $23, there is a chance that a further rise will be seen in the market. Everett Millman, a precious metals expert at Gainesville Coins, explains that silver has great potential at current price levels because investors have neglected it. "It is more likely that silver will outperform gold. Its recent behavior is encouraging, and the available supply of investment products is quite limited," he said. Relevance up to 09:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/331738
EUR/USD Trading Analysis and Tips: Navigating Signals and Volatility

Saxo Bank Podcast: The Wild Reaction To A Very Weak December ISM Services Survey And More

Saxo Bank Saxo Bank 09.01.2023 12:56
Summary:  Today we look at the mixed US jobs report on Friday and more importantly, the wild reaction to a very weak December ISM Services survey, while we question whether a single data point deserves such a strong reaction function. Regardless, the market took down US treasury yields and the US dollar in the wake of the data. Elsewhere, the market is scrambling to absorb the remarkable policy shift out of China, with metals, AUD and especially CNH firming further. A look at stocks to watch, perspective on the big US banks as they are the first to report for the upcoming earnings season on Friday. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Read next: Incorporating Slack And Other Apps Into The Salesforce Platform Can Actually Put Buyers Off| FXMAG.COM   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: Over-reacting to a single data point? | Saxo Group (home.saxo)
The RBA Is Expected To Raise Rates By 25bp Next Week

The Aussie Pair Is Trading Above 0.69$, The Euro Above 1.07, The British Pound Also Benefits From A Weak Dollar

Kamila Szypuła Kamila Szypuła 09.01.2023 14:33
The US dollar on Monday approached a seven-month low against other major currencies after data suggested the Federal Reserve could slow the pace of rate hikes. The dollar suffered its biggest quarterly loss in 12 years in the last three months of 2022, driven mainly by investor confidence that the Fed would not raise interest rates above 5%. The probability of a 25 basis point Fed rate hike in early February rose above 70% after the release of this data, reflecting the return of dovish Fed betting. The US economic report will not contain any important macro data on Monday. Later in the day, Atlanta Federal Reserve Bank Chairman Raphael Bostic will give a speech, and he said on Friday that he expects the Fed to keep interest rates at peak levels until 2024. Friday's monthly employment report showed an increase in non-farm payrolls and a slowdown in wage growth. The US employment data hit the US dollar hard. USD/JPY The Japanese yen strengthened above 132 to the dollar, returning to its highest level in seven months. The yen is building on December gains amid mounting speculation that the Bank of Japan may soon move away from ultra-easy policy after it unexpectedly raised the upper end of its 10-year government bond tolerance band to 0.5% from 0.25% last month . However, BJ Governor Haruhiko Kuroda clarified that the move was not a sign of starting a massive stimulus exit, but was intended to improve the functionality of the bond market. AUD/USD The AUD/USD pair builds on Friday's strong rally and gains strong traction on the first day of the new week. This marks the second day in a row of positive movement. The Aussie pair broke through the 0.69 level in the Zajati session. China's hopes of reopening may have contributed to the strengthening of the commodity currency. The world's second largest economy has lifted quarantine requirements for visitors, taking another step towards reconnecting to the world in the post-Covid era. Over the weekend, China finally reopened its sea and land border crossings with Hong Kong, the last pillar of its zero-covid policy, after three years. On the monetary policy front, the currency remains supported by expectations that the Reserve Bank of Australia will raise interest rates further this year in an ongoing effort to bring down inflation. Otherhand, markets are currently split on whether the RBA will deliver another rate increase at its Feb. GBP/USD The British pound hit a two-and-a-half-week high on Monday against a fundamentally weak dollar. GBP/USD entered a consolidation phase and pulled back towards 1.2100 after hitting a two-week high at 1.2175 earlier in the day. The US dollar came under strong selling pressure before the weekend. Traders are fully pricing in a 25bps rate hike at the February BoE meeting with around a 65% chance of a larger 50bps hike. The money markets predict that the bank rate will peak at around 4.5% in the middle of this year. EUR/USD EUR/USD is on a strong gain for the second day in a row. After Friday's rally before the weekly close, EUR/USD rose to 1.0699 on Monday. The euro benefited from better market sentiment. Today the EUR/USD pair climbed towards 1.0700. Unemployment in the EU shows a downward trend and November's print jobs reached 6.5% . Lower gas prices are also contributing to optimism in the eurozone and a better economic outlook for the eurozone, but the main driver of the euro appears to be a sell-off of the dollar along with flows into risky assets. Source: investing.com, finance.yahoo.com, dailyfx.com
Despite The Improvement In The Outlook Due To Falling Energy Prices, The Economic Environment In Britain Remains Difficult

Rates Daily: The Speeches Of The Representatives Of The ECB And The Bank Of England Will Be Dominated By A Hawkish Tone

ING Economics ING Economics 10.01.2023 08:47
A lot of central bank comments will hit newswires today, but the odds of any meaningful signal being communicated to markets are low. On balance, we expect bonds to retain their bullish bias as long as today’s deals are well absorbed Bonds keep their bullish bias and look past Powell Bonds continue to trade with a bullish bias. After weakness at the open yesterday, fixed income markets recovered the ground lost thanks to the New York Fed consumer expectations survey seemingly confirming that inflation upside is abating. Most notable was the reduction in inflation uncertainty and falling probability of three-years ahead inflation remaining above 4%. Taken together, they aren’t sufficient to conclude that inflation is heading back to the Fed’s 2% target, but they will comfort investors in their view that the period of jumbo hikes from Fed trying to cap inflation upside is behind us. Too sharp a fall in market interest rates is detrimental to the Fed’s objective The end of the Fed’s interest rate shock therapy is proving particularly beneficial for risk assets. In rates, the long-end has benefitted the most, courtesy of growing rate cut expectations: almost 50bp from the Fed Fund peak this year, and a further 150bp in 2024. While we agree, too sharp a fall in market interest rates is detrimental to the Fed’s objective. Indeed, while encouraging inflation news may spell the end of the aggressive phase of this tightening cycle, we expect the Fed to continue pushing back against cut expectations. This is in order to prevent financial conditions from easing too fast and undoing its policy tightening work. Raphael Bostic was for instance insisting yesterday that the Fed should hold rate above 5% thorugh 2024. Chair Jerome Powell is listed among today’s speakers. His attempts to impress his hawkish view on markets in recent months ended in failures. Recent data have, on balance, made his job even more difficult. For now, focus is on the size of the next hike. Markets think 25bp is more likely, and both Bostic and Mary Daly said yesterday this is one of the options on the table. But the next step absent an effective pushback from the Fed is for the curve to price out any subsequent hikes, or even to price no more hike in this cycle. Markets don’t need much encouragement to see the dovish side of everything. US consumers see lower inflation upside and inflation uncertainty within three years Source: Refinitiv, ING Headline and supply risk today in Europe Over in Europe, a paper by the European Central Bank (ECB) seemed to foresee a further acceleration of wages in the comign quarters. Whilst ECB economic papers aren’t a conduit for policy signals, wages are a key piece of the inflation puzzle in Europe and elsewhere. We expect the view of research staff on that topic is something that resonates with governing council members, and by extension with markets. Along a similar vein, Bank of England (BoE) chief economist Huw Pill listed the reasons why inflation in the UK risks being more persistent than in Europe. The speech was full of hawkish soundbites but the fact that it was mostly backward-looking provided an excuse for bonds to ignore them. Issuance has failed to make much of a dent in the (US-led) rally in bonds There is also a long list of ECB and BoE speakers today. If recent history is any guide, a hawkish tone will dominate but the format of panel discussions brings the risk of out of context comments being reflected in headlines in news services. The other main potentially market-moving event today is supply. So far, issuance has failed to make much of a dent in the (US-led) rally in bonds but much will depend on how well each deal is received. Falling implied volatility shows markets think the central bank shock therapy is behind us Source: Refinitiv, ING Today's events and market view November industrial production figures from France and Spain start today’s list of economic releases, followed in the afternoon by US small business optimism survey. The questions relating to hiring intentions and prices will as usual be more closely watched. The Riksbank symposium speakers list include central bank household names such as Isabel Schnabel of the ECB, Andrew Bailey of the BoE, Hurahiko Kuroda of the Bank of Japan, and Jerome Powell of the Fed. All are listed as taking part in panel discussions which isn’t an obvious format to send policy signals but brings the risk of misleading headlines. As is usually the case in January, bond supply is what will keep a large part of market participants busy today. On the sovereign side, Belgium (10Y) and Italy (20Y, green) mandated banks for syndicated deal which should materialise today. This will come on top of scheduled auctions from the Netherlands (3Y), Austria (3Y/24Y) and Germany (10Y Linker). The US Treasury starts this week’s issuance slate with a 3Y T-note auction, this will be followed by 10Y and 30Y sales later in the week. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
China: PMI positively surprises the market

The China Government Considering CNY3.81trn Of Local Government Bond Issuance In 2023

Saxo Bank Saxo Bank 10.01.2023 08:54
Summary:  While the US markets remained mixed overnight with the post-wage growth and ISM gains cooling off, focus in Asia shifts back to China’s reopening and policy measures. A fresh round of fiscal boost and a likely higher budget deficit target could mean more infrastructure spending, and hence further gains for industrial metals. Copper broke the key $4/lb mark. Furthermore, higher import quotas for crude oil were also announced. Tesla charged ahead, but remains in a technical long-term downtrend. What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) consolidated, waiting for the Fed and upcoming earnings U.S. equity benchmark indices pared their over 1% gains in the morning and finished the Monday session mixed. Nasdaq 100 gained 0.6% while S&P 500 was nearly flat. Among S&P 500 sectors, information technology was the top winner and advanced 1.1%, led by the strong performance of Nvidia (NVDA:xnas) and Advanced Micro Devices (AMD:xnas). Tesla (TSLA:xnas), rallying 5.9%, was the best-performing stock within S&P 500. The stock however is still in a long-term downtrend. Healthcare was the worst-performing sector. Lululemon Athletica plunged 9.3% after saying the company expected lower profit margins in Q4. Uber gained 3.8% on an analyst upgrade. Apple plans to drop Broadcom chips and Qualcomm modem Apple (AAPL:xnas) plans to drop Broadcom (AVGO:xnas) chips from its devices and use in-house chips. Apply also aims to replace the modems from Qualcomm (QCOM:xnas) with in-house designs. Shares of Broadcom fell nearly 2% and those of Qualcomm shed 0.6%. US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) extended gains After a strong session last Friday, Treasuries extended their gains to finish 2 to 4 bps richer across the curve. Yields on the 10-year edged down 3bps to 3.53% and those on the 2-year slid by 4bps to 4.21%. The market is pricing a 77% chance of a 25bp hike at the February FOMC. Comments from Fed’s Bostic and Daly, both non-voter this year, did not offer new insights. Bostic said he was in favor of “raising rates to the 5%-5.25% range”. Fed Chairman Powell will speak in a panel discussion on central bank independence at a Riksbank event today. The New York Fed survey showed U.S. consumers expecting 1-year, 3-year and 5-year inflation expectations at 5%, 3% and 2.4% respectively. What should you be watching today in equities across APAC? The Australian share market (ASXSP200.I) opened slightly lower on Tuesday down 0.2%, while Japan’s market is suggested to outperform in APAC today, with the futures suggesting the Nikkei could rise 0.9%. Keep an eye on coal stocks particularly as China’s National Development and Reform Commission has issued three notices urging parties to secure and speed up the process of locking in medium and long-term supply deals, to ensure China does not run out of power. China banned the imports of Australian coal for over two years, however yesterday, reports suggested BHP struck a deal, and sold two shipments of met coal to China. This highlights that trade relations are improving but also means the price of coal is likely to remain supported as demand is increasing. Keep an eye on Coronado (CRN) Whitehaven Coal (WHC), and New Hope (NHC). In Australia and Asia today, Copper stocks are in focus after the copper price rose 2.4% to over $4, which is a six month high. Copper stocks to potentially watch include BHP, Oz Minerals. It’s also worth watching the Bloomberg Commodity Index which jumped 1.1%. There also affiliated ETFs that are worth watching given China is easing restrictions and likely to ramp up commodity buying after the lunar new year. Iron ore (SCOA) trades flat today, but holds a five month high, as buying of iron ore is expected rise after the new year holidays as it typically does. This notion is also supporting iron ore stocks in the industry like Vale, Champion Iron, Fortescue Metals, BHP and Rio. Hong Kong’s Hang Seng (HIF3) and China’s CSI300 (03188:xhkg) advanced in anticipation of a less uncertain regulatory environment Alibaba (09988:xhkg), surging 8.7%, was the best-performing stock within the Hang Seng Index on Monday, following Ant Group announcing a new arrangement in which Alibaba’s founder Jack Ma cedes his indirect control of Ant Group. The new arrangement, which apparently has the blessing of the Chinese authorities, signals that Alibaba and its affiliates may be close to the end of the government-imposed reorganization and return to relatively normal business. Separately, Guo Shuqing, who is Party Secretary of the People's Bank of China (PBOC) and Chairman of the China Banking and Insurance Regulatory Commission, said that the rectification of 14 internet platform companies' financial businesses had basically been completed and China will support platform companies to play a bigger role in job creation and global competition. Hang Seng Index climbed 1.9% and Hang Sang TECH Index surged 3.2%. In A-shares, CSI300 gained 0.8% with non-ferrous metal, non-bank financials, food and beverage, beauty care, education services, and poultry farming being top gainers. FX: Post-ISM dollar selling extended The USD was further lower on Monday continuing the post-NFP and ISM Services decline as risk assets enjoyed a bid on the back of China reopening optimism, seen throughout Asia, Europe, before paring in the US afternoon. The latest NY Fed consumer inflation expectations were mixed, but the cooling in 1yr ahead expectations gained the most attention. Fed speakers failed to add anything new, but clearly opened the door for a 25bps in February resulting in some dovish Fed repricing, and focus is now on Chair Powell and US CPI. EURUSD continues to look stretched as it rose to 7-month highs of 1.0761. AUDUSD capped at 0.6950 for now but China optimism continues to underpin with USDCNH now below 6.8000. Crude oil (CLG3 & LCOH3) prices higher on China hopes Crude oil prices opened the week with gains on continued China optimism as fiscal stimulus measures bode well for the demand outlook in China. China also issued a fresh batch of import quotas, of about 112 million tons in its second allocations for 2023, in a signal that the world’s largest importer is ramping up to meet higher demand. The upcoming Lunar New Year is also keeping the travel demand robust. Meanwhile, Russian oil exports are likely suffering on the back of sanctions (read below). WTI futures traded close to $75/barrel in the Asian morning while Brent was close to $80. Copper breaks the $4/lb mark With the China government considering CNY3.81trn of local government bond issuance in 2023, there is expectations of a further push to infrastructure spending which will continue to bump up industrial metals prices. Beijing may also bump the budget deficit to 3% of GDP, up from 2.8% last year. Meanwhile, copper inventories for immediate withdrawal from LME warehouses fell 2.8%, the most since 8 December. That leaves stockpiles at just above a 17-year low. Having touched the $4.05 level overnight, HG copper prices are now back the $4 mark, and support is seen at $3.8475.  Read next: The Aussie Pair Is Trading Above 0.69$, The Euro Above 1.07, The British Pound Also Benefits From A Weak Dollar| FXMAG.COM What to consider? China likely to add fiscal stimulus China exempts value-added tax (VAT) among small businesses with monthly revenues less than RMB100,000 a month till the end of 2023, according to Bloomberg. China is also considering a record special debt quota and a wider budget deficit with a new special bond quota of up to CNY 3.8tln and a deficit ratio of around 3% for the year. China is on track to spend more on infrastructure and support the real estate sector, both will bump up demand for industrial metals. Japan’s December Tokyo CPI touched the 4% mark Tokyo CPI for December was released this morning, with the headline coming in at 4.0% YoY as expected from a revised 3.7% YoY in November, suggesting price pressures in Japan haven’t started to cool off yet. Tokyo core CPI (ex-food) was higher than expected at 4.0% YoY from 3.6% YoY previously while the core-core measure (ex-food and energy) was also higher at 2.7% YoY from a revised 2.4% YoY in Nov. With Tokyo CPI numbers leading the broader print, there are clear signs that further upside pressures are likely to stay and continue to keep a policy tweak option alive for the BOJ. Asian and EM equities enter bull market The leading MSCI indices tracking these two segments of the global equity market have entered a bull market up 20% since their lows in October fuelled by gains in China and a weaker USD. The market is betting on a shallow recession in some parts of the world, while inflation keeps coming down, and on top of a successful kickstart of the Chinese economy. All three wishes may not be able to be fulfilled simultaneously and our view is that the market is getting too excited about growth too early as a lot of uncertainty persists. The rally has been fast and furious, so it is only natural to expect some profit-taking. There are also some risks to keep a tap on, such as BOJ's hawkish shift and company earnings. But that being said, there is still room for Asian markets to outperform its global peers in 2023. The labour market remains tight in the eurozone There is not much on the eurozone calendar this week. According to the latest Eurostat figures, the labour market remains well-oriented both in the eurozone and in the European Union (EU). The eurozone unemployment was at 6.5 % in November and at 6.0% in the EU. The figures are stable compared to October. Within the EU, Spain scores the highest official unemployment rate (12.4%) and Germany and Poland the lowest one (3.0%). In a working paper published yesterday, ECB economists pointed out the risk of high wage growth in the coming quarters – way above historical patterns. This reflects robust labour markets that so far have not been substantially affected by the slowing of the economy, increases in national minimum wages and some catch-up between wages and high rates of inflation. We tend to disagree with this assessment. Wage growth is of course fuelling inflation in the CEE area. But this is clearly not the case in Western Europe. The likelihood that wages will increase significantly, thus becoming an issue in regard to the fight against inflation, is rather low in our view. The United Kingdom is certainly the only European country (but not belonging to the EU) which may potentially face a wage-price spiral this year.  Russian crude exports coming under pressure Russia’s Urals grade, a far bigger export stream than any other crude that Russia sells, was $37.80 a barrel at the Baltic Sea port of Primorsk on Friday, according to data provided by Argus Media. Global benchmark Brent settled at $78.57 on the same day. Combined flows to China, India and Turkey hit the lowest last week since October, suggesting sanctions and EU embargo may be impacting Russia’s key exports.   For a look ahead at markets this week – Read/listen to our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: Market Insights Today: China’s fiscal boost charges Copper; Can Tesla gain further? – 10 January 2023 | Saxo Group (home.saxo)
Asia's Key Events: BoJ Meeting, Korea's GDP, Singapore Inflation, and Australia's CPI Data

FX: The Romanian Leu Has Benefited From Favourable Global Conditions In Recent Weeks

ING Economics ING Economics 10.01.2023 10:13
FX markets continue to trade with cautious optimism on the view that a US slowdown can rein in a hawkish Fed and that a reset in China policy will (eventually) see resurgent consumer demand and perhaps even improved foreign relations. That looks like a good story for the commodity and EMFX complex. Look out for comments from Fed Chair Powell today and the NFIB The market is growing increasingly confident that the Fed will end its tightening cycle this quarter USD: Powell pushback? Risk assets have started the year on a strong footing, with a good performance from both equity and debt markets. Emerging markets are back in fashion after a tough couple of years, where the building view that the Fed can soften its pressure on the monetary brakes plus China re-opening can see quite a strong recovery in emerging market currencies against the dollar. We note with interest a piece in the Financial Times today speculating on China's approach to stimulating domestic demand and also seeking to improve foreign relations. China's softening of a ban on coal imports from China and yesterday's news of a 20% increase in crude oil import quotas are consistent with the article. This comes at a time when the market is growing increasingly confident that the Fed will end its tightening cycle this quarter and embark on an easing cycle in the third quarter. Today will see two inputs into that Fed story in the form of i) comments from Fed Chair Jerome Powell around 15CET today and ii) the NFIB small business sentiment survey. Powell is speaking at a Riksbank conference on central bank independence, making it unclear whether he will today push back against the recent softening in US financial conditions. Certainly, the market does not buy into the Fed's narrative of the funds rate being taken to 5.00% and being kept there for a long time. Markets seem to price a 50bp easing cycle in 2H23. Regarding the NFIB survey, the market will be interested in whether it sinks any further and supports the recessionary readings provided by last Friday's ISM services release. Assuming that neither Powell's comments nor the NFIB breaks the building narrative of a more relaxed Fed (and Thursday's US CPI will also be key for this story), we would expect momentum to remain against the dollar and continue to favour activity/commodity currencies. Speculation will also be building that the Bank of Japan might have a further Japanese government bond (JGB) yield target adjustment in store after the Tokyo ex-food CPI hit 4% year-on-year – a level last seen in 1981. The Bank of Japan meets next week. DXY looks biased towards the 102.00 as investors put money to work on non-USD assets. Chris Turner EUR: So far, so good EUR/USD managed to nudge up to a new high yesterday without the support of much new news. It seems that asset managers are starting the year by placing money overseas, where dollar sales for emerging market currencies seem to lift EUR/USD as well. That said, European equities continue to outperform at the start of the year and eurozone data also continues to surprise on the upside.  For the time being, we would prefer to back further EUR/USD strength – should today's US event risks allow. This could see EUR/USD pressing last May's high at 1.0785. This week there is an outside risk of 1.0950 should Thursday's US December CPI show another soft reading. Before we dust off the call to 1.15, we should note that a re-opened China will compete for global LNG supplies. This means that the issue of high natural gas prices could well come back and bite the eurozone and the euro later in the year. Chris Turner GBP: Better risk environment provides some insulation Sterling has been performing slightly better, helped no doubt by the constructive risk environment at the start of 2023. The UK has quite a large country weight in global equity and debt benchmarks, meaning that flows into these products can provide some support. Sterling barely budged yesterday on comments from Bank of England Chief Economist Huw Pill that there were early signs that the UK labour market was softening. Again, market pricing of a further 100bp BoE hike to the 4.50% area this summer looks resolute. 0.8770-0.8870 may well contain EUR/GBP for the rest of this week, though GBP/USD could have some more upside should US data allow. Chris Turner CEE: Romania closes the hiking cycle in the region Today's calendar in the region offers National Bank of Romania (NBR) policy meeting. Although it seemed likely that we would not see another rate hike after the last meeting, the November inflation number has convinced us that one more hike is more than likely. That is why we expect the last 25bp rate hike today to 7.00%. However, our chief economist in Bucharest, Valentin Tataru, gives a 30% chance that rates will remain unchanged today. A rate hike is unlikely to impress anyone, and we will look for clues as to how the NBR views the liquidity situation in the market. From a rate perspective, we think this meeting should be the last live one, which will close the CEE region's hiking cycle, given that we do not expect rate hikes anywhere else.  The Romanian leu, like the entire CEE region, has benefited from favourable global conditions in recent weeks and, with the exception of the last few days of last year, has remained below NBR intervention levels. Although Romania is the least energy-dependent country in the region, the positive impact of the drop in gas prices and the more favourable EUR/USD level has not avoided the Romanian market. These conditions are expected to persist in the coming weeks. Although the carry level is among the lower ones within the region, it is at least stable. Moreover, the central bank maintains strong market confidence not to allow a depreciation above intervention levels. Thus, in our view, any EUR/RON upward moves may be tempting for RON buyers. Frantisek Taborsky Read this article on THINK TagsNational Bank of Romania FX Daily Federal Reserve Dollar  
Warsaw Stock Exchange SA Approves Dividend Payout: Neutral Impact Expected

US Dollar Is Under Pressure, Russian Crude Shipments On Falling Trend

Swissquote Bank Swissquote Bank 10.01.2023 11:25
Good news is that Asian stocks entered bull market. Bad news is that the Federal Reserve (Fed) President Jerome Powell could hammer the post-NFP stock rally in US stocks. Sentiment is mixed and investors are tense before Powell’s speech, and Thursday’s US inflation data. S&P500 The S&P500 was unable to extend gains above the 3900, rapidly started erasing early-session gains and ended the session 0.08% lower. Nasdaq also gave back early-session gains, though closed the session 0.60% higher. US makret US equity futures are in the negative this morning, as the King of market disappointment, the Fed Chair Jerome Powell, will be speaking at an event in Stockholm today, and he will probably not pop the champagne just because the wages grew less than expected last month, especially when you think that the US economy added a near record 4.5 million jobs last year, and that the unemployment rate fell to 3.5%. Forex In the FX, the US dollar index remains under a decent selling pressure, as a result of the dovish Fed expectations since last Friday’s US jobs data. The EURUSD advanced to 1.0760 yesterday, Cable flirted with 1.22 this morning, and gold consolidates gains. Energy market In energy, crude oil remains under pressure despite the Chinese reopening talk, and the falling Russian supply. We see that the European sanctions weigh on Russian oil supply, as the 4-week average shipments decline despite a small gain posted last week. That means that the lower Russian supply will be another supportive factor of oil prices. Watch the full episode to find out more! 0:00 Intro 0:27 Asian stocks enter null market 1:25 Powell could shoot Fed doves down 5:18 Another big S&P500 is possible 7:11 US dollar under pressure 8:32 Russian crude shipments on falling trend 9:32 Copper futures rally, but risks prevail Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Fed #Powell #speech #Fed #expectations #USD #EUR #GBP #XAU #earnings #season #Lululemon #banks #MSCI #AsiaPacific #bull #market #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
EUR/USD Pair Has Potential For The Downside Movement Today

The EUR/USD Pair Is Still Above 1.0700$, The USD/JPY Pair Was Little Changed

Kamila Szypuła Kamila Szypuła 10.01.2023 14:52
The US dollar improved slightly against its major trading partners early on Tuesday. The National Federation of Independent Business's monthly small business sentiment reading fell further in December as small businesses continue to struggle with high inflation that is dragging down profits. The economic outlook has deteriorated further this year. Markets are increasingly doubting whether the Fed will need to raise interest rates above 5% to cool down inflation as the effects of its aggressive rate hikes last year are already being felt in the economy. The focus for today will be Fed Chair Powell’s comments. USD/JPY So far, the Japanese yen has changed little against the dollar this week. USD/JPY was little changed on the news, but the Bank of Japan’s ability to maintain a loose monetary policy setting may come under closer scrutiny. USD/JPY is currently bullish and trading at 132.2600. In the earlier trading hours, the pair was even below 132. Japanese inflation appears to be accelerating after the headline Tokyo CPI hit a 40-year high at 4.0% year-on-year to the end of December. This was in line with forecasts, but core CPI was also 4.0% for the same period, above the 3.8% anticipated and 3.6% prior. EUR/USD EUR/USD has lost its traction and declined toward 1.0700 in the early American session on Tuesday. The EUR/USD was even above 1.0750 today. But the current level shows that the pair failed to break through the 1.0740 level, and the daily chart shows that the pair is barely down. It is possible that the EUR/USD pair will drop below 1.0700. While the US dollar remains under pressure from lower rate expectations, the Euro continues to be bolstered by the ECB’s insistence that rates will need to go higher to dampen ongoing price pressures. With the Fed coming to the end of its rate hike cycle, and with the ECB still in full flow, rate differentials between the two will continue to favor Euro strength. The EUR/USD pair as focus shifts to FOMC Chairman Powell's speech. GBP/USD The British pound traded above to $1.2, near a two-and-a-half-week high against the dollar, which hit Monday, The Cable Market is currently below that level, far from it. Trading is at the time of writing around 1.2120. The Bank of England's chief economist, Huw Pill, warned of the risk of continued inflationary pressures from a tight labor market, even if natural gas prices stabilize or fall. The UK central bank is likely to raise interest rates again to 4% next month. Meanwhile, markets are divided as to how much more interest rates will rise. On the data front, all eyes are on the monthly UK GDP figures. AUD/USD The Aussie pair stayed above 0.69 in the early hours of trading, but failed to maintain that level and found itself below it again. Currently, the Australian pair is trading around 0.6860. In addition, the market is also slightly favoring a quarter point hike from the Reserve Bank of Australia (RBA) to 3.35%. The probabilities may change data on monthly prices of consumer goods and services and retail sales for November, which will be published on Wednesday. After a surprise dip in October, inflation picked up again to an annualized 7.3%, while retail spending is expected to rise by a solid 0.7% thanks to major sales this month. Source: finance.yahoo.com, investing.com
Hawkish Fed Minutes Spark US Market Decline to One-Month Lows on August 17, 2023

The Commentary From Fed Officials Was More Hawkish Than What Investors Wanted

Craig Erlam Craig Erlam 10.01.2023 15:26
European stock markets are softer in early trade on Tuesday following a similar session in much of Asia as investors turn more cautious ahead of Thursday’s US inflation data. The commentary from Fed officials at the start of the week was more hawkish than what investors wanted to hear following a knockout jobs report. Considering the rhetoric in the weeks leading up to Friday, it shouldn’t have come as a great surprise that policymakers are sticking to the “higher for longer” narrative. There has been a determination to not allow financial conditions to loosen on the expectation of lower rates down the road as it undermines tightening efforts now. While the central bank’s assessment of future rates may be more hawkish than the markets, it’s also possible that they’re being intentionally overly hawkish now in an attempt to stop investors from getting carried away. The jobs report may not have been enough to warrant a shift in the language, but that doesn’t mean we aren’t close and any change could be quite stark. The inflation report on Thursday could further justify such a move although investors will be very wary that a bad one could ensure policymakers dig their heels in for a while longer yet. Tentatively higher Bitcoin is marginally higher after breaking back above $17,000 yesterday, buoyed by an improvement in risk appetite. That remains fragile though and a nasty surprise this Thursday from the US inflation report could send risk assets into reverse. The broader crypto environment remains the dominant driver though and it’s gone a little quiet on that front which will be welcome. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
US Inflation Rises but Core Inflation Falls to Two-Year Low, All Eyes on ECB Rate Decision on Thursday

The World Bank Cut Its Global Growth Forecast To 1.7%, Copper Continues To Get Support From China’s Reopening

Saxo Bank Saxo Bank 11.01.2023 09:05
Summary:  Despite Powell’s relative silence on policy outlook, there were other Fed and non-Fed speakers that continued to sound hawkish and raising alarms on inflation. Bonds slumped although equities and USD struggled to find direction in pre-US CPI positioning moves. Some optimism seen on European growth outlook while the World Bank still cautious about a global recession. Australia’s November CPI was hotter-than-expected, aiding further gains for the AUD which is underpinned by China’s reopening and policy stimulus.   What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) rise and trade near key technical levels After two Fed speakers reminding markets US rates could rise to over 5%, JPMorgan CEO Jamie Dimon joined the party, saying there’s 50% chance rates could go to 6%, while money managers BlackRock and Fidelity (among others) warned that markets are underestimating the ultimate rate peak. The World Bank slashed growth forecasts in half, saying new adverse shocks could tip the global economy into a recession. It estimates GDP will rise 1.7% this year, (that’s almost half the pace forecast in June). So this sets the stormy tone for the major indices in 2023. That said, JPMorgan's trading desk says there a two-in-three chance Thursday’s inflation data for December (released on US Thursday), could be on the soft side and spark a 1.5-2% S&P500 rally. On Tuesday the major US indices rose in choppy conditions; the Nasdaq 100 (USNAS100.I) rose for the third day, adding 0.9%, edging closer toward its 50 day moving average, the S&P 500 (US500.I) fluctuated around 3,900, which is a possible technical key resistance level. Others signs of caution were see in bonds, as the two-year US Treasury yield rose to 4.25%, the 10-year jumped 9 bps to 3.62%, while gold nudged up, to 8-month highs, $1,881, while the US dollar advanced modestly. Ten of the 11 sectors within the S&P 500 gained on Tuesday, led by communication services, consumer discretionary, and materials. The only sector that declined was consumer staples. US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) sold off on supply Fed Chair Powell’s speech did not have much impact on Treasuries as he did not discuss U.S. monetary policy specifically and only noted generally “restoring price stability when inflation is high can require measures that are not popular in the short term”. Yields on Treasuries rose as European government bonds sold off on supply from Italy and Belgium and ahead of today’s supply from Germany. Yields on 10-year bunds rose 8bps. Traders also sold Treasuries going into the auction of USD40 billion 3-year Treasury notes, bringing yields to the intraday high right before the auction. The 3-year auction went well with strong demand and saw Treasury yields off their intraday highs afterward. Yields on the 2-year finished the session 4bps higher at 4.25% and those on the 10-year were 9bps cheaper at 3.62%. What should you be watching in equities across APAC? As in what's the big picture with China's reopening and what does it mean to investors? The Australian share market (ASXSP200.I) opened 0.7% higher, with other APAC markets expected to also open most higher. Japan’s futures suggest the Nikkei could rise the most across APAC today. But big picture, we think the most important thing for investor right now, is to consider, that… China’s economic recovery could be the dictator for the course of commodity assets, travel, and property. Not just China tech and consumer spending. China’s pivot away from its Covid Zero stance, led by a sooner-than-expected January 8 lifting of quarantines for cross-border travel, is poised to fast track its international air-transport recovery in 2023. But China’s recovery is not just about travel reviving. Chinese developers have also been seen kicking off recoveries in early 2023, having hit a bottom for contracted sales last year. As China’s economic recovery surges, stocks remain supported and are indeed rallying. A similar trend occurred in 2020 when mainland China reopened after a series of lockdowns following a breakout in Wuhan. But, reflecting on global trends, you’d think China has a better chance of putting Covid behind it this time around… which could support commodities and travel in particular. But, let’s see. Hong Kong’s Hang Seng (HIF3) and China’s CSI300 (03188:xhkg) trod water After a strong first week in the new year, Hong Kong and China stocks trod water on Tuesday. Hang Seng Index edged down 0.3% and CSI300 was nearly flat. Bilibili (09626) fell 4.3% after the company issued ADSs at a 7% discount to buy back convertible bonds. Chinese automakers rallied, especially EV names. Li Auto (02015:xhkg), Nio (09866:xhkg), and XPeng (09868:xhkg) surged each surged over 6%. BYD (01211:xhkg) pared all its initial weaknesses following the news that Berkshire Hathaway had reduced its stake to 13.97% from 14.06% and gained 2.9%. According to its CEO, Li Auto’s Model L7 is gaining market shares from Tesla’s Model 3 and Model Y. BYD reportedly will raise the prices of its EVs, as opposed to Tesla’s price cuts in China. Social media stories speculate that some Chinese cities are going to relax passenger car licensing restrictions in order to boost consumption. Shares of Geely (00175:xhkg) were up 6%, GAC (02238:xhkg) +3.1%, and BAIC (01958:xhkg) up 2.2%. Macao casino operators outperformed with Sands (01928:xhkg) rising 4.8%, MGM (02282:xhkg) up 3.6%, and SJM (00880:xhkg) up 3.1%. In A-shares, automakers, retailing, electric equipment, and beauty care names gained while financial, petrochemical, and steeling makers were among the biggest losers. FX: Dollar range-bound as it eyes the US CPI Lack of data and anu relevant commentary from Fed Chair Powell left the USD struggling to find direction in the pre-CPI trade. EURUSD was the outperformer, with better growth outlook underpinning, but it continued to find resistance at 1.0760. USDJPY is back above 132 amid higher yields, while AUDUSD rose back above 0.69 following the higher-than-expected November CPI. USDCNH also still below 6.7900. The Aussie dollar rallies after hotter than expected CPI and retail data The Aussie dollar rose 0.3% to 0.6911 US, with inflation and retail sales coming in hotter than expected, which shows the RBA has room to keep rising rates, and as such this theoretically supports the AUD. Core or trimmed CPI (which the RBA looks at) rose from 5.3% YoY to 5.6% YoY in November - hotter than 5.5% YoY expected. Retail sales rose 1.4% in November, beating the 0.6% expected, while also importantly showing Aussie retail sales strongly recovered from the October drop in sales. Some traders have a view the Aussie dollar will push up over the medium term, in lieu of China’s reopening notion which is likely to add to Australia’s GDP, with hot sauce coming from China buying Australian coal for the first time in two years. Crude oil (CLG3 & LCOH3) choppy amid China optimism and inventory build Crude oil prices wobbled on Tuesday as the market remained buoyed by optimism of China demand recovery. European session was supported by upbeat Eurozone outlook. Meanwhile, EIA raised its forecast for demand growth in 2023 to 1.05mb/d. However, it also expects US output to rise to meet this demand, with US shale oil providing the bulk of the gains. The API report showed a strong inventory build of 14.9mn barrels in crude as against expectations of a 2.2mn draw, and focus now turns to EIA figures today. WTI futures touched $76/barrel before sliding back below $75, while Brent reversed from $81. Copper continues to march higher Copper continues to get support from China’s reopening and policy support to fuel economic recovery. Gains were further boosted by Chair Powell staying away from a pushback on easing financial conditions, and the weaker USD as a result. Having retraced close to 50% of the 2022 sell off, HG copper is now seeing resistance ahead of $4.08 (LME $8900), potentially opening up some scope for a correction to check the strength of support. Focus in that regard being $3.84, the 200 DMA, the break above which started this latest runup.  Read next: The EUR/USD Pair Is Still Above 1.0700$, The USD/JPY Pair Was Little Changed| FXMAG.COM What to consider? Powell stays away from policy guidance With some expectations that Powell would likely pushback on the easing financial conditions, equity markets celebrated the lack of any clear guidance on policy direction. Fed Chair Powell did not comment on the current US economic or monetary policy outlook in his prepared remarks, only stating that restoring price stability when inflation is high can require measures not popular in the short term. The pushback on market’s rate cut expectations from Kashkari (voter) was more direct, saying that "They are going to lose the game of chicken." Bowman, also a voter, was also relatively hawkish with comments hinting at more work to do on inflation. When a sufficiently restrictive rate level is reached, the Fed needs to hold the policy rate there "for some time". The story is shifting on Europe Softer energy prices, the lack of black-out and resilient hard data (notably in Germany) are pushing forecasters to review their 2023 recession calls. Goldman Sachs is the first international bank to drastically revised upward its growth forecasts, from minus 0.1 % in 2023 to 0.6 %. Said differently, the U.S. based bank does not expect a recession in the eurozone this year anymore. Early Q4 indications are out this Friday with the preliminary 2022 FY growth estimate. This should certainly confirm a milder-then-expected economic downturn. A mild recession (meaning drop in GDP of 0.1 or 0.2 %) is still our baseline this year. But we agree that the economy is surprisingly resilient. We also believe there will be no extreme macro and market events in 2023 – which could be positive from a growth perspective. If the economy performs much better, this will however give ECB policymakers more confidence in hiking rates as laid out in December by Christine Lagarde. World Bank warns of a global recession The World Bank cut its global growth forecast to 1.7% this year, down from an estimate of 3.0% in June. This marks the third weakest pace of global growth in nearly 30 years, overshadowed by only the 2009 and 2020 downturns. Growth estimate for 2024 was also slashed, down to 2.7%, as persistent inflation and high interest rates weigh. Meanwhile, the agency urged for global action to mitigate the risks of a global recession and debt distress. Growth of aggregate financing slowed to 9.6% Y/Y in China while loans to corporate picked up In December, the growth of outstanding aggregate financing, the broad measure of credit in China, decelerated to 9.6% Y/Y from 10.0% Y/Y in November. New aggregate financing declined to RMB1,310 billion in December (below consensus RMB1,850 billion) from RMB1,987 billion in November, dragged by a decline in new bond issuance from local governments and a net bond redemption by corporate. New RMB loans rose to RMB1,400 billion (above consensus RMB1,200 billion) from RMB1,214 billion in November and were also above RMB1,130 billion in December 2021. The growth of RMB loans picked up to 11.1% Y/Y in December from 11.0% in November. The better-than-expected growth in RMB loans was driven by new loans to the corporate sector which rose to RMB1,264 billion in December from RMB884 billion in November and above RMB 662 billion a year ago, as the Chinese authorities had asked banks to extend credits to support the housing market and other key industries. New loans to households came in weak, falling to RMB175 billion in December from RMB263 billion in November and RMB372 billion in December a year ago. The daily number of domestic flights in China rose to over 10,000, the first time since August China’s Lunar New Year travel season started last Saturday 7 January with 9,454 flights or a 2.26% growth from the first day of the same travel season last year. The number of daily flights increased to 10,123 on 8 January, an 13.65% increase from the same period last year and above 10,000 for the first time since August 2022. China suspends short-term visas for visitors from Japan and South Korea In retaliation to travel restrictions imposed on visitors from China, China stops issuing short-term visas for visitors from Japan and South Korea. Restrictions from both sides could be a temporary setback to the trend of the reopening of the Chinese economy but it is likely to be resolved in the near term. Microsoft may invest USD10 billion in OpenAI Microsoft is reportedly in discussion to make an investment of USD 10 billion in Open AI, the creator of AI bot ChatGPT. This would be Microsoft’s second investment, after acquiring a USD1 billion stake in 2019. Microsoft is expected to integrate ChatGPT into the software giant’s search engine.   For a look ahead at markets this week – Read/listen to our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: Market Insights Today: Powell’s silence on policy puts the focus back on US CPI – 11 January 2023 | Saxo Group (home.saxo)
UK Manufacturing Surge Lifts Q2 Growth: Insights and Outlook

Apple Is Aiming To Replace Screens From Samsung By 2024

Saxo Bank Saxo Bank 11.01.2023 09:11
Summary:  Risk sentiment found its feet yesterday after the prior day’s reversal ahead of the important December US CPI release tomorrow, though markets seem confident that the trajectory of inflation is not a threat in the near term. The US dollar hovers near multi-month lows in many USD pairs ahead of that data and gold has notched new eight-month highs overnight, while copper is cementing its move higher above four dollars per pound.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures rallied 0.7% after a weak Tuesday’s session in a strong signal that the market remains upbeat about growth prospects and inflation cooling. US equities are still stuck in an odd range with moving averages of different lengths pointing in all directions. The key trading focus is tomorrow’s CPI report and whether the market dares to extend momentum into the report. Tuesday’s intraday high in S&P 500 futures at 3,973 is naturally the hard resistance level on the upside. Hong Kong’s Hang Seng (HIF3) and China’s CSI300 (03188:xhkg) The Hang Seng Index resumed its uptrend to make a new recent high to trade above 21600, up more than 1% from yesterday and a level last seen in July last year. China’s Lunar New Year travel season started last Saturday 7 January with 9,454 flights or a 2.3% growth from the first day of the same travel season last year. The number of daily flights increased to 10,123 on 8 January, a 13.7% increase from the same period last year and above 10,000 for the first time since August 2022. Other high frequency data also showing increases in inter-city travelling. Chinese mega cap internet names led the charge higher, with Alibaba (09988:xhkg) and Tencent (00700:xhkg) gaining over 3%. Coal miner, China Shenhua Energy (01088:xhkg), rising by 5.6%, was the top winner within the Hang Seng Index. Mainland China’s CSI300 was flat. Coal mining, oil and gas exploration and development, and property management services stocks gained. FX: USD dips on rebounding risk sentiment ahead of December CPI data Thursday Lack of data and any relevant commentary in Fed Chair Powell’s short comments at a conference of central bankers yesterday saw the USD easing lower by this morning as risk sentiment rebounded. EURUSD was the outperformer, with better growth outlook underpinning, but it continued to find resistance at 1.0760. USDJPY is back above 132 amid higher yields, while AUDUSD rose back above 0.69 following the higher-than-expected Australian November CPI print released overnight. USDCNH also still below 6.7900. Tomorrow’s US December CPI release will prove important in confirming or rejecting the recent USD weakening move. Crude oil (CLG3 & LCOH3) choppy amid China optimism and inventory build Crude oil prices continue to pivot around $80 per barrel in Brent and $75 in WTI as the market remained buoyed by optimism of China demand recovery while yesterday’s European session was supported by upbeat Eurozone outlook. Meanwhile, EIA raised its forecast for demand growth in 2023 to 1.05mb/d. However, it also expects US output to rise to meet this demand, with US shale oil providing the bulk of the gains. The API report showed a strong inventory build of 14.9mn barrels in crude as against expectations of a 2.2mn draw and focus now turns to EIA figures today. Near-term futures spreads meanwhile are holding in a bearish contango structure, signalling ample supply. Resistance around the 21-day moving average in Brent at $81.50 and $76 in WTI Gold (XAUUSD) pushed higher overnight ... supported by general metal strength amid the current focus on the reopening of the Chinese economy and pent-up seasonal demand ahead of the Lunar New Year holiday. Developments that are being supported by a softer dollar and a drop in US bond yields ahead of tomorrow’s US CPI print, which is expected to show further softening, leading to speculation the FOMC may slow the pace of future rate hikes. While momentum supports technical and speculative buying, for now primarily through short covering, activity in ETF market from longer-term investors remain tepid, raising the short-term risk of a correction. The next major hurdle for gold being $1896, the 61.8% retracement of the 2022 correction, with support now at $1865 and $1830. Copper continues to march higher Copper continues to gain momentum as it remains buoyed by the reopening of Chinas economy and increased policy support to fuel an economic recovery to offset the economic fallout from President Xi’s failed and now abruptly abandoned covid-zero policies. Gains were further boosted by Chair Powell staying away from a pushback on easing financial conditions, and the weaker USD as a result. While the metal increasingly looks ripe for a correction, the sharply improved technical outlook and limited investor positioning may drive it higher in the short term. Overnight futures prices in London and New York managed to retrace 50% of the 2022 sell off, in HG copper at $4.0850 and LME at $8900. Support at $3.96 followed by the 200 DMA at $3.84 US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) edge higher, 10-year auction up today After nearly touching 3.50% at the start of the week, the US 10-year benchmark yield rebounded above 3.60% yesterday before settling slightly lower as risk sentiment improved. An auction of 3-year treasuries saw strong demand yesterday, with a 10-year auction up later today after a string of weak auctions for longer maturity US paper in late 2022. Read next:According To Analysts, Russia May Collapse Within A Decade, Guaranty Trust Bank Has Fined| FXMAG.COM What is going on? The Aussie dollar rallies after hotter than expected Australian CPI and retail data The Aussie dollar nudged up 0.3% to 0.6906 US, with local inflation and retail sales coming in hotter than expected, reflect that the RBA can continue to tighten, as inflation remains above the RBA target. Today's data also reflects stagflation could hit the nation in 2023; with unemployment likely to rise, and real GDP to fall to 2% (consensus). The biggest contributors to inflation (housing price rises, food and transport (petrol costs)) are also sticky and are not expected to subside in the near term. (Core CPI rose from 5.3% YoY to 5.6% YoY in Nov (beating 5.5% expected). Moving to retail sales in November, which jumped 1.4%, boosted by Black Friday, also reflect Australian's are not perturbed by rate hikes. Over the medium term, the Aussie could remain supported amid China’s reopening, with GDP to also benefit from China buying Australian coal for the first time in two years.    The story is shifting on Europe Softer energy prices, the lack of black-out and resilient hard data (notably in Germany) is pushing forecasters to review their 2023 recession calls. Goldman Sachs is the first international bank to drastically revise its growth forecasts upward, from minus 0.1 % in 2023 to 0.6 %. Said differently, the U.S. based bank does not expect a recession in the eurozone this year anymore. Early Q4 indications are out this Friday with the preliminary 2022 FY growth estimate. This should certainly confirm a milder-then-expected economic downturn. A mild recession (meaning drop in GDP of 0.1 or 0.2 %) is still our baseline this year. But we agree that the economy is surprisingly resilient. We also believe there will be no extreme macro and market events in 2023 – which could be positive from a growth perspective. If the economy performs much better, this will however give ECB policymakers more confidence in hiking rates as laid out in December by Christine Lagarde. China’s aggregate financing slowed to 9.6% y/y while loans to corporate picked up In December, the growth of outstanding aggregate financing, the broad measure of credit in China, decelerated to 9.6% y/y from 10.0% y/y in November. New aggregate financing declined to RMB1,310bn in December (below consensus RMB1,850bn) from RMB1,987bn in November, dragged by a decline in new bond issuance from local governments and a net bond redemption by corporate. New RMB loans rose to RMB1,400bn (above consensus RMB1,200 billion) from RMB 1,214bn in November and were also above RMB1,130bn in December 2021. The growth of RMB loans picked up to 11.1% y/y in December from 11.0% in November. The better-than-expected growth in RMB loans was driven by new loans to the corporate sector which rose to RMB1,264bn in December from RMB884bn in November and above RMB 662bn a year ago, as the Chinese authorities had asked banks to extend credits to support the housing market and other key industries. New loans to households came in weak, falling to RMB175bn in December from RMB263bn in November and RMB372bn in December a year ago. Apple aims to start using own screens by 2024 replacing Samsung Apple is accelerating its vertical integration with the news yesterday that it plans to replace Broadcom chips by 2025 and today it is aiming to replace screens from Samsung by 2024. It is a classic move for a big company increase profit margins by insourcing parts of the value chain, but the key risk long-term is the potential loss of innovation and lower prices. The alternative to integrating components is to let a competitive market supplying what you need as Samsung and LG do today in fierce competition. French labor unions call for strike to start Jan 19 on Macron pension plan French president Macron unveiled a plan to raise France’s minimum retirement age to 64 by 2030 from the current level of 62. France has one of the highest pension costs as a percentage of GDP in the EU (nearly 14%) and the ranks of the retired are set to grow for at least another 15 years if no changes are made. Iron ore price above $120 The iron ore futures traded in Singapore reached a 5-month high overnight, underpinned by China reopening and stimulus for the property sector. Look for a reversal as China had warned of tightening the supervision on iron ore pricing on Friday to crack down on speculators. Supply outlook is also relatively better, with an estimated 40 million tons of additional supply in 2023, while demand will likely be suppressed due to constraints on crude steel production in China. Wages set to rise in Japan? The fast-fashion Japanese retailer Uniqlo is set to hike pay for many full-time staff in Japan by as much as 40% and will raise the salary for newly hired graduates by over 17%. Bank of Japan Governor Kuroda has long stated that inflation is only rising sustainably if Japanese wages also begin to rise in line with commodity- and other input costs. What are we watching next? US December CPI up on Thursday The latest CPI data out of the US is the next important test for global markets, which seem confident that the Fed will not only halt its policy tightening soon after perhaps 50 basis points of further tightening but will even be signalling rate cuts by year-end. The US CPI releases have triggered considerable volatility in recent months, particularly in equity markets on aggressive trading in very short-dated options. The market expects that inflation will actually fall month on month by –0.1% and only rise 6.5% year-on-year versus +7.1% in November. The core, ex Food and Energy number is expected to rise +0.3% MoM and +5.7% YoY vs. +6.0% YoY in November and a peak rate of 6.6% in September. Earnings to watch The Q4 earnings season kicks off this Friday with banking earnings from Bank of America, JPMorgan Chase, and Citigroup with consensus expecting earnings to continue contracting among US banks before coming back to growth this year. The key uncertainty is credit quality in 2023 as it is linked to the degree of a recession or maybe no recession at all in the US economy. With higher interest rates level expectations are that banking revenue will slowly begin to accelerate and if high interest rates persist for an extended period, the longer-term growth for banks could be quite attractive. Overall, the Q4 earnings season is likely going to see an extension of value and tangible companies performing better than intangible-driven companies. Thursday: Fast Retailing, Seven & I Friday: DiDi Global, Aeon, Bank of New York Mellon, Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, UnitedHealth, BlackRock, Delta Air Lines, First Republic Economic calendar highlights for today (times GMT) 0800 – Czech Dec. CPI 1530 – EIA’s Weekly Crude and Fuel Stock Report 2350 – Japan Nov. Current Account data 0030 – Australia Nov. Trade Balance 0130 – China Dec. PPI, CPI Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: Financial Markets Today: Quick Take – January 11, 2023 | Saxo Group (home.saxo)
Hawkish Fed Minutes Spark US Market Decline to One-Month Lows on August 17, 2023

Fed Chairman Jerome Powell Appealed To Lawmakers To Use Their Regulatory Powers To Address Climate Change

InstaForex Analysis InstaForex Analysis 11.01.2023 12:03
Fed Chairman Jerome Powell asked politicians to avoid interfering with the central bank, stressing it should be free from any influence as long as it struggles with persistently high inflation. Price stability is the backbone of a healthy economy He explained that stabilizing prices requires tough decisions that can be politically unpopular. "Price stability is the backbone of a healthy economy and, over time, brings immeasurable benefits to the population," Powell said. "But restoring it when inflation is high may require measures that are unpopular in the short term as we raise interest rates to slow the economy. The lack of direct political control over our decisions allows us to take the necessary measures without regard to short-term political factors," he added. Markets surprisingly took these statements calmly, perhaps because they did not provide any direct indication of where the Fed's policy was heading. Nevertheless, further increases are expected this year. Read next: Pietro Beccari Will Be The Louis Vuitton’s CEO, Departures Several Top Executives At Rivian| FXMAG.COM Senator Elizabeth Warren of Massachusetts criticized the observed round of rate hikes Powell has recently encountered strong opposition and criticism of his actions from both parties. Most recently, Senator Elizabeth Warren of Massachusetts criticized the observed round of rate hikes, while President Joe Biden largely refrained from commenting on the Fed's actions, noting that the central bank is primarily responsible for fighting inflation. "Without clear legislation, it would be inappropriate for us to use our monetary policy" Although Powell repeatedly stated that political factors have not influenced his actions, it is clear that the pressure on the central bank is high as more and more politicians are talking about a return to a softer approach amid the first signs of slowing inflationary pressures. He also appealed for lawmakers to use their regulatory powers to address climate change, as well as asked major banks to check their financial preparedness in case of situations, such as hurricanes and floods. "Decisions on policies that directly address climate change should be made by the elected branches of government, reflecting the will of society," he said. "But without clear legislation, it would be inappropriate for us to use our monetary policy to develop a greener economy or to achieve other goals related to climate change in the world," he added. EUR/USD With regards to the forex market, EUR/USD still has a chance of updating the December highs, but for this to happen, the pair has to break above 1.0760 as only that will push the quote to 1.0790 and 1.0850. Meanwhile, a drop below 1.0720 will bring the pair to 1.0680 or to 1.0650. GBP/USD In GBP/USD, buyers need to stay above 1.2140 to maintain their advantage as the rise is gradually slowing down. The breakdown of 1.2200 will spur the pair to reach 1.2260 and 1.2301, while a fall below 1.2140 will push it to 2090 and 1.2040. Read next: According To Analysts, Russia May Collapse Within A Decade, Guaranty Trust Bank Has Fined| FXMAG.COM Relevance up to 08:00 2023-01-12 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/331954
EUR/USD: Looking beyond the market’s trust issues with the Fed and ECB

The Euro, The Aussie Gain On Hawkish Central Bank Expectations, Crude Oil Under Pressure

Swissquote Bank Swissquote Bank 11.01.2023 12:29
US equities first struggled to find direction, as the Federal Reserve (Fed) Chair Jerome Powell kept mum on monetary policy in Stockholm yesterday, worried about the World Bank’s morose growth projections, but then turned north on hope that a softer US inflation print tomorrow could boost the Fed doves and enhance appetite in US equities. Gold Gold benefits from softer US yields, and softer dollar on expectation that a softer inflation could soften the Fed’s policy stance. World Bank The World Bank predicts a global growth of about 1.7% this year, about half the pace it predicted last summer. Although the slowing economic growth softens the rate expectations – and boost equities, a weaker global economy should weigh on corporate profits and should not let the rally run too far. Forex In the FX, European Central Bank (ECB) officials stand behind their hawkish view despite the latest softening in inflation. The EURUSD pushes higher as the positive pressure is the fruit of the divergence between softening Fed expectations and hawkish ECB bets. Australia In Australia, inflation advanced more than expected to 7.3% in Q4 fueling the expectation that the Reserve Bank of Australia (RBA) could opt for another 25bp hike in its February meeting. Energy Finally, in energy, crude oil is dragging its feet below the $75 this morning and will likely remain under pressure as yesterday’s API data showed that the US oil inventories rose by a little less than 15 mio barrels last week as the refining activity returned to normal following weather-related shutdowns. Watch the full episode to find out more! 0:00 Intro 0:23 Stocks rallied on softer US inflation bets 1:58 ‘Be careful what you wish for!’ 3:20 World Bank cuts growth forecasts… 3:53 … but Goldman calls off the Euro recession!? 5:48 Euro, Aussie gain on hawkish central bank expectations 6:55 Crude oil under pressure on 15-mio US stockpile build 7:34 Gold benefits from softer dollar, yields 7:56 Microsoft could be on a good path with ChatGPT! Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Fed #inflation #expectations #USD #EUR #GBP #XAU #earnings #season #Microsoft #ChatGPT #tech #stocks #World #Bank #Goldman #Sachs #growth #forecast #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH        
National Bank of Poland Meeting Preview: Anticipating a 25 Basis Point Rate Cut

Discussion Of Bank Representatives On Financing The Ecological Transformation

Kamila Szypuła Kamila Szypuła 11.01.2023 13:23
The problems of climate change are becoming a frequent topic of discussion. Many governments and central banks are taking action to increase ecological transformations. The difficult economic situation raises the question of whether, in the fight against inflation, it is necessary to undertake investment activities in ecology? In this article: Digitizing Asia Financing the ecological transformation through monetary policy Digitizing Asia The development of technology and digitization is very important. This was shown by the time of the pandemic, in which technology played a significant role. The digital landscape of Asia has grown in recent years, and its further development may be an even greater opportunity for the inhabitants of this region. Digital technologies can increase the efficiency of the public and private sectors, expand financial inclusion, improve access to education and open up new markets by enabling companies to serve distant customers. During the pandemic, for example, digitalization has improved the allocation of valuable resources to health and social services, enabling quick relief while controlling public spending leaks. Digitization helped maintain resilience during the pandemic, where combined with heavy fiscal support, remote working and online sales, it protected employees, students and businesses. The pandemic has accelerated the trend of digitization of the region. The percentage of patent applications related to remote working and e-commerce technologies has increased during the pandemic. As the data shows, Asia is the leader in online retail. But despite this, there are still regions in Asia where digitization is not at a satisfactory level, and the differences between highly digitized and low digitized regions may be of key importance for the whole of Asia. Greater digitalization can help boost productivity growth in Asia, which already has shown itself to be a leader in fields from robotics to e-commerce. See our latest blog for more. https://t.co/QDPoYNFZiM pic.twitter.com/cN22xOfdtv — IMF (@IMFNews) January 10, 2023 Read next: Pietro Beccari Will Be The Louis Vuitton’s CEO, Departures Several Top Executives At Rivian| FXMAG.COM Should the role of central banks in the fight against climate change be active? There are divisions among the world's most powerful central banks over their role in tackling climate change as policymakers focus on curbing inflation. US Federal Reserve Chairman Jerome Powell said the Fed would not become a "climate policy maker" or engage in matters beyond its congressional mandate. The Governor of the Bank of Japan, Haruhiko Kuroda, said that any climate-driven policy decisions must remain within the relevant mandates of central banks and avoid compromising the market neutrality of policy makers. Whereas, from the ECB, Isabel Schnabel said the Frankfurt-based institution needs to become more climate-friendly. Soaring inflation and rising interest rates have thwarted the ECB's plan to redirect its corporate bond holdings towards greener assets to support the energy transition. Should banks participate in the ecological transformation? There are many who are in favor of it, because by financing such investments, the country in which the bank undertakes such activities builds a positive image for future investors. But in a difficult economic situation where it is difficult to implement, the question arises whether to take action in this direction. It all depends on whether the governments of the countries will be able to undertake this task. Major central bankers dispute role in tackling climate change as they battle inflation https://t.co/tN2NI4I6oy — CNBC (@CNBC) January 11, 2023
Analysis Of The Euro To US Dollar Pair Situation - 30.01.2023

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

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

FX: EUR/USD Optimism Continuing To Build, USD/JPY Is Consolidating At The Lows

ING Economics ING Economics 11.01.2023 14:52
FX markets are consolidating ahead of tomorrow's important December US CPI release. But the dollar bias is lower. Business surveys point to a slowing US economy and, if inflation allows, the Fed will be in a position to ease policy later this year. Commodity markets remain bid on the China rebound story and we expect emerging and commodity FX to remain bid USD: Business pessimism builds We highlighted in yesterday's publication that the day presented two event risks to the building dollar negative sentiment. Those were Federal Reserve Chair Jerome Powell's comments at a Riksbank symposium and the US NFIB small business confidence reading. In the end, Chair Powell avoided discussing monetary policy and instead warned against central bank mission creep into climate policy. And the NFIB survey was very pessimistic indeed, including a view on pricing power which ING's US economist, James Knightley, says is consistent with US core inflation dropping to a more comfortable 2-3% year-on-year area by the late summer. That core reading is currently running at 6.0% year-on-year and is expected to drop to 5.7% YoY in tomorrow's December CPI release - the key US release this week. Thus this year's FX market proposition remains whether US inflation can acquiesce enough to allow the Fed to cut later this year. The markets price a 50/60bp hike into the spring, then a cut of a similar magnitude by year-end. A further 150bp of easing is priced into next year. ING's house view is a little more aggressive, looking for 100bp of cuts this year and then a further 150bp next year. Assuming no upside surprises in inflation then and the increasing focus on China firmly supporting domestic demand, the risk environment is being read as positive. We note copper, a key barometer of Chinese demand, climbing back to $9000/MT in Asia today. We think investors will therefore be looking to sell the defensive dollar on rallies as they put money to work in 2023. As always, we think the short end of the US yield curve will play a major role in FX markets and as long as two-year US Treasury yields continue to hover near the range lows at 4.20/4.25%, the dollar will stay on the soft side.  DXY remains soft and we would say the near-term bias remains towards the 102.00 area, unless tomorrow's US CPI release throws a hawkish curveball. The US event calendar looks exceptionally light today, although we will start to see US quarterly earnings releases build through the week. Chris Turner EUR: Options market turns more bullish EUR/USD remains gently bid, buoyed by expectations of a Fed U-turn in the second half of this year, China reopening and a belatedly hawkish European Central Bank. On that subject, we have four ECB speakers today. Market expectations are firmly set on a further 125-150bp of ECB tightening this year - seemingly 50bp hikes in both February and March and a final 25bp in May to take the deposit rate to 3.25%. Our eurozone team agrees with this pricing.  Looking at the FX options market we can see EUR/USD optimism continuing to build. Measures such as the risk reversal - the cost of a 25 delta EUR/USD call option versus a similar EUR/USD put option - continue to move in favour of EUR/USD upside. As recently as October, the markets were prepared to pay 2% extra in volatility terms for a 3-month 25 delta EUR/USD put option. That skew for euro puts has now narrowed to 0.67%. The skew turning positive - in favour of EUR/USD calls - would be a big moment for the FX market. As above, the seemingly benign investment environment (despite the horrors in Ukraine) probably has investors wanting to buy EUR/USD on dips. It is the time of year when FX markets move on fixing flows from the asset management community. Today's EUR/USD bias looks towards resistance at 1.0785 and potentially towards the 1.09 area tomorrow, should the US CPI release oblige. Chris Turner JPY: Lots of focus on the BoJ USD/JPY is consolidating at the lows and the focus very much remains on Bank of Japan (BoJ) policy after December's surprise widening in the 10-year JGB yield target band. 10-year JGB yields continue to press the topside of the new +/- 0.50% band, with the expectation growing that the band will be widened to +/- 1.00% over the coming months. Despite the BoJ marketing these adjustments as a measure to address JGB market functioning, investors are reading this as BoJ tightening - and yen positive. Focus on the exit of the ultra-dovish BoJ governor in April means that investors will be very cautious selling the yen over coming periods. One month realised USD/JPY volatility is still at an incredibly high 16.5% - making the JPY far too volatile for any kind of funding currency - and we think USD/JPY can end the quarter somewhere near 128. Chris Turner CEE: Czech inflation to rise again Yesterday's meeting of the National Bank of Romania (NBR) brought a 25bp rate hike to 7.00%, as expected. Although we consider this to be the last hike in this tightening cycle, we feel that the NBR wants to keep the door open if needed. But probably the most interesting part is the dropping of the "firm liquidity control" commitment. While dovish in essence, we read this more like an after-the-fact acknowledgement rather than any forward guidance. The Romanian leu barely changed yesterday but we still think it should benefit from global factors, catch up with the lag behind the region and make another move below NBR levels. Today, the focus shifts to the Czech Republic. December inflation we think will show a rise from 16.2% to 16.4% year-on-year, above market expectations. However, as we showed earlier, there is still room for upside surprises. Moreover, fuel prices are the main reason for slower inflation than we have been used to, while inflation remains strong in other parts of the CPI. For the market, the higher number should be a reminder that the inflation problem is still with us and this may be the first opportunity this year to reassess the strong dovish expectations built up recently. At the one-year horizon, markets expect a 170bp rate cut, which is hard to believe given the current Czech National Bank rhetoric, the record strong koruna and the inflation profile. However, the koruna is looking the other way and ignoring domestic conditions. More important for it and the entire CEE region at the moment is the global story, the massive improvement in sentiment in European markets and gas prices below EUR70Mwh. This, in our view, should keep the positive sentiment in the region at least for the rest of the week and keep FX steady.                                Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The RBA Raised The Rates By 25bp As Expected

Inflation In Australia Is Moving In The Opposite Direction

InstaForex Analysis InstaForex Analysis 12.01.2023 08:01
Australia's inflation report was released on Wednesday, which exceeded expectations of most experts. The consumer price index rose 7.3% in Q4 2022, with a forecast of 6.8% growth. Notably, in the third quarter, inflation showed signs of slowing (when the growth forecast was 7.4%, the indicator turned out to be at 6.9%). And in the fourth quarter analysts expected further development of this trend - but in fact the CPI returned to the level of the second quarter, thereby puzzling market participants. In addition, on Wednesday another equally important report was published in Australia, which reflected a significant increase in consumer activity. We are talking about retail sales, which rose by 1.4% month-on-month in November (with a modest forecast of 0.6%). This is the strongest growth rate since last March. For comparison, in the previous month the figure increased by only 0.4%. The data added to the fundamental picture for the pair, which is shaping up quite positively. The relevant news flow is mainly related to China, which abandoned its "zero-Covid" policy and resumed imports of coal from Australia. The reset in relations between Beijing and Canberra was appreciated by AUD/USD traders: in the first week and a half of 2023, the pair rose more than 200 pips to settle at the 69th figure area. Interest rate  Wednesday's inflation report, which is important in and of itself, also suggests that the Reserve Bank of Australia will continue to "quietly" tighten monetary policy parameters. The RBA has cut the rate of interest rate hikes to 25 points since last October, but assures markets that it is not going to pause the tightening of monetary policy. The resumed growth of inflation in the fourth quarter suggests that the issue of a pause is now finally off the agenda (at least in the perspective of the next meetings). Following the December meeting, RBA head Philip Lowe said that the central bank does not pursue a pre-planned course: in his words, the size and timing of future rate hikes "will be determined by incoming data and the outlook for inflation and the labor market. Another noteworthy phrase from the head of the RBA is that the Board's priority remains restoring low inflation and getting inflation back into the 2-3% range over time. Inflation report is unlikely to prompt the RBA to be more aggressive As we can see, so far inflation in Australia is moving in the opposite direction. Therefore, the likelihood of any pause at this point is close to zero. On the other hand, the latest inflation report is unlikely to prompt the RBA to be more aggressive (in the context of a return to the 50-point rate). Most likely, the Australian central bank will continue to raise the rate in 25-point increments, without risking to increase the rate due to possible side effects (relevant concerns were repeatedly voiced by the RBA representatives). In other words, the aforementioned report will not lead to any "revolutionary" changes, despite its greenback color. At the same time, this release has reduced to zero the probability of a pause in the RBA rate hike. That's enough for the aussie to keep trying to climb back up to the 70s. But so far the bulls' attempts to get closer to the main price barrier at 0.7000 are failing. During the two days the pair's bulls were assaulting the intermediate resistance level at 0.6930 (the upper line of the Bollinger Bands indicator on the daily chart), but each time they were back to their previous positions, to the base of the 69th figure. The reason for such indecisiveness is also caused by the inflationary report, only now it is the American one. US data Let me remind you that the US Consumer Price Index will be released at the beginning of the US session. According to most experts, the release will reflect a further slowdown in US inflation, reinforcing the discussion that the Fed may move to a 25-point rate hike. The likelihood of such a scenario materializing (at least in the context of the February meeting) has risen to 76% after last Friday's Nonfarm data. If inflation also disappoints traders, the probability of a 25-point rate hike in February will probably rise to 85-90%. The greenback will again come under pressure and bulls will have an excuse to make a march to the 70s. The alternative scenario But the alternative scenario (though unlikely, of course) is that inflation in the US will show growth contrary to what most experts predicted. In that case, the dollar bulls will assert themselves all over the market, especially in the light of the latest statements of the Fed representatives. Mary Daly and Raphael Bostick made some very hawkish remarks this week. Specifically, Daly said that the rate could be raised "by either 25 or 50 points" at the next meeting. Also, in her opinion, the final point of the current cycle would be in the 5.1%-5.25% range (that is, she was against lowering the upper bound). Bostick took a similar stance. Fed All this suggests that it is too early to write off the hawkishness of the Fed: if the inflation report surprises market participants with its greenback, the US currency will strengthen its position considerably. Again, this option is unlikely, but judging by the dynamics of the dollar pairs, traders do not risk to play against the greenback on the threshold of this release. AUD/USD Thus, at the moment the best option for the pair is to take a wait-and-see stand, because the key macro report of Thursday is hypothetically able to "redraw" the fundamental picture for all the dollar pairs.   Relevance up to 23:00 2023-01-12 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/332040
ECB cheat sheet: Wake up, this isn’t the Fed!

Rates Daily: The European Central Bank Continuing To Signal Its Intention To Hike Rates Further

ING Economics ING Economics 12.01.2023 09:17
There is the potential for a big reaction to today's US CPI report. The biggest one would be on a disappointing report that identifies sticky inflation, especially with the market tending to choose to believe that the dominant likelihood is for another surprise to the downside for inflation Auctions plus inflation expectations shine a very positive light on Treasuries - there's risk there The market has come through the auction test so far We had been quite intrigued as to the size of interest at auction yesterday in the 10yr, fearing that the recent run into money market funds might have been a signal of a reduced desire to take down duration. But in the event the auction went very well, on tight pricing, good cover and decent client interest based off the auction statistics. Today's 30yr auction will be a further test of duration appetite, although the 10yr event yesterday was the more relevant one; more representative of wider market sentiment. Bottom line the market has come through the auction test so far this week, and will now take its cue from an incredibly important CPI report today. The market will be expecting a good US CPI report. Falls in energy prices will bring down the headline monthly outcome; indeed a moderate fall is anticipated. This together with a notable base effect brings down the headline year-on-year rate to 6.5% for December. Even the core number has the capacity to surprise to the downside given the reversals being seen in prior rises from other elements, like second-hand car prices. But watch services inflation in particular. This represents about 40% of the index, and despite everything this was still running at 0.4% on the month for the previous month, which still annualises to 6%. This needs to slow, else the pressure from the Fed will remain as intense as ever. The biggest reaction would be on a disappointing CPI report We note that the Bloomberg financial conditions index is now back to neutral territory, driven there by falls in market rates, tighter credit spreads and a lower TED spread. The Fed won't mind this if the inflation story is really on the wane. But if it's not, the Fed will want to see a reversal in many of these factors. The market is in a remarkably relaxed mood right now based off this, and likely fully expecting a market-friendly CPI report. There is the potential for a big reaction to this report. The biggest one would be on a disappointing report that identifies sticky inflation, especially with the market tending to choose to believe that the dominant likelihood is for another surprise to the downside for inflation. EUR curves flatten, with the ECB still toeing the hawkish line With supply out of the way European rates managed to eke out a decent curve flattening and outperforming US rates. 10Y EUR swaps rallied 10bp lower, while the front end 2Y only nudged 2bp lower.    Front-end rates are held up with the European Central Bank continuing to signal its intention to hike rates further and officials sticking to the hawkish narrative. We have seen headline inflation drop back to single digits, but core inflation has still crept higher to a new record. With the labour market still historically strong in the eurozone, it remains one of the key risks for second-round effects as our economists have pointed out.   ECB's determination is not changed as long as core inflation has not peaked The ECB’s Holzmann stated yesterday that the central bank’s determination is not changed as long as core inflation has not peaked. Chiming in on the timelines floated by colleagues he concurred that the terminal rate could be reached by the summer, dropping the possibility that this might need another four 50bp hikes. That would be 75bp more than our economists are expecting currently, but Holzmann is also one of the most hawkish members of the ECB. And it may also reflect a view that rates should remain the ECB’s primary monetary policy tool, as he noted that the central bank should be cautious about moving too quickly on quantitative tightening – perhaps somewhat surprising coming from a hawk. All segments of the euro swap curve are now inverted Source: Refinitiv, ING EGB spreads tighten despite supply deluge Currently the ECB is slated to melt off its APP portfolio by €15bn per month starting in March and continuing at that pace through the second quarter. If we assume a doubling of that pace starting in the second half of the year and look at the overall shifting balance of government debt that will have to be digested by private investors, one can see where Holzmann's caution may stem from: The effective net supply of European government bonds (EGB) to private investors taking into account the ECB portfolio changes could rise to €600bn, an increase of €400bn over last year. Effective EGB net supply to private investors could rise to €600bn Yet so far European government bond spreads over their Bund peers have continued to narrow in the first weeks of the year. The first bulk of syndicated bond deals has been straddled and more generally risk sentiment has improved as the worst of recession fears have been placated by easing energy prices and China starting to reopen. Yesterday's chatter about possibly more joint EU financing to provide a European counterweight to the US green investment plans is also helping. 10Y Italian bonds have retightened towards 180bp, having stood at around 210bp at the turn of the year. Outperforming were Greek bonds, though, helped by market expectations that they could regain investment grade status already this year.   Euro sovereigns need to find a lot more demand for their debt this year Source: Refinitiv, ING Today's events and market view Today’s main release is the US CPI data. Expectations are largely geared towards a softer reading which would confirm market pricing converging towards a 25bp Fed hike in February. As such, the surprise impact of a higher reading than expected could be larger, as it would give more credence to the ongoing hawkish yet ineffective tones coming from the Fed. To that end we will hear from the Fed’s Bullard after the data today. He is one of the hawkish Fed speakers, although he is not a voter in the Federal Open Market Committee this year. Other speakers are the Fed’s Harker and Barkin.   Other data releases today are the US initial jobless claims. In the eurozone the main focus should be on the ECB's consumer expectations survey and its inflation measures. In the past, ECB proponents of quicker action such as the ECB's Schnabel have also drawn on these indicators to flag the risks of deanchoring inflation expectations.  In supply the focus is on the 30Y US Treasury auction while in the eurozone we will see bond auctions from Spain and – in smaller size after the recent 20Y bond syndication – Italy. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Commodity: The World's Two Biggest Commodity Consuming Nations, Both Delivered Price Softening News

Aluminium, Copper And Iron Ore Rose To New Highs, The EUR/USD Pair Broke Above 1.0760

Saxo Bank Saxo Bank 12.01.2023 09:32
Summary:  US stocks rallied as yields fell ahead of the CPI release later today where a softer reading is widely expected. Key to watch in the inflation release will be the services ex-housing print, and significant volatility can be expected due to large hedging flows. Oil prices higher despite inventory builds. Meanwhile, the metals space continues to run hot amid positive sentiment from China’s reopening and policy stimulus, with Aluminum, Iron Ore and Copper all rising to fresh highs. Gold also held onto its recent gains, but could be ripe for a temporary correction with CPI on the radar.   What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) rallied on lower bond yields, short covering, and optimism of upcoming CPI data potentially soft With relatively quiet corporate headlines, S&P 500 gained 1.3% and Nasdaq 100 advanced 1.8% as bond yields slid. The interest rate-sensitive real estate sector, up 3.6%, was the top winner within the S&P 500 Index, followed by consumer discretionary and information technology. Traders notably covered some of their shorts ahead of today’s CPI as the most-shorted names were among the best performers on Wednesday. The Nasdaq 100 closed above its 50 day moving average. Meanwhile, the S&P 500 (US500.I) rose for the second day and closed at the high of the day. Tesla and Amazon shares trade at key levels; but caution is thick in the air Indeed these were some of the standouts share on Wednesday with Tesla shares up 3.7% after failing to move above a key resistance level. It appears there is some skepticism about the rally as Tesla is selling less EVs than its making and is cutting prices in China. Amazon meanwhile, gained 5.8%, closing near its high of the day and around 15% up from its low last Friday, and moved further above its 50-day moving average. These are positive signs. US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) rallied on dovish ECB comments, strong 10-year auction U.S. Treasuries were well bid through European hours in tandem with German bunds which rallied on dovish remarks from a typically hawkish Holzmann, an ECB Governing Council member. Treasuries held on to their gains and traded sideways for the most part of the New York session before rallying further with yields on the long-end falling further on a strong 10-year note auction. Yields on the 10-year were 8bps richer to 3.54%. Yields on the 2-year were off by 3bps to 4.22, bringing the 2-10-year curve 5bps more inverted to -68. Boston Fed’s Collins (non-voter) said she would “lean at this stage to 25 [basis point hike], but it’s very data-dependent.” Traders’ focus is now on the CPI data scheduled to release today. What to watch in Australia and Asia: Oil rises for 5th day, Iron ore clears $120, copper rises to six month high entering a bull market The Australian share market (ASXSP200.I) rose 1% in early trade, with Hong Kong’s market futures in the positive, as well as Japan’s futures. A major focus will be on resources, with the oil price jumping 3% to $77.41, as well as focus on industrial metal equites, that will likely rally again on optimism of China’s reopening, which has pushed some commodities into bull markets. The Copper price rose to $4.18 on the Comex market, rising 2.5% in New York, taking its rally of its July 2022 low to 29%. With copper at $9000 per tonne for the first time since June, Goldman thinks it could hit $11,500 by year-end. Copper remains Saxo’s preferred metal for its use in electrification and urbanisation (for more click here). Popular copper equities include BHP, Oz Minerals, Rio Tinto. Meanwhile, iron ore (SCOA) cleared $120 for the first time in 6-months, with the iron ore price up 54% from its October low. BHP is trading at its highest level in history. It makes 48.7% of its revenue from iron ore, 26.7% from copper and the remainder from coal. It has a PE of 8 times earnings, and a dividend yield of 13.8%. Rio Tinto also trades near its all-time high and it’s also involved in the key metals mention too; making 58% of its revenue from iron ore, 11% from copper, and the rest from aluminum and others. Rio’s PE is 6.8 times earnings, its dividend yield is 8.6%. Hong Kong’s Hang Seng (HIF3) and China’s CSI300 (03188:xhkg) pared gains after making a 6-month high After having taken out the top of trading range resistance and making a six-month new high, Hang Seng Index pared most of the gains to finish the Wednesday session up only 0.5%. Alibaba (09988:xhkg) gained 3.1% on the news report that the eCommerce platform giant entered into a strategic cooperation agreement with the municipal government of Hangzhou and a People’s Daily article sounded complimentary to the Ant Group. Air China (00753:xhkg) dropped by 1.2% and China Southern Airlines (01055:xhkg) shed 1.5% following China suspended issuing visas to visitors from South Korea and Japan. EV names gained even though the China Passenger Car Association (CPCA) dismissed the speculation on the relaxation of licensing restrictions in Beijing. EV maker BYD (01211:xhkg) and coal miner China Shenhua Energy (01088:xhkg), each rising around 4.7%, were the two top winners within the Hang Seng Index. Mainland China’s CSI300 was down 0.2%. Stocks in coal mining, oil and gas exploration, and development industries gained. FX: USDJPY drops below 132 on possible BOJ action next week The USD was range-bound on Wednesday as it awaited the key US CPI release, despite a drop in yields taking the 10-year yields closer to 3.50% support once again. Fed member Susan Collins, although a non-voter, she is leaning towards a 25bps hike at the February 1st meeting although the data will help guide her decision, adding further dovish hints in the day. However she still favoured rates above 5% and a pause thereafter throughout 2023. EURUSD broke above 1.0760 and EURCHF rose above parity for the first time since July. ECB’s De Cos said he sees “significant” rate hikes at the upcoming meetings. USDJPY saw a big move lower in the Asian morning to drop below 132 from highs of 132.88 yesterday with expectations of BOJ likely considering further tweaks to its YCC policy (read below). FX watch: Australian trade data surged beyond expectations. US CPI next catalyst for AUDUSD Australia’s trade balance data released today, rose well beyond expectations, with the trade balance surging to $13.2 billion, when consensus expected exports and imports to have fallen considerably in November, with the market expecting the surplus would fall from $12.2 billion to $11.3 billion. This data shows that trade has been improving, well ahead of China’s easing of restrictions – which is a positive sign. The AUD rallied to 69.18 US, which is the level it hit yesterday after Australian inflation and retail data came out hotter than expected. The next resistance level is a psychological one, 0.700 for the AUD vs the USD. However, if core US CPI comes out hotter than expected (5.7% YoY), then a hotter USD may pressure the AUD back down. Our Head of FX Strategy suggests if that happens the AUD could drop back to another support level. However the next few days are pivotal. Click for more on FX. Crude oil (CLG3 & LCOH3) prices continue higher on China story Crude oil prices rallied again overnight as signs of improving Chinese demand boosted sentiment. Chinese buyers have become active in the physical market, with Unipec snapping up about 3-4mbbl of US crude for March and April in recent days. This comes following news that China had issued a fresh batch of import quotas as it reopens following years of COVID-19 restrictions. Supply was supported by a huge build in US inventories, but could not dampen the price sentiment as higher inventories was expected. US crude oil stocks jumped 19m barrels last week, the biggest since Feb 2021, driven by a 2m b/d drop in exports to 2.1m b/d. WTI futures rose above $77.50/barrel while Brent got in close sight of $83. No stopping the gains in metals space, yet Industrial metals continued to march higher on positive signals from China on Zero Covid and policy stimulus. An apparent peak in infections follow the sudden dropping of COVID-19 restrictions has raised the prospect of an earlier than expected jump in industrial activity. Pent up consumer demand is likely to add to the clamour for metals. Aluminium, copper and iron ore, all rose to new highs. Iron ore (SCOF3) could be potentially ripe for a reversal, given China’s warning on tightening the supervision on iron ore pricing on Friday to crack down on speculators. Meanwhile, Copper’s gains to $4.16 have also been fast and could see scope for a correction, but the sharply improved technical outlook and limited investor positioning may drive it higher still in the short term. Gold (XAUUSD) sees correction risks ahead of CPI Gold prices are hovering around an 8-month high, but our Head of Commodity Strategy sees risk of correction even if ‘lower-than-expected’ CPI print sends gold higher to test the resistance level around $1900. He sees potential of profit taking emerge. He says, “Gold’s price action during the past week has in my opinion showed us the correct direction for 2023, but while the direction is correct, I believe the timing could be wrong.”  Read next: The EUR/USD Pair Maintains A Steady Upward Trend, The Aussie Pair Keeps Close To 0.69| FXMAG.COM What to consider? US CPI remains the most key data point to watch There is enough reason to believe that we can get some further disinflationary pressures in the coming weeks. Economic momentum has been weakening, as highlighted by the plunge in ISM services last week into contraction territory, particularly with the forward-looking new orders subcomponent. An unusually warm winter has also helped to provide some reprieve from inflation pains. Bloomberg consensus forecasts are pointing to a softening in headline inflation to 6.5% YoY, 0.0% MoM (from 7.1% YoY, 0.1% MoM prev) while core inflation remains firmer at 5.7% YoY, 0.3% MoM (from 6.0% YoY, 0.2% MoM). Still, these inflation prints remain more than three times faster than the Federal Reserve’s 2% target. Fed officials have made it clear they expect goods price inflation to continue to ease, expecting another big drop in used car prices. But officials are seemingly focused on services ex-housing which remains high. So even a softer inflation print is unlikely to provide enough ammunition for the Fed to further slow down its pace of rate hikes. Volatility on watch if US CPI sees a big surprise The last two months have shown that big swings in US CPI can spark significant volatility in the equity markets, given the large amounts of hedging flows and short-term options covering. With a big focus on CPI numbers again this week, similar volatility cannot be ruled out. Volume might be thin still this week as many are still on holidays, so moves in equities could be amplified in either direction. Meanwhile, FX reaction to CPI has been far more muted, but some key levels remain on watch this week. A higher-than-expected CPI print could keep expectations tilted towards a 50bps rate hike again in February, while a miss could mean expectations of further slowdown in Fed’s tightening pace to 25bps in February could pick up which can be yield and dollar negative. Apple plans to use its own displays in mobile devices Apple (AAPL:xnas) aims to its own custom displays in the consumer electronic giant’s mobile devices starting in 2024, as opposed to procuring from Samsung and LG. It is the latest move in a series of initiatives from Apple to reduce reliance on sourcing components from partners, including chips from Broadcom and modems from Qualcomm. China’s CPI expected modestly higher, PPI less negative Economists surveyed by Bloomberg had a median forecast of China’s December CPI at an increase of 1.8% Y/Y, edging up from 1.6% in November, mainly due to base effects, as food prices are likely to be stable and higher outprices in the manufacturing sector might be offset by a fall in services prices. PPI in December is expected to be -0.1% Y/Y, a smaller decline from -1.3% Y/Y in November, benefiting from base effects. The decline in coal prices was likely to be offset by an increase in steel prices. Signs of wage growth in Japan; could we see more action from BOJ next week? The fast-fashion Japanese retailer Uniqlo (owned by Fast Retailing) is set to hike pay for many full-time staff in Japan by as much as 40% and will raise the salary for newly hired graduates by over 17%. Bank of Japan Governor Kuroda has long stated that inflation is only rising sustainably if Japanese wages also begin to rise in line with commodity and other input costs. Meanwhile, Yomuiri reported that BOJ officials will review the side effects of the ultra-easy monetary policy at their policy meeting next week, opening the door for further adjusting the yield curve control policy or the bond-buying as the central bank continues to see 10-year yields testing the new upper limit of 0.5%. Fast Retailing (9983:xtks) reports earnings today and a 10th straight quarter of operating profit growth is seen, although the pace of growth is likely to slow amid China’s lockdowns in the November-ended quarter and fading FX benefits. TSMC (TSM:xnys) reporting Q4 results, 1H23 outlook and overseas expansion plans key to watch Given the industry-wide inventory overhang, investors will be closing monitoring the world’s largest foundry’s 1H2023 revenue outlook when TSMC reports Q4 2022 results today. Investors will also pay much attention to the management’s comments on TSMC’s plans for building manufacturing capacities outside of Taiwan and mainland China which have implications on margins and capex spending. For Q4 results, analysts surveyed by Bloomberg, on average, are forecasting revenues coming at TWD636 billion and adjusted earnings at TWD11.087 per share. For a look ahead at markets this week – Read/listen to our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: Market Insights Today: US CPI day, Bank of Japan policy tweak speculation – 12 January 2023 | Saxo Group (home.saxo)
Czech National Bank Prepares for Possible Rate Cut in November

CPI In China Rose, US CPI Print Are For A Rise For The Year-On-Year At 6.5%

Saxo Bank Saxo Bank 12.01.2023 09:40
Summary:  Markets have charged higher again, seemingly confident that today’s US December CPI data won’t provide any pushback against this rally, which is pulling up into the psychologically important 4,000 area in the US S&P 500 Index. Elsewhere, the USD remains on its back foot on hopes for a soft CPI print, while EURCHF has suddenly pulled above parity for the first time in over six months in a delayed reaction to ECB hawkishness. Oil jumped.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures extended momentum all the way up to the falling 200-day moving average closing at 3,990 and in early trading this morning the index futures are hovering around the 200-day moving average. This average was hit back in mid-December before US equities were weighed down by hawkish central bank comments and sold off into New Year. Today’s US December CPI report is naturally the key report to watch today as the previous three inflation reports have caused significant volatility over the release. If the market gets it lower inflation print then S&P 500 futures might push above 4,000 and even all the way up to 4,050. Hong Kong’s Hang Seng (HIF3) and China’s CSI300 (03188:xhkg) After making a new six-month high this morning, Hang Seng Index reversed and pared gains. Profit-taking weighed on recent policy beneficiaries, such as mainland Chinese property developers, domestic consumption names, mega-cap internet stocks, and Macao casino operators. Shares of EV makers bucked the market trend of retracement to advance, led by BYD (01211:xhkg) up 5.7%. FIT Hong Teng (06088:xhkg), a subsidiary of Foxconn, soared 23% on speculation that the company might replace GoerTek (002241:xsec) to assemble AirPods for Apple. In A-shares, defense, aerospace, auto industrial equipment and wind power outperformed as the domestic consumption space retraced. As of writing, Hang Seng Index and CSI300 edged up around 0.3%. FX: USD still low, JPY resurgent. EURCHF blasts higher The greenback remains on its back foot coming into today’s US December CPI release, with market players likely very unclear around the reaction function (more on that below in What’s Next?) to in-line or even soft data today. EURUSD etched marginal new highs above 1.0760 yesterday, but clearly faces a test over today’s data and may have been driven yesterday by flows in EURCHF, which suddenly bursts out of its range and traded well above parity – likely on the hawkish ECB outlook finally sending the pair over the edge. ECB’s De Cos said he sees “significant” rate hikes at the upcoming meetings, while ECB’s Holzmann soft-pedaled the message on QT, saying he was very cautious on moving too fast.  USDJPY dipped on the news flow overnight as described below, and many other USD pairs are still within recent ranges, if toward important USD support in places, especially AUDUSD. Crude oil (CLG3 & LCOH3) remains supported by China recovery story Crude oil prices rallied strongly on Wednesday with the improved outlook for Chinese demand and the softer dollar driving a fifth day of gains. Chinese buyers have become active in the physical market, with Unipec snapping up about 3-4mbbl of US crude for March and April in recent days. This comes following news that China had issued a fresh batch of import quotas as it reopens following years of COVID-19 restrictions. Supply was supported by a huge 19m barrels build in US inventories, the biggest since Feb 2021, but it could not dampen the positive price sentiment as higher inventories was expected after the late December cold blast reduced exports while temporarily shutting down some refineries. Fresh momentum was seen in both WTI and Brent after breaking their 21-day moving averages, now offering support at $76.35 and $81.65 respectively. Gold sees raised correction risk as US CPI looms Gold’s price action and gains during the past week has in our opinion showed us the correct direction for 2023, but while the direction is correct, we believe the timing could be wrong, and with momentum showing signs of slowing ahead of key resistance around $1900, and a potential weaker-than-forecast US CPI print today having been priced in, the risk of correction has risen. Pent-up demand in China ahead of the Lunar New Year may soon fade, while India’s demand may slow as traders adapt to the higher price level. In addition, we have yet to see demand for ETF’s, often used by long-term focused investors, spring back to life with total holdings still hovering around a near two-year low at 2923 tons. The next major hurdle for gold being $1896, the 61.8% retracement of the 2022 correction, with support around $1865 followed by $1826, the 21-day moving average. US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) yields drop, strong 10-year auction supports The US 10-year yield dropped back toward 3.50% support overnight after falling some 7-basis point yesterday, supported in part by a solid US 10-year auction, with bidding metrics sharply improving relative to the prior couple of weak auctions. The 2-10 year yield slope inverted back toward –70 basis points. Treasuries may find additional support if today’s December US CPI report proves softer than expected. Read next: Discussion Of Bank Representatives On Financing The Ecological Transformation | FXMAG.COM What is going on? The Eurozone economy is more resilient than forecasted Economic surprises are improving significantly in the eurozone. The consensus forecasts a drop in GDP of minus 0.1% this year. Based on hard data, this seems excessively conservative. It is bound to be revised up, in our view. The German economy is especially very resilient. While gas consumption has collapsed by double digits, industry output has remained largely flat. This is a remarkable achievement. Based on the latest data on industrial production (for the month of November), it looks like there will be no recession in German industry in Q4. However, the year 2023 will be challenging in the eurozone: credit stress is on the rise (this is the first time in a decade we start the year with European IG credit yield above the 4 % level), and the market will need to absorb about 700bn euros of liquidity due to the ECB quantitative tightening. Metals pause after powering higher on China optimism Industrial metals are pausing ahead of today’s CPI print and after having marched higher on positive signals from China on Zero Covid and policy stimulus. An apparent peak in infections follow the sudden dropping of COVID-19 restrictions has raised the prospect of an earlier than expected jump in industrial activity. Pent up consumer demand is likely to add to the clamour for metals. Aluminium, copper and iron ore, all rose to new highs on Wednesday. Iron ore (SCOF3) could be potentially ripe for a reversal, given China’s warning on tightening the supervision on iron ore pricing on Friday to crack down on speculators. Meanwhile, Copper’s year-to-date gain of 9% to near $4.20 has also been fast and could see scope for a correction, but the sharply improved technical outlook and limited investor positioning may continue to provide some support in the short term. USDJPY drops below 132 on possible BOJ action next week The Bank of Japan meets next Wednesday and may be set to guide for further policy tweaks after a regional Bank of Japan report released overnight . In other news in Japan, the Yomiuri newspaper reported that the BoJ will review the side effects of its policy at next week’s meeting and a quarterly Bank of Japan report raised its assessment of the economy in four of Japan’s nine regions, noting that in “there were many cases where companies were increasing winter bonus payments, or plan to hike wages.” Also JPY-supportive, preliminary data from Japan’s Ministry of Finance suggest that Japan’s life insurers sold a record amount of foreign bonds last month. CPI and PPI inflation remained low in China CPI in China rose to 1.8% y/y in December from 1.6% in November, in line with expectations. The rise was due to a low base and on CPI was unchanged m/m. Excluding food and energy, core CPI came in at 0.7% y/y in December, edging up slightly from 0.6% y/y in November. The change in PPI however rebounded less than expected to -0.7% y/y versus -0.1% expected and -1.3% y/y in November. TSMC Q4 earnings beat estimates The world’s largest foundry of semiconductors beat on net income in Q4 driven by gross margin at 62.2% vs est. 60.1%. TSMC says company to face margin headwinds in 2023 with revenue growth slowing down. CAPEX in 2023 is expected at $32-36bn vs est. $35bn against $36bn in 2022. The company is considering a second manufacturing plant in Japan and a new automotive chips plant in Europe. It has also expanded its 28nm production in China and is planning to mass produce its new 2nm in 2025 in its facilities in Taiwan. Fast Retailing sees big miss in Q1 operating income The parent company behind the Japanese fashion retailer Uniqlo reports Q1 operating income of JPY 117bn vs est. JPY140bn but maintains its outlook for profit and revenue growth amid its commitment from yesterday to raise wages up to 40% for its Japanese retail workers. KB Home outlook hit by interest rates When the price of capital goes up the demand on homes often goes down, and this is exactly what KB Home is experiencing. The US homebuilder reported Q4 EPS of $2.47 vs est. $2.86, but it was the FY23 outlook of revenue between $5bn and $6bn missing the consensus of $6bn in revenue, but with new orders down 80% more profit warnings could come during the year. What are we watching next? WASDE report on tap with grain traders watching stock levels The Bloomberg Grains Index, rangebound for the past six month has opened a new trading year with a loss of 3.5% primarily driven by lower wheat prices on ample supply from the Black Sea region, will receive some fundamental input later today when the US Department of Agriculture releases its monthly supply and demand report. Market estimates point to a trimming of the global corn and soybeans inventories, while wheat is expected to show a small rise. US inventories, meanwhile, is expected to rise across the board driven by weakness in Chinese demand and strong competition from overseas supplies, in part due to the dollar. Also focus on Argentina where an ongoing drought may drive a 6% reduction in the country's soy and corn output. US December CPI up today – what is the reaction function? The latest CPI data out of the US is the next important test for global markets, which seem confident that the Fed will not only halt its policy tightening soon after perhaps 50 basis points of further tightening but will even cut rates cuts by year-end. The US CPI releases have triggered considerable volatility in recent months, and the November CPI release on December 13 ullustrates the potentially treacherous reaction pattern to this data points, as softer than expected inflation levels reported saw risk asset jump aggressively as US treasury yields eased, only for the equity market move to get erased within hours and the US yields to bottom out on the following day. Consensus expectations for today’s CPI print are for a fall in the month-on-month headline data of –0.1% and a rise for the year-on-year at 6.5% versus +7.1% in November. The core, ex Food and Energy number is expected to rise +0.3% MoM and +5.7% YoY vs. +6.0% YoY in November and a peak rate of 6.6% last September. Earnings to watch The Q4 earnings season kicks off tomorrow with banking earnings from Bank of America, JPMorgan Chase, and Citigroup with consensus expecting earnings to continue contracting among US banks before coming back to growth in 2023. The key uncertainty is credit quality in 2023 as it is linked to the degree of a recession or maybe no recession at all in the US economy. With higher interest rates level expectations are that banking revenue will slowly begin to accelerate and if high interest rates persist for an extended period, the longer-term growth for banks could be quite attractive. In addition, US banks have extended credit at the fastest pace in 2022 since the year leading up to the Great Financial Crisis. Overall, the Q4 earnings season is likely going to see an extension of value and tangible companies performing better than intangible-driven companies. Today: Fast Retailing, Seven & I Friday: DiDi Global, Aeon, Bank of New York Mellon, Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, UnitedHealth, BlackRock, Delta Air Lines, First Republic Economic calendar highlights for today (times GMT) 1330 – US December CPI 1330 – US Weekly Initial Jobless Claims 1345 – US Fed’s Harker (voter 2023) to discuss economic outlook 1530 – EIA Natural Gas Storage Change 1630 – US Fed’s Bullard (non-voter) to speak 1700 – UK Bank of England’s Mann to speak 1700 – USDA's World Agriculture Supply and Demand Estimates (WASDE) Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher
Weaker Crude Oil Prices Undermine The Loonie Pair (USD/CAD)

A Modest Pullback In Crude Oil Prices Undermines The Commodity-Linked Loonie (CAD)

TeleTrade Comments TeleTrade Comments 12.01.2023 09:55
USD/CAD attracts fresh buying on Thursday, though the upside potential seems limited. A modest downtick in oil prices undermines the Loonie and lends support to the major. Smaller Fed rate hike bets weigh on the USD and could cap gains ahead of the US CPI. The USD/CAD pair regains positive traction on Thursday and steadily climbs to the top end of its weekly range, closer to mid-1.3400s during the early European session. The intraday move up, however, lacks bullish conviction and is more likely to remain capped ahead of the release of the latest US consumer inflation figures. In the meantime, a modest pullback in crude oil prices from over a one-week high touched on Wednesday undermines the commodity-linked Loonie and lends some support to the USD/CAD pair. Despite the recent optimism led by China's pivot away from its zero-COVID policy, worries that a deeper global economic downturn will hurt demand act as a headwind for the black liquid. That said, subdued US Dollar price action might hold back traders from placing aggressive bullish bets around the major and keep a lid on any further gains. In fact, the USD Index, which measures the greenback's performance against a basket of currencies, languishes near a seven-month low amid the prospects for smaller rate hikes by the Fed. Investors now seem convinced that the US central bank will soften its hawkish stance amid signs of easing inflation. This is evident from a further decline in the US Treasury bond yields and continues to weigh on the greenback. Traders, however, might prefer to wait for the crucial US CPI report before determining the near-term trajectory. Read next: The EUR/USD Pair Maintains A Steady Upward Trend, The Aussie Pair Keeps Close To 0.69| FXMAG.COM The Fed policymakers have indicated that they remain committed to combat high inflation and that rates could remain elevated for longer, or until there is clear evidence that consumer prices are falling. Hence, a stronger US CPI print will lift bets for a more hawkish Fed and push the USD higher, allowing the USD/CAD pair to build on this week's recovery from its lowest level since November 25. Conversely, a softer reading will set the stage for an extension of the recent rejection slide from the 1.3700 round-figure mark.
Further Downside Of The AUD/JPY Cross Pair Is Expected

The Australian Dollar Might Draw Support From Rising Bets

TeleTrade Comments TeleTrade Comments 12.01.2023 10:02
AUD/USD surrenders modest intraday gains and retreats below the 0.6900 mark in the last hour. The cautious market mood lends some support to the safe-haven buck and acts as a headwind. Bets for an additional RBA rate hike in February should limit losses ahead of the key US CPI. The AUD/USD pair struggles to capitalize on its modest intraday gains and fails near the 0.6925-0.6930 supply zone for the third straight day on Thursday. Spot prices retreat below the 0.6900 mark during the early part of the European session and refresh the daily low in the last hour, though the downside seems limited. The Australian Dollar might draw support from rising bets for an additional interest rate hike by the Reserve Bank of Australia (RBA) in February, bolstered by Wednesday's hotter domestic inflation data. In fact, the Australian Bureau of Statistics reported that the headline Consumer Price Index (CPI) re-accelerated to the 7.3% YoY rate - a 32-year-high - in November from the 6.9% in the previous month. Apart from this, subdued US Dollar price action could act as a tailwind for the AUD/USD pair, at least for the time being. The USD Index, which measures the greenback's performance against a basket of currencies, languishes near a multi-month low amid diminishing odds for a more aggressive tightening by the Fed. A slowdown in the US wage growth was seen as the initial sign of easing inflationary pressures, which could allow the US central bank to soften its hawkish stance. This leads to a further decline in the US Treasury bond yields and weighs on the buck. That said, the cautious mood helps limit any further losses for the safe-haven USD. Read next:Discussion Of Bank Representatives On Financing The Ecological Transformation | FXMAG.COM The anxiety ahead of Thursday's release of the latest US consumer inflation figures tempers investors' appetite for perceived riskier assets. This is evident from a softer tone around the equity markets, which is seen benefitting the greenback's relative safe-haven status and capping the upside for the risk-sensitive Aussie. Hence, the focus remains on the crucial US CPI report, due later during the early North American session.
All Eyes On Capitol Hill, Jerome Powell Will Appear Before The Senate Banking Committee

The Fed Will Most Likely Be More Deliberate In Its Decisions

Jakub Novak Jakub Novak 12.01.2023 10:29
While market players await the crucial inflation data from last year, which could trigger another rally, three leading Chicago Fed economists said the Fed will raise rates by one more percentage point before announcing that it has reached the ceiling so it will end the monetary policy tightening. Randall Kroszner Economists predict that rates will peak around 5.5% and stay there for a long time, keeping prices of everything from food to fuel in check. "I do think the Fed is going to keep rates at the highs for a while," said Randall Kroszner, a former Fed governor. "Even if inflation falls by 200 basis points over the year, or maybe even 300 basis points, the Fed will still keep rates at 5.5%," he added. Inflation  Inflation jumped to a 40-year high last year as global demand for goods and services recovered. Although prices have fallen since then, they are still well above the Fed's 2% target, making the bank realize that they missed the appropriate time they should have started to raise rates. Of course, if no more problems arise in the market and if the situation remains stable, economic recession will still be avoided. Interest rates Fed officials increased interest rates to 4.3% last month and forecasted that it will reach 5.1% this year. This is entirely different from the path they took back in the 1970s, when inflation began to slow. It was probably because the decision before was a fatal mistake as prices began to rise sharply again, leading to a crisis in the economy. Read next: Pietro Beccari Will Be The Louis Vuitton’s CEO, Departures Several Top Executives At Rivian| FXMAG.COM The Fed has not lost confidence in the markets Although today's data may indicate that inflation remains under control, the Fed will most likely be more deliberate in its decisions. At least, that is what many market participants are hoping for. But many experts say there is a vast difference between the late 1970s, early 1980s and today as it is obvious that the Fed has not lost confidence in the markets. If events unfold in this way, a rate hike will probably lead to a mild recession later this year, but it will only be short-lived. EUR/USD In terms of the forex market, there are still chances of hitting new monthly highs in EUR/USD as long as buyers manage to push euro to 1.0760. That will spur the pair to rise above 1.0790 and reach 1.0850. But if pressure returns and sellers get ahold of 1.0760, euro will collapse to 1.0720 and head to 1.0680 or as low as 1.0650. GBP/USD In GBP/USD, the rally is gradually slowing down, which means that buyers need to stay above 1.2120 in order to maintain their advantage. Only the breakdown of 1.2180 will push pound to 1.2240 and 1.2300 as a return of pressure around 1.2120 is likely to result in a collapse to 1.2060 and 1.2010.   Relevance up to 08:00 2023-01-13 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/332086
From UFOs to Financial Fires: A Week of Bizarre Events Shakes the World

The Fed Doesn’t Want To Be Responsible For A Needlessly Sharp Downturn

Craig Erlam Craig Erlam 12.01.2023 11:53
European equity markets opened cautiously higher on Thursday, following a mixed session in Asia amid nerves around the US inflation release later in the day. This inflation print has been the main topic of conversation all week. The jobs report last Friday changed the dynamic in the markets and ensured that not only was this CPI report going to be important but in all likelihood pivotal ahead of next month’s Fed meeting. We’ve gone from inflation declining but the labour market being stubbornly tight to both appearing to sing from the same hymn sheet. Cracks are appearing in the economy following a very aggressive tightening cycle that’s leading to cooling demand, prices, and wage demands. Unemployment remains low as employers have been reluctant to lay people off but there’s every chance that will follow. The Fed doesn’t want to be responsible for a needlessly sharp downturn and the lag effect of monetary policy means that is a risk when the central bank is raising rates as aggressively as they have been. Another good inflation report today, particularly on the core side, will give policymakers more than enough reason to slow the pace of tightening further and even lower the terminal rate projections in March if it continues. Read next: The New Disney Drama: Disney Is Opposing Activist-Investor Nelson Peltz| FXMAG.COM Bitcoin buoyed by risk recovery Bitcoin is capitalising on the improvement in risk appetite that we’re seeing in the broader markets, rallying more than 4% today before paring gains just shy of the December peak. After weeks of treading water between $16,000 and $17,000, cryptos have been given new life by the jobs report and the risk rally that has ensued. Another positive inflation reading today could see it trading at levels not seen since the early days of the FTX collapse. ​ For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
The USD/JPY Price Seems To Be Optimistic

The USD/JPY Pair Drop To 130, The Aussie Pair Keeps Trading Above 0.69$

Kamila Szypuła Kamila Szypuła 12.01.2023 14:22
Financial markets started Thursday with optimism putting some pressure on the US dollar, although activity remained subdued ahead of the release of the US Consumer Price Index (CPI). Traders, meanwhile, seem reluctant to place aggressive bets and prefer to wait for the release of US consumer inflation data on Thursday. The headline CPI is expected to rise by 6.5% in the 12 months to December, much better than previously at 7.1%, and further decline from a multi-year high of 9.1% recorded in June. Investors will pay particular attention to the underlying reading, which excludes fluctuations in food and energy prices. Core inflation peaked at 6.6% y/y in September, falling to 6% in November. A key US CPI report should clarify whether the Fed will need to raise its interest rate target above 5% to curb stubbornly high inflation. December inflation data from the US may significantly affect the valuation of the US dollar. Apart from inflation data, the US will publish preliminary jobless claims data for the week. USD/JPY The yen gained ground on Thursday amid expectations that the Bank of Japan will review the side effects of monetary easing. Due to the strengthening of the yen, USD/JPY fell to the level of 130.7030. Overall, the yen also indirectly benefited from the more dovish move markets are pricing in for the Federal Reserve. Markets are clearly pricing in a Fed turnaround that will come early after weaker US economic data earlier this month. The upcoming BOJ meeting, expectations of an upward revision of the bank's inflation forecast, and the imminent announcement of a new BOJ chairman are also likely to fuel expectations for a change in policy. Read next: The New Disney Drama: Disney Is Opposing Activist-Investor Nelson Peltz| FXMAG.COM EUR/USD The EUR/USD daily chart has seen an impressive series of green candles this year, extending its rally from deep below par that started in September 2022. EUR/USD keeps trading above 1.0750. On the “EUR” side, further interest rate hikes from the European Central Bank are expected. The bottom line is that expectations for future interest rate support will continue to favor the euro. GBP/USD The GBP/USD Pair lost the momentum of its rebound and dropped below 1.2150 ahead of Thursday's US session amid cautious market sentiment. The short-term technical outlook suggests that GBP/USD's bullish bias remains intact. What's more, the pound fell to its lowest level since late September on Wednesday as the rising euro hit a seven-month high amid hawkish messages from European Central Bank officials. AUD/USD In the Asian session, the pair traded above 0.69, only in the European session did it drop below this level. Currently, the pair of the Australian has regained strength and again trades above $0.6910 The Australian and New Zealand dollars rose on Thursday as markets assumed incoming US data would confirm a cooling in inflation, while Australia boasted a surprisingly large trade surplus amid falling imports. Local data showed how Australia continued to benefit from being a net exporter of resources when commodity prices were still relatively high. The country's trade surplus rose to A$13.2bn ($9.13bn) in November, well above forecasts. Source: dailyfx.com, finance.yahoo.com, investing.com
The Commodities Digest: US Crude Oil Inventories Decline Amidst Growing Supply Risks

All Eyes On US Inflation Data!, Bitcoin Rebounds

Swissquote Bank Swissquote Bank 12.01.2023 14:29
Today is the most important day of the trading week, in terms of economic data release, as the US will reveal its latest CPI update, and it could be a make-or-break moment for the market sentiment. Consumer price inflation  Consumer price inflation in the US probably eased to 6.5%, from 7.1% printed a month earlier. Core inflation fell to 6% at last release, from a peak of 6.6% printed for October, and is expected to fall further to 5.7% y-o-y.US equities extended gains yesterday, on hope that softening inflation will further boost the Fed doves. Today’s US inflation data will help move things, to one side or the other. But keep in mind that there is room for decent hawkish pricing given that the money markets still price that the US interest rates will top around 4.9%, while the Fed officials are struggling to convince investors that they will go above 5%. Watch the full episode to find out more! 0:00 Intro 0:26 All eyes on US inflation data! 3:27 Why inflation may not ease smoothly this year? 5:51 Some bank analysts see EURUSD at 1.15 7:01 Short sterling? 7:51 Bitcoin rebounds as FTX finds $5bn to repay customers 8:36 Why bonds are better alternative for dovish Fed bets? Read next: The USD/JPY Pair Drop To 130, The Aussie Pair Keeps Trading Above 0.69$| FXMAG.COM Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #US #CPI #inflation #Fed #China #expectations #USD #EUR #GBP #JPY #crude #oil #copper #Bitcoin #FTX #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH      
Polish Inflation Declines in July, Paving the Way for September Rate Cut

The UK GDP Data Is Likely To Show A Decrease

InstaForex Analysis InstaForex Analysis 13.01.2023 08:20
Today, January 12, Thursday, the US dollar dropped significantly once more. Let me remind you that last Friday, reports on the unemployment rate, the labor market, and business activity were released in the United States for the first time in 2023. 223 thousand people were employed, the unemployment rate declined to 3.5%, and the ISM index unexpectedly went below the 50.0 level. Generally speaking, the only ISM index that is detrimental to the dollar is the one for the services sector. The remaining news is all favorable in my opinion, but the demand for the US dollar is still down significantly. The demand for the dollar was steady at the start of this week, but today data on inflation in the United States was released, which did not appear to startle the market but sparked a strong reaction. The market anticipated a decrease in the consumer price index of 6.5% y/y, which exactly happened. The market also anticipated a 5.7% y/y decline in the base index. There were no additional significant occurrences today. The demand for US dollars nonetheless decreased It turns out that although both results from the same report were almost exactly in line with predictions, the demand for US dollars nonetheless decreased, preventing both instruments from starting (or continuing) to build the correction portion of the trend. It is vital to note that the subsequent activities of central banks, in this case, the Fed, are more significant than inflation itself. Michelle Bowman, one of the FOMC's voting members, recently predicted that the rate will increase because inflation is still too high. At a Florida event, Bowman stated, "I believe we can cut inflation without a big economic slump as the jobless rate continues at its historic lows. Other FOMC members had previously argued for the continuation of monetary policy tightening. However, the market appears to be responding that all interest rate increases have already been fully absorbed by the US dollar's constantly declining demand. The rate is anticipated to climb to a maximum of 5.5% by the market, though it may be lower following today's inflation report The recession in the UK has reportedly already started It is important to keep in mind that the demand for the currency is supported by a tighter monetary policy. Therefore, as expectations for the rate decline, so does the demand for the currency. Therefore, from a wave perspective, I continue to anticipate the development of downward trend sections. Despite their significant length and complexity, the market indicates that it is willing to build upward segments. Only figures on British GDP, European and British industrial production, and the American University of Michigan's consumer sentiment index are available this week. The recession in the UK has reportedly already started, thus the most significant GDP data is likely to show a decrease. If this is the case, it would be difficult to predict that the GDP will increase over a single month. The MACD is indicating a "down" trend I conclude that the upward trend section's building is about finished based on the analysis. As a result, given that the MACD is indicating a "down" trend, it is now viable to contemplate sales with targets close to the predicted 0.9994 level, or 323.6% per Fibonacci. The potential for complicating and extending the upward portion of the trend remains quite strong, as does the likelihood of this happening. The building of a downward trend section is still assumed by the wave pattern of the pound/dollar instrument. According to the "down" reversals of the MACD indicator, it is possible to take into account sales with objectives around the level of 1.1508, which corresponds to 50.0% by Fibonacci. The upward portion of the trend is probably over, however, it might yet take a lengthier shape than it does right now. Relevance up to 16:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/332164
FX Markets React to Rising US Rates: Implications and Outlook

Rates Daily: The Turn In Inflation Sentiment Has Been Nothing Short Of Spectacular

ING Economics ING Economics 13.01.2023 08:48
The turn in inflation sentiment has been nothing short of spectacular, in particular in the US. To be fair, it's been supported by benign inflation breakevens. At the same time there is a lot of positive extrapolation going on. Bonds are continuing to ride this narrative, and the looming recession one. We have reservations, but momentum is one way for now US CPI came in as expected, but was enough for the markets to view things as glass half full Market rates edged lower post the CPI number, but not for good reason. The report was in line with expectations in terms of the headline numbers. But moreover, an issue for bonds here is services less energy, which accounts for almost 60% of the index, which is up to 0.5% month-on-month for December (was 0.4% MoM in the previous month). That’s still hot. It annualises to over 6%. The jobless claims number was hot too (claims fell again and remain close to 200k). Enough here to worry the Fed. Note that the Bloomberg version of financial conditions moved into loose territory this week as market rates fell and credit spreads tightened. Not the ideal combination from the Fed’s perspective, at least to the extent that they have concern that the job is not yet done on inflation. Financial conditions moved into loose territory this week From the market’s perspective, note again the large spread from 3mth SOFR to Treasury yields. The US 10yr is in the 3.5% area versus 3mth SOFR at 4.6%. Any spread above 100bp (inversion) is extreme from an historical context. We’ve been higher, but typically not for long. And as the Fed hikes in the coming months, that spread stretches wider. Therein is the pressure for market rates to be pulled higher from a carry perspective, even if logic suggests that rates should collapse lower on recession risks. The issue here is a lot of that move has already been priced. But the market is one-way at the moment, helped by a strong 30yr auction. This presents clear evidence of demand for duration, despite the recent run to money market funds. Funds are getting the best of both worlds here, with rolling longs on the front end resulting in high running yield, plus performance further out the curve. Glass half full seen from this the CPI report helped too. Overall this market is finding good excuses to continue to test the downside for yields. We have some reservations, as stated before, but that's clearly the path of least resistance. 10Y rates dipping more than 100bp below Fed Funds make them vulnerable to a re-pricing higher Source: Refinitiv, ING The next TLTRO repayment to shrink the ECB's balance sheet The European Central Bank will announce banks’ next targeted longer-term refinancing operations (TLTRO) repayment today. After the tweaks to the TLTRO terms in October, close to €800bn have already been repaid or have matured. With the bulk of early repayment decisions likely having been made already and the largest part of the remaining €1.3tn to mature over the second half of the year, we do not see any particular reason to expect another larger repayment this time around. The median expectation surveyed by Bloomberg is €213bn, but as with past early repayments the range of estimates is wide, from €75bn to €450bn.   ECB’s balance sheet is on a clear downward trajectory, regardless of today's figure From a policy perspective the ECB’s balance sheet is already on a clear downward trajectory, regardless of today's figure. The TLTROs winding down has had and will have the largest impact on the excess reserves in the banking system near term, but also the asset portfolios have been announced to start melting off come March. That reduction in excess reserves was also seen as one factor contributing to the tightening of Bund asset swap spreads (ASW), as less liquidity now seeks a home in high quality collateral. Indeed the peak in excess liquidity broadly lines up with the peak in Bund ASW spreads, and the further trajectory of the former leaves room for more tightening of the latter. Easing collateral scarcity has tightened short-end swap spreads Source: Refinitiv, ING   A reinstated 0% cap for government deposits still poses a risk of another collateral squeeze Another factor that had contributed to the tightening of ASW was that the ECB chose in September to suspend temporarily the 0% remuneration cap on government deposits held at the ECB. That has prevented these cash holdings, substantial at the time, from pushing into the already tight market for collateral. The suspension only runs until the end of April, which still poses a risk of another collateral squeeze. General government deposits have declined substantially since the first half of 2022, halving towards now €327bn with the latest ECB financial statement. But the previous two year-ends have also seen reductions of around €200bn, which then proved to be temporary seasonal phenomena. Later in February we will have more confidence in judging whether risks for another squeeze have subsided.   Today's events and market view The US CPI report has removed one obstacle for a further rally in rates. To the extent that this rally is more driven by confirmation bias, today's University of Michigan consumer survey could prove more market moving than comments from Fed officials. Slated to speak today is the Fed's Kashkari. We will also hear from the Fed's Harker again, who already yesterday called for raising rates by 25bp "a few more times". Markets currently price in less than 50bp combined over the next two Fed meetings. In a typically hawkish fashion, Bullard was arguing for Fed Funds to be raised above 5% 'as soon as possible' yesterday, noting better growth prospects than expected. In the euro area we will get final infation readings for December out of several countries, and for the bloc as a whole we will also get industrial production and trade balance data. The TLTRO repayment announcement comes at 12.05 CET. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  
Gold Traded Softer In Response To Dollar Strength, The Bank Of Japan Left Its Policy Levers Unchanged

A Softer US Inflation Data Helps Gold, The Japanese Yen Was The Biggest Gainer

Saxo Bank Saxo Bank 13.01.2023 09:03
Summary:  A Fed downshift to 25bp hikes may be firmer in the cards with the in-line 0.3% M/M increase in the core CPI bringing the measure to 3.1% on a three-month annualized basis. Yields on the 10-year Treasury notes plunged 10bps to 3.44% and the S&P 500 closed just below its 200-DMA. The Japanese Yen was the biggest winner in the currency space on speculation for further policy shifts by the BOJ next week. Bank of America, JPMorgan Chase, and Citigroup report Q4 earnings today.   What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) advanced on CPI prints supporting a Fed downshift U.S. stocks climbed, following CPI data that support the Fed to slow the pace of rate hike to 25bps in February. Nasdaq 100 gained 0.5% and S&P 500 edged up 0.3%. Closing at 3983.17, the S&P 500 has its 200-day moving average of 3,984.39 within reach. Energy, rising 1.9, was the best-performing sector within the S&P 500 as WTI crude oil climbed over 1% to USD78.29. Interest rate-sensitive REITS was the other top winning sector. American Airlines (AAL:xnys) surged 9.7% on upbeat revenue growth and earnings guidance and a debt reduction plan.   US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) rallied, yields on the 10-year sliding to 3.44% After choppy initial reactions when traders digested the CPI prints, U.S. Treasuries advanced and their yields slid decisively. The headline and core CPIs in December were in line with expectations. Investors noted the decline of the core inflation on a three-month annualised basis to 3.1% and the softness in core services excluding shelter and concluded that the Fed is on track to downshift to a 25bp hike in February. Comments from Fed’s Harker (voter) that “hikes of 25bps will be appropriate going forward” added conviction to the notion. The strong results from the USD18 billion 30-year auction saw yields on the long end richer further. Yields on the 10-year finished the session 10bps lower to 3.44% and those on the 2-year were 4bps lower to 4.12%. In Australia and Asia today focus is on; risk-on assets, Oil, Iron Ore and Copper charging The Australian share market (ASXSP200.I) opened 0.8% higher, with most other Asian markets are set to open in the positive. Ahead of Australia’s company reporting season kicking off next month, we’re thinking we could likely see many commodities companies upgrade their outlooks for 2023, expecting higher earnings as many resources prices have quickly entered bull markets amid China easing restrictions sooner than expected. However today, eyes will once again be on commodities and affiliated equites; as the oil price jumped for the 6th day, moving up to $78.30, after rising 1.1%, The copper price rose 0.1% to $4.17 on the COMEX market in New York. Iron ore (SCOA) is 0.6% higher at $123, a new 6-month high. Hong Kong’s Hang Seng (HIF3) and China’s CSI300 (03188:xhkg) traded sideways on profit taking After making a new six-month high, Hang Seng Index reversed and pared gains to finish Thursday only 0.4% higher. Profit-taking weighed on recent policy beneficiaries, such as mainland Chinese property developers, domestic consumption names, mega-cap internet stocks, and Macao casino operators. Country Garden, down 6.3%, was the biggest loser within the Hang Seng Index. Shares of EV makers bucked the market trend of retracement to advance, led by BYD (01211:xhkg) which was up 5.3% and was the top winner among Hang Seng Index constituents. NetEase (09999:xhkg) outperformed other China internet names with a 3.7% gain on collaborating with the state-owned CCTV to broadcast the Lunar New Year gala on the company’s metaverse platform. FIT Hong Teng (06088:xhkg), a subsidiary of Foxconn, soared 17.2% on speculation that the company might replace GoerTek (002241:xsec) to assemble AirPods for Apple. In A-shares, telecommunication, electric equipment, EV, non-bank financials, and new energy outperformed as the domestic consumption space retraced. CSI300 climbed 0.2%. FX watch; Australian dollar is on the heels of 0.70 US After US CPI data showed US prices have continued to fall, the US dollar vs the AUD continued to fall, taking its fall from its peak to 10%. Inversely, Australia's trade balance data released yesterday, as well as Aussie retail and Aussie CPI earlier in the week, plus the all-important easing of China’s restrictions sooner than expected, all support upside in the AUD. As such the Aussie versus the US rallied to new four-month highs, 69.67 US. The next resistance level, the psychological 70.00 US is the next hurdle to get over. Aussie home loan data released today is the next catalyst to watch. If it’s stronger than expected, the AUDUSD could march on up. FX: USDJPY crumbles on weaker USD and BOJ speculation The Japanese yen was the biggest gainer on Thursday, boosted both by lower US yields as well as speculation around a policy tweak by the Bank of Japan at the next week’s meeting. USDJPY slid from 132.50 to 129 handle. Japanese 10-year bonds continued to test the upper limit of the permitted trading band, and rose higher to 0.53% in early Asian hours testing the central bank’s resolve on a dovish policy. EURUSD broke above 1.08 to fresh highs of 1.0867 with expectations of Fed-ECB divergence setting a bullish tone. Crude oil (CLG3 & LCOH3) rounding in at about 6% gains for the week Crude oil prices gained further on Thursday amid the risk on tone set by further softening in inflation pressures. China’s steady commitment to reopen the economy and provide a stimulus to the economy continued to support sentiment this week, along with Chinese buyers become more active in the physical market as import quotas were increased. WTI futures rose to $79/barrel while Brent moved above $84/barrel. Gold (XAUUSD) reached $1900 on expectations of Fed downshift Gold saw another rally with a softer inflation print in the US bolstering the case for a further downshift in the Fed’s rate hike trajectory. A broadly dovish tone from the Fed members also saw a plunge in US yields and weighed on the USD, helping support gains in Gold as well. Silver outperformed gold, and platinum and palladium gained as well.    Read next: GM, Ford, Google And Solar Producers Would Work Together To Set Standards For Increasing The Use Of VPPs| FXMAG.COM What to consider? US CPI boosts the case for a Fed downshift A further slowdown was seen in US CPI last night, with the headline sliding to 6.5% YoY as expected from 7.1% YoY in November, stepping into the disinflationary territory on a m/m basis with a negative 0.1% print from +0.1% previously. Core inflation also eased in-line with expectations to 5.7% YoY in December from 6.0% YoY previously but still higher on m/m basis at 0.3% from 0.2% in November. Services inflation was still higher, being the more sticky component of inflation, but with six consecutive months of softening in inflation, the Fed could take some comfort that its tightening moves are working. Market is pricing in another step down at the Fed’s next decision on Feb 1 to 25bps rate hike, but the terminal rate pricing still stands at sub-5% levels compared to a unanimous voice from the FOMC members calling for rates over 5%. Meanwhile, US jobless claims unexpectedly fell to 205,000 from a revised 206,000 the previous week, suggesting labor market is still tight. Continuing claims also surprisingly improved, dropping to 1.63 million from 1.7 million. Fed members also signal a further downshift Patrick Harker (voter) said 25-bp increases "will be appropriate going forward" after data showed inflation moderating. Thomas Barkin (non-voter) also emphasised that Fed has more work to do, although he signalled that "it makes sense to steer more deliberately." Bullard was relatively more hawkish, but he also doesn’t vote this year. He said that he favors getting the benchmark above 5% as soon as possible before holding. US Bank earnings kickstart today US banking earnings kick off the Q4 earnings season today, most notably from Bank of Bank of America, JPMorgan Chase, and Citigroup. Analysts remain muted on US banks with earnings expected to show another quarter of negative growth compared to a year ago. Peter Garnry, Saxo’s Head of Equity Strategy, wrote in his recent article that the interest rate shock had been bad for banking earnings and activity levels across the investment banking division. As credit portfolios have an average maturity of around seven years banks will slowly begin rolling their assets into higher interest rate levels which will begin to accelerate their net revenue figures improving profitability over time. If the US economy just experience a shallow recession in real terms and strong nominal growth then US banks should be considered as a good tactical trade over the coming years. CPI and PPI inflation remained low in China CPI in China rose to 1.8% y/y in December from 1.6% in November, in line with expectations. The year-on-year growth was due to a low base. On a month-on-month basis, CPI was unchanged in December. Excluding food and energy, core CPI came in at 0.7% y/y in December, edging up slightly from 0.6% y/y in November but remaining subdued. The change in PPI rebounded less than expected to -0.7% y/y versus -0.1% expected and -1.3% y/y in November. Deflation in the processing sector narrowed to -2.7% Y/Y in December from -3.2% Y/Y in November. The mining component in the PPI swung to 1.7% Y/Y in December from -3.9% Y/Y in November. TSMC (TSM:xnys) Q4 earnings beating estimates, expecting revenue decline and CAPEX cuts in 2023 The world’s largest foundry of semiconductors beats on net income in Q4 driven by a gross margin of 62.2% versus the 60.1% expected. TSMC says the company is to face margin headwinds in 2023 with revenue growth slowing down. For Q1 2023, the management expects revenues to fall to between USD16.7 billion and USD17.5 billion from USD17.57 billion in Q1 2022. CAPEX in 2023 is expected to be between USD32 billion and USD36 billion, against $36bn in 2022. The company is considering a second manufacturing plant in Japan and a new automotive chips plant in Europe. It has also expanded its 28nm production in China and is planning to mass produce its new 2nm in 2025 in its facilities in Taiwan. TSMC expects that revenues of the global semiconductor industry, excluding memory chips, to fall 4% in 2023. UK November GDP to signal an incoming recession UK’s monthly GDP numbers are due this week, and consensus expects a contraction of 0.3% MoM in November from +0.5% MoM previously which was boosted by the favourable M/M comparison vs. September, which was impacted by the extra bank holiday for the Queen’s funeral. The economy is clearly weakening, and another quarter of negative GDP print remains likely which will mark the official start of a recession in the UK.   For a look ahead at markets this week – Read/listen to our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: Market Insights Today: Softer US CPI supports Fed downshift, Bank earnings ahead - 13 January 2023 | Saxo Group (home.saxo)
The Commodities Digest: US Crude Oil Inventories Decline Amidst Growing Supply Risks

CPI In The US Slowed Down Further, Falling To 6.5% y/y With Expectations

Saxo Bank Saxo Bank 13.01.2023 09:13
Summary:  The market churned wildly in the wake of perfectly in-line US CPI data yesterday after perhaps hoping for even stronger signs of decelerating inflationary pressures than the data delivered. Alas, in the end the market celebrated the data, sending US treasury yields and the USD lower and risk sentiment higher, with the S&P 500 testing its 200-day moving average. Gold touched $1,900 per ounce.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities chopped around after the in-line December CPI data release, with the S&P 500 index taking a stab at trading above the 4,000 level and the 200-day moving average just above that level for the March future (and at 3,984 for the cash index – the cash index never traded north of 4,000 yesterday, peaking at 3997). For its part, the Nasdaq 100 has been interacting with the prior support areas now resistance around 11,550. Interesting days and weeks ahead as we trade up into pivotal technical levels just ahead of earnings season. Hong Kong’s Hang Seng (HIF3) and China’s CSI300 (03188:xhkg) Hang Seng Index had a lackluster session on Friday trading sideways around yesterday’s close. Mainland’s CSI300 advanced 0.8% led by a bounce in domestic consumption, brokerage, and insurance names. China’s exports in December fell 9.9% in U.S. dollar terms from a year ago and imports declined 7.5%. The Chinese authorities have reportedly drafted an action plan to help “quality” property developers to strengthen their balance sheets. Shares of Chinese developers however have generally retraced and registered modest losses. The three Chinese state-own oil companies traded in Hong Kong advanced between 1% and 3% on higher oil prices. NetEase, rising 3%, stood out among China internet names. FX: USD drops on in-line CPI data. JPY strongest on BoJ expectations, falling yields The US dollar fell after a chaotic knee-jerk reaction to in-line CPI data, as the market may have been leaning for a softer-than-expected surprise. In the end, US yields dropped and risk sentiment rallied anew, the ideal combination for USD bears. The selling was most intense for the balance of the day in USDJPY, which probed new cycle lows below 129.00 and much of the move coming ahead of the US data as the market was busy absorbing the news flow from earlier in the day on the potential for a shift in BoJ policy at next Wednesday’s BoJ meeting. Japanese 10-year bonds continued to test the 0.50% upper limit of the permitted trading band, rising to above 0.57% by late Asian hours hours and testing the central bank’s resolve. EURUSD broke above 1.08 to fresh highs of 1.0867 with expectations of Fed-ECB divergence setting a bullish tone. EURUSD also cleared the prior highs and traded as high as 1.0868, while AUDUSD touched a new high of 0.6983, just ahead of the key 0.7000 level. Crude oil (CLG3 & LCOH3) seen heading for a 6% weekly gain Crude oil has rallied strongly this past week on China’s improving outlook and after US inflation continued to cool, thereby supporting the general level of risk appetite, not least through a weaker dollar. China, the world's biggest importer is expected to hit record consumption this year, a development already gathering pace with Chinese buyers becoming more active in the physical market as import quotas are increased. Gains in the energy sector being led by gasoline after its premium over WTI rose to the highest since August. In the short-term WTI may now find some resistance at $80, where the 50-day moving average is lurking while in Brent that level can be found at $84.75. Gold trades near $1900 as cooling inflation softens up the dollar Gold is heading for a fourth weekly gain as US inflation continues to ease thereby supporting a further downshift in the Fed’s rate hike trajectory. A broadly dovish tone from Fed members also supported gold as the dollar and bond yields softened. Trading just below $1900 and within an area of resistance, today’s price action ahead of the weekend will be important in order to gauge the underlying strength. Physical demand may struggle in the short term as traders warm to higher prices, not least in India where demand according to Reuters plunged by 79% in December from a year earlier. In addition, we have yet to see demand for ETF’s, often used by long-term focused investors, spring back to life with total holdings still hovering near a two-year low at 2923 tons. US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) drop, long yields perched near cycle lows The in-line US CPI data release yesterday saw a choppy market but eventually saw treasuries strongly bid later in the session, sending the 2-year to a test just below the prior 4.13% low at one point and the US 10-year yield toward the 3.40% pivot low from back in early December. A 30-year T-bond auction saw the strongest bidding metrices since last March. Read next: GM, Ford, Google And Solar Producers Would Work Together To Set Standards For Increasing The Use Of VPPs| FXMAG.COM What is going on? US December CPI in-line with expectation, boosts the case for a Fed downshift A further slowdown in US CPI as expected yesterday, as the headline slid to 6.5% YoY as expected from 7.1% YoY in November, stepping into the disinflationary territory on a m/m basis with a negative 0.1% print from +0.1% previously. Core inflation also eased in-line with expectations to 5.7% YoY in December from 6.0% YoY previously but still higher on m/m basis at 0.3% from 0.2% in November. Services inflation was still higher, being the stickier component of inflation, but with six consecutive months of softening in inflation, the Fed could take some comfort that its tightening moves are working. The market is pricing in another step down at the Fed’s next decision on Feb 1 to 25bps rate hike, but the terminal rate pricing still stands at sub-5% levels compared to a unanimous voice from the FOMC members calling for rates over 5%. Meanwhile, US jobless claims point to a tight labour market, unexpectedly falling to 205,000 from a revised 206,000 the previous week. Continuing claims also surprisingly improved, dropping to 1.63 million from 1.7 million. Resources companies: earnings upgrades could be on the cards Commodities companies are likely to start to upgrade their outlooks for 2023, ahead of reporting full year results in February. Iron ore, copper and aluminium companies in particularly are likely to upgrade their 2023 earnings as these respective commodity prices quickly entered bull markets +64%, +30%, and +20% respectively from their lows as China eased restrictions sooner than expected. The Iron ore (SCOA) price as an example, rose 2% alone in Asia today, hitting a new 6-month high. BHP shares in Australia hit a new record high of A$49.64 while Rio Tinto trades about 3% shy of its record, with both iron ore, and copper giants trading higher in anticipation of higher free cashflow in 2023. WASDE report sees corn prices jump the most since September The USDA on Thursday unexpectedly cut its outlook for US domestic production and available stocks of both corn and soybeans, a sign that an ongoing drought from last year may continue to underpin prices. The worst Argentinian drought in 60 years also led to a downgrade in the outlook for soybeans and corn production, some of that being partly offset by an expected bumper harvest in Brazil. One bright spot was wheat where the USDA raised its outlook for global production. Following the WASDE report corn (ZCH3) rose 2.5%, soybeans (ZSH3) 1.8% while wheat (ZWH3) was up by less than 1%. Sweden December CPI hits new cycle highs as weak krona aggravates inflation The December headline number came in at +2.1% MoM and +12.3% YoY vs. 1.8%/12.0% expected, respectively and vs. 11.5% YoY in Nov. The core data was +1.9% MoM and +10.2% YoY vs. +1.6%/+9.8% expected, respectively and vs. +9.5% YoY in Nov. What are we watching next? Bank of Japan meeting next Wednesday shaping up as major event risk The recent news flow and rumor mill sees the Bank of Japan announcing further tweaks to its policy next Wednesday at its meeting. Ironically, the anticipated further widening of its yield curve control “band” (de facto more of a “cap”) on 10-year JGB’s comes as long yields are dropping sharply elsewhere, accentuating the tightening of spreads between Japanese yields and those in, for example, Europe and the US. Earnings to watch The Q4 earnings season kicks off today with banking earnings from Bank of America, JPMorgan Chase, and Citigroup with consensus expecting earnings to continue contracting among US banks before coming back to growth in 2023. The key uncertainty is credit quality in 2023 as it is linked to the degree of a recession or maybe no recession at all in the US economy. With higher interest rates level expectations are that banking revenue will slowly begin to accelerate and if high interest rates persist for an extended period, the longer-term growth for banks could be quite attractive. In addition, US banks have extended credit at the fastest pace in 2022 since the year leading up to the Great Financial Crisis. Overall, the Q4 earnings season is likely going to see an extension of value and tangible companies performing better than intangible-driven companies. Today: DiDi Global, Aeon, Bank of New York Mellon, Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, UnitedHealth, BlackRock, Delta Air Lines, First Republic Economic calendar highlights for today (times GMT) 1000 – Eurozone Nov. Trade Balance 1000 – Euro zone Nov. Industrial Production 1330 – US Dec. Import Price Index 1500 – US Fed’s Kashkari (Voter 2023) to speak 1500 – US Jan. Preliminary University of Michigan Sentiment 1520 – US Fed’s Harker (Voter 2023) to speak Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: Financial Markets Today: Quick Take – January 13, 2023 | Saxo Group (home.saxo)
The Loonie Pair (USD/CAD) Bounces Off An Upward-Sloping Support Line

Higher Oil Prices Will Strengthen The Canadian Dollar (CAD)

TeleTrade Comments TeleTrade Comments 13.01.2023 09:25
USD/CAD has picked strength amid caution in the market mood, however the overall sentiment is still positive. Federal Reserve is likely to trim the pace of policy tightening due to a downward trend in US inflation. A sheer recovery in oil prices led by expectations of economic recovery in China may strengthen the Canadian Dollar. USD/CAD is likely to continue its downside journey toward the horizontal support plotted at 1.3226. USD/CAD has picked strength and has extended its recovery to near the round-level resistance of 1.3400 in the early European session. Earlier, the Loonie asset picked up demand after dropping to near 1.3345 as the risk appetite of the market participants dropped. Investors trimmed their longs in risk-sensitive assets after a stretched rally. The S&P500 futures have sensed selling pressure after remaining extremely bullish consecutively in the past three trading sessions, portraying caution in the overall positive market mood. A decline in the risk appetite has also impacted the demand for US government bonds, which has increased the 10-year US Treasury yields to 3.47%. The US Dollar Index (DXY) has turned sideways below 102.00 after registering a fresh seven-month low at 101.65. Soften US Inflation supports lower interest rate hike by the Fed Thursday’s release of the United States Consumer Price Index (CPI) has provided confidence that the price pressures are softening and the Federal Reserve (Fed)’s blueprint of achieving price stability is operating effectively. From a peak of 9.1%, the annual headline price index has dropped to 6.5% in a few months. Thanks to the declining gasoline and used car prices have decelerated the pace of inflation in the United States economy. A meaningful decline in the US price index has triggered odds of further deceleration in the pace of the interest rate hike already after slowing in December’s monetary policy meeting as Federal Reserve chair Jerome Powell and his teammates are working in the right direction. Philadelphia Fed Bank President Patrick Harker said on Thursday that it was time for future Fed rate hikes to shift to 25 basis points (bps) increments, as reported by Reuters. S&P500 to achieve recovery if Fed trims policy tightening pace The equity domain in the United States economy witnessed an intense sell-off in CY2022 as the Federal Reserve was on a trip of hiking interest rates to achieve the 2% inflation target. The US central bank hiked the borrowing rates with four 75 basis points (bps), two 50 bps, and one 25 bps rate hike announcements to 4.25-4.50%. As inflation is getting under control gradually and the Federal Reserve won’t be so hard on interest rates, it looks like the S&P500 will get back into the picture. The slowdown in the pace of the interest rate hike will allow firms to achieve a sense of optimism, which will support them in executing expansion plans and boosting operations. No doubt, the pace of policy tightening will be trimmed but short-term pain will stay. Philadelphia Fed Bank President Patrick Harker cited that recession in the United States economy is not into the picture but the Gross Domestic Product (GDP) could slow to 1% this year. Oil faces barricades for around $79.00 After a perpendicular rally led by support from recovery in the Chinese economy led by sheer reopening measures and expectations of further sanctioning on Russia, oil prices are facing a halt around $79.00. Moscow is expected to face further sanctions from Western countries for oil supply as nations want to restrict it from getting liquidity to fund arms and ammunition in its fight against Ukraine. Further upside in the oil price looks likely amid a decline in US inflation, which will trim the policy tightening pace of the Fed. Meanwhile, the United States administration has denied oil supply to China from its Strategic Petroleum Reserve (SPR). This will force the Chinese economy to look for alternative suppliers, which could accelerate oil prices in a short span of time. It is worth noting that Canada is a leading exporter of oil to the United States and higher oil prices will strengthen the Canadian Dollar. Read next: The USD/JPY Pair Drop To 130, The Aussie Pair Keeps Trading Above 0.69$| FXMAG.COM USD/CAD technical outlook USD/CAD has delivered a breakdown of inventory distribution placed in a range of 1.3500-1.3700 on a four-hour scale. A breakdown of the inventory distribution phase results in extreme volatility expansion which triggers wider ticks to the downside. The Lonnie asset is likely to find a cushion around the horizontal support plotted from November 15 low at 1.3226. Meanwhile, downward-sloping 20-and 50-period Exponential Moving Averages (EMAs) at 1.3414 and 1.3460 respectively, add to the downside filters. A bearish momentum will be triggered if the Relative Strength Index (RSI) (14) will slip into the bearish range of 20.00-40.00.
BRICS Summit's Expansion Discussion: Impact on De-dollarisation Speed

The Fed's Unclear Stance Is why Investors Are Holding Back In The Markets

InstaForex Analysis InstaForex Analysis 13.01.2023 10:27
The latest inflation data in the US prompted a rally on Thursday, but it did not lead to a strong rise in stock indices. This is because market players remain worried of the Fed's monetary policy, which continues to be tight and is likely to end with interest rates above 5% this year. The report showed that consumer inflation continued to slow down in the US, with the year-on-year figure falling to 6.5% and the month-over-month data declining to -0.1%. Although Fed Chairman Jerome Powell did his best not to comment on the issue, some members of the bank showed hawkish rhetoric in their speeches, arguing for continued increases in interest rates. This is unclear stance is the reason why investors are holding back in markets. But there is another reason for the moderate market reaction, that is, the Q4 earnings reports from companies. Big US banks will release their data on this, which is likely to set the direction for markets. If they show good earnings and performance reports, yesterday's rally in the stock markets will continue, accompanied with a weakening of dollar. Of course, the uncertainty will remain in markets until the outcome of the Fed meeting on February 1. This means that until then, players will continue to debate on whether the Fed will go for a 0.25% rate hike and then pause or not. Forecasts for today: AUD/USD The pair is declining towards 0.6920. If this level holds, an attempt to rise to 0.7030 will happen. XAU/USD Gold tested the level of 1900.00 for the first time since May 2022. It could correct down to 1885.60, then return to 1915.80. Relevance up to 07:00 2023-01-16 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/332206
Energy Companies Will Likely Reveal Another Excellent Quarter

Energy Companies Will Likely Reveal Another Excellent Quarter

Swissquote Bank Swissquote Bank 13.01.2023 10:44
US inflation came in line with expectations. The kneejerk market reaction to the data was surprisingly negative, but the major US stock indices extended rally, while the US dollar dropped sharply. S&P500  The S&P500 ended the session at a very important technical level – the index is now testing the ceiling of the 2022 bearish trend and the 200-DMA to the upside. The 200-DMA has not been broken since April 2022, and has, so far, acted as a sign to sell the top. It could take more (…better-than-expected earnings) to clear resistance around 3990-4000 range. Tech stocks will likely deliver their second straight quarter of negative growth From now, investors’ focus will shift to earnings. According to FactSet, the S&P500 companies could post earnings growth of -4.1% for the Q4. Energy companies and tech stocks are an exception to this, of course. Energy companies will likely reveal another excellent quarter due to high energy prices, while tech stocks will likely deliver their second straight quarter of negative growth, with a decent 9.5% contraction expected across the sector. But don’t forget that high expectations are difficult to beat, while low expectations are easier to beat, and the prices move regarding where the results fall compared to expectations. Read next: The USD/JPY Pair Drop To 130, The Aussie Pair Keeps Trading Above 0.69$| FXMAG.COM Q4 results Today, big US banks including JP Morgan, Citigroup, Bank of New York, Bank of America and Wells Fargo will reveal their Q4 results. Watch the full episode to find out more! 0:00 Intro 0:27 US inflation in line with expectations… 3:47 … boost expectation of slower Fed rate hikes 4:34 USD depreciates 6:29 S&P500 tests key resistance, but needs more to extend gains 8:07 S&P500 earnings are expected to fall in Q4 Ipek Ozkardeskaya  Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #US #CPI #inflation #Fed #expectations #USD #EUR #GBP #JPY #XAU #crude #oil #earnings #season #US #big #banks #TSM #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH        
ECB cheat sheet: Wake up, this isn’t the Fed!

ECB President Christine Lagarde Affirmed That Rates Need To Go Significantly Higher

Franklin Templeton Franklin Templeton 14.01.2023 09:42
The Franklin Templeton Fixed Income (FTFI) Central Bank Watch is a qualitative assessment of the central banks for the Group of Ten (G10) nations plus two additional countries (China and South Korea). See full methodology on page 6. Key highlights Stepping down pace of hiking ≠ outright dovish pivot. A majority of developed market (DM) central banks should gradually reach their respective peak policy rates through the first half (H1) of 2023. The US Federal Reserve (Fed) and the European Central Bank (ECB) remain on the most hawkish end of the spectrum. The Bank of Korea (BoK) may well be the closest to a dovish pivot. Tight labor markets and sticky inflation are still the primary concerns. Although headline inflation may be receding, central banks remain concerned about tight labor markets keeping wages elevated, which in turn can spill over into the stickier components of inflation. Bank of Japan (BoJ) surprises with a policy tweak. A wider trading band for 10-year Japanese government bonds (JGBs) has already had implications for global bond markets and US dollar dominance. Although the BoJ insists its latest move isn’t a step toward broader tightening, a policy move in 2023 is very much on the table. Latest thoughts on global central bank policy Far from done on tightening policy; markets think otherwise As expected, the Fed downshifted to a 50-basis point (bp) hike at the December Federal Open Market Committee (FOMC) meeting. “Ongoing increases” in the policy rate were deemed to be appropriate— giving the Fed optionality in February. Despite recent downside surprises in inflation, the Fed raised its median inflation projections, prompting a higher median peak policy rate in 2023. Fed Chair Jerome Powell welcomed the deceleration in monthly core inflation but noted that services inflation excluding housing remains uncomfortably high. Meanwhile, in our view, the ongoing strength of the labor market and a still-elevated level of demand-supply imbalance will keep wage and services inflation well supported. Despite Powell’s hawkish rhetoric, markets continue to price in a peak rate of just 4.9, with rate cuts beginning in September 2023 and 50 bps of cumulative cuts by the end of the year. We, on the  other hand, expect a total of 75 to 100 bps of increases, given the still-negative real policy rate and the likely persistence of services inflation. However, smaller (25 bp) hikes wouldn’t come as a surprise  since the FOMC intends to “feel their way” to an appropriate policy stance. Once at the peak rate, the Fed will signal a pause through 2023 as it gauges the full economic impact from all the tightening. Closing in on a pause? After raising rates at a record pace of 400 bps over the past nine months to 4.25%, the BoC signaled  a willingness to pause at its next policy meeting on January 25. The December statement was in sharp contrast to the one from October, when the bank was expecting rates to go even higher. However,  the Bank did not firmly close the door on future rate hikes, placing the onus on the evolution of economic data to determine future action. The BoC noted that the economy continues to operate in excess demand, and that while sequential measures of core inflation may be losing momentum, they remain uncomfortably high. We believe the BoC’s adoption of a more neutral tone is meant to gauge how tighter monetary policy is working its way through the economy; it is not indicative of an outright dovish pivot.  If inflation data were to surprise to the upside, we would not rule out a final 25-bp hike in January. While we expect the BoC to remain on pause throughout 2023, it faces a challenge in convincing markets not to expect a shift to cutting rates—especially as bond yields fall. Smaller hikes = more tightening The ECB raised its policy rates by 50 bps in December, slowing the pace from two consecutive 75-bp jumbo hikes. However, the message coming from the statement and press conference was extremely hawkish. ECB President Christine Lagarde affirmed that rates need to go significantly higher, at a steady pace (of 50 bps) and over a period of time. This effectively erases any dovish pivot expectations of a  more careful calibration going forward, reinforced by explicitly pushing back against market pricing of a sub-3% terminal rate, and indicating that rates will remain in restrictive territory to dampen demand  and inflation expectations. The balance sheet shrinkage will accelerate in 2023 with the beginning of passive quantitative tightening (QT) on its asset purchase program (APP), starting in March at a pace of EUR 15 billion per month (approximately half of expected redemptions) to be reviewed in June. Inflation is forecasted to remain above target until mid-2025, supported by higher wages, while a soft-landing scenario for growth looks increasingly optimistic over the medium-term. We now see the terminal rate at a minimum of 3.25% with upside risks linked to the inflation dynamics of the next two quarters. Source: cbw-0123-u.pdf (widen.net)
The USD/JPY Price Seems To Be Optimistic

USD/JPY Ended The Week Below 128, GBP/USD Managed To End The Week Above 1.22

Kamila Szypuła Kamila Szypuła 14.01.2023 20:01
The data from the US revealed that the Consumer Price Index declined by 0.1% on a monthly basis in December. The Core CPI, which strips volatile energy and food prices, was up 0.3% in the same period. Finally, annual Core CPI arrived at 5.7%, down from 6% in November, as expected. Although the US Dollar struggled to find direction with the initial reaction to the US inflation report, dovish comments from Fed officials triggered a sharp decline in the US T-bond yields and weighed heavily on the currency. Atlanta Federal Reserve Bank President Raphael Bostic said that he was comfortable with a 25 basis points (bps) increase at the next meeting. On the same note, Philadelphia Fed President Patrick Harker noted that it was time for future Fed rate hikes to shift to 25 bps increments. Dovish comments from Fed officials, however, made sure that investors continued to move away from the US Dollar. The latest Michigan Consumer Sentiment report showed consumer sentiment remaining low. Year-ahead inflation expectations fell to 4% from 4.4% while the five-year reading nudged a touch higher to 3% from 2.9% in December. USD/JPY USD/JPY started the week trading at 130.8020. Over the next days, trading was in the range of 131.50-132.50. The USD/JPY pair reached its highest level on Wednesday, a record high was set at 132.8370. After that, the pair began to fall below 130. The pair recorded a low just before the end of the trading week at 127.53, and ended the week just above the weekly low of 127.8340. The Japanese Yen ended last week on the front foot from both USD weakness driven by softening inflation in the U.S. as well as market hopefulness around a more aggressive Bank of Japan (BoJ). A change from the current ultra-loose monetary policy due to elevated inflationary pressures could be something that can take place next week. The Bank of Japan meets on January 18. EUR/USD For the EUR/USD pair, this week was in an uptrend. The pair started the week at 1.0669. And around 1.0660 it recorded its lowest weekly level. In the following days it was growing, exceeding the level of 1.07. On Thursday, the EUR/USD pair crossed the threshold of 1.08 and above this level reached the weekly maximum - 1.0870. The trade for the pair ended above 1.08 at 1.0828. European Central Bank (ECB) policymaker Martins Kazaks said there was no reason for markets to be betting on an interest rate cut. While the Fed is now widely expected to ease further policy tightening, ECB policymakers are scrambling to ensure markets understand their commitment to the hawkish outlook. GBP/USD The cable pair started the week at 1.2114 and finished much higher at 1.2234. GBP/USD traded the low for the week at 1.2097. The record high level in the week was reached by the pair at the level of 1.2242. GBP/USD has benefited from the broad-based selling pressure surrounding the US Dollar and reached its highest level since December 15 at 1.2250. The pair's near-term technical outlook suggests that the bullish stays intact. Gross Domestic Product Growth was 0.1% when the markets had been looking for a 0.2% contraction. However, as manufacturing and industrial production missed expectations. Interest rate support for sterling is likely to remain fitful as the economic numbers trickle out. Continued poor labor relations and the prospect of recession, possibly accompanied by a degree of ‘stagflation’ will keep the Pound a nervous bullish bet. AUD/USD The Australian pair started the week at 0.6901. In the following days, trading was in the range of 0.6865-0.6950. The lower border of the range was also the weekly low of the AUD/USD pair. The Aussie Pair's weekly peak traded close to the 0.70-0.6984 level. The pair finished trading near 0.70 at 0.6980 Source: finance.yahoo.com, investing.com
The Collapse Of The Silicon Valley Bank Weakened The Dollar And USD/JPY But Supported EUR/USD, AUD/USD, And GBP/USD

Another Year Of Very Low Net Supply Is Expected And USD Supply Will Be Manageable

ING Economics ING Economics 15.01.2023 16:58
2023 Supply forecasts Corporate supply is forecast at no more than US$600bn in 2023 • Corporate supply was just US$6bn in December pushing the full year supply up to US$555bn, in line with our forecast. This is much lower than previous years, normally averaging closer to US$700bn. TMT saw the largest supply last year with US$137bn, followed by US$99bn from Utilities and US$86bn in Industrials. Looking at the beginning of this year thus far, primary markets have been rather active with US$27bn issued.  • USD supply will be manageable in 2023 as we expect another year of very low net supply. We forecast USD corporate supply to be no more than US$600bn in 2023, up compared to the US$555bn last year. This is still below the average US$700bn seen in the past number of years. Furthermore, redemptions are up in 2023, to US$334bn, and net supply is expected to be rather low at just US$276bn, lower than the average US$400bn.  • Financial supply totalled US$533bn in 2022, very much in line with previous years. Bank senior supply amounted to US$343bn, while Bank capital was US$53bn. A decent amount of financial supply has also been issued in the past week and a half, sitting at US$27bn thus far.    Corporate Reverse Yankee supply expected to remain slow at €40bn in 2023 • Historically, Reverse Yankee supply generally accounts for 10% of US corporate supply, which should amount to US$55bn (€55bn). Furthermore, Reverse Yankee supply is on average 19% of Euro corporate supply which we have forecast at €275bn. This also suggests €55bn for Reverse Yankee supply in 2023.  • However, much like what has been seen in 2022, we expect somewhat lower Reverse Yankee supply in 2023 relative to what is mathematically indicated above, due to:  1. Instability in markets often leads to safe-haven issuance. Many US corporates will be tempted to issue domestically in USD due to the headwinds facing the market this year.  2. The unattractive cross currency basis swap, and our expectation it will remain so.  3. Initial, expected USD outperformance in 1H23, creating less attraction early in 2023. • Therefore, we forecast Reverse Yankee supply to be 38% (€15bn) lower than the normal % of US corporate and EUR corporate supply and hit €40bn in 2023. This will still be up on last year’s c.€30bn.    Read the article on ING Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
US Inflation Rises but Core Inflation Falls to Two-Year Low, All Eyes on ECB Rate Decision on Thursday

Credit Markets Will Have To Contend With A Far Less-Forgiving Borrower Environment

Franklin Templeton Franklin Templeton 15.01.2023 17:08
Fasten your seatbelts—credit markets are going to be bumpy. Events that once seemed unlikely (high inflation, limited central-bank tools, rising interest rates, unexpected war, slowing global growth, margin compression) are all transpiring.  Economic and market outlooks are uncertain. An anomaly? For the most part, no. While war and sky-high inflation are certainly not the norm, many dynamics are consistent with conditions that existed for decades before the global financial crisis (GFC), an era that saw a persistent special  situations opportunity set. However, there is one critical difference between the two eras:  a massive debt market, which the explosion of the leveraged finance market had fueled.  In this piece, we summarize key dynamics at play in credit markets and explore how best  to capitalize on the bumps that are creating the beginnings of another fertile special situations investment environment. Key takeaways An end to the highly anomalous post-GFC era is near, with a return of traditional economic cycles and operating environments underscored by higher cost of capital, sustained dislocations and a rolling opportunity set. Leveraged credit markets have more than doubled (US$4.2 trillion today versus just US$1.7 trillion in 2010), creating an unprecedented amount of leverage in the f inancial ecosystem. Macroeconomic headwinds and uncertain topline performance without the buffers of zero interest rates and central-bank liquidity injections are creating volatility and dispersion in the market. The stressed/distressed opportunity set has increased ~400% year-to-date (YTD) from US$75 billion to nearly US$300 billion. Numerous opportunities for equity-like returns in credit, both in primary and secondary markets; opportunity set and return potential can expand significantly in the event of a prolonged global recession. In an uncertain environment, we believe it is prudent to be positioned in a portfolio focused on asset coverage in industries that are historically recession-resilient. Post-GFC to a reversion to the mean It seemed as though low rates, a dovish Federal Reserve (Fed), and easy liquidity would persist forever post-GFC. Low cost of capital, borrower-friendly documents, and central banks willing to quell any hiccup in financial conditions with sizable liquidity injections paved the way for massive debt issuance. Leveraged credit markets grew ~150% from US$1.7 trillion in 2010 to over US$4.2 trillion in 2022.3 Then, the unexpected. A pandemic, supply chain issues, and labor shortages, combined with a massive growth in money supply, have led  to inflation levels not contemplated in decades. Seemingly behind the inflation curve,  central banks have been forced to dramatically raise interest rates, leading inevitably to slowing global growth. These higher levels of inflation, and the impact on interest rates and  central-bank activity, lead us to believe credit markets will have to contend with a far less-forgiving borrower environment, one more akin to the late 1990s and early 2000s. Cost of capital for US companies rose dramatically in 2022, driven by an increase in both base rates and spreads.  Throughout the post-GFC period, the yield-to-worst (YTW) on US high-yield bonds averaged 6.6%; in late 2022, it has reached as high as 9.6%.4 The market has changed behaviorally as well. Financial missteps are no longer forgivable. Missed earnings, increased leverage and messaging on anemic guidance are now punishable offenses. Cycles and leverage could become significantly more challenging for companies, creating regular pockets of opportunity as opposed to the episodic boom/bust cycle that had become the hallmark of the post-GFC world.  The beginnings of an opportunity set explosion In less than two quarters, the stressed/distressed opportunity set increased almost 400% from US$75 billion to US$300 billion,5 all without a defined “shock” to the financial system.  A recession, seemingly likely in the next six to 12 months, would push this opportunity set  to an even larger quantum. A phrase that many had forgotten (or had never heard of) is beginning to resurface: “good company, bad balance sheet.” Prior to 2022, to meet typical special situations return targets, investors were forced to target more challenged  businesses through highly labor-intensive and episodic opportunities, oftentimes at higher attachment points. Today, higher costs of capital and tighter financial conditions have  limited corporate flexibility. As a result, good businesses that have made mistakes can become stressed, providing very attractive opportunities for special situations investors.  We believe an expanded opportunity set, and the ability to buy good businesses at a discount with process-oriented catalysts to help close the gap, should generate very attractive returns while limiting downside. Why wait for spreads? Or a recession? A propensity to focus on spreads (which do have ample room to widen when compared to past dislocations) has obscured the fact that absolute yields in credit are attractive.  US five-year government bond rates have widened from ~1% at the end of 2021 to just under 4% at the end of December 2022. Dollar prices in the US high-yield market are the lowest they have been since the GFC, excluding the very brief China/commodities crisis and COVID-19 pandemic. Primary markets have slowed, limiting borrower access to the easy capital to which they have become accustomed, leading to both increased borrowing costs and an increased interest in creative capital solutions. At the same time, inflationary pressures are materially impacting corporate margins and profitability, leaving more and more companies in need of near-term capital. These are the two critical dynamics today that are leading to primary and secondary opportunities.  A recession would expand an already-attractive investment landscape, creating a massive opportunity to identify even higher returning investments in both the primary and secondary markets. However, an attempt to time the bottom is never advisable, or one may miss the boat entirely. The time is now. Historic moves in prices and yields have already started, generating investments with uncorrelated, event-driven catalysts, better attachment points, compensation for process, convexity to rates and downside cushion via lower prices. Conclusion Today’s markets offer attractive opportunities in credit that cannot be ignored, even when adjusted for highly uncertain headwinds and a glut of leverage. We believe the best  risk/reward today lies within a portfolio of uncorrelated and bespoke process-oriented investments, event-driven themes, and names that stand to perform during a recessionary and inflationary environment. Current dynamics are creating these investments with  greater convexity, at lower prices and lower attachment points. We believe it is prudent to allocate capacity today to be able to deploy dollars now and into an accelerating  opportunity set.  This article is part of the report  
US Nonfarm Payrolls Disappoint: Impact on Dollar and EUR/USD Analysis

Analysis Suggests That Markets Usually Trough Around The Same Time As The Macroeconomic Data

Franklin Templeton Franklin Templeton 15.01.2023 17:28
Is the growth pause discounted already? The current economic environment is shaped by the experiences and actions of the past year (or three). It was ever thus, but that doesn’t lessen the importance of this observation. The outlook for growth, as foretold by leading indicators of activity, remains downbeat (see Exhibit 1). This reflects the cumulative tightening of monetary policy that the leading central banks have already made, and the further hikes that undoubtedly will be delivered in the early part of 2023. It also incorporates the hit to consumers’ confidence from costofliving effects — a result of wage gains, large though they have been in many economies, failing to keep up with the surge in inflation seen in 2022. All of this is further complicated by the lingering economic effects of COVID 19 and the very real consequences of China moving away from its zero-- COVID policy. But is the likely pause in developed market growth already discounted by financial markets? The signs of a slowdown have been building for a while, as we have discussed in Allocation Views in recent months. This has resulted in us continuing to anticipate a high probability that many developed economies will experience a recession in the coming year. In some, such as the United Kingdom, they may already be in recession, according to our analysis. Indeed, certain market commentators are describing this as “the most highly anticipated recession in history.” However, in the case of the United States in particular, where more lagging measures of activity remain robust, it doesn’t feel like recession. Indeed, corporate earnings expectations do not seem to fully reflect an impending recession. It is important to note that this is mainly because the US economy is not yet in recession. The lagging indicator in data from The Conference Board shown above reflects the ongoing strength of the labor market, which remains a focus of the US Federal Reserve (Fed) and continues to support the policy response which will see further rate hikes. But history suggests the cumulative effect of tighter policy will be felt in the end and see coincident measures (a proxy for reported gross domestic product growth) weaken further. Eventually, even the lagging indicators should confirm that a recession has happened. This is important for our outlook for risk assets, as our analysis suggests that markets usually trough around the same time as the macroeconomic data — within a few months of each other. Markets can and do recover before the end of a recession, but it seems unlikely that they would trough before its onset.   Inflation has peaked Part of the reason that financial markets have fared better in recent weeks, and led some market participants to anticipate an end to the Fed’s hiking cycle, is that it is seems increasingly clear that inflation has passed its peak. This statement may require a few caveats. Clearly, in the case of the United States, it is only six months since annual measures of Consumer Price Index inflation reached the highest level seen in many decades. Given the lopsidedness of that “decades to months” comparison, it is too early to say that any form of secular peak has been reached. As we discussed in last month’s Allocation Views, we anticipate ongoing inflation will remain above its previous trend level during the next business cycle. However, the postpandemic phase is likely to allow more of the imbalances that drove inflation to its 2022 high to be reversed. We continue to see silver linings to the supplychain bottleneck clouds that were dominating the discussion a year ago (see Exhibit 2).  With labor markets tight — especially in the United States, but also in the United Kingdom — wage pressures remain the dominant concern of policymakers. So long as job openings remain elevated and employers struggle to fill vacancies with appropriately skilled applicants, broad measures of inflation will be slow to normalize. These pressures are particularly acute in the service sector, where productivity gains can be harder to come by and automation is more problematic. As a result, central bankers continue to have a laser focus on developments in employment and the labor force. Even as we become more certain that inflation has peaked, it is too early to sound the “all clear” from a policymaker’s perspective. With labor markets tight — especially in the United States, but also in the United Kingdom — wage pressures remain the dominant concern of policymakers. So long as job openings remain elevated and employers struggle to fill vacancies with appropriately skilled applicants, broad measures of inflation will be slow to normalize. These pressures are particularly acute in the service sector, where productivity gains can be harder to come by and automation is more problematic. As a result, central bankers continue to have a laser focus on developments in employment and the labor force. Even as we become more certain that inflation has peaked, it is too early to sound the “all clear” from a policymaker’s perspective. Policy remains a headwind Developed market central banks’ policy objectives remain clear. Their resolve to keep inflation expectations anchored appears to have been stiffened by the period of uncomfortably high inflation during the last two years. We have talked about a singular focus on fighting inflation and a willingness to accept the collateral damage caused by higherthananticipated interest rates, in the form of slower growth and potentially higher unemployment, in the years ahead. However, in the past month, the last outlier has started to move in the same direction as its peers. The Bank of Japan (BoJ) surprised the markets by recalibrating its yield curve control policy, widening the range within which the benchmark 10 year government bond yield would be constrained. Although this is not directly a precursor to rate hikes, it has been taken as an indication of the direction of travel. If wage pressures in Japan rate policy. continue to build, the BoJ may eventually move away from its zero Despite what we view as a clear restatement of policy imperative by central banks, markets continue to discount a pivot toward easier monetary policy in the year ahead, by the Fed and others. This has fueled a bear-- market rally in stocks and the riskier parts of the bond market. With the Western central banks all confirming that they are indeed likely to slow the pace of future rate hikes (though they protest that this is not in any way the same as confirming the market view that easing is just around the corner), government bonds have also joined the “feel good” party. Taken together with the prospects for a slimming of central bank balance sheets, expected central bank hikes will moderate negative real rates and sustain restrictive conditions. Although fiscal policy is responding to energy costs in some countries, especially in Europe, it will be slow to sway dovish in others, leaving it more differentiated across economies. However, the anticipated shift in global policy is still quite hawkish. Overall, this sees our final theme complete a set of three unambiguously negative drivers for markets, even as it evolves to downplay the pace of hikes but emphasize “Policy to Remain Restrictive” we move through 2023. Equity valuations have moderated (the multiples of earnings at which stocks trade have fallen considerably), but the levels of anticipated earnings per share remain close to their peak. This appears to underplay ongoing concerns around economic growth, inflation, and likely policy responses that continue to weigh on investor sentiment and to support us remaining more cautious in our view of stocks, rather than becoming bolder. We moved to trim our toplevel allocation preference for equities early last year and took advantage of the ebbs and flows of sentiment that occurred to progressively temper our view. We enter 2023 with an allocation preference away from stocks, which we have retained in recent months as we do not see a sustained rally at this stage. Over the next few quarters, we anticipate that a nimble investment management style will continue to be required, and we look for assets that offer some protection if a less favorable scenario were to be realized. We are more attracted to the yields available in highquality government bonds. Although we still see attractive longerterm return potential for stocks and believe they should earn their equity risk premium over time (see Exhibit 3), we struggle to find a strong argument supporting an equity preference at this time.
US Inflation Slows as Spending Stalls: Glimmers of Hope for Economic Outlook

Tesla Cut Prices Across Models In The U.S., The BOJ Bought Roughly 10 trillion yen In JGBs Over The Past Two Days

Saxo Bank Saxo Bank 16.01.2023 09:09
Summary:  U.S. equities charged higher with the S&P 500 rising above its 200-day moving average despite bond yields surging higher on profit-taking. The four biggest U.S. banks reported Q4 earnings, beating expectations but the weaker outlook for net interest income and higher provision for credit losses weighed on share prices initially before reversing and finishing the session higher. Stocks in Hong Kong and mainland China gained as the Chinese Government took up “special management shares” in local units of Alibaba and Tencent. The Japanese Yen strengthened to 127.87 against the dollar on mounting speculation on BOJ policy adjustment at this week’s meeting.   What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) gained as bank stocks bounced U.S. equities opened lower as shares of banking stocks initially got hit by disappointing guidance on net interest income and credit loss provision, despite reporting Q4 earnings beating expectations. Shares of JP Morgan, (JPM:xnys), Bank of America (BAC:xnyg), Citigroup (C:xnys), and Wells Fargo (WFC:xnys) recovered fully from early losses and more, having finished Friday between 1.7% and 3.3% higher. Consumer discretionary names gained, with Target (TGT:xnys) and Amazon.com (AMZN:xnas) each rising around 3%. The S&P 500 Index edged up 0.4% to close at 3999.09, breaking to the upside its 200-day moving average (currently at 3981.22). The Nasdaq 100 Index rose 0.7% to 11,541.48, above its 100-day moving average (currently at 11523.33). Tesla (TSLA:xnas) fell 0.9% after the EV giant cut prices in the U.S. and Europe. Share of General Motors (GM:xnys) slipped 4.8% and Ford (F:xnys) plunged 5.3%. Delta Airlines (DAL:xnys) declined 3.5% on Q1 guidance which was below analyst estimates. Yields on US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) jumped on profit-taking Yields on Treasuries bounced from their lows and finished the Friday session cheaper on profit-taking. Selling concentrated in the front end and saw the yields on the 2-year jump 9bps to 4.23%. Yields on the 10-year rose 6pbs to 3.50%. The 2-10 year curve went more inverted at -73bps. The University of Michigan survey’s inflation expectations came in mixed. A softer print in the 1-year inflation expectation, falling to 4.0% Y/Y in January from 4.4% Y/Y in December was offset by the ticking of 5-year inflation expectation to 3.0% Y/Y from 2.9% Y/Y a month ago. Hong Kong’s Hang Seng (HIF3) and China’s CSI300 (03188:xhkg) continued to rally Hong Kong and mainland Chinese stocks rallied last Friday afternoon. Hang Seng Index gained 1%, bringing its advance to nearly 10% since the beginning of the year. China’s CSI 300 climbed 1.4% last Friday and gained 5.2% so far in 2023. Within the Hang Seng Index, healthcare and consumer stocks gained the most. Wuxi Biologics (02269:xhkg), up 6.4%, was the best performer, followed by Chow Tai Fook Jewellery (01929:xhkg), up 4.8%. Hang Seng TECH Index gained 1.5% on further signs that the regulatory crackdown against Chinese internet platform companies is being replaced by institutionalized and hopefully more predictable supervision and regulation. The Chinese authorities have taken up “special management shares” in local units of Alibaba (09988:xhkg), up 1.7%, and Tencent (00700.xhkg), up 2%. Didi is reportedly to gain approval for relaunching its ride-hailing app at app stores. The People’s Bank of China has reportedly drafted an action plan to help “quality” property developers to strengthen their balance sheets. Trade in shares of Chinese developers was mixed. The three Chinese state-own oil companies traded in Hong Kong advanced between 1% and 2% on higher oil prices. NetEase, rising 4.7%, stood out among China internet names. Australia’s share market is a touch away from a record high; gold stocks charge in 2023 The Australian share market (ASXSP200.I) opened 0.5% higher on Monday with interest rates sensitive stocks charting the most, in anticipation of the Fed’s likely downshift in policy following on from last week's roll over in monthly CPI. The Aussie share market is trading at a two week highs, just a puff or 2.6% from its record high. The most momentum in 2023 is from the Mining sector, up 9%, in anticipation of higher earnings from China’s reopening. Gold stocks are the biggest shiners this with the most momentum, in anticipation of a higher gold price as global growth moderates, while the US dollar and bond yields retreat. At Saxo, we believe Gold may be likely to have a correction in the shorter term, but in 2023 gold should see a strong year of buying amid appetite from global central banks, as our head of Commodity Strategy mentioned.  Silver Lake Resources, De Grey Mining , Remelius Resources, up 18-23% so far in 2023. FX: JPY takes centre stage this week The Japanese yen gained by over 3% against the USD last week, moving from highs o f132.87 to lows of 127.46 on Friday. The yen was also stronger on all the crosses amid Bank of Japan’s unscheduled bond buying operations as the markets continued to test the policy yield cap of 0.5%. USDJPY and yen crosses will remain key this week as well as BOJ meets for the first time this year and speculation about a further policy tweak is rife. EURUSD gained to 1.080+ levels amid better growth prospects for Eurozone and a dovish bent in US CPI and Fed communications that has shifted the February rate hike pricing towards 25bps. AUDUSD has been basking in China’s reopening glory, testing 0.7000, but Australia’s employment data will be key this week. GBPUSD also has a host of UK data from CPI to retail sales to labor market to consider which could bring the 200DMA of 1.2000 in focus. Crude oil (CLG3 & LCOH3) opens steady after last week’s gains Crude oil prices were steady in the Asian morning hours after recording over 8% gains last week on China’s reopening optimism. WTI traded near $80/barrel while Brent was close to $85.50. China’s road traffic levels are continuing to rebound from record low levels following the easing of COVID-19 restrictions. A congestion index comprising the 15 cities with the most vehicles registrations has risen by 31.3% vs a week earlier. China’s crude oil imports rose to 48mt in December, up by 2.8% m/m. Meanwhile, increased import quotas by China saw oil demand pick up in the physical market. Sentiment was also bolstered by expectations of the Federal Reserve slowing its interest rate hikes, following lower than expected inflation. Higher inventory levels were to be expected, driven by the late December cold blast reducing exports while temporarily shutting down some refineries. Iron ore (SCOA) reverses amid China pledging crackdown Iron ore fell in Singapore back to $120.90 a ton from highs of $126 last week after China’s National Development and Reform Commission (NDRC), the top economic planner, said in a statement on Sunday that it would crack down on illegal activities including spreading false information, hoarding and price gouging to keep the iron ore market stable. Corn (ZCH3) closes the week with strong gains following the US crop output report Corn prices recorded their biggest weekly gain since August as droughts curb the world’s supply buffer. The US Department of Agriculture unexpectedly cut its outlook for US domestic production and available stocks of both corn and soybeans, a sign that an ongoing drought from last year may continue to underpin prices. The worst Argentinian drought in 60 years also led to a downgrade in the outlook for soybeans and corn production, some of that being partly offset by an expected bumper harvest in Brazil. Corn prices were up over 3% in the week and Soybeans up over 2%. Read next: The UK Economy Expects A Slightly Fall In Inflation, Expected To Fall By 0.1%| FXMAG.COM What to consider? U.S. bank Q4 earnings beat but guidance on interest income and credit loss provision disappoint The four largest commercial banks in the U.S., JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo reported Q4 earnings beating analyst expectations. Q4 profits grew 6% at JPMorgan and 2% at Bank of America and fell 21% at Citigroup and 50% at Wells Fargo from a year ago. Revenues at JPMorgan Chase, Bank of America, and Citigroup in Q4 came in above analyst estimates while those at Well Fargo missed. Despite the overall solid earnings and revenues, provisions for credit losses were higher than expected and the outlooks guided by the management of these large banks on net interest income were weaker than analyst estimates. JPMorgan Chase made a provision for credit losses at USD 2.3 billion, above the street estimate of USD 2.1 billion.  JPM is guiding net interest income of $73bn in 2023, below the USD74.4 billion analyst estimate. CEO Jamie Dimon says there is still a lot of uncertainty around the impact of the macro headwinds and that the bank’s macroeconomic outlook has deteriorated modestly. Bank of America guided below expectations net interest income at USD 14.4 billion in Q1 2023. Wells Fargo reported a negative surprise on credit provisions ($57mn vs est. $860mn). Wells Fargo’s CFO is also saying that the bank is preparing for the economy to worsen. Bank of Japan prepares to buy more Japanese Government Bonds The Bank of Japan again broke its daily record for Japanese government bond purchases Friday as yields defied its 0.5% cap, in a sign of the rising market pressure for another policy tweak by the central bank as it meets this week in its first meeting of 2023. The BOJ bought roughly 10 trillion yen ($78 billion) in JGBs over the past two days, with a 5 trillion yen purchase on Friday topping the high it had just set Thursday and is preparing to purchase more Japanese government bonds on Monday, according to the Nikkei. China’s exports declined 9.9% Y/Y in December; the import volume of iron ore grew while copper shrank In U.S. dollar terms, China’s exports in December fell 9.9% Y/Y in December, further decelerating from the -8.9% in November but slightly better than the -11.1% feared as per the survey by Bloomberg. In real terms, that is, after adjusting for inflation in export prices, the decline in exports was deeper. The fall in exports was most notable to the European Union, which fell 17.9% Y/Y in December versus -9.3% in November. Export to the US shrank 18.4% Y/Y in December, negative but having improved from -24.7% Y/Y in November. On the other hand, exports to ASEAN grew by 6.6% Y/Y in December, accelerating from 5.9% in November. Imports shrank 7.5% Y/Y in December, less negative than -10.6% Y/Y in November and above the consensus estimate of -10.0%. The improvement however was largely a result of the base effect. In volume terms, the import of crude oil slowed to 4.2% Y/Y in December from 11.8% in November. Coal imports rebounded to almost flat in December from a fall of 7.8% Y/Y in November. Iron ore imports grew 5.6% Y/Y in December, reversing from a 5.8% decline in November. Copper import shrank 12.7% Y/Y versus a rise of 5.8% a month ago. Tesla cut prices in the US and Europe Tesla cut prices across models in the U.S., including shedding the price of its baseline Model Y lower by almost 20% and its high-performance Model 3 by 14%. The price reduction may allow buyers to entitle to federal tax credits. Telsa is also cutting prices in Germany, France, and other European countries by about 13%. Recently, Telsa has cut prices in China. China took up “special management shares” in Alibaba and Tencent The Chinese authorities have taken up “special management shares” also known as “golden shares” in local units of Alibaba and Tencent (00700.xhkg) apparently to exert influence over business decisions far beyond the around 1% equity stake that otherwise represents under normal situations. Investors generally welcome the move as it tends to signal that the Chinese authorities are shifting from a less predictable and heavy-handed crackdown on internet platform companies to more institutionalized, consistent, and predictable regulation and supervision of the industry.  Comments from the Davos forum on watch The World Economic Forum’s annual meeting kicks off in Davos, Switzerland this week. The theme this year is “Cooperation in a Fragmented World’, suggesting deglobalisation trends remain key to watch as has been a regular theme at Saxo. The meeting brings together heads of nineteen central banks and 56 finance ministers. Comments on key global issues, ranging from inflation to recession, as well as energy and food crisis will remain on watch. Geopolitical crisis will also constitute a key discussion as the war in Ukraine rages on and US-China tensions may come back in focus.   For a global look at markets – tune into our Podcast.   Source: Market Insights Today: U.S. bank Q4 earnings beat but weaker outlook; Yen surged on BOJ policy adjustment speculation; US holiday - 16 January 2023 | Saxo Group (home.saxo)
Wage agreement may be game-changing in a way. First meeting of the new BoJ Governor Ueda takes place on April 28th

All Eyes Are On The Japanese Yields, US Crude Oil Rallies

Swissquote Bank Swissquote Bank 16.01.2023 11:00
Earnings season kicked off last Friday when the big US banks reported their Q4 results. The results were mixed. But overall, despite the skyrocketing inflation, and slowing economy, the banks continued raking in the dough… US banks Further good news is that, the major US banks said that they all expect ‘mild recession’, and that unemployment in the US would rise to between 4.9 and 5.5% depending on who is talking- fueling dovish Federal Reserve (Fed) expectations and the equity bulls. Forex In the FX, all eyes are on the Japanese yields, and the yen, as last week saw the 10-year JGB yield go past the Bank of Japan’s (BoJ) 0.50% ceiling, boosting rumours that the BoJ could abandon the YCC policy. In Europe, the euro shines brighter with every ray of sunlight that pushes away the risk of energy shortage and recession. In the US, a warning from Treasury Department that the US will reach the debt limit on January 19th and will need extraordinary measures from Congress to avoid a government default, is weighing on the US dollar, while boosting appetite in gold. Energy And, in energy, US crude cleared the 50-DMA to the upside last Friday. Watch the full episode to find out more! 0:00 Intro 0:48 Mixed US bank earnings support stock rally 4:03 Japanese yen bid on hawkish BoJ expectations 6:14 Fed doves, warnings of US default weigh on USD, boost gold 8:12 US crude rallies past 50-DMA 8:43 Euro shines brighter with every ray of sunlight Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #US #bank #earnings #BoJ #policy #decision #YCC #Europe #mild #winter #USD #EUR #JPY #XAU #crude #oil #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH      
The USD/JPY Price Reversed From The Lower Limit

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

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

The Change In Expectations For The Fed's Aggressive Monetary Policy Remains The Biggest Bullish Factor For Gold

InstaForex Analysis InstaForex Analysis 16.01.2023 14:11
Despite the fact that the precious metal can be considered overbought, market sentiment suggests that prices will rise in the near future. The first weekly review of gold shows that sentiment from both Wall Street analysts and Main Street investors is overwhelmingly bullish, with many analysts suggesting it is only a matter of time before reaching the $2,000 an ounce target. "There is a gravitational pull to $2,000 and will only build as prices continue to move higher," said Phillip Streible, chief market strategist at Blue Line Futures. While momentum favors higher prices, analysts advise investors not to chase the market. Streible believes that gold will rise and plans to buy from the pullback. Daniel Pavilonis, senior commodities broker with RJO Futures, said he is also bullish on gold but advised investors not to buy at current levels. Last week, 18 Wall Street analysts took part in the gold survey. Among the participants, 11 analysts, or 61%, were bullish in the short term. At the same time, three analysts, or 17%, are bearish, and four analysts, or 22%, believe prices are trading sideways. Meanwhile, 825 votes were cast in online polls. Of these, 524 respondents, or 64%, expected gold prices to rise this week. Another 190 voters, or 23%, said the price would go down, and 111 voters, or 13%, were neutral. Read next: USD/JPY Pair Is Trading Above 128 Again, The Testimony Of Bank Of England Governor Andrew Bailey May Have Affect On The Pound (GBP/USD)| FXMAG.COM   Some analysts say the change in expectations for the Federal Reserve's aggressive monetary policy remains the biggest bullish factor for gold. Those analysts say that lower inflationary pressures have given the Federal Reserve room to further slow its pace of rate hikes next month, with bond yields and the U.S. dollar somewhat reversing last year's massive upward trend. Kevin Grady, president of Phoenix Futures and Options, said the momentum of the U.S. dollar is turning bearish as market expectations change. He added that while gold could reach excessive levels, it still has upside potential. According to Grady, the bond market will decline and that is beneficial for gold. However, not all analysts are convinced that gold will be able to maintain the current momentum. Ole Hansen, head of commodity strategy at Saxo Bank, said that despite his optimism for gold, there are growing risks of price consolidation at current levels. And Colin Cieszynski, chief market strategist at SIA Wealth Management, said he is neutral on gold in the near term. Relevance up to 10:00 2023-01-19 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/332376
Technical Analysis: Gold/Silver Ratio Still On The Rise

Optimism Forced Investors To Actively Buy U.S. Stocks, Gold And Silver

InstaForex Analysis InstaForex Analysis 16.01.2023 14:17
Market participants continue to react to the bullish market sentiment created by the CPI report, which was released on Thursday last week. Inflation was 6.5% year-over-year, marking the sixth consecutive month that inflation has declined from a peak of 9.1% in June. According to the U.S. Bureau of Labor Statistics, after a 0.1% increase in November, consumer price index for all urban consumers (CPI-U) fell by 0.1% in December on a seasonally adjusted basis. And the all items index, before seasonal adjustment, increased by 6.5% for the year. Core CPI inflation (excluding food and energy costs) rose 5.7% YoY, up 0.3% from the previous month. Although inflationary pressures have eased, the core consumer price index is still about three times the Federal Reserve's target of 2%. At the same time, optimism forced investors to actively buy U.S. stocks, gold, and silver. However, they did not base market sentiment on recent Fed statements. The caveat is that the Federal Reserve has repeatedly reaffirmed its unwavering determination to keep interest rates high throughout 2023. Many analysts believe that the Fed is bluffing because current rates are not sustainable throughout the year. Others feel that their vows to be transparent simply no longer exists. U.S. equities, gold, and silver have benefited from this sentiment, leading to a strong rally in gold and silver, as well as moderate gains in major stock indices. Dow added 0.33%: S&P 500 added 0.40%: and the NASDAQ Composite Index added 0.70%: Gold up $24.20: Silver up $0.41: If the Fed continues on its course of tightening, it could lead to one of the biggest Fed blunders in recent history. The Fed's days of data dependency only seem to matter when the data supports their assumptions   Relevance up to 10:00 2023-01-19 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/332378
The Collapse Of The Silicon Valley Bank Weakened The Dollar And USD/JPY But Supported EUR/USD, AUD/USD, And GBP/USD

The Idea Of A Probable Pivot In The Fed’s Policy Keeps The Price Action Around The DXY Depressed

TeleTrade Comments TeleTrade Comments 17.01.2023 08:49
The index extends the range bound theme around 102.30. US markets return to normal activity following Monday’s holiday. NY Empire State index, short-term auctions, Fedspeak next on tap. The greenback, in terms of the USD Index (DXY), navigates under some downside pressure in the 102.30 region on turnaround Tuesday. USD Index looks to data, Fedspeak The index surrenders part of the auspicious start of the new trading week and returns to the 102.30 area on Tuesday, as US markets also return to their usual activity following Monday’s Martin Luther King Jr. Day holiday. The renewed softer stance in the dollar comes on the back of the pick-up in the sentiment surrounding the risk complex, in particular following better-than-expected results from the Chinese fundamentals published earlier in the Asian trading hours. In the US data space, the manufacturing gauge measured by the NY Empire State Index will be the sole data release and will be accompanied by short-term auctions and the speech by NY Fed J.Williams. What to look for around USD The dollar keeps navigating levels last seen in June 2022 around 103.30 pari passu with the resumption of the buying interest in the risk complex. The idea of a probable pivot in the Fed’s policy in the next months continues to weigh on the greenback and keeps the price action around the DXY depressed. This view, however, also comes in contrast to the hawkish message from the latest FOMC Minutes and recent comments from fed’s rate-setters, all pointing to the need to advance to a more restrictive stance and stay there for longer, at the time when rates are seen climbing above the 5.0% mark. On the latter, the tight labour market and the resilience of the economy are also seen supportive of the firm message from the Federal Reserve and the continuation of its hiking cycle. Key events in the US this week: NY Empire State Manufacturing Index (Tuesday) – MBA Mortgage Applications, Producer Prices, Retail Sales, Industrial Production, NAHB Index, Business Inventories, Fed’s Beige Book, Net Long-term TIC Flows (Wednesday) – Building Permits, Housing Starts, Philly Fed Manufacturing Index, Initial Jobless Claims (Thursday) – Existing Home Sales (Friday). Eminent issues on the back boiler: Rising conviction of a soft landing of the US economy. Prospects for extra rate hikes by the Federal Reserve vs. speculation of a recession in the next months. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China trade conflict. USD Index relevant levels Now, the index is losing 0.23% at 102.31 and the breach of 101.77 (monthly low January 16) would open the door to 101.29 (monthly low May 30) and finally 100.00 (psychological level). On the other hand, the next hurdle emerges at 105.63 (monthly high January 6) followed by 106.41 (200-day SMA) and then 107.19 (weekly high November 30).
Saxo Bank Podcast: The Bank Of Japan Meeting And More

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

ING Economics ING Economics 17.01.2023 09:56
Bond markets face a number of bearish risks today, which have to be weighed against the underlying bullish tone. Look out for a strong ZEW, bond supply, and pre-BoJ positioning Source: Shutterstock Bearish risks for a strong bond market Germany’s ZEW survey is the first potential banana skin in the European morning. As a survey of investor confidence, calling its direction is relatively straightforward: it should improve. The warmer-than-usual winter weather, reductions in gas prices, and surprising resilience of hard economic data all point in that direction. This is particularly true when compared to the gloom prevailing in the last months of 2022. Bond supply so far this year has been well absorbed Bond supply so far this year has been well absorbed by investors betting on declining inflation, and despite record-breaking volumes in the first two weeks of January (see chart below). However, occasional sovereign and corporate deals, especially the unswapped types, have tended to lead to temporary bond market weakness. Usually, these seem to have been bought into, like the morning sell-off in yesterday’s session, but there is no guarantee that investors would do so today, especially given the event risks later in the week. High bond supply so far this year hasn't caused yields to rise Source: Bond Radar, ING Last chance to position for higher JGB yields This is particularly true due to the proximity of the January Bank of Japan meeting. Today is the last European and US trading session before a meeting where the Bank is increasingly expected to lift the 10Y Japanese Government Bond (JGB) yield target once more. Back in December, when that cap was lifted from 0.25% to 0.50%, 10Y Bund and Treasuries rose by roughly 50% of the sell-off in JGBs. Assuming a 25bp sell-off, one would expect European and US yields to jump by 13bp. Consensus is increasingly shifting to a higher yen With consensus increasingly shifting to higher yen rates - see for example 10Y swap rates hovering around 1% - this means the risk around the meeting is likely two-way, however. Shorting 10Y JGBs comes with a hefty carry and roll cost so a delay in shifting the cap higher may well result in short-covering. Note also that the steady selling of US and European bonds by Japanese investors in 2022 should reduce the foreign impact of higher JGB yields. Japanese investors have sold foreign bonds over the whole of 2022 Source: Japanese Ministry of Finance, ING Economic optimism isn't always good for bonds All this has to be weighed against the underlying strength in bond (and other) markets evident since the start of the year (in fact since late October if one excludes the late December sell-off). At its heart, the ‘everything rally’ is driven by an improvement in macro conditions, especially by the belief that inflation is getting under control. There is no obvious catalyst for a change of tone on today’s calendar but note that investors could at any point wake up to the potentially inflationary consequences of some of the drivers of their economic optimism, for instance better European growth, resilient job markets, or China reopening. Two of these risks were highlighted by Bank of England Governor Andrew Bailey yesterday. Today's events and market view Germany’s ZEW survey should be a good gauge of how much investor sentiment has improved. Based on the market reaction to lower gas prices and inflation, we would guess a lot. In the US session, the Empire Manufacturing Survey is the main release. Germany is scheduled to sell €5bn 5Y bonds. Greece has mandated banks for the sale of a new 10Y benchmark, John Williams, of the Fed, is the only central banker listed on today’s calendar but the World Economic Forum, known informally as Davos after the Swiss mountain resort, is sure to produce a flurry of quotes from economic leaders. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Bank Of Canada Paused Rates Hiking, The ADP Employment Report Had A 242K Increase In Jobs

Forex: The Bank Of Canada (BoC) Looks Set To Face A Hike Or No-Hike Dilemma

ING Economics ING Economics 17.01.2023 10:00
Chinese activity data for 4Q22 released overnight was much better than expected and supports the proposition that the 2023 Chinese growth story will support pro-cyclical currencies, including the euro. Ongoing declines in natural gas prices are also helping. Today's focus will be on digesting UK labour market data, the German ZEW, and Canadian CPI Activity data released overnight supports the view that China's zero-Covid reversal will spark resurgent Chinese demand USD: Quiet start to the week still favours pro-cyclical currencies FX markets have had a quiet start to the week – perhaps awaiting edicts from Mount Davos? However, Chinese data released overnight was material and very much supports this year's hottest trend that China's zero-Covid reversal will spark resurgent Chinese demand. My colleague Iris Pang was very impressed by the December retail sales and fourth-quarter GDP data, so much so that she has revised up the 2023 China GDP forecast to 5%. The December data, in particular, supports the proposition that despite the pick-up in case numbers, the freedom of movement story is positively dominating the Chinese demand story. The Chinese data did not, however, trigger any follow-through buying of the renminbi or Asian currencies in general. Rather than concluding that this story has already run its course in FX markets, we would prefer to see price action as merely quiet before the Chinese New Year starting next week, and the big event risk in early Asia tomorrow, which is the Bank of Japan (BoJ) meeting. The dollar itself is steady. The US data calendar only really kicks off with what may be a soft December US retail sales release tomorrow. And there are no Fed speakers during European hours today. Some further DXY consolidation looks likely in a 102.00-102.50 range today. A downside break could emerge in Asia tomorrow, were the BoJ to again tweak its 10-year JGB yield target. Chris Turner  EUR: Revising the EUR/USD forecast higher Yesterday we published some substantial upside revisions to our EUR/USD forecast profile. Broadening signs of slowing US price pressures, stronger signs of US recession, a better Chinese demand outlook and a better energy situation all made our sub-consensus EUR/USD forecasts untenable. We now favour EUR/USD moving higher through 2Q23 towards the 1.15 area – but the gains may stall there in 2H23 given what could be trouble with the US debt ceiling in late summer and higher energy prices next winter. Back to the shorter term, the EUR/USD backdrop remains supportive. As discussed above, China's demand trends are supportive of pro-cyclical currencies like the euro. That better outlook for the eurozone could appear in today's German January ZEW investor survey, where the expectations component is expected to have improved from -23 to -15.  Also positive is the continuing fall in European gas prices. Two stories caught our eye today. The first is that European natural gas inventories are now 82% full versus the average levels of 63% normally seen at this stage of the heating cycle. The second is that Chinese importers are redirecting LNG shipments to Europe, given local inventories seem sufficient. That is a surprise. The continuing fall in European natural gas remains a positive development for the eurozone trade balance and is euro supportive. EUR/USD may consolidate in a 1.0780-1.0870 range today – but the near-term macro trends remain supportive. Chris Turner GBP: 50bp hike still in play for February Our UK economist, James Smith, describes today's release of November jobs figures as "another month of relative resilience in the UK jobs market". Wage growth was a little higher than expected and supports the latest findings from the Bank Of England's Decision Maker Panel survey. Depending on the resilience of tomorrow's release of December UK CPI data it seems too early to dismiss the risk of another 50bp rate hike from the Bank of England on 2 February. Currently the market prices in around 42bp of tightening at that meeting. Today's data saw EUR/GBP drop 15 pips – a move that makes sense. EUR/GBP is trading close to 0.89 because of December's hawkish ECB shift. The longer the BoE stays in hawkish mode, the more support sterling can get. Expect EUR/GBP to trade on the soft side of an 0.8850-0.8900 range today, with tomorrow's UK CPI release proving the next major input. Chris Turner CAD: Inflation key for BoC January move The Bank of Canada (BoC) looks set to face a hike/no-hike dilemma at next week’s (25 January) policy meeting. Signs of slowing economic activity were taken on board in the latest BoC statement and clearly emerged in yesterday’s BoC Business Outlook survey, where the future sales index dropped to the lowest since the pandemic and most interviewed firms said they expect a recession in Canada. However, the jobs figures came in very strong in the December read, with robust full-time hiring keeping the unemployment rate around cyclical lows. The slowdown in wage growth from 5.4% to 5.2% did not seem enough of a silver lining, and markets have been reluctant to price out the 19bp currently embedded in the OIS curve. Today’s CPI read will be key. Consensus expectations are centred around a deceleration in headline inflation from 6.8% to 6.4%, and from 5.0% to 4.9% in the core (median) rate. Any signs of resilience in inflation would likely see markets fully price in a 25bp hike in January. Below-consensus reads should support CAD short-dated bonds, but it seems hard that investors will completely rule out a hike next week. The impact on CAD should be quite visible in both directions, although external forces should remain the key drivers on the loonie. Building USD weakness may favour a USD/CAD contraction to 1.31-1.33 in the coming weeks, although a surprise hold by the BoC is a clear upside risk for the pair.  Francesco Pesole Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The ECB Has Made It Clear That Rates Will Remain High Until There Is Evidence That Inflation Is Falling Toward The Target

The European Central Bank Have Provided Support For The EUR/USD Pair And The Euro

InstaForex Analysis InstaForex Analysis 17.01.2023 12:05
The US currency is working hard to stay afloat and not slide to the lowest levels. Nevertheless, the greenback occasionally slumps, unwittingly giving a chance to the euro. The latter willingly uses this opportunity and tries to rise as much as possible, having accumulated a certain amount of growth. Analysis The greenback started the week lower, hitting a 7-month low against other currencies, but stabilized later on. On Monday evening, January 16, EUR/USD soared to a new 9-month high of 1.0874 but then pulled back to the critical 1.0816 mark. As a result, the pair lost 0.16%, but started recovering by the next trading session. On Tuesday morning, January 17, EUR/USD traded in the range of 1.0829-1.0830, having partly recouped its earlier losses. The technical situation According to analysts' estimates, the technical situation has stabilized slightly. At a certain moment, the pair reached the highest level since April 2022, but then retreated to the lower limit of the current range. This is because risk appetite has decreased, which supports the dollar and is a "headwind" preventing the euro's growth. Disappointing US macro data, published last week, contributed to the dollar's downfall. Recall that in December 2022, US consumer prices fell for the first time in more than 2.5 years. This had a significant impact on the greenback, as aggressive Federal Reserve rate hikes were the key driver of its growth (by 8%) in 2022. EUR/USD The US currency is gradually recovering from a seven-month low. This puts significant pressure on the EUR/USD pair. Traders and investors are worried about the economic problems triggered by the outbreak of COVID-19 in China, as well as the protracted Russian-Ukrainian conflict. This increases fears about the global economic downturn and restrains optimism in the markets. In such a situation, experts record a massive outflow of capital to USD as a safe asset. This limits the euro's growth and worsens its future prospects. US inflation  On the bright side, US inflation is gradually easing, which recently reached its highs in the last 40 years. Against this background, investors expect the Fed to pause rate hikes. In addition, market participants believe that interest rates will not be raised immediately, but gradually and by a certain amount. Most economists (91%) expect a 25bp hike and only 9% expect a 50bp hike. The Fed would soften its hawkish stance According to experts, a significant recovery of the dollar is still elusive. Market participants used to be confident that the Fed would soften its hawkish stance after seeing signs of continued easing of inflation pressures. However, assumptions that the central bank is close to ending its rate hikes were not justified. At the moment, it will probably continue to raise rates, but may slow the pace of rate hikes (only by 25 basis points in February). According to economists at Deutsche Bank, most of the current factors are in favor of a continued decline in the greenback and a relative stabilization of the euro. A combination of China's economic reset after the removal of covid restrictions and an improving energy situation in the EU have set the USD back. In addition, recent hawkish statements from the European Central Bank have provided support for EUR/USD and the euro. At the same time, there is growing confidence in the markets that inflation in the US will peak, so EUR/USD could rise to 1.1500 in 2023 and the dollar could remain in a downtrend Relevance up to 09:00 2023-01-20 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/332491
The Bank Of England Can Tighten Monetary Policy Considerably More Gradually Than It Is Now Doing

GBP/USD Is Strengthening And Trading Above 1.2260, Investors Took A Breather Ahead Of The Bank Of Japan Meeting

Kamila Szypuła Kamila Szypuła 17.01.2023 14:11
The US dollar is under pressure as the market seems to expect the Federal Reserve to ease its aggressive monetary policy later this year. USD/JPY The yen was close to a seven-month high as investors took a breather ahead of a potential change in policy at the Bank (BOJ). At the last meeting, the Yield Curve Control (YCC) program was changed, setting a range of +/- 0.50% around zero for Japanese government bonds (JGB) for up to 10 years. They previously targeted +/- 0.25% around zero. While they are not expected to change their prime interest rate, which currently stands at -0.10%, another change to the long-term yield target range is being discussed. Today, USD/JPY managed to break above 129 but failed to hold. The USD/JPY pair stabilized above 128.50. AUD/USD The Australian dollar jumped towards yesterday's six-month high against the US dollar, with China's GDP much better than forecast. China's GDP printed at 2.9% year-on-year in the fourth quarter versus expectations of 1.6% and 3.9% previously. At the same time, other Chinese data were released, and industrial production for the year to end-December was 1.3% instead of the expected 0.1%. On the monetary policy side, the local market favors a quarter-point hike from the Reserve Bank of Australia (RBA) to 3.35% in February, with some chance it could stop at its first meeting since May. Australian government bond yields remained stable, albeit close to last week's one-month lows. Monday's drop in the AUD/USD pair did not affect the prevailing uptrend. The pair of the Australian in the morning session was approaching the key level of 0.6975, the pair managed to exceed this level, but did not hold it and fell in the European session. Currently the Aussie Pair is trading above 0.6955. Read next: Alibaba And Its Share Buyback Program Which Is Supported By Ryan Cohen, Microsoft Corp. Plans To Incorporate AI Tools| FXMAG.COM GBP/USD The British pound edged higher on Tuesday after data showed a tight labour market and accelerating pay growth. GBP/USD trades above 1.2200, bouncing back from daily lows after the UK jobs report. The UK unemployment rate stabilized at 3.7% in November, while average hourly earnings rose more than expected. GBP/USD raises bids to reverse early-week pullback from monthly high. Broad US dollar pullback lays foundation for cable pair recovery ahead of key jobs report. Talks of Brexit labor shortages, UK labor strikes and British Prime Minister Sunak's difficulties are being explored by the GBP/USD bulls. The Bank of England is expected to raise interest rates at its tenth consecutive meeting on February 2 in an attempt to bring inflation down further. Today's UK employment data becomes more important for GBP/USD traders. The pair traded close to 1.2200 in both the Asian and European sessions and also fell below 1.2200. Currently, the cable pair is rising and trading above 1.2260 EUR/USD The latest German economic sentiment index, ZEW, rose in January, beating both last month's reading and market forecasts. The positive reading, the first since February 2022, points to "a notable improvement in the economic situation over the next six months" Today's ZEW release had little or no impact on the euro, which has been treading water against the US dollar so far. EUR/USD remains above 1.0800. The euro is expected to take center stage as the European Central Bank (ECB) aims to peak interest rates by the summer. The EUR/USD pair started Tuesday trading around 1.0830. In the European session it fell below this level. It managed to cross 1.0840 but dropped to around 1.0835 Source: investing.com, dailyfx.com, finance.yahoo.com
FX Daily: Upbeat China PMIs lift the mood

In 2023 There Will Be Conditions For Economic Growth In China

InstaForex Analysis InstaForex Analysis 17.01.2023 14:25
The fundamental background for the EUR/USD pair remains ambiguous. On the one hand, the dollar is under pressure amid growing confidence in the slowdown of the Fed rate hike to 25 points. On the other hand, traders need additional information impulse for the upward movement. The pair consolidated within the 8th figure (for the first time since last April), but to conquer the 9th price level, not to mention the 10th figure, they need a powerful informational trigger. Chinese anti-records Experts pinned certain hopes on China, which today published key data on its economic growth. However, these hopes were not justified. The data turned out to be negative, but for the most part they came out in the green zone. Neither the dollar nor the euro were the beneficiaries of today's release. In terms of figures, the situation is as follows. China's GDP grew 3.0% last year, down from 8.4% in 2021. If we exclude the 2.2% growth after the first blow of the coronavirus crisis in 2020, this is the worst performance since 1976. Clearly, this result reflected the effects of the "zero tolerance" policy on COVID, which Beijing abandoned only at the end of last year. A sharp 180-degree turn suggests that in 2023 there will be conditions for economic growth in China. In addition, according to The Wall Street Journal, the Chinese authorities have significantly eased pressure on technology companies, relaxed strict regulation of real estate and recently lifted the ban on coal imports from Australia (which was in effect for more than two years). However, another question remains regarding the overall global demand for Chinese goods, given the global economic slowdown and the threat of recession in the world's largest economies. In addition, another alarming signal was published today: it became known that the population of the People's Republic of China decreased last year for the first time in more than 60 years. According to a number of analysts, this is a historic shift, which in the future will have long-term consequences for both the Chinese and the global economy. According to data, Chinese population decreased by 850,000 people last year to 1.41 billion. The reverse side of a coin However, despite the set anti-records, the safe dollar could not benefit from the situation, including in pair with the euro. Several factors acted as a counterbalance. First, almost all the components of today's release came out in the green zone. China's fourth-quarter GDP beat forecasts despite growth at the slowest pace since the 1970s, with China's economy expanding 2.9% (slowing down from 3.9% growth in the third quarter), while the consensus forecast was 1.8%. As mentioned above, in 2022, the Chinese economy grew by 3.0%, while the forecast was at 2.7%. Other indicators are also green: for example, retail sales in December fell by 1.8%, while experts were more pessimistic in their estimates, expecting a decline of 9.5%. In turn, the volume of industrial production grew by 1.3% (in annual terms), with a weak growth forecast of 0.5%. The official unemployment rate fell to 5.5% (forecast was 5.8%). The second support factor that somewhat smoothed over the negative emotions on the market from today's release was the fact that Beijing still abandoned the frankly destructive policy of zero-COVID policy. Thus, contradictory signals from China could not tip the scales—neither in the direction of buyers nor in the direction of sellers of EUR/USD. Moreover, some support for the euro is provided by the ECB representatives, who voiced hawkish comments. In particular, European Central Bank chief economist Philip Lane said in an interview with the Financial Times that "interest rates should be much higher than they are now." Earlier similar messages were voiced by other representatives of the European regulator, in particular Martins Kazaks, Isabel Schnabel, Robert Holzmann, Olli Rehn and Francois Villeroy de Galhau. Conclusions The pair is holding within the 8th figure, against the background of the general weakness of the greenback and the 90% probability of the implementation of the 25-point scenario at the February meeting of the Fed. The hawkish comments of the ECB only fuel interest in buying EUR/USD, but do not allow the pair's bulls to organize a large-scale counterattack. In my opinion, short positions on the pair are too risky and fundamentally unreasonable. Whereas it is advisable to consider longs only after overcoming the 1.0860 resistance level, which corresponds to the upper line of the Bollinger Bands indicator on the D1 timeframe. It is likely that the price turbulence (which may not be in favor of the dollar) will be provoked by representatives of the Fed, many of whom will voice their position in the second half of the week. The market is expecting speeches by Lorie Logan, Susan Collins, Lael Brainard, Patrick Harker, Christopher Waller and John Williams. Perhaps they will shift the balance of power towards EUR/USD buyers. However, in the current, rather shaky situation, it is best to take a wait-and-see attitude Relevance up to 10:00 2023-01-18 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/332508
Agriculture: Russia's Exit from Black Sea Grain Deal Impacts Grain Prices

Representatives Of The ECB Claim That By The End Of 2023, Inflation Should Have Reached The Target Level

Paolo Greco Paolo Greco 18.01.2023 08:23
On Tuesday, the EUR/USD currency pair continued to rise and showed no signs of wanting to begin a reversal. The first two trading days of the week had essentially no fundamental or macroeconomic background, but traders still could not see any reason to fix at least some of the profit on long holdings. Therefore, the technical situation is unchanged at this time. While we have been anticipating a significant downward correction for more than a month, we also recognize that this is merely a basic hunch. We cannot think of any justifications for the European currency to have grown so strongly in such a short amount of time. There is now no sell signal, but the price is still above the moving average line on the 4-hour TF and above the lines of the Ichimoku indicator on the 24-hour. Many analysts' recent economic and currency forecasts have made mention of the Chinese economy. They present completely disparate arguments at the same time that frequently conflict with one another. For instance, the removal of COVID's "zero tolerance" policy is considered a benefit for the world economy and volatile currencies. Everyone is aware that the US dollar often emerges as the most secure and stable currency when uncertainty occurs. Right now, the situation is reversed. The Celestial Empire's economy is expanding, but at the same time, birth rates are declining, and population growth is declining for the first time in 60 years. We've long accepted that the Chinese population is growing, but since 400 million of the nation's 1.5 billion people are seniors, international experts are now raising the alarm. Since there will always be more retirees, if there is no growth, there will also be no economic growth and a recession. The Chinese government has already started encouraging more children to be born by removing limitations on having one or two children in a family and instead giving financial advantages to each child. This news, in our opinion, only serves as background information and does not directly affect the movement of the euro/dollar pair. The ECB officials' language continues to be "hawkish." The ECB and Fed's interest rates are currently one of the most important factors affecting the foreign currency market, as has been stated numerous times. We think that market participants are still buying euros because they anticipate a significant rate increase in the European Union but not a comparable process in the United States. It's straightforward: Since the Fed's rate has nearly reached its maximum, it makes no sense to raise it quickly. The next two meetings are expected to see two increases of 0.5% each, followed by an increase of 0.25%, according to the ECB rate. Representatives of the ECB claim that by the end of 2023, inflation should have reached the target level. They also anticipate that a dramatic fall in the price of gasoline and oil will have a favorable impact on the inflation rate. While we somewhat concur with Philip Lane and Isabel Schnabel, we think that inflation may not be moderate enough to prevent rate increases in the coming months. In any scenario, the euro currency will no longer have any motivation to demonstrate growth if the ECB also completes the tightening program. So far, we are unable to identify any causes for the European currency to increase during the majority of this year. We might claim that it is currently partially fortunate because the market frequently ignores favorable news for the currency. Lucky is the lucky one, though. One cannot dismiss the expansion of the euro as completely irrational. It is unstable and not very promising, in our opinion. One of the riskier currencies is still the euro, and nobody can predict what surprises 2023 will bring. We are certain that the euro may plunge once more if new global tensions develop. The euro could quickly decline once the ECB has finished hiking rates. The euro may drop quickly if the EU economy does go into recession. As of January 18, the euro/dollar currency pair's average volatility for the previous five trading days was 89 points, which is considered "normal." So, on Wednesday, we anticipate the pair to fluctuate between 1.0704 and 1.0882. The Heiken Ashi indicator will turn back up to signal the start of the upward movement. Nearest levels of support S1 – 1.0742 S2 – 1.0620 S3 – 1.0498 Nearest levels of resistance R1 – 1.0864 R2 – 1.0986 Trading Suggestions: The moving average has undergone a new micro adjustment in the EUR/USD pair. At this point, we can take into account opening additional long positions with goals of 1.0864 and 1.0882 if the Heiken Ashi indicator reverses direction and moves higher or the moving average recovers. After the price is locked below the moving average line, you can start opening short positions with targets of 1.0704 and 1.0620. Explanations for the illustrations: Determine the present trend with the use of linear regression channels. The trend is now strong if they are both moving in the same direction. Moving average line (settings 20.0, smoothed): This indicator identifies the current short-term trend and the trading direction. Murray levels serve as the starting point for adjustments and movements. Based on current volatility indicators, volatility levels (red lines) represent the expected price channel in which the pair will trade the following day. A trend reversal in the opposite direction is imminent when the CCI indicator crosses into the overbought (above +250) or oversold (below -250) zones   Relevance up to 05:00 2023-01-19 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/332572
There Are No Obvious Reversal Of GBP/USD Pair Signs Yet

The British Pound (GBP) Is Still Increasing

Paolo Greco Paolo Greco 18.01.2023 08:34
Despite the lack of any compelling explanations, the GBP/USD currency pair once again displayed an upward trend on Tuesday. In the UK, data on unemployment and earnings were released early in the morning. These numbers cannot be characterized as "strong" or "failed," but it is very tough to call them either. Simply put, the unemployment rate remained at 3.7% in November, while earnings climbed by 6.4%, which was basically in line with expectations. Remember that the UK has been experiencing a severe cost of living problem for several months. The country's population's salaries are devalued by the fast-falling value of the pound in 2022 and a strong rise in inflation. Naturally, the least socially protected groups experience the most severe pound devaluation. Simply described as low-paid, everyday laborers. They can tell that the value of the pound has decreased by 10%. 10% inflation is a lot to them. Therefore, it is difficult to describe the 6.4% growth in earnings during a time of inflation that is higher than 10%. However, traders hurried to repurchase the pound after discovering a teaspoon of honey in a barrel of tar. They are completely correct from a technical standpoint because there isn't even one sell signal at the moment. The pair is still above the moving average line on the 4-hour TF, and both linear regression channels point upward. The price is above all of the Ichimoku indicator's lines on the 24-hour TF. Therefore, anything is possible based on fundamental research, but the pound will gain in value if the market buys more of it. Since many currently anticipate that the Bank of England will reduce the "monetary pressure" on the economy, the pound can, of course, halt this process at any point. Simply put, the BA may again pause the pace of tightening monetary policy in February to prevent a serious recession. If so, one of the strongest pillars of the pound's support may be lost. The Bank of England's governor is overjoyed with confidence. On Tuesday, Andrew Bailey testified before the House of Commons Treasury Committee. It had been a while since he had spoken in public because the head of BA rarely does so. He expressed his optimism for a significant drop in inflation in 2023 as a result of reducing energy prices in his address. He thinks that the military confrontation between Ukraine and Russia in 2022 caused the sharp rise in energy prices, but gas prices have dropped by almost four times since then, suggesting that inflation can be slowed down even without the regulator's help. Additionally, Mr. Bailey informed the Committee that the financial markets had calmed following the Liz Truss board issue, which saw a dramatic devaluation of the pound and an increase in government bond yields. The BA chairman added, "However, it will take some time to convince people that the worst is over." The markets continue to anticipate a further increase in rates in early February despite Mr. Bailey's silence on the subject. Since the anticipation of lower inflation naturally entails that the regulator may slow down the pace of tightening monetary policy more, we think Bailey's comments can be viewed as a "dovish" element. And give it a total break with the possibility of several months. The pound is still increasing, though. The result is the following image: The pound is growing regardless of how quickly or slowly rates are rising; rates may even cease rising altogether. Therefore, we continue to think that the more crucial element is the slowing of the US rate rise. Based on this reason, the British pound may continue to increase for some time, but its prospects may suffer if the rate is lowered to 0.25%. In any case, you shouldn't anticipate a significant decline in the value of the pound until the price is locked below the moving average. When that occurs, it will be possible to guess whether this is just a little reversal or the start of a new, lengthy decline in the value of the pound. Over the previous five trading days, the GBP/USD pair has averaged 117 points of volatility. This figure is "high" for the dollar/pound exchange rate. Therefore, on January 18, we anticipate movement that is contained inside the channel and is constrained by the levels of 1.2151 and 1.2385. A new bout of corrective action will begin when the Heiken Ashi indicator reverses direction and moves back down. Nearest levels of support S1 – 1.2207 S2 – 1.2146 S3 – 1.2085 Nearest levels of resistance R1 – 1.2268 R2 – 1.2329 Trading Suggestions: In the 4-hour timeframe, the GBP/USD pair is attempting to advance further. Therefore, until the Heiken Ashi indicator swings down, it is still possible to hold long positions with goals of 1.2329 and 1.2385. If the price is set below the moving average, short trades can be opened with goals of 1.2085 and 1.2024. Explanations for the illustrations: Determine the present trend with the use of linear regression channels. The trend is now strong if they are both moving in the same direction. Moving average line (settings 20.0, smoothed): This indicator identifies the current short-term trend and the trading direction. Murray levels serve as the starting point for adjustments and movements. Based on current volatility indicators, volatility levels (red lines) represent the expected price channel in which the pair will trade the following day. A trend reversal in the opposite direction is imminent when the CCI indicator crosses into the overbought (above +250) or oversold (below -250) zones   Relevance up to 05:00 2023-01-19 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/332574
BRICS Summit's Expansion Discussion: Impact on De-dollarisation Speed

The US 10yr Yield Really Has No Business Getting Below 3%

ING Economics ING Economics 18.01.2023 09:31
Inflation is convincingly lower and falling. And, at the very least, we’re heading into a growth recession. So, shouldn’t market yields be collapsing? They could. But, then again not necessarily. There are technical factors pushing in the other direction, ones that can in fact pressure longer-dated market yields higher, or at least mute any fall The US 10yr yield looks one-way biased to fall for macro reasons, but the absolute level is already quite low Here are four factors to consider: 1. History shows that the 10yr yield trades below the funds rate as the rate hiking cycle peaks. Typically it would get to 75bp through. It has been 150bp through in the past (e.g. dotcom bust), but not till just before the Fed cut. Recently it’s been some 150bp through the likely peak in the funds rate. So, right here at 3.5%, the 10yr is not that cheap. 2. There is better risk / reward from ultra-front end positions, where handles of 4% + are attainable. The price risk here is minimal (to zero). The only risk is the Fed starts to cut rates, which would adjust down the yield on roll-overs. This trade, by definition, means lower buying of duration. Recent flows into money market funds suggest this is happening. 3. While US Treasury yields offer a generous yield for influential Japanese-based players, that’s not the case for hedged positions. The cost of a 3mth hedge back into the Japanese yen is 4.9%, well in excess of any running yield along the Treasury curve. With hedged positions yielding a negative yield, this important rump will not play in Treasuries. 4. Importantly, the monetary tightening story is not just a US one. Ultra-low rate economies like the eurozone and Japan are also tightening policy. Indeed, more tightening is likely from the ECB than from the Fed in the coming months. So even unhedged longs will see attainable spreads becoming less attractive as we progress through 2023. Bottom line, we’re suggesting that the US 10yr yield is in fact not that high, we identify better risk/return on the ultra-front end, and suggest that external demand can become more fickle from a relative value sense. This is further amplified should the US dollar maintain a weakening trend, and bond markets that are inversely related to the USD start to perform better (e.g. some emerging markets). Future Fed cuts must mean room is made for a much steeper curve Source: Macrobond, Federal Reserve, ING estimates Also, to end up with a proper upward sloping curve there needs to be room made by the 10yr yield There is another important technical factor to consider too, centered on finding room for the curve to steepen out appropriately. Typically, as the cycle morphs from Fed hiking to cutting we evolve towards an upward sloping curve. At the very minimum the 2/10yr should get to 50bp, and even that is very conservative, as it more often than not gets to 100-200bp. The evolution from dis-inversion to a positively sloped curve limits the room for the 10yr yield to fall. The 2yr yield can fall by lots. The 10yr too, but it depends on what’s feasible. So what is feasible? Let’s take our relatively aggressive view for the funds rate – as we see the Fed cutting later in 2023, and getting the funds rate down towards 2.5%. That’s the starting point for the curve. When the funds rate gets there, it has bottomed, and the 2-10yr yield curve should be positively sloped. Let’s pitch the 2yr at flat to the funds rate, at 2.5% in 2024. Given that, the 10yr yield really has no business getting below 3%, as at 3% that’s only a 50bp curve. It should in fact be a 100bp curve, which would bring us all the way back to 3.5%, where we currently are. In fact, if the 10yr were at 4% while the funds rate targetted 2.5%, that would not be an unusual combination. The target for the 10yr is 3% and no lower, but don't be surprised if it reverts to 4% So as a call for 2023, we are looking for the 10yr to rally down to 3%, mostly as the Treasury market can get all excited as the Federal Reserve winds up for rate hikes. But that should in fact prove to be an overshoot to the downside. The 10yr really has no business getting to below 3%, unless there is the emergence of some (unknown at this point) crisis. In fact, a fairer level is 3.5%. Moreover, if the market gets its head around this, there is a neat route back to 4%. Now that would be a more credible curve, and one more consistent with the renewed ability for economies to generate inflation in the future. We could even skip the 3% and go for straight to 4%. We understand that the average US 10yr yield over the past decade is 2.15%, and indeed the 2% area has been crossed on a frequent basis over that period; a mean-reversion tendency. Fine, but that does not mean we are heading back down there. There is simply neither room nor logic for that to happen, apart from an anchoring to the recent past when 2% seemed normal.  Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  
Pound Sterling: Short-Term Repricing Complete, But Further Uncertainty Looms

Euro Sovereigns Have Benefitted Doubly From The Improvement In Inflation And Growth Expectations

ING Economics ING Economics 18.01.2023 09:39
Mixed European Central Bank messages and better economic data continue to benefit core and peripheral bonds alike. Markets increasingly think the ECB will cut rates shortly after the Fed. We think bonds don’t price properly higher sovereign funding needs this year. We also note that US 10yr yield is already priced quite low versus the future funds rate Sticky US Treasuries, despite the one-way macro data US Treasuries are bascially back to where they were just before the consumer price inflation release of last Thursday. Even the front end, which had dropped in an almost precipitous manner in yield, has snapped back to practically where it was. Yesterday's drop in the Bund yield also did not have a lasting effect on Treasuries, taking them down in yield initially, but then yields eased back up again. It seems the downdraft in yield is no longer the path of least resistance. It seems the downdraft in yield is no longer the path of least resistance We'd note that the 10yr Treasury yield is not exactly cheap here. It is practically at, or has been recently, some 150bp through the terminal funds rate being priced by the Fed funds future. That's quite a spread. History shows it has been wider, but not by much, and not for too long. History also shows that it is rare for it to trade through the funds rate by this much. The macro impulses are clearly bullish, but technical relative value suggests that precipitous falls in yields from here will not be as straightforward as many suggest. Future Fed cuts must mean that room is made for a much steeper curve Source: Macrobond, ING ECB mixed messages expose the market's underlying strength We warned in yesterday’s Spark that bond markets face a number of bearish risks in what is evidently a strong bullish trend. Sometimes, contradictory events and the way markets react to them provide us with a golden opportunity to test our theory. This was the case yesterday in which markets pretty much shrugged off European Central Bank chief economist Philip Lane’s hawkish message – from no less than one of the most dovish members of the board – to instead focus on a vague anonymous ECB sources story. Market participants have faced an uninterrupted string of hawkish comments since the December meeting Since the December meeting, participants have faced an uninterrupted string of hawkish comments since the December meeting so perhaps Lane’s comments were less surprising to markets. They, however, increasingly contrast with the swap curve pricing 80bp of cuts in 2024. The way markets think of Fed policy heavily influences the way they think of the ECB too. The ECB sources story highlighted the prospect of a downshift to a 25bp hike in March after a 50bp hike in February, contrary to Lagarde and other officials signalling two 50bp hikes. This seems to have reinforced not only the view that the end of the ECB’s hiking cycle is close, but also that cuts are imminent. Bond markets have so far shrugged off the wall of supply they're facing in 2023 Source: Refinitiv, Debt Management Offices, ING High beta sovereigns are the clear winners but supply looms large Euro sovereigns have benefitted doubly from the improvement in inflation and growth expectations. First, lower inflation lets markets hope for a world with less aggressive central banks. The related drop in core rates has also benefitted higher beta fixed income, for instance peripheral bond markets. Second, as the sharp improvement in the Zew index yesterday illustrates, markets no longer price a disastrous recession for the eurozone. This is reflected in better appetite for riskier investment, and has accelerated the outperformance of riskier bonds over safer ones. In one word spreads tightened. The two developments could prove contradictory, however, as better growth might slow down the decline in inflation. We expect bond yields to continue to rise relative to swap rates You wouldn’t guess it looking at the strength of sovereign bonds this year, but these markets are faced with a wall of supply. The ECB will shift from being a net buyer in 2022 to being a net seller in 2023. Combined with wide deficits, this results in a dramatic increase in funding needs. We find that euro sovereign bond markets do not reflect this wall of supply properly. For one thing, we expect bond yields to continue to rise relative to swap rates. Secondly, we expect markets to better take into account supply dynamics in pricing relative sovereign yields. The chart below gives a rough guide of where each sovereign 10Y swap spreads trade compared to our estimate. Euro sovereign bonds don't reflect coherently new supply dynamics Source: Refinitiv, Debt Management Offices, ING Today's events and market view The main release this morning will be the eurozone’s December inflation report, although this is a final reading and so less likely to surprise markets. The US calendar is more substantial with retail sales and producer price index. Both are expected to decline and so shouldn’t prove a challenge to the market’s expectation of the Fed easing as soon as this year, barring an upside surprise. The NAHB housing market index should prove equally gloomy. Germany is scheduled to sell 30Y debt. Francois Villeroy of the ECB, alongside Raphael Bostic, Patrick Harker, and Lorie Logan of the Fed, are the speakers listed on the World Economic Forum in Davos but we’re sure to get quotes from others. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  
Rates Spark: Riding the hawkish wave while it lasts

The Fed Is On A More Hawkish Path Than Before

Conotoxia Comments Conotoxia Comments 18.01.2023 13:49
Investors are used to following the changes in interest rates and perceive it as one of the key macro indicators affecting stock market returns and general sentiment. Meanwhile, another less discussed indicator may have an even stronger influence on the stock market returns, especially in the long term. This indicator has a substantial impact on the said interest rates, among other factors. Summary The country’s central bank regulates the money supply in the economy by purchasing or selling debt securities. Higher money supply leads to lower interest rates, higher business activity, and higher sales, positively affecting the stock market. Historically, the US money supply grew at a steady rate of nearly +0.50% per month, which was accelerated to support the economy amid the Covid-19 pandemic – the Fed added about 5 trillion USD to its balance sheet until April 2022. Recently, the Federal Reserve has obtained a money supply reduction policy to remove from its balance sheet value that was amassed during the pandemic and to combat the high inflation while slowing down the economy. The stock market may not be able to change its course as long as the Fed continues to decrease the money supply. Money supply The money supply in the economy is regulated by the country’s central bank (or Federal Reserve in the United States). To increase the money supply, the central bank would purchase government debt securities. For decreasing the money supply – the opposite would happen – the central bank would sell the government debt securities. Higher money supply in the market leads to lower interest rates (cheaper money), higher spending, and higher inflation – all of which typically boost stock returns. M2 money supply appreciated almost linearly until February 2020 at a steady rate of nearly 0.50% per month. As the US Federal Reserve accelerated quantitative easing in order to support the economy due to Covid-19 pressure, the money supply growth rate surged to an average of 1.38% per month and continued until March 2022. Starting from April 2022, the US M2 money supply has been decreasing at an average rate of -0.21% per month.  Source: FRED, graph: Author  Reductions in money supply have taken place in history, although smaller and less consistent. Since January 1959, reductions in money supply have occurred 34 times (4.44% of the 776 readings), with an average decrease of -0.16% (-0.13% if excluding the recent outliers) and a median decline of -0.072%. Meanwhile, four out of the ten most significant reductions within this period occurred this year, with an average decrease of -0.41%. If the Fed aims to return to the money supply level corresponding to the linear growth path characteristic of the period before the Covid-19 pandemic, it would have to reduce the money supply by -0.50% monthly until February 2024, when it would reach 19,764 billion USD. Fed’s balance sheet As the Fed engaged in growing the money supply to support the US economy during the Covid-19 pandemic, its balance sheet blew up more than twice to nearly 9 trillion USD. The Fed’s balance sheet doubled during the 2008 Global Financial Crisis and again in its aftermath by the end of 2014. Now, the same as previously, the Fed wants to reduce its balance sheet to a more stable level. Although, this time, the Fed has chosen a considerably more aggressive strategy. In June 2022, the Fed started its balance sheet normalization process by letting 47.5 billion USD worth of assets mature and roll from its balance sheet. The same happened in July and August. However, in September, the Fed decided to speed up the process and doubled the value of assets to be rolled from its balance sheet to 95 billion USD. Source: https://www.federalreserve.gov/ Total assets of the Federal Reserve, 01.01.2020.-20.12.2022. Based on the data available until December 20, 2022, the Fed kept the pace of removing assets off its balance sheet in October and November. Since its peak on April 12, 2022, the Fed balance sheet has been reduced by 401 billion USD. Jerome Powell and other Federal Bank officials have not stated how far they are planning to extend the balance sheet reduction. However, they have indicated that they don’t see any reason for the reduction slowdown. On November 30, Jerome Powell suggested that the Fed doesn’t want to repeat 2019 when the reserves were drawn down too much, but also that “we are not close to reserve scarcity”. For comparison, let us review the Fed's activities the last time it entered the path of reducing its balance sheet. Last time, the Fed waited almost two years since the first interest rate hike to start reducing its balance sheet – compared to just 3 months this time. Furthermore, previously the Fed chose to gradually increase the assets’ value to be rolled off its balance sheet within 12 months until it reached a 50 billion USD per month peak. This time, the Fed started with almost the same value – 47.5 billion USD – and just after two months, doubled it. Based on the data above, it may be concluded that the Fed is on a more hawkish path than before. Why is this important? As discussed previously, the stock market generally enjoys an elevated money supply and generates corresponding returns to investors. Still, how strongly does the money supply impact the stock market? Based on the end-of-month data for M2 money supply and S&P 500 closing price since the beginning of 2013, the correlation between the two measures is impressive: 97%. Meaning that almost every time the money supply grows, so does the S&P 500. Based on the historical changes of both measures, we see that the S&P 500 index is more volatile – on average, for every 1-point move in money supply, S&P 500 moves 1.47 points. If the money supply were to be reduced by another -7.71% to reach the level corresponding to the linear growth path characteristic of the period before the Covid-19 pandemic, the S&P 500 might follow with a -11.33% drop by the end of 2023. It is crucial to note that the above-described scenario considers only one measure and its impact on the S&P 500 based on historical data to reflect the money supply’s significance in the stock market’s movements. In reality, other predictable and unpredictable events may significantly impact the stock market’s movements this year. Furthermore, the Fed may change its stance at any point based on the prevailing market conditions. Stay safe, stay informed, and be well-diversified. Santa Zvaigzne-Sproge, CFA, Head of Investment Advice Department at Conotoxia Ltd. (Conotoxia investment service)
Assessing the 50-50 Risk: USD's Outlook and Market Expectations for a June Fed Hike

The ZEW Index: The Mildly Negative Assessment Of The US Economy, The German Economy Was Assessed Similarly To The Eurozone As A Whole

Conotoxia Comments Conotoxia Comments 18.01.2023 13:54
The ZEW Index is a survey of the economic sentiment of financial market experts in Germany. It measures expectations for the German economy over the next six months. The survey is conducted by the Centre for Economic Research (ZEW). The indicator is based on responses from analysts and economists from banks, insurance companies and other financial institutions. It is regarded as an important indicator for assessing economic activity in Germany and is closely monitored by many investors. Currently, the value of this indicator has reached a positive reading for the first time since February 2022 (16.9 points), which could mean that the situation of this economy could be improving. What else could we learn from the survey? Evaluation of the economic situation The January survey was conducted among 179 analysts and specialists. Regardless of the region assessed, the majority of specialists view the current economic situation negatively. The worst performer here is China, where as many as 77% of respondents view the current economic situation negatively. Second from the bottom is Germany with 60.3%. What may seem interesting is the mildly negative assessment of the US economy, currently at minus 5 points, which is a drop from the previous positive reading of 6.8 points.China also ranks first in terms of perceptions of the future. As many as 58.9% of respondents answered that the situation for this economy would improve (previously 41.9%). This may be linked to the expected easing of the 'zero COVID' policy. Similarly, respondents answered about the behaviour of the SSE Composite index (56% positive responses), to which we could gain exposure through the iShares MSCI China ETF (MCHI). Source: Conotoxia MT5, MCHI, Weekly The future of the German economy was assessed similarly to the euro area as a whole. The ZEW index reached 16.9 points and 16.7 points respectively. This is a significant improvement on the previous reading, which rose by more than 40 points in both cases. 44% of specialists forecast that the value of the DAX index (DE40) would increase, while 38.1% of respondents believe that it would remain unchanged. There is a noticeable improvement in sentiment relative to the last survey for all indices. Source: Conotoxia MT5, DE40, Weekly Despite the negative reading of the ZEW indicator for the future of the US economy, at minus 6.7 points, we continue to see an improvement on the last reading, which was minus 23.3 points. One could conclude that more important than the value of a given indicator is its trend of change. A more optimistic view is taken of the future of the Dow Jones Industrial index (US30), with 48.2% of respondents expecting it to increase in value (previously 41.1%), while 31% believe it would remain unchanged. Source: Conotoxia MT5, US30, Weekly The foreign exchange market and interest rates The survey questions also focused on two currency pairs: the euro to the US dollar and the euro to the Chinese yuan. In both cases, survey's experts expect a significant strengthening of the European currency. The biggest change is expected for the EUR/USD pair, where as many as 53.5% of respondents expect an increase (previously 46.2%) and 33.5% assume no major change. Source: Conotoxia MT5, EURUSD, Weekly The positive attitude towards a strengthening of the euro appears to be linked to interest rate expectations. Almost unanimously, 87.1%, respondents were in favour of an increase in euro area interest rates in the short term. However, they are less positive about increases in the long term (we could assume more than six months), where 48.3% of respondents expect rates to rise and 36.5% expect no change. In second place in terms of expected interest rate increases is the United States. 79.2% of respondents see a further tightening of monetary policy in the forthcoming FOMC decision. In the long term, 38% of respondents expect an increase and 39.8% expect no change. These expectations seem to be reflected in US bond yields. Long-term 10-year bonds have lower yields than short-term ones (e.g. 2-year bonds). Currently, this difference is 0.65 percentage points. This situation may seem illogical, as why would we want to receive less for holding our funds longer. Historically, a similar relationship has usually heralded a period of recession or slowdown in the economy, which, it seems, we are beginning to feel today. Grzegorz Dróżdż, Junior Market Analyst of Conotoxia Ltd. (Conotoxia investment service)
Indonesia Inflation Returns to Target, but Bank Indonesia Likely to Maintain Rates Until Year-End

Asia Market: Bank Indonesia Is Widely Expected To Hike Rates Today

ING Economics ING Economics 19.01.2023 09:05
Souring US data raises thoughts of the Fed's endgame. Australian labour data and Bank Indonesia decision APAC highlights Source: shutterstock Macro outlook Global Markets:  Big Moves in bond markets overnight – the run of soft data in the US is being taken at face value by investors – bad news finally equals bad news. Stocks had a bad day, with the S&P500 and NASDAQ both losing between 1 and a quarter and one and a half per cent on the day, but it is the moves in US treasury yields that most catch the eye. 2Y US Treasury yields fell 12.2bp, to 4.082%,  while the 10Y bond saw yields down 17.8bp to 3.37%, which has helped drag bond yields elsewhere down too. The Australian 10Y now yields 3.43%, which is down more than 60bp from the start of the year. Japan’s 10Y JGB is now yielding only 0.402% after investors were chastened by Kuroda’s blunt rejection of further changes to the BoJ’s policy stance. It did look at one point as if these weaker yields would drive EURUSD to new year highs, and for a while they did, reaching up to 1.0887, but the rise was short-lived, and EURUSD is now back to just below 1.08. The AUD had a similar gain and then reversal, as did Cable, though it managed to hold on to more of its earlier gains to trade at 1.2345 currently. The JPY did almost the opposite, selling off up to 131.50 after the BoJ meeting, only to recover back to 128.43. Asian FX had a mostly positive day yesterday, led by the THB, INR, IDR and PHP. G-7 Macro: December US advance retail sales came in even weaker than expected, dropping 1.1% MoM, with downward revisions to previous months’ data. PPI inflation data also fell sharply from the previous month, and there was a nasty fall of 0.7% MoM from industrial production. James Knightley has written about this data plus what it may mean for the Fed. It’s well worth the read – it even questions whether the Fed will raise further after February.  The Fed’s Beige book also noted that the rate of price increases was moderating in many districts with contacts expecting further moderation in the year ahead. In spite of this, James Bullard and Loretta Mester kept up the hawkish commentary – not that it seems anyone in the markets is listening. Today, we get US housing starts and permits. Housing starts have been on the slide since April last year, though these winter readings need to be taken with a pinch of salt as they are prone to seasonal anomalies. UK RICS house price balance is also released for December today and is expected to show further declines. Australia: The December labour report contains a lot of interesting data. The headline figure of a 14,600 decline in total employment is the most eye-grabbing detail, though it was mainly a result of part-time job losses (-32,200), and full-time jobs still grew a respectable 17,600, though slower than in November. And there was a higher-than-expected unemployment rate of 3.5% up from 3.4%. Together, these data mean that we will stick to our 3.6% peak cash rate call, despite the inflation disappointment last month. More inflation data is released next week, which we hope will restart inflation's move lower.  Indonesia: Bank Indonesia meets to discuss policy today.  The central bank is widely expected to hike rates at today’s policy meeting to steady the IDR and to quell still-potent price pressures.  Inflation unexpectedly flared up last December with BI Governor Warjiyo warning that inflation could remain elevated this year. BI will continue to monitor inflation developments and the performance of the currency. However, we could see the central bank eventually pause after Governor Warjiyo voiced some concerns about the economy’s growth trajectory in 2023.     Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  
The Challenge to the Dollar: De-dollarisation and Geopolitical Shifts

Rates Daily: The Market Is Now Homing In On A 25bp Hike From The Fed At The February Meeting

ING Economics ING Economics 19.01.2023 09:17
The rates rally is extending, but also looking increasingly stretched, especially in the euro area where 10Y Bunds are back below 2% and 2023 European Central Bank rate cut expectations are creeping in. Today's session holds fewer data to feed the rally, and we might get more pushback from the ECB against the notion of slowing hikes   The belly of the curve leads the rally as the focus increasingly turns to Fed cuts The bond bulls got all they could hope for yesterday to extend the rates rally with US dictating the way. The 5Y part of the curve led the way lower in Treasury yields dropping by more than 18bp on the day, and the 10Y yield dropped below 3.40% in a session capped off by a strong 20Y auction. The BoJ and softer US data provided the backdrop for a further bid Certainly, the Bank of Japan leaving its policy of yield curve control in place paved the way for lower rates ahead of the session, US data later provided the backdrop for a further bid. Softer-than-expected retail sales, a producer price index hinting at weaking pipeline inflation pressures and a miss in industrial production data suggest that the Fed is close to the end of its hiking cycle with recession on its way. Near term the market is now homing in on a 25bp hike from the Fed at the February meeting and the possibility of another hike following in March. This implies the peak of the Fed funds upper bound target rate at 5%. The Fed hawks Bullard and Mester were making the case for tightening policy rate beyond 5%, but the market easily glossed over their comments also given that in the Fed’s own survey, the Beige Book, contacts reported expectations of further moderating price growth. The focus is increasingly turning to the first Fed cuts, 50bp in total now discounted for the second half of the year. The 5Y sector is rallying faster than other maturities, indicating growing cut expectations Source: Refinitiv, ING The rally spills into EUR rates, but might receive more pushback today EUR rates rallied alongside US rates with the 10Y Bund yield dipping below 2% for the first time since mid-December. The EUR market obviously had its own dovish ECB sources story this week to underpin the rally, but that story has received pushback in ECB officials’ comments yesterday. With an eye on the keeping financing conditions sufficiently tight to rein in inflation, ECB officials possibly see their earlier efforts of decoupling its outlook from the Fed at risk.  Earlier efforts of the ECB to decouple itself from the Fed are at risk France’s Villeroy stated that the President’s guidance from the last meeting for a series of 50bp hikes was still valid. Similarly, Finland’s Rehn said “significant interest rate hikes in the near-term monetary policy meetings are justified”, arguing it was too early to speculate about the pace of hikes after March. Today we will hear from the ECB President herself when she speaks in Davos. Equally as impressive as the outright rally in EUR rates was the further tightening of intra government bond spreads. The key 10Y spread between Italian government bonds and the German peers briefly dipped below 170bp, the tightest since April last year. Back then the ECB already flagged its intention to wind down asset purchases, but it was still ahead of the rate hikes and any plans of quantitative tightening. 250bp of hikes later with another 125bp likely to come and balance sheet reduction well under way, that is an impressive feat. But keep in mind, even EUR markets are now pricing in the prospects of first ECB rate cuts for the second half of this year. Real swap rates haven't yet eased financial conditions but tighter sovereign spreads have Source: Refinitiv, ING Today's events and market view Rates markets are on a run. Events and data have given at least US rates good reason to do so, though we think that levels are becoming more stretched. Technical factors like the historically wide gap between the Fed funds rate – still set to rise near term – and the 10Y yield suggest building upward pressure. But there is also an underappreciation of inflationary risk coming from a re-opening China and we have also not seen the last chapter of the BoJ story. But it is especially in the eurozone we think the spilling over of rate cut expectations looks overdone. Today’s data calendar features housing data, initial jobless claims and the Philadelphia regional Fed index  in the US. There is little by way of data in the euro area, but we will get the accounts of the December ECB meeting in which the central bank delivered a ‘smaller’ 50bp hike than at the previous meeting, but with a hawkish twist. Quantitative tightening was kicked off and President Lagarde hinted at more 50bp hikes to come. This puts particular focus today on her scheduled appearance at the Davos Economic forum. With ECB's Klass Knot there is also another ECB hawk who could push back at the notion that the pace of hikes could be slowed in March. In primary markets we will see France and Spain with auctions today.    Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  
US Retail Sales Boost Prospects for 3% GDP Growth, but Challenges Loom Ahead

Results From Procter & Gamble And Netflix Will Shed Some Light On Global Consumer Strength

Saxo Bank Saxo Bank 19.01.2023 09:28
Summary:  The deteriorating US retail sales and industrial production data hurt risk sentiment, and US equity markets tumbled despite lower yields. The US dollar was choppy after BOJ’s pushback on market speculation and the announcement to keep policy unchanged, but hotter core CPI in UK supported the sterling. Weaker Australia employment data sent AUDUSD lower to test 0.6900. Crude oil prices plummeted on deteriorating economic outlook and a weaker API inventory build. Focus turns to earnings today with Proctor & Gamble and Netflix due to report.   What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) reversed and fell over 1% on recession fears U.S. equities opened higher initially as bond yields tumbled on a dovish Bank of Japan and much weaker than expected prints on U.S. retail sales, industrial production, and producer prices. Comments from the Fed’s Bullard in a Wall Street Journal interview about his preference of keeping the pace of rate hike at 50bps at the February FOMC triggered a reversal around mid-day and saw U.S. stocks plunge in the New York afternoon session. The weak economic data and the risk of the Fed overdoing it in rate hikes troubled equity investors. At the close of Wednesday, Nasdaq 100 fell 1.3% and S&P 500 slipped 1.6%. All 11 sectors of the S&P 500 declined, with the consumer staples sector falling the most to finish the session 2.7% lower. In the Fed’s Beige Book released on Wednesday, U.S. retailers said they were having difficulties in passing through costs increases to consumers. On individual stocks, PNC Financial Services (PNC:xnys) fell 6% on a larger-than-expected credit losses provision. Moderna (MRNA:xnas) gained 3.3% following release of positive trial results for a RSV virus vaccine. US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) surged on dovish BoJ and weak economic data; the 10-year yield slid to 3.37% Treasuries surged in price and yields collapsed on dovish outcomes from the Bank of Japan’s monetary policy meeting. The BoJ doubled down on monetary easing with an adjustment to its Funds-Supplying Operations against Pooled Collateral which enables it to lend cheaply to banks up to 10 years in maturity from only up to two years previously. Apparently, the BoJ aims at bringing down the elevated swap rates closer to the yields of JGBs. Treasury yields took a further dive in New York morning hours following the release of larger-than-expected declines in retail sales and industrial production as well as a bigger-than-expected 0.5% month-on-month fall in the Producer Price Index in December. The hawkish comments from Fed’s Bullard about keeping the February hike at 50bps did not have much of an impact on Treasuries despite being picked up as a reason to fade the rally in equities by traders. The result from the USD12 billion 20-year Treasury bond auction was strong. Treasury yields finished the Wednesday session with the 2-year 12bps richer at 4.08% and the 10-year 18bps richer at 3.37%, bringing the 2-10 curve more invested to -71bps. Hong Kong’s Hang Seng (HIF3) ticked up and China’s CSI300 (03188:xhkg) traded sideways Hang Seng Index ticked up by 0.5% and CSI300 edged down by 0.2%. Online and mobile gaming names led in both the Hong Kong and mainland bourses. China released 88 new licenses of online/mobile games, including one title from Tencent (00700:xhkg), up 1.7%. and one title from NetEase (09999:xhkg), up 6.5%. Trading in other internet names, however, was mixed. Auto dealers were led lower by an 8.3% decline in Zhongseng (00881:xhkg). EV makers traded weakly, XPeng (09868”:xhkg) down 2.9%. In A-shares, food and beverage, beauty care, and construction materials led the decline while online gaming, computing, media, communication, and non-ferrous metal gained. Northbound net buying was over RMB4 billion, bringing the net buying in January to over RMB90 billion. FX: Choppy dollar after BOJ ECB’s Villeroy dismissed dovish ECB talks and says Lagarde guidance still valid, bumping up EUR higher but the gains were reversed later and EURUSD ended below 1.0800 again. EURGBP meanwhile testing a break below 0.8740 to near 1-month lows as UK core CPI came in hotter-than-expected. AUD and NZD were divergent with AUDNZD falling from highs of 1.0873 to lows of 1.0783. AUDUSD was slightly lower on weaker-than-expected employment data which saw unemployment rate rising to 3.5% while overall employment fell 14.6k compared to expectations of +25k, while last month’s employment gains were revised lower to 58.3k. NZDUSD however saw little reaction to reports of PM Arden’s resignation. USDJPY back below 129 after the BOJ-related volatility yesterday. Crude oil (CLG3 & LCOH3) tumbled on sluggish US data and weak API build Crude oil prices rose to fresh highs earlier on Wednesday before sliding in the NY hours. US data flow turned out to be grim with both retail sales and industrial production disappointing, sending recession concerns soaring. The International Energy Agency was also circumspect. It said the market faces immediate headwinds, with supply exceeding demand by about 1mb/d in Q1. Meanwhile, API reported that US crude stockpiles rose 7.6mn barrels for last week. WTI futures retreated from highs of $82+ to $79, while Brent was back below $85/barrel from highs of ~$88.  Read next: The Japanese Yen (JPY) Weakened, The Aussie Pair Is Trading Above 0.70$| FXMAG.COM What to consider? BOJ maintains policy unchanged, launches new tool to support bond market The Bank of Japan left its policy levers unchanged at the January meeting, defying heavy market speculation of another tweak after the surprise in December. The announcement saw the yen plunge by over 2%, as the central bank said it would continue large-scale purchases of government bonds and increase it on a flexible basis as needed. The central bank, in a new measure to maintain yield control policy, also extended a loan offer to banks for funds of up to 10 years against collateral for both fixed- and variable-rate loans. Meanwhile, the BOJ still sees inflation getting back to sub-2% range this year. Core CPI estimate for FY2022 was only slightly raised to 3.0% for 2.9% previously, while the FY2023 estimate of 1.6% was maintained. In the press conference, BoJ Governor Kuroda said that the sustainable inflation goal is not yet in sight, suggesting low odds that he will declare victory on bringing back inflation before his exit in April. Bad economic news is now bad news for the markets US PPI fell 0.5% M/M in December, a deeper fall than the expected 0.1% decline, while the prior was downwardly revised to +0.2%; PPI Y/Y rose 6.2%, a big fall from the prior (downwardly revised) +7.3%, beneath the expected +6.8%. While slowing inflation continues to be a positive for the markets, concerns around slowing economic growth have started to bite as well. December US retail sales fell 1.1% M/M, deeper than the consensus 0.8% decline with a sizable downward revision for the prior to -1.0% from -0.6%. Industrial production fell 0.7% M/M in December, deeper than the consensus -0.1%, with the prior downwardly revised to -0.6% from -0.2%. Manufacturing output also declined by a larger 1.3%, deeper than expected -0.3% and the prior revised to -1.1% from -0.6%. Fed speakers continue to be mixed, with the non-voters staying hawkish Fed’s Bullard (non-voter) said his dot plot forecast for 2023 is just above the Fed's median of 5.1% at 5.25-5.50% and that Fed policy is not quite in restrictive territory, reiterating it needs to be over 5% at least. Bullard added the Fed should move as rapidly as it can to get over 5% and then react to data, noting his preference is for a 50bps hike at the next meeting (against the consensus 25bps). Loretta Mester (non-voter) said further rate hikes are still needed to decisively crush inflation and we are not at 5% yet, nor above it, which she thinks is going to be needed given her economic projections. She believes the Fed's key rate should rise a "little bit" above the 5.00-5.25% range that the Fed median implies. Harker (voter) said Fed needs to get FFR above 5%, but its good to approach the terminal rate slowly. Dallas President Lorie Logan (voter) spoke later as well, and also hinted at a slower pace of rate hikes. She said she wants a 25bp rate hike, not 50, at the February 1 FOMC meeting. She said if slower rate hike pace eases financial conditions, then the Fed can offset that by gradually raising rates to a higher level than previously expected. UK CPI softens for a second straight month UK Dec. CPI out this morning and slightly hotter than expectations as the headline rose +0.4% MoM and +10.5% year-on-year vs. +0.3%/+10.5% expected, respectively while the core CPI level rose +6.3% YoY vs. +6.2% expected and +6.3% in November. Sterling traded slightly firmer after the data. P&G and Netflix report earnings today On the earnings front, results from Procter & Gamble (PG:xnys) and Netflix (NFLX:xnas) will shed some light on global consumer strength. P&G reports Q4 earnings on Thursday before the market opens with analysts expecting revenue growth of -1.1% y/y and EPS of $1.59 down 4% y/y suggesting that volumes are being hit by inflation and that analysts expect P&G to see their operating margin decline q/q. The potential upside for P&G on its outlook is the reopening of China. Netflix reports Q4 earnings on Thursday after the market close with analysts expecting revenue growth of 1.7% y/y as streaming services are still facing headwinds post the pandemic. EPS is expected at $0.51 down 67% y/y. The things to focus on for investors are user growth, updates on its advertising business, and user engagement figures relative to recent content launches.   For a look ahead at markets this week – Read/listen to our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: Market Insights Today: Sluggish US economic data; P&G and Netflix earnings ahead - 19 January 2023 | Saxo Group (home.saxo)
Sterling Slides as Market Anticipates Possible Final BOE Rate Hike Amidst Weakening Consumer and Housing Market Concerns

The Global Recession Fears Are For Now Taking A Backseat With Europe Weathering The Energy Crisis Better And China’s Economy Reopening

Saxo Bank Saxo Bank 19.01.2023 09:34
Summary:  Even as inflation concerns continue to be the top concern for markets, weak US retail sales and industrial production data overnight has sparked some concerns of an economic slowdown. The strength of the labor market still provides room to argue in favor of a soft landing vs. a steep recession, and markets will becoming increasingly sensitive to payroll data going forward. Earnings will also start to take a bigger focus with major tech players starting to report next week. The global economic cycle is at a critical juncture, and investors are trying to weigh up the options between whether we get a soft landing or a recession. While US housing data and survey data has been weak for months now, it is the real economic data that is now starting to show a significant deterioration. The markets are also evolving on their interpretation of economic data, coming from a point where bad news was good news and suggested that the Fed will pivot on its rate hike cycle which provided a bid to equities. Now, bad news is bad news, and it is starting to send shivers about what the Fed’s tightening cycle means to the growth outlook. This shift in perspective comes from a weak set of US data last night. December US retail sales fell 1.1% M/M, deeper than the consensus 0.8% decline with a sizable downward revision for the prior to -1.0% from -0.6%. Industrial production fell 0.7% M/M in December, deeper than the consensus -0.1%, with the prior downwardly revised to -0.6% from -0.2%. Manufacturing output also declined by a larger 1.3%, deeper than expected -0.3% and the prior revised to -1.1% from -0.6%. Source: Bloomberg, Saxo Markets The state of the US consumer; payroll data will be key This shift in narrative is raising some key questions about the strength of the consumer which has been the key pillar of strength in this extremely tough macro environment. With inflation and interest rates in record high territory, consumers are likely to find ways to cut costs. This translated into a reduction of excess savings last year, as spending shifted from goods to services and from high-priced goods to lower-priced goods. Some risks have emerged to a deterioration in services demand as well, with the December retail sales print also showing a deterioration in restaurant sales, which serves as a proxy for spending on services. But with the labor market still tight, it is hard to see consumer spending decelerate sharply. That being said, markets will continue to look for more signs to judge the state of the US consumer and a big focus will be on labor market and wage data going forward. Wage pressures are cooling, especially in industries that saw the largest wage gains over the past year due to labor shortages, including leisure and hospitality and wholesale trade. But for now, jobs are still growing and that keeps the outlook of the consumer supported against any sharp and steep reversals. In the weeks to come, we could see market volatility shifting away from CPI days to NFP (nonfarm payroll) days as the jobs data comes under greater scrutiny. Read next:The Japanese Yen (JPY) Weakened, The Aussie Pair Is Trading Above 0.70$| FXMAG.COM Watch for earnings The next nonfarm payroll data is after two weeks (due 3rd February). In the meantime, markets will be getting a lot more to digest from the earnings front. Consumer staples giant Proctor & Gamble reports today, followed by Kimberly Clark next week. After Netflix reports today, tech earnings also pick up next week with Microsoft and Tesla reporting, while Apple, Amazon, Alphabet and Meta report earnings a week later. Factset estimates that S&P500 will report earnings decline of 3.9% YoY in Q4, as analysts are revising their estimates lower. Our Equity Strategist Peter Garnry has also written numerous equity notes suggesting that company earnings and margins are likely to come under pressure this year as pricing power declines and costs (esp wages) remain sticky. Investment Implications We believe that earnings disappointments will continue to spark further fears of an economic slowdown. But the global recession fears are for now taking a backseat with Europe weathering the energy crisis better and China’s economy reopening at a rapid pace. For now, inflation fears continue to be somewhat more pronounced but if recession fears start to take a firmer hold, that could likely nudge investors towards safe havens such as bonds. If market pricing for economic growth deteriorates further, earnings estimates could get hurt even more and we could potentially see more pain for growth stocks. This necessitates the importance of a diversified and balanced portfolio once again, despite dismal results for a 60/40 portfolio last year. We also believe Asian equities have the potential to outperform US equities in 2023, as discussed in this video, and provide some attractive valuation levels to consider.   Source: Macro Insights: Growth concerns starting to bite harder | Saxo Group (home.saxo)
Reserve Bank of New Zealand: Kenny Fisher says he expects a 25bp rate hike on May 24th

Jacinda Ardern Has Resigned As Prime Minister Of New Zealand, Crude Oil Extended Wednesday's Steep Decline

Saxo Bank Saxo Bank 19.01.2023 09:43
Summary:  Yesterday saw a sharp reversal in risk sentiment across the board, with US equities in a steep slide and the USD higher, even as treasury yields dipped. The slide in sentiment came after weak US Retail Sales and other data - is bad news finally bad news again? The selling came in at a key technical area after the recent rally, making for a compelling bearish reversal. Elsewhere, the Japanese yen bounced back across the board overnight, just after BoJ-inspired weakness.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) fall over 1% on recession fears U.S. equities opened higher initially as bond yields tumbled on a dovish Bank of Japan and much weaker than expected prints on U.S. retail sales, industrial production, and producer prices. Comments from the Fed’s Bullard in a Wall Street Journal interview about his preference of keeping the pace of rate hike at 50bps at the February FOMC triggered a reversal around mid-day and saw U.S. stocks plunge during the afternoon session. The weak economic data and the risk of the Fed overdoing it on rate hikes troubled equity investors. On the close the Nasdaq 100 was down 1.3% while the S&P 500 slipped 1.6%. All 11 sectors of the S&P 500 declined, with the consumer staples sector falling the most to finish the session 2.7% lower. In the Fed’s Beige Book released on Wednesday, U.S. retailers said they were having difficulties in passing through cost increases to consumers. Hong Kong’s Hang Seng (HIF3) and China’s CSI300 (03188:xhkg) Following the decline in U.S. stocks overnight, Hong Kong and mainland Chinese stocks opened lower but managed to pare losses and more. Hang Seng Index and CSI300 edged up modestly in the early afternoon local time. Chinese property developer stocks outperformed while technology names were among the laggards. Hang Seng TECH Index dropped more than 1% on profit taking ahead of the 3-day Lunar New Year holiday next week. Chinese social platform, Kuaishou (01024:xhkg) plunged nearly 6% after a co-founder sold shares. FX: US dollar posts strong rally on weak US data; JPY roars stronger still overnight The weak US data yesterday (more below) took US treasury yields sharply lower all along the curve, but with risk sentiment sliding badly on the news, the USD rallied sharply rather than selling off on the implications for less Fed tightening at coming meetings. This suggests investors may finally be fretting the risk of an incoming recession. The USD strength eased overnight as the Japanese yen, already beginning to reverse to the strong side by late US hours despite the dovish BoJ earlier in the day (the JPY traditionally thrives most on falling global yields and weak sentiment/recession fears) rallied hard, handily outpacing the US dollar and ripping stronger across the board, particularly against the hapless AUD, which was hit by weak December employment data overnight. Crude oil (CLG3 & LCOH3) tumbles badly on sluggish US data Crude oil extended Wednesday’s sharp losses which occurred after poor US economic data triggered fresh growth concerns. The move lower was strengthened by technical and momentum traders getting wrong-footed after having bought an upside break earlier in the day. A reopening of China has been the main supporting focus in recent weeks but with activity there now slowing ahead of the Lunar New Year holiday, traders turned their attention elsewhere and did not like what they saw. Also, the API reported another chunky inventory rise of 7.6 million barrels, well above the 2-million-barrel rise expected by the EIA later today. Finally, IEA delivered a bullish outlook for 2023 demand as China recovers and air travel rebounds. Gold ended lower for a third day, but bids keep coming Gold’s newfound strength continues to be tested but so far, the metal has shown resilience and found fresh bids on any pullback. Yesterday it ended lower for a third day, but still above $1900 with traders (many of which are algorithmic, and machine based) taking their directional input from the US bonds market and not least the dollar. Traders have built positions in the belief we will see peak rates soon in the US, a development that triggered very strong rallies on three previous occasions during the past 20 years. However, as long the market trusts the FOMC will deliver lower inflation, major institutional investors are likely side lined, something that shows up in ETF holdings which remain near a two-year low. Support at $1896 followed by $1855, the 21-day moving average. US Treasury yields lower on weak US data, BoJ standing pat (TLT:xnas, IEF:xnas, SHY:xnas) Treasuries surged in price and yields collapsed on dovish outcomes from the Bank of Japan’s monetary policy meeting. Treasury yields then took a further dive following the release of larger-than-expected declines in US retail sales and industrial production as well as a bigger-than-expected 0.5% month-on-month fall in the Producer Price Index in December. The hawkish comments from Fed’s Bullard about keeping the February hike at 50bps was ignored by Treasuries despite being picked up by traders as a reason to fade the rally in equities. The result from the USD12 billion 20-year Treasury bond auction was strong. The 2-year trades this morning at 4.04% while the 10-year yield has dropped to a four-month low at 3.32%, with the 2-10 curve still very inverted at -72.5 bps. What is going on? US December Retail Sales and other US data disappoint The December US Retail Sales report for December was the second consecutive monthly report to disappoint expectations, with the headline falling –1.1% MoM vs. -0.9% expected and despite the negative November revision to –1.0% (vs. -0.6% originally). The ex Auto and Gas number was also disappointing at –0.7% vs. 0.0% expected and also with a negative revision for November to –0.5% (from –0.2%). These are particularly negative numbers given still high inflation in the US as they are not inflation-adjusted. Elsewhere, the US PPI data was softer than expected at –0.5% MoM and ex Food and Energy at +0.1%, with the YoY dropping to +6.2%/5.5% vs. 6.8%/5,6% expected. Finally, December US Industrial Production fell 0.7% MoM vs. 0.1% expected, with a negative revision of November data to –0.6% from -0.2%. New Zealand Prime Minister Jacinda Ardern shocks with resignation announcement Her resignation was announced after five and a half years in power and came in the context of announcing an October 14 election this year. She will step down no later than February 7. Her Labour Party is trailing the opposition National Party slightly in the polls. Ardern said she hadn’t the energy to continue as PM. Microsoft to lay off 10,000 employees ... as a part of it what it considers a set of cost-cutting measures outlined in a securities filing yesterday. CEO Satya Nadella cited a downward shift in demand for digital services and fears of  a recession. “...we saw customers accelerate their digital spend during the pandemic, we’re no seeing them optimize their digital spend to do more with less.” The layoff are just under 5% of the company’s global workforce. Rising volume of trades on Euronext Paris In recent sessions, we have noticed a strong rise in the volume of trades and a sharp increase of volatility for several small and medium companies listed on Euronext Paris. Target Spot (which connect brands to their audience through a premium portfolio of publishers across digital audio) has experienced a huge rebound in recent sessions (+28 % on a weekly basis) driven by an increase in the volume of trades. This company can be considered as a penny stock (the stock was exchanged at 50 cents two weeks ago). There is also a jump in speculation for companies using dilutive financing in the form of OCABSAs ((bonds convertible into shares with share subscription warrants). In October 2022, the French stock market authorities, the AMF warned against the risks associated to this financing, especially for retail investors. There are several listed companies in that case at the Paris stock market, such as Avenir Telecom (manufacture of mobile phones) and Spineway (implants and surgical instruments). Usually, stay away from any kind of ultra-dilutive funding. Fed speakers continue to be mixed, with the non-voters staying hawkish Fed’s Bullard (non-voter) said his dot plot forecast for 2023 is just above the Fed's median of 5.1% at 5.25-5.50% and that Fed policy is not quite in restrictive territory, reiterating it needs to be over 5% at least. Bullard added the Fed should move as rapidly as it can to get over 5% and then react to data, noting his preference is for a 50bps hike at the next meeting (against the consensus 25bps). Loretta Mester (non-voter) said further rate hikes are still needed to decisively crush inflation and we are not at 5% yet, nor above it, which she thinks is going to be needed given her economic projections. She believes the Fed's key rate should rise a "little bit" above the 5.00-5.25% range that the Fed median implies. Harker (voter) said Fed needs to get FFR above 5%, but its good to approach the terminal rate slowly. Dallas President Lorie Logan (voter) spoke later as well, and also hinted at a slower pace of rate hikes. She said she wants a 25bp rate hike, not 50, at the February 1 FOMC meeting. She said if slower rate hike pace eases financial conditions, then the Fed can offset that by gradually raising rates to a higher level than previously expected. What are we watching next? Norway Central Bank the latest to indicate end-of-cycle hike today? The Norwegian central bank was the first G10 central bank to hike rates back in 2021, but maintained a curiously slow pace of hikes relative to other central banks. The market is divided on whether the Norges Bank is set to hike by 25 basis points today, with most believing that even if it doesn’t, the following meeting in late March will see a hike, probably the last of the cycle for now. Earnings to watch The Q4 earnings season continues today with two big earnings reports from two very different companies: the huge US consumer products company Procter and Gamble (Market Cap $350B) and streaming services provider Netflix, which has enjoyed a more than 100% rally off the lows by rejuvenating subscriber growth and rolling out plans to launch advertising on its platform for the first time. Still, that stock is down more than 50% from the bubble peak in 2021. Today: Procter & Gamble, Netflix Friday: Investor, Sandvik, Ericsson, Schlumberger Economic calendar highlights for today (times GMT) 0900 – Norway Rate decision 1330 – US Dec Housing Starts and Building Permits 1330 – US Initial Jobless Claims 1330 – Philadelphia Fed Business Outlook 1330 – Canada Dec. Terante/National Bank Home Price Index 1530 – EIA Natural Gas Storage Change 1600 – EIA's Weekly Crude and Fuel Stock Report (delayed) 1815 – US Fed Vice Chair Brainard to speak on economic outlook 2330 – Japan Dec. National CPI 0001 – UK Jan. GfK Consumer Confidence Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – January 19, 2023 | Saxo Group (home.saxo)
Bank of England Faces Rate Decision: Uncertainty Surrounds Magnitude of Hike

Gold Looks Appetizing On Weaker Dollar, Soft Economic Data From The US Revives The Fed Doves

Swissquote Bank Swissquote Bank 19.01.2023 10:59
The latest PPI data showed that the producer price inflation in the US fell way faster than expected, while retail sales fell 1.1% in December – marking the biggest monthly drop of last year. S&P500 The S&P500 didn’t like the mix of slowing economic data, and hawkish comments from Fed officials, and dived more than 1.50% yesterday. But the dovish expectations – despite the hawkish comments from the Fed, feed well into the bond markets: the US 2-year yield is diving toward the 4% mark, while the 10-year yield hit 3.30%, the lowest level since September. This means that the positive divergence in the sovereign space, compared with the stocks, is happening. Netflix and P&G And the divergence could be even more visible if the stocks fall further on soft earnings. Netflix and P&G will announce their Q4 results today. Read next: Un Secretary General Antonio Guterres Encouraged The Transition To Green Energy At The World Economic Forum In Davos, The Chinese Economy May Surprise You Positively| FXMAG.COM Energy In energy, US crude advanced past the $82 mark on Chinese reopening optimism and IEA predicting that the oil demand will hit a record in 2023, before falling back below the $80 on recession pessimism. Precious metals In precious metals, gold is bid above the $1900 level, supported by lower US yields and the softer US dollar. Watch the full episode to find out more! 0:00 Intro 0:42 Soft economic data from the US revives the Fed doves 2:09 But the Fed doves aren’t enough for cheering up the stock bulls 3:36 Netflix & P&G to reveal Q4 earnings today 6:00 USD is unloved 8:20 Crude oil swings up and down 9:05 Gold looks appetizing on softer yields & weaker dollar Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #US #PPI #retailsales #data #Netflix #P&G #earnings #USD #EUR #GBP #JPY #crude #oil #gold #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
Gold Has Extreme Bullish Condition

Rosenberg Was Quite Optimistic About The Outlook For Gold In 2023

InstaForex Analysis InstaForex Analysis 19.01.2023 12:02
Rosenberg Research founder and chief economist David Rosenberg said investment demand for gold could push prices to historic highs in 2023, most likely above $2,000, if the US economy falls into recession. He said in an exclusive interview that when it comes to the state of the economy this year, the only questions investors should be asking themselves are: how severe will the impending recession be and how should they protect their wealth? Rosenberg was quite optimistic about gold in his 2023 outlook report, explaining that this is because he sees dollar and the Fed's monetary policy peaking this year. He also mentioned that even though inflation has fallen sharply from its 2022 summer high, it remains consistently high. And since the Fed is set on bringing down this figure to 2%, it is likely that response to other growing economic weaknesses will be slow. Rosenberg added that the Fed will not cut interest rates quickly because it does not want a new threat to inflation. Most likely, it will raise interest rates next month and then hold them until recessionary conditions become too difficult to ignore. Rates will be cut only in the second half of the year Read next: Elon Musk Is Facing Trial In Fraud Trial Over 2018 Tweets| FXMAG.COM Regarding market pricing, Rosenberg said investors should take the central bank's forecasts with a considerable amount of skepticism. He also believes that the recession could last more than six quarters, the longest one since the 1980s. Rosenberg used the US housing market as one example of an impending economic downturn, noting that the house price bubble is bigger than it was before the 2008 financial crisis. He also said that the Federal Reserve may not provide much help during the impending recession, so consumers should not expect any fiscal stimulus   Relevance up to 09:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/332751
Assessing 'Significant Upside Risks to Inflation': Insights from FOMC Minutes

The Statement Of The Fed Of Dallas, Lorie Logan, About The Reduction Of Aggression Is Slightly Different From Expectations

Jakub Novak Jakub Novak 19.01.2023 12:12
The positions of Federal Reserve officials are gradually being divided. Some see the need for a less aggressive policy, while others are betting on maintaining the same position and further raising rates according to the plan. Federal Reserve Bank of Dallas President Lorie Logan At the subsequent meeting of the central bank, according to Federal Reserve Bank of Dallas President Lorie Logan, it would be prudent to further slow down the rate of the interest rate increase. We're referring to the meeting that will take place in February of this year. At the University of Texas at Austin, McCombs School of Business, Logan remarked, "A slower pace is merely a means to make sure we're making the best possible selections." Even if GDP slows, "we may, and if necessary, should change our overall policy to maintain restrictive financial conditions." In her first address on monetary policy since taking office in August last year, Logan stated that she agreed with the Fed's choice to slow the rate of an interest rate increase to half a percentage point at the December meeting. It's important to note that she mentioned boosting the rate by 0.5%, not by 0.25%, as many people would anticipate. Thus, her speech about lowering aggression somewhat deviates from expectations and positions her on the side of those who favor the Federal Reserve System continuing its strict monetary policy. She claims that Logan, who is a voting member of the Federal Open Market Committee this year, may hike rates even higher if required in the future. "We must keep an eye on the financial and economic outlook and devise a flexible yet solid plan of action. This will put us in a better position to succeed, regardless of how the situation develops "added Logan. Read next: Elon Musk Is Facing Trial In Fraud Trial Over 2018 Tweets| FXMAG.COM Permit me to remind you that the report from last week showed that inflation continued to fall in December, which raised concerns about the need to lessen price pressure and anticipation that the Fed would further slacken its rate hike schedule. The Federal Reserve raised interest rates by 0.5% in December, increasing the federal funds rate to 4.5% after four straight rises of 75 basis points. Investors are currently predicting a quarter-point hike in the following meeting. Logan stated Logan stated, "I view increasing inflation in the service sector as an indication of an overheated economy and a tight labor market, which need to be brought into a more balanced state so that the overall inflation rate returns to 2%." She also stated that the Fed is managing two threats well despite describing the labor market as "tight." She believes that to achieve price stability, the labor market and economy will need to be somewhat weaker.  EUR/USD Given that the bullish trend has not yet been broken, the technical picture of EUR/USD indicates that demand for the euro could resume at any time. There is also a prospect for more expansion and setting new records for the year. To do this, the trading instrument must remain above 1.0770, which will cause it to increase to the vicinity of 1.0815. You may reach 1.0860 with ease by climbing over this point. If the trading instrument falls, only a breakdown of support at 1.0770 will put more pressure on the pair, pushing EUR/USD to 1.0720 with a possible drop to a minimum of 1.0685. GBP/USD Regarding the technical analysis of GBP/USD, the pound's efforts to keep rising have been fairly successful so far. Buyers must continue to trade over 1.2310 to keep their advantage. The only thing that will increase the likelihood of a further recovery to the area of 1.2430, after which it will be possible to discuss a more abrupt move of the pound up to the area of 1.2485, is if the resistance of 1.2370 fails to hold. After the bears seize control of 1.2310, it is feasible to discuss the pressure on the trading instrument. The GBP/USD will be forced back to 1.2250 and 1.2190 as a result, hitting the bulls' positions.   Relevance up to 08:00 2023-01-20 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/332741
ECB's Tenth Consecutive Rate Hike: The Final Move in the Current Cycle

The Fed Needed To Get Rates Above 5% Sooner Rather Than Later

Michael Hewson Michael Hewson 19.01.2023 13:34
Yesterday saw another broadly positive session for European markets, with the FTSE100 once again underperforming, after UK inflation data showed itself to be much stickier than was anticipated, putting upward pressure on the pound in the process.   US markets initially started the day on the front foot until a double punch of weak data saw yields slide sharply on both the short and long end, prompting concerns that US economic activity was being impacted by the lagging effects of multiple rate hikes.   This concern about the economic outlook, along with announcements from the likes of Amazon and Microsoft about job losses, saw US markets roll over after European markets had closed, closing sharply lower, as once again the S&P500 failed above the 4,000 level.   Yesterday's weakness came as a result of concerns about the health of the US consumer. After a strong performance throughout most of 2022, consumer spending appears to have run out of steam with November and December retail sales declining 1% and 1.1% respectively. US PPI for December also saw a lower-than-expected rise of 6.2%, a sharp drop from the 7.4% seen in November.   The Fed Beige Book added little to the picture when it came to how the US economy is doing, apart from an acknowledgement that price pressures are starting to slow, however St. Louis Fed President James Bullard added to the uncertainty by insisting that the Fed needed to get rates above 5% sooner rather than later. This view conflicts with the prevailing market narrative of a 25bps hike next month, as concerns rise that the Fed could well be hiking into a potential recession.   These economic concerns also translated into crude oil prices which having hit their highest levels since the beginning of December early on the day, promptly reversed course to close the day sharply lower.   One thing in the favour of the US economy in the face of disappointing economic reports is a resilient labour market, with today's weekly jobless claims expected to see a modest rise from 205k to 214k.   We also have housing starts and building permits data for December, with the recent cold weather not expected to offer much hope of a respite here.   Last night's weaker US close looks set to translate into a lower European open.   The US dollar had a mixed day slipping to a marginal 8 month low against the euro before recovering, while against the Japanese yen we saw a 400-point range, after the Bank of Japan pushed back on market expectations of further measures to tweak its monetary policy settings around yield curve control.   Governor Kuroda went on to say that a further widening of the YCC band wasn't needed yet, as he looked to finesse the central banks messaging around its next policy move. The BoJ's biggest problem is that yesterday's events only delay the inevitable, with national CPI for December expected to reach a 42 year high of 4% later today.   With the Fed closer to the end of its rate hiking cycle, and the Bank of Japan yet to start its tightening regime, the line of least resistance for USD/JPY is likely to be a move towards 120 and possibly lower in the coming weeks.   EUR/USD – made a marginal new high of 1.0887 yesterday, before sliding back again, as the market struggles for direction. Could see a deeper fall towards 1.0720. The key resistance sits at 1.0950 which is a 50% retracement of the move from the 2021 highs to last year's lows at 0.9536. A move through 1.0950 opens up a move towards 1.1110.   GBP/USD – ran out of steam just shy of the December peaks at 1.2440. Above 1.2450 could see a move towards 1.2600. We need to hold above the 1.2000 area for further gains to unfold or risk a return to 1.1830.   EUR/GBP – the failure at the 3-month highs at 0.8895 this week has seen a move below last week's low at 0.8770/80, with the risk we could see a move towards the 0.8720 area, and 50- and 100-day SMA. The next support below 0.8720 targets 0.8680.   USD/JPY – the failure to hold onto the gains above 130.00 yesterday suggests the prospect of further weakness and a move towards the 126.50 area which is the 50% retracement of the up move from 101.18 to the highs at 151.95. Below 126.50 targets the 120.60 area.   FTSE100 is expected to open 38 points lower at 7,792   DAX is expected to open 60 points lower at 15,121   CAC40 is expected to open 30 points lower at 7,081   Email: marketcomment@cmcmarkets.com   Follow CMC Markets on Twitter: @cmcmarkets   Follow Michael Hewson (Chief Market Analyst) on Twitter: @mhewson_CMC
A Further Rise In Gold Is Very Likely, The Dovish Expectations Are Feeding Well Into The Bond Markets

A Further Rise In Gold Is Very Likely, The Dovish Expectations Are Feeding Well Into The Bond Markets

Ipek Ozkardeskaya Ipek Ozkardeskaya 19.01.2023 13:41
There was good, and less good news for investors on the wire yesterday.   The latest PPI data showed that the producer price inflation in the US fell way faster than expected. The expectation was a slowdown in factory gate inflation from 7.3% to 6.8%. And the data printed a sexy 6.2% for December – which meant a 0.5% retreat instead of a 0.1% decline. Core PPI also slowed. That's the good news.   The bad news is the US retail sales fell 1.1% in December – marking the biggest monthly drop of last year.   On the jobs front, Microsoft said that it will cut 10'000 jobs while Amazon started cutting jobs in the context of 18'000 job cuts announced a couple of weeks earlier. Exactly what the Fed wants.  The bad news would normally be good news for the stocks, if the Federal Reserve (Fed) members weren't there to spoil the dovish Fed expectations by saying that the US rates should go higher. Loretta Mester said more hikes are needed, and James Bullard reminded that the rates would have to stay 'on the tighter side this year' to help the Fed reach its 2% inflation goal.  S&P500 is an easy short at the current levels  The S&P500 didn't like the mix of slowing economic data, and still a hawkish Fed, and dived more than 1.50% yesterday.   And traders didn't hesitate much sending the index below the 200-DMA, and below the bearish trend building since the start of 2022, given that there is nothing encouraging for stock investors out there, other than the softening Fed expectations – which don't help filling the company's coffers.  Stock/bond divergence is happening!  The dovish expectations are, however, feeding well into the bond markets: the US 2-year yield is diving toward the 4% mark, while the 10-year yield hit 3.30%, the lowest level since September.   This means that the positive divergence in the sovereign space, compared with the stocks, is happening. Investors return to US sovereign bonds on expectation that the Fed would soften its policy due to recession jitters, while stock markets don't benefit from the expectation of softer financial conditions, as slowing economic activity is bad for profits.   And speaking of profits, Procter & Gamble and Netflix are due to release their Q4 earnings today!   Crude oil swings between gains and losses  US crude advanced past the $82 mark on Chinese reopening optimism and IEA predicting that the oil demand will hit a record in 2023, before falling back below the $80 on recession pessimism, and the news that the US crude inventories jumped by 7.6 million barrels last week, while the expectation was a drop in inventories.   The more official EIA data is due today, and the expectation of a 2.1 million barrel fall will likely disappoint the bulls. But I continue believing that the bulls will take the upper hand and carry the rally higher, though on a bumpy road.   Falling stocks + falling yields: a boon for gold diggers  Gold is bid above the $1900 level, and the positive pressure is supported by lower US yields – which decrease the opportunity cost of holding the non-interest-bearing yellow metal, and the softer US dollar.   The overbought conditions hint that we could see a minor downside correction in the short run, but levels between $1855 and 1900 are interesting for amassing gold.   There is potential for a further rise in gold, especially if the stocks fall, while the US yields continue easing. 
The EUR/USD Pair Has A Potential For Drop

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

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

Weaker Activity And An Increasingly Benign Inflation Backdrop In US

ING Economics ING Economics 19.01.2023 14:38
Widespread falls in key retail sales components and broadening signs that inflation pressures are rapidly moderating means we are getting very close to the peak for Federal Reserve policy rates. A 25bp hike in February still appears odds-on, but the case for additional hikes is looking less convincing US retail sales fell 1.1% month-on-month in December Broad, steep declines in retail sales In what is yet another disappointing set of US activity data, retail sales fell 1.1% month-on-month in December, worse than the -0.9% figure the market was expecting. Meanwhile, November's contraction of -0.6% was revised to an even weaker -1% MoM print. The damage was widespread with 11 of the 14 main components posting monthly declines including motor vehicles/parts (-1.2%), furniture (-2.5%), electronics (-1.1%), gasoline stations (-4.6%), department stores (-6.6%) and non-store retailers (-1.1%). Of the three that didn’t fall we have food/beverages flat on the month, sporting goods up 0.1% and building materials up 0.3%. Retail sales levels (February 2020 = 100) Source: Macrobond, ING   Lower gasoline prices obviously had a big impact given this is a dollar value report, but even if you exclude them, retail sales fell 0.8% after a 0.9% fall in November. The decline in autos is no surprise given the drop in unit volumes already reported while variable weather patterns may also have played a part, particularly on eating out. Nonetheless, the breadth of weakness, including internet, underlines the weaker consumer spending story as worries about squeezed incomes and falling asset prices weigh on sentiment. Can spending on services offset the gloom? The core 'control' group, which omits volatile components such as autos, gasoline and building materials and better tallies with broader consumer spending activity was also poor – falling 0.7% MoM rather than the 0.3% consensus. We can only hope that spending on services is holding up better. As the chart below shows, retail sales as a proportion of total consumer spending remains well above pre-Covid trends, so it may well be that overall spending holds up better as consumers gradually re-balance their spending back towards services. Retail sales spending as a proportion of total consumer spending Source: Bloomberg Increasingly benign inflation backdrop argues against the need for more major hikes Meanwhile the producer price inflation report showed that pipeline price pressures were also weaker than expected in December and November. Headline PPI fell 0.5% MoM rather than at the -0.1% rate expected  while November was also revised down a tenth of a percentage point. Core PPI (ex food & energy) was in line at just 0.1%, but November’s rate of price increases was revised down two-tenths of a percent. So we have further evidence of weaker activity and an increasingly benign inflation backdrop, which clearly suggests we are in the end game for Fed rate hikes. Today’s numbers, coming after the softer CPI report, should cement expectations for a 25bp Federal Reserve interest rate hike in February and at the margin diminish the case for additional rate hikes – currently we expect a final 25bp in March. With recessionary forces intensifying and inflation looking less and less threatening, the prospects for Fed rate cuts later in the year are growing. Read this article on THINK TagsUS Retail sales Inflation Federal Reserve Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The ECB Has Made It Clear That Rates Will Remain High Until There Is Evidence That Inflation Is Falling Toward The Target

Rates Daily: Pushback From The ECB Against The Notion That Its Rate Hikes Could Be Downsized

ING Economics ING Economics 20.01.2023 08:36
The European Central Bank's pushback against market rates lower has had modest success so far, but we think more headwinds are brewing for EUR rates in particular. It is not just from the last dash of ECB communications ahead of the quiet period, but also from the direction of supply and data next week The ECB's pushback is becoming more explicit US markets remain focussed on the looming recession, though data not being quite as bad yesterday allowed for a modest bounce back in rates. But it was a  bigger bounce in Bund yields where we witnessed more pushback from the ECB against the notion that its rate hikes could be downsized to 25bp starting in March. Going into the session the ECB’s Klaas Knot put it very bluntly, saying that the ECB was planning on hiking by 50bp ‘multiple’ times. President Lagarde, who had originally given out a series of 50bp hikes as a guidance at the last meeting, was less explicit in her remarks. She did make it clear, though, that inflation remained way too high and that the ECB would stay the course. Knot: The ECB is planning on hiking by 50bp ‘multiple’ times The minutes of the December meeting which were released yesterday gives us more reason to believe that we have not seen the last of the ECB's efforts to steer market expectations higher again. In December the central bank assessed that the “configuration of interest rates and expectations embodied in market pricing was not sufficiently restrictive". After the temporary push higher in market rates over the year-end, these rates are now close to where they were just ahead of the last meeting. While the ECB has officially moved to a meeting-by-meeting approach, it implicitly still sees it as crucial to its goals to guide longer term rates. One should expect more micro management of market expectations in coming days. We expect the ECB to push back against the lower terminal rate and cuts in 2024 priced in by swaps Source: Refinitiv, ING More headwinds brewing next week, especially for EUR rates The distance Bunds have put between themselves and the 2% mark is yet small when benchmarked against the overall volatility we have witnessed, but we think it should grow further. For one we would be surprised if ECB officials were not to make good use of their final opportunities to steer expectations before the quiet period ahead of the February policy meeting kicks in next Thursday. Already scheduled to speak early next week are again Lagarde and Knot, but also Holzmann, on the hawkish end of the spectrum, and Panetta, who occupies the dovish end. Data and long end supply are other factors to watch On the data front we will get the flash PMI readings for which consensus is pencilling in a slight improvement. This would gel with the latest less downbeat data, but should also give the ECB additional room to tighten policies more aggressively than the market currently prices. Supply could provide a more technical headwind for rates markets with the EU slated to sell bonds via syndicated deals next week. The EU tends to be an issuer in longer tenors, although lately market expectations seem to have turned more towards a tap of an existing ultra-long bond as part of a dual tranche deal rather than a new 30Y issue. Scheduled supply from the euro area sovereigns themselves is relatively muted, though markets are still waiting for new issue deals from Spain and France anytime now.   Of course one always has to take into account what happens on the other side of the Atlantic. The Fed will stay quiet next week ahead of its policy meeting, but we may still get some spill-over from market reaction to US data. Most prominently we will get the advance GDP reading for the final quarter of 2022, giving an indication of economic momentum late last year. We will also have the personal income and spending data, which will be scrutinized in the wake of the latest weak retail data readings. And crucially, the Fed’s favoured inflation measure, the Personal Consumption Expenditures price index will also be released, where the consensus survey is pointing to a small uptick in the month-on-month core reading. Supply and profit-taking are key risks to the January bull run Source: Refinitiv, ING Today's events and market view Overall we have already suggested earlier that the current levels of market rates look stretched. The upcoming policy meetings may eventually put the rally to the test, but it is for EUR rates that we see the clearest signs of headwinds brewing already near term – not just from last dash ECB communications, but potentially also data and supply. We think the least we should see is an underperformance of EUR rates versus the US.   The Fed’s Harker and Waller are the last scheduled speakers before the quiet period ahead of the Fed meeting sets in tomorrow. In Europe we will hear from Lagarde again today, and given the limited impact of communications over the past days she would have good reason to be more explicit. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  
Prices Of Gold Rose For The Third Straight Session

The Increase In Gold Prices Depends On Fed Interest Rates

Saxo Bank Saxo Bank 20.01.2023 09:37
Summary:  In our video we explore what investors need to consider, if the US Fed stops rising rates and what it means for how gold, equities, and gold stocks could perform. Will they relive the 2019 scenario after the Fed paused and cut rates?   What could be on the horizon for gold and equities What could be on the horizon if the Fed stops rising rates; What could it mean for it gold, equities, and gold stocks?   Despite bond yields rising slightly on Thursday in the US to 3.4%, bond yields are now considerably from their October peak down about 0.8%. Interestingly the US 10-year Treasury yield broke below key support two days ago. And our head of technical analysis pointed out the closely watched yield could drop to 3.22%. As you may recall, our view at Saxo is that ‘peak hawkishness’ would come in Q4 2022, which supported the retreat in bond yields since November last year. And the fact that we have seen ‘peak hawkishness’ could also mean bond yields could continue to retreat.   Inversely, at the same time, the gold price has risen 19%, as it tends to have an inverse relationship to bond yields which have fallen. Also companies involved in gold are also looking interesting. US gold giant Barrick Gold has rallied about 30% from its September low. De Grey Mining in Australia is up 90% from its July low, while Australia’s biggest gold producer Newcrest Mining is up 34% from its October low. But also what’s really interesting is this; If we see the US Fed Funds rate peak or the Fed cut rates (which is what consensus thinks), as Ole Hansen pointed out on yesterday’s podcast, then gold price could rally further, taking gold equities up higher too. Ole reflects on when the Fed Funds peaked over the last 20 years and after it peaked, about a month later, gold strongly rallied. The last peak in the Fed funds rate was in 2019, and Ole mentions that lead to a 61% rally in gold. So if this repeats again, our outrageous prediction of gold hitting $3,000 could come true. Thinking about equities now with the same scenario. If you look at a chart and see what happened after the US Fed funds rate peaked in 2019, after the Fed cut rates, equities strongly rallied. If you looked at a chart, from early 2020, the S&P500 rallied 24% over the course of about 21 months and Australia’s ASX200 rallied 48% over about 17 months. So if we do see the Fed cut rates, and these scenarios play out, we could potentially see the S&P500 potentially trade at over 4,800 points and the ASX200 could rally to over 11,000 in two years. So these scenarios are worth keeping an eye on. Stay tuned to Saxo's inspiration page for trading and investing ideas, as news breaks.  For a global look at markets – tune into our Podcast. Source: Investor Video: If the Fed pauses rates, will gold rally 60% and equities charge 30%? | Saxo Group (home.saxo)     Source: Investor Video: If the Fed pauses rates, will gold rally 60% and equities charge 30%? | Saxo Group (home.saxo)
US Retail Sales Boost Prospects for 3% GDP Growth, but Challenges Loom Ahead

Netflix Added 7.66 Million Subscribers, Gold Continues To Show Resilience

Saxo Bank Saxo Bank 20.01.2023 09:45
Summary:  Somewhat muddled action across markets, as yields rebounded on hawkish ECB talk and strong US jobless claims data, halting the latest advance in the US dollar and Japanese yen. Equities traded on the weak side again, with Netflix reporting stronger than expected subscriber growth after hours, while its CEO is set to leave after twenty years in the position. Asian stocks advanced ahead of the week-long holiday for greater China to mark the Lunar New Year.   What is our trading focus? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) slid on concerns about earnings Nasdaq 100 moved down by 1% and S&P500 slid 0.8% in a relatively quiet day. Energy and communication services bucked the decline and managed to each gain around 1%. Microsoft added to its previous day’s decline, falling 1.7% on Thursday. Consumer product giant, Procter & Gamble dropped 2.7% on a small earnings miss and more importantly a disappointing organic sales growth dragged by a 6% decline in volume. The management raise sales outlook for FY23 sales outlook but had its FY23 EPS outlook at the low end of its initial range. Netflix reported Q4 2022 EPS at USD0.12, below market expectations. However, share prices jumped nearly 7% on a better-than-expected gain of 7.7 million subscribers in Q4. Guidance for Q1 2023 revenue at USD 8.17 billion was stronger than market expectations. Hong Kong’s Hang Seng (HIF3) and China’s CSI300 (03188:xhkg) advanced ahead of long holiday Next week is the Lunar New Year holiday, during which Shanghai and Shenzhen’s stock exchanges will be closed for the whole week next week and the Hong Kong bourse will be closed from Monday to Wednesday. Ahead of the long holiday, investors were better buyers on Friday to position for potentially a strong recovery in the Chinese economy in the Year of the Rabbit. Hang Seng Index advanced more than 1% and the CSI300 climbed around half a percent. Oil and gas, China internet, and educational services stocks led the charge higher in the Hong Kong bourse. CNOOC (00883:xhkg), surging 5.2%, was the top gainer within the Hang Seng Index, followed by Meituan (03690:xhkg), up 4.6%. In A-shares, non-ferrous metal, coal mining, rare earth, and educational services outperformed.   FX: US dollar and JPY advance halted by turnaround in US treasuries, hawkish ECB The ECB’s Klaas Knot (well known to lean hawkish) talking “multiple 50 basis point” hikes saw European yields righting themselves yesterday and helped put a floor under the euro yesterday as EURUSD has refused to drop below 1.0800, stuck in a very narrow range. Strong US jobless claims data helped US yields pop back higher above the key levels taken out on the weak Retail Sales release the prior day, but this did very little to revive the US dollar’s fortunes, as it slumped back against most currencies, save for the even weaker JPY, which didn’t appreciate the fresh jump in bond yields. Crude oil (CLG3 & LCOH3) rebound led by gasoline Crude oil prices are heading for a second weekly advance after recovering from a midweek wobble. Supported by continued China demand optimism and strength in the product market with gasoline and diesel both trading at a two-month high ahead of the embargo on Russian products from next month. Reports that China’s covid caseload has peaked further boosted optimism that demand will start to recover more sustainably following the Lunar New Year holiday. Global demand expectations got a boost as US jobless claims data supported the view that the labor market is still tight. In the US, an 81% jump in exports and the first week without injections from SPR nevertheless saw inventories jump 8.4m barrels as refinery demand struggled to recover following the late December cold blast and outages. Having bounced from support at the 50-day moving at $83.77 in Brent, a weekly close above $87 may signal further strength in the week ahead. In WTI that level is at $81. Gold rebounds Gold continues to show resilience and following a three-day pullback during which it found support at $1896 it jumped to an eight-month high overnight at $1835, supported by US yields and the dollar remaining near new cycle lows. As long these two key sources of inspiration for momentum and machine-driven strategies continue to support, gold is likely to remain supported. This despite a continued lack of interest from ETF investors as total holdings remains near a two-year low, having seen no pickup during the past two months rally. Copper supported by supply concerns Copper is heading for a fifth weekly gain with optimism about a pickup in demand as China reopens being supported by supply concerns. Protests in Peru are threatening supply from two mines accounting for nearly 2% of the world’s copper output, this at a time when visible inventories held at exchanges are low and demand is expected to rise as China recovers and the energy transition continues to gain traction. US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) consolidated on hawkish ECB comments and a strong Philly Fed survey Treasuries erased their gains in Asian hours as yields followed German bunds higher in London hours on pushbacks from ECB’s Lagarde and Knot to speculation on a downshift of ECB rate hikes from 50bps to 25bps. Yields on the short end climbed further following a smaller-than-expected 190K rise in initial jobless claims and an increase of the Philly Fed Business Outlook Index by 4.8 points to -8.9, better than the consensus estimate of -11.0. The 6-month ahead conditions sub-index improved nearly 6 points to 4.9. While Fed’s Vice Chair Brainard reiterated “the need for further rate increases, likely to just above 5 percent”, she suggested that it is possible that inflation can come down “without a significant loss of employment”. The USD17 billion TIPS auction went very strong with bid-to-cover at 2.79, well above the average of 2.25. As the federal government reached its debt limit, Treasury Secretary Yellen wrote a letter to Congress about measures that the Treasury Department is taking to keep meeting obligations until at least early June to allow time for Congress to work on raising the debt limit. Yields on the 2-year rose 4bps to 4.13% and those on the 10-year climbed 2bps to 3.39%, bringing the 2-10-year curve 2bps more inverted at -74. What is going on? Hawkish ECB speaker's pushback against reports of slowing rate hikes ECB's Knot said that market developments of late are not entirely welcome and that the ECB won't stop after a single 50bps hike, planning to hike by 50bps multiple times. Despite a softer CPI print lately, Knot said that there are no signs of underlying inflation pressures abating and said that the ECB will be in "tightening mode" until at least mid-year. ECB President Lagarde was also on the wires, saying economic news has become much more positive as the contraction in Eurozone 2023 GDP may be smaller than previously expected, so the ECB will stay the course with rate hikes. Netflix jumps after hours on stronger than expected subscriber growth The jump of 7.1% came, however, after a worse than 3% slide in yesterday’s session. Netflix added 7.66 million subscribers versus estimates of +4.5 million, though the number is still down –7.5% year-on-year. Company guidance for Q1 was somewhat lower than expected for EPS and operating margin, but the full year guidance was above consensus estimates for free cash flow. Procter and Gamble drops on first revenue decline since mid-2017 The US consumer products giant registered its first year-on-year quarterly decline in revenue in more than five years. Revenue dropped –0.9% as it noted some consumers are cutting back on purchases due to price hikes, and volume trends worsened by some 6% versus last year, half due to lower final sales, half due to inventory reductions. Earnings beat expectations slightly at $1.59 per share versus $1.66 last year. The stock was down some 2.7% on the day. Guidance was for sale to –1% to 0%, better than the prior estimates of –1 to –3%. Strong US data a day after weak data The data refuses to all swim in the same direction from the US, as the latest initially weekly claims data matched an 8-month low at 190k, far lower than the 214k expected. The January Philadelphia Fed survey came out at –8.9, still a very negative number, but better than the –11.0 expected and the dire Empire Manufacturing survey reading from a few days before. US Housing starts came in a touch stronger than expected at an annualized 1382k than expected and Building Permits a bit weaker. For perspective, the housing starts number, while down from the peak of 1805k in April of last year, is still just above the range from 2008-2019. More Fed members, including Brainard, hinting at a 25bps rate hike Lael Brainard (voter) said the recent downshift in the pace of rate hikes allows the Fed to assess more data as it moves policy to a "sufficiently restrictive" level, noting we are now in "restrictive" territory and are probing for a sufficiently restrictive level. She didn’t clearly confirm a 25bps rate hike for February, but hinted at that saying Fed downshifted the rate hike pace in December to absorb more data, and that logic is applicable today. Another voter Williams is speaking in the Asian morning hours and signalling that the Fed has more work to do but labor demand far exceeds supply. Non-voter Collins reaffirmed her view that rates need to rise to likely just above 5%, and then the Fed needs to hold rates there for some time, also saying that it is appropriate to slow the pace of hikes particularly with risks now more two-sided. It's the demography, stupid! Earlier this week, we have learnt that China reached its demographic peak with 10-year ahead of projections. This will serve a as wake-up call for other countries, certainly. The world population growth is now below 1 % for the first time since the first half of the 20th century. About 61 countries in the world are expected to see their population decrease by at least 1% by 2050 (the population of Japan has been declining since 2010 while that of Italy since 2014, for instance). Expect massive consequences for the labor market. In Germany, about 500,000 people will leave the labor market each year between 2025 and 2035. This is massive! We are entering into a world of human capital shortage. UK Retail Sales still in steep decline (in volume terms)   The December report out this morning showed volumes declined –1.0% MoM and –5.8% YoY including Auto fuel and ex Auto fuel were –1.1% MoM –6.1% YoY. What are we watching next? Japan’s December CPI touches 4%, eyes on BOJ nominations due in February Japan’s December CPI came in at 4.0% YoY from 3.8% YoY previously, with core CPI also at 4.0% YoY while the core-core measure was a notch softer-then-expectations but still above the 2% target, coming in at 3.0% YoY. Despite the Bank of Japan’s pushback on expectations to tweak policy this week, speculations are likely to continue as inflation breadth is spreading. A contender to succeed Bank of Japan Governor Kuroda, Takatoshi Ito, said that the BOJ's next step may be to widen 10y band, could raise it to 0.75% or 1.00% by mid-year, likely won't tweak yield curve control at least until April, and may abandon negative rates this year depending on inflation and wage developments. Commodities companies reporting earnings next week In energy, Haliburton will announce its result while the five western super-majors are expected to deliver record annual profits, starting with Chevron next Friday. US Steel and Freeport McMoRan will be watched on metals while the agriculture sector will be watching the result from ADM, one of a quartet of agriculture trading power houses, known as the ABCD’s, the others being Bunge, Cargill and Louis Dreyfus. Earnings to watch The Q4 earnings season continues today with two Swedish companies: mobile network equipment maker Ericsson, with its share price down some 50% from the peak and trading a few percent above the lows since 2018, and Sandvik, a company specializing in tools, machinery and applications related to metalworking and rock excavation. Its share price has seen a strong revival off late 2022 lows of some 30+%. Schlumberger also reports today and is the US’ largest oilfield services company. Today: Investor, Sandvik, Ericsson, Schlumberger Economic calendar highlights for today (times GMT) 1330 – Canada Nov. Retail Sales 1400 – US Fed’s Harker (voter 2023) to speak 1500 – US Dec. Existing Home Sales 1800 – US Fed’s Waller (Voter) to speak Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – January 20, 2023 | Saxo Group (home.saxo)
BRICS Summit's Expansion Discussion: Impact on De-dollarisation Speed

Fed Officials Continue To Highlight The Need For Further Rate Hikes

InstaForex Analysis InstaForex Analysis 20.01.2023 12:34
Growing uncertainty has caused US equities to fall, with all three major indices down a full percentage point. Meanwhile, gold rose strongly and almost gained as much as 1.5%. The move came after reports emerged that the US already reached the debt ceiling set by the Congress. According to the data, it now exceeds $ 31 trillion, which is likely to force Treasury Secretary Janet Yellen to take "extraordinary measures", such as not paying all of the country's bills. It will also prompt Yellen to send a letter to the Congressional leadership, following the one she already sent last January 13, when she urged the Congress to act immediately in order to protect the full faith and credit of the United States. Despite this, Fed officials continue to highlight the need for further rate hikes as it is a key tool to address and lower the current rate of inflation. The bank has announced its plan to raise the benchmark rate above 5% even though recent data indicates that inflationary pressures may have peaked. Markets are becoming increasingly concerned because previously, the political administration has been slow to act, either postponing a solution or only proposing to raise the debt ceiling. Persistently high inflation can only make the problem worse Relevance up to 10:00 2023-01-25 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/332875
Analysis Of The EUR/JPY Pair Movement

The USD/JPY Pair Is Trading Close To 130.00, The EUR/USD Pair Is Still Above 1.08

Kamila Szypuła Kamila Szypuła 20.01.2023 13:24
The dollar traded around seven-month lows on Friday as a plethora of data worries investors that an economic slowdown may be inevitable. Today's day in the economic calendar is quite calm, apart from the events from the economic forum in Davos and statements of the Fed (Waller, Harker). Next week, however, we'll get our first look at the US GDP figures, which are crucial to the outcome of the "soft landing" the Fed hoped for as it continued to tighten financial conditions to bring down inflation. Markets expected a smaller tightening from the Fed after US retail sales revealed their lowest level of activity in the last 12 months. USD/JPY The Japanese yen fell today despite the December CPI data. Further selling pressure around the Japanese yen lifts USD/JPY Pair to fresh daily highs. On the daily chart, USD/JPY is in an uptrend and is approaching 130.00. The 10-year Japanese government bond (JGB) yield fell below 0.40% today, well below the Bank of Japan's 0.50% ceiling that remained unchanged at its meeting earlier this week. GBP/USD The pound fell on Friday after weak retail sales data reminded investors about the gloomy outlook for the British economy. The cable pair started the day close to 1.24, but reports caused a weakening and a change of direction. The pair is currently trading below 1.2360. UK CPI data showed yesterday that there was an increase in inflation in services and an acceleration in food/beverage prices, which will be a cause for concern for decision makers at the Bank of England. The poor economic outlook in the UK fuels speculation that the BoE may be less hawkish on policy than previously expected. Retail volumes are down 1% since November, pointing to a challenging environment for consumers as the cost of living continues to be reduced. EUR/USD EUR/USD holds slight gains while trading above 1.0800 in European trading. The US dollar is trying to rebound alongside US Treasury yields, despite an improved risk profile. Looking ahead, EUR/USD traders should pay attention to ECB President Lagarde's speech and recent speeches from Fed policy makers. ECB's Lagarde reiterates that the central bank will continue to raise rates. The recent gains of the major currency pair can be linked to the broad weakness of the US dollar, as well as the optimism surrounding the old continent, namely the Eurozone. Today, the major currency pair EUR/USD traded mostly in the range of 1.0830-1.0847. Currently, the EUR/USD pair is below this range at 1.0820. Read next: $1 Million In Sanctions Against Former President Donald Trump, Netflix Co-Founder Reed Hastings Has Stepped Down As CEO| FXMAG.COM AUD/USD AUD/USD is down sharply for the second day in a row, and the risk of continued decline has increased with the pair below 0.6930. The sentiment-linked Australian dollar has underperformed its major counterparts over the past 24 hours. The Australian was weighed down by local data on Thursday, which showed Australian employment unexpectedly fell in December, spurring a bond rally as markets priced in a lower interest rate peak from the Reserve Bank of Australia. The focus is now on the quarterly inflation report next Wednesday. Economists expect consumer prices to increase by 7.5% in the fourth quarter of last year compared to last year. Source: investing.com, finance.yahoo.com, dailyfx.com
Analysis And Trips For Trading The GBP/USD Pair In Short And Long Positions

It Was A Good Week For The Cable Pair, GBP/USD Pair Achieved 1.24$. EUR/USD Kept Above 1.08

Kamila Szypuła Kamila Szypuła 21.01.2023 17:52
During the week we heard from a chorus of speakers at the Fed who raised the alarm about an interest rate hike and didn't wait for weaker and disinflationary data, the dollar could have been stronger. In the last trade, st. Louis Federal Reserve Chairman James Bullard spoke for the second time this week and said US interest rates must continue to rise to ensure inflationary pressures subside. USD/JPY The USD/JPY pair started the trading week at 128.07. On Monday, the pair was falling, so the pair recorded its weekly low on that day, below 128.00 at 127.2530. In the following days, the USD/JPY pair rose until it reached a weekly high of 131.45. USD/JPY did not stay above 130.00 and in the following days the pair fell. The pair closed the week at 129.5390. The Bank of Japan met this week remains unchanged. The governor of the Bank of Japan reiterated that the central bank will maintain its very loose monetary policy. The next meeting of the Bank of Japan is scheduled for March 9-10. GBP/USD It was a good week for the cable pair. The pound gained strength which helped the GBP/USD pair to rise. GBP/USD started the week at 1.2226. The weekly minimum at 1.2175 appeared at the beginning of the week on Monday and Tuesday. The cable pair peaked above 1.24 (1.2428), and the GBP/USD pair ended the week above this level (1.2401). UK retail sales figures revealed a monthly decline in both the report's "volume" and "value" metrics. After alcohol fueled the World Cup's economic recovery in November, British consumers decided to tighten their belts in December as the cost of living remained low. In the strike-hit month of December, consumers not only spent less but also bought fewer goods, which had negative readings on both accounts compared to November. Bank of England Governor Andrew Bailey had further comments on inflation and the market's view of where the final rate will be. Bailey reiterates earlier forecasts that inflation will fall significantly in 2023, but still well above the 2% target. Big Sterling impact events are few and far between next week and mostly include manufacturing PMI data. EUR/USD The main currency pair EUR/USD is holding steady in the week despite falls above 1.08. Also above this level it started and ended the trading week. The EUR/USD trading week started at 1.0828 and ended at 1.0858. The pair recorded a weekly low well below the 1.08 level at 1.0774, and the week's high came close to the 1.09 level at 1.0884. The next meeting of the European Central Bank is scheduled for February 2. ECB President Christine Lagarde said on Friday that the ECB will "keep the course" on raising rates as inflation remains too high. AUD/USD The Australian's pair started the week at .6979. Over the next few days, the AUD/USD pair traded above 0.6950 and rose until it reached a weekly high of 0.7059. It then declined until reaching a weekly low of 0.6875. At the end of the trading week, the Aussie Pair rebounded from the low to end the week at 0.6973. Source: investing.com, finance.yahoo.com
A Better-Than-Expected US GDP Read, Nvidia Extends Rally

A Slight Decline In U.S. GDP Is Expected

Kamila Szypuła Kamila Szypuła 21.01.2023 18:57
Outlook for the global economy is gloomy. The economic outlook for 2023 will feel different depending on where you are in the world. The world's largest economy is also struggling, and some believe it may be facing a mild recession. There is evidence that the economy is improving, and the US may nevertheless avoid a major downturn. GDP forecast Since the beginning of the first half of last year with two consecutive quarters of negative GDP growth, the US economy has recorded a return to positive GDP growth in Q3 at the level of 3.2%. As we look at the first iteration of Q4 GDP this week, it seems quite likely that we will see a slowdown after the strong performance in Q3. A slight decline to 2.6% is expected, although given the signs of a slowdown in consumer spending in recent months, one would think that there could be a significant risk of lowering this estimate. Source: investing.com Steven Blitz opinion According to TS Lombard's chief US economist, Steven Blitz, a recent US Federal Reserve survey of real economy companies found that the majority of respondents said they expect little or no growth in their order books and that they are already seeing the pace of growth prices in the real economy slow. He said economic activity was returning to normal levels that had previously been spurred by stimulus during the pandemic. In his opinion, at the same time as the impact of the stimulus wears off, the central bank raised interest rates, which should lower the level of aggregate demand in the economy. Positive signs for the US economy Positive signs include the declining Consumer Price Index (CPI), which fell for six consecutive months through December, signaling easing inflation. Then there is the job market, which remains strong. Negative signals for the economy Retail sales fell by 1.1% in December after a downward-adjusted fall of 1% in November. The drop was larger than expected and it was the biggest drop in 12 months. Autumn is really unsettling because we are talking about the pre-Christmas shopping season. However, sales have been reduced in part due to falling prices. Industrial production also surprised negatively, falling by 0.7% in December. November saw a decline of 0.6% and was larger than expected. The decline was mainly due to industrial production, which fell by 1.3% in December and fell by 2.5% yoy in the fourth quarter. Higher interest rates and reduced purchasing power due to inflation hurt the demand for commodities. Will the Fed slow down with rate hikes? Disinflationary pressures and widespread signs of weakening demand may prompt the Fed to further decelerate the pace of interest rate hikes. That's what Philadelphia Fed chairman Patrick Harker suggested this week, saying he's "ready for the U.S. central bank to move to a slower pace of rate hikes amid some signs that hot inflation is fading away." Dallas Fed Chairman Lorie Logan expressed a similar view. Source: investing.com
US Inflation Rises but Core Inflation Falls to Two-Year Low, All Eyes on ECB Rate Decision on Thursday

The Attention Is Set To Remain On The Latest Set Of Earnings Reports

Michael Hewson Michael Hewson 23.01.2023 10:16
After two weeks of strong gains, European markets gave back some of this year's early momentum with a modest pullback last week, with some suggesting that we may well have seen the peaks in the short term, in a manner similar to what we saw last year. US markets  US markets had an altogether more mixed week with the Dow seeing its worst week since early December while the Nasdaq 100 finished the week higher.   While there may be some logic in the argument that we may have seen the peaks in US markets, given how they have performed in the last few months, there is less of an argument when you look at markets in Europe, which look set to open higher later this morning..   Valuations in Europe are lower to begin with, and on an income/dividend basis much more compelling, compared to the US, with the FTSE100 and DAX both trading on forward dividend yields of 3.77% and 3.36% respectively.   Nonetheless financial markets appear to have a rising conviction that central banks are on the cusp of a significant pivot on monetary policy sometime later this year, a view that appears to be getting additional traction now that a number of Fed policymakers appear comfortable with the idea of another step down in the central banks rate hiking cycle to 25bps next week.   This view continues to be reflected in the US bond market, where yields continued to make fresh multi week lows, with the US 2 year closing lower for the third week in a row, as has the 10-year yield.   The performance of the US dollar was no less nuanced, posting a fresh 8-month low, as various European Central Bank officials continued to make more hawkish noises. The pound also held up well last week, closing higher for the 4th week in succession against the US dollar.   As we look ahead to a new week most of the attention is set to remain on the latest set of earnings reports, as investors look to decide whether the current strong run of gains can continue, and how much further central banks are prepared to go to get a handle on inflation.   Last week markets appeared to take some comfort from the fact that companies were focusing much more on maintaining their margins, and cutting costs, as well as jobs, amidst uncertainty over the global economic outlook.   This comfort appears to be predicated on an assumption that any economic slowdown will prompt a pause first and foremost in the central bank's rate hike plans, followed by some rapid rate cuts. Of course this assumes that these aforementioned central banks will be happy to start cutting rates when inflation is still well above target.   This seems highly unlikely, and while markets appear to have become conditioned to this sort of mindset since the financial crisis took rates sharply lower, it is by no means the given markets appear to think that it is.   Unemployment is still low, not only in US but in the UK and Europe as well, and having heard last week from the likes of Fed governor Lael Brainard, who is normally considered dovish, that inflation in her view still remains way too high, it is difficult to envisage a scenario where rate cuts this year are likely at this point.   ECB President Christine Lagarde was also at it, saying that inflation is still way too high and markets are underestimating the ECB's resolve to drive prices back towards their 2% inflation target. While the ECB did step down to a 50bps hike in December, there were a number on the governing council who wanted another 75bps hike.   When the ECB met last month, Lagarde more or less pre-committed the ECB to at least another 3 50bps rate hikes at the next 3 meetings, in a move that saw the euro push higher, but thus far has failed to see it follow through.   This would suggest that markets are unconvinced the ECB will be able to follow through on such guidance given the risks it might pose to the borrowing costs of the more highly indebted members of the euro area.   As we look ahead to a new week, the main focus will once again be on the US economy and this week's Q4 GDP numbers, as well as the December core PCE deflator inflation numbers, which are due on Thursday and Friday.     EUR/USD – still finding the air quite thin anywhere near to the 1.0900 area and support around the 1.0770/80 area. Could see a deeper fall towards 1.0720. The key resistance sits at 1.0950 which is a 50% retracement of the move from the 2021 highs to last year's lows at 0.9536. A move through 1.0950 opens up a move towards 1.1110.   GBP/USD – ran out of steam just shy of the December peaks at 1.2440, last week, but closed near the highs of the week. Has managed to hold above the 1.2300 area for the last two days. Above 1.2450 could see a move towards 1.2600. We need to hold above the 1.2000 area for further gains to unfold or risk a return to 1.1830.   EUR/GBP – held above the 50- and 100-day SMA last week at the 0.8720 area, before squeezing back to the 0.8775/85 area. We need to see a move through 0.8800 to retarget the 3-month highs of earlier this month. The next support below 0.8720 targets 0.8680.   USD/JPY – last week's rebound from the 127.00 area has thus far struggled to maintain traction above the 130.20 area, although we did overshoot briefly to 131.60 after the BoJ decision. We need to see a move through the highs last week to open up 132.50. We currently have support at 128.30.     FTSE100 is expected to open 12 points higher at 7,782   DAX is expected to open 73 points higher at 15,106   CAC40 is expected to open 23 points higher at 7,019   Email: marketcomment@cmcmarkets.com Follow CMC Markets on Twitter: @cmcmarkets Follow Michael Hewson (Chief Market Analyst) on Twitter: @mhewson_CMC
Bitcoin Extends Rally, Microsoft & Tesla Will Report Earnings This Week

Bitcoin Extends Rally, Microsoft & Tesla Will Report Earnings This Week

Swissquote Bank Swissquote Bank 23.01.2023 10:29
US stocks, and Bitcoin rallied on Friday, boosted by gains in tech stocks on surprisingly strong Netflix results, Google’s job cut announcement and dovish hints from Federal Reserve (Fed) members. Earnings This week, the quiet period for Federal Reserve (Fed) officials will help us digest what has been said over the past weeks and focus on earnings!Microsoft, Johnson&Johnson, General Electric,Texas Instruments, Intel, Tesla Mastercard, Visa, Chevron and American Express are among companies that will go to the earnings confessional this week. Big Tech earnings projections are down by about 5% since October. Yet, expectations went sufficiently low that there is plenty of room for a positive surprise, as has been the case with Netflix. Forex In the FX, the US dollar kicked off the week under pressure. The EURUSD already hit the 1.09 mark early in the session. Cable advanced to 1.2450. The barrel of American crude posted its second straight week of advance, though the 100-DMA hasn’t been cleared… just yet! Watch the full episode to find out more! 0:00 Intro 0:45 US stocks reverse losses 2:29 Bitcoin extends rally 3:14 Digesting Fed expectations into the FOMC meeting 4:40 Microsoft & Tesla will report earnings this week 6:07 EURUSD hits 1.09; sterling, Loonie are also better bid against USD 8:13 Crude oil eyes $82pb resistance Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Microsoft #Tesla #earnings #Fed #expectations #USD #EUR #GBP #CAD #crude #oil #Bitcoin #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
GBP's Strong Start: Outpacing G10 Currencies Amid Elevated Risk Sentiment

John Hardy (Saxo Bank): I don’t think any single inflation print will unsettle the BoE here, just look at the huge recovery in sterling from the lows

John Hardy John Hardy 13.12.2022 14:44
Stocks go up as the US inflation print surprises market participants, but we cannot forget about other important events this week, which are three key decision of three key central banks. Even if today's US infation print seems to cement the 50bp rate hike, UK economy is still ahead of CPI inflation print. In the same time it's still not sure which variant European Central Bank is going to choose on Thursday and, what's event more important, what's beyond. Today, we're delighted to hear from John Hardy, Head of FX Strategy at Saxo Bank. BoE is expected to hike the rate by 50bp on Thursday, but the day before CPI inflation data is published - would you expect a hawkich pivot if CPI bounces back above November print? John Hardy, Head of FX Strategy at Saxo Bank: BoE: I don’t think any single inflation print will unsettle the BoE here, just look at the huge recovery in sterling from the lows, which will help stabilize inflation relative to other countries just as sterling weakness was making the situation worse until recently. Already in early November, the BoE were saying that they were unlikely to take the rate as high as the market expects next year, so given the further encouragement from a strongly recovering sterling and lower natural gas and petrol prices, I don’t expect fireworks in the guidance even if inflation proves a bit hotter then expected. Read next: An incoming cold spell in the US has seen the cost of US gas surge 27% during the past three trading session while (...) Dutch TTF gas contracts remain below €150| FXMAG.COM December Fed decision seems to be sealed, but on Friday UMich and PPI data gloomed the picture of the US Economy a little bit. Are you of the opinion Fed will permanently shift to 50bp hikes until the end of cycle? Fed: The Fed will hike by 50 basis points on Wednesday and would likely hike in smaller 25-basis point increments thereafter unless inflationary pressures re-emerge (something the market is not at all anticipating and would take considerable time to develop anyway – a “slower fall” in inflation than expected is the worst case scenario barring new shocks).  For the FOMC meeting, the market is more looking at where the Fed forecasts its policy rate will be at the end of 2023 than at the size of the hikes, as well as where the Fed expects growth/inflation/employment data will be next year for a sense of how much economic weakness would be required for the Fed to stop hiking and eventually cut. Still, the market has a strong forward view on steeply falling inflation and growth and will react the most to incoming data. That view on incoming data has the already expecting rate cuts from the Fed starting as early as Q4 of next year, which suggests it is willing to ignore much of what the Fed says if the guidance is intended for anything beyond the next two or three meetings. Read next: The handling and demise of FTX have ultimately set the ecosystem's facilitative regulatory agenda and adoption efforts back | FXMAG.COM ECB decides on interest rate this week - what do you expect from the Bank this time? When could the cycle come to an end? ECB: The ECB is set to hike 50 basis points, which will take the deposit rate to 2.00%. Whether they hike another 50 basis points or step down to 25 basis point hikes thereafter is the question. Europe is already in recession and expected to be in recession next year. I don’t expect much above 2.50% for this cycle from the ECB for the peak policy rate – getting higher would likely require a reacceleration of inflationary pressures and its too early for that to unfold in the near future, when a drop-off in inflation is on course.
The Russell 2000 Breaks Below Key 200-Day Moving Average: Implications for the US Economy and Other Benchmarks

British Pub Earnings Will Suffer Significantly

Kamila Szypuła Kamila Szypuła 23.01.2023 12:40
Earnings for the last quarter of last year are pouring in. Investors buy on the earnings of large companies, but earnings from the pub and restaurant industry can be equally interesting. Especially when it comes to earnings of companies from the British economy. In this article: Larger vehicles The pub and restaurant industry in UK is getting worse An interview to Boomberg TV Fed decision ahead Larger vehicles Everyone likes something different, even the car market reflects this. The gap between Americans and Europeans is significant. Americans love big cars, while their European counterparts prefer small cars such as city cars, subcompacts and compact cars. But this is a general view, also in the old continent there is a growing interest in big cars. Consumer demand has driven automakers to create ever larger vehicles. Large cars delight with their appearance and the comfort that space gives them, but there are also disadvantages. It turns out that big cars are more expensive and if they burn gasoline, they are more harmful to the environment. Despite this, the interest in this type of cars does not weaken. Have regulations on fuel efficiency incentivized automakers to make bigger vehicles? Some researchers say so. Watch the video to learn more. https://t.co/q70uJkIa7k pic.twitter.com/YAKNYSgm1Q — CNBC (@CNBC) January 23, 2023 The pub and restaurant industry in UK is getting worse The British economy is not doing well. Growing inflation and fighting it with high interest rates forced the British to save. But there were other problems in the form of strikes. The service industry suffers the most from this. Shops and pubs are not popular in the last period. The pub and restaurant industry, which was limping back to recovery from the pandemic, had hoped to recover from the first Christmas in three years without restrictions, but nationwide rail strikes over wages as the cost of living fell has curtailed customer visits. Pub operator Fuller Smith & Turner illustrates this perfectly, as it has warned that it expects its full-year earnings to be below market expectations. There may be more companies with a similar situation. British pub group Fuller warns on annual profit as train strikes choke sales https://t.co/hKF5iM6Nha pic.twitter.com/90Gto8QyVS — Reuters Business (@ReutersBiz) January 23, 2023 An interview to Boomberg TV Vincent Chui, Head of Asia Pacific Wealth Management, in an interview to Boomberg TV, discusses the economic prospects and also talks about business strategy. Such interviews have a positive impact on the company's image and foster greater trust on the part of customers and create new opportunities to establish business relationships. Watch Vincent Chui, Head of Asia Pacific Wealth Management, speaking at the Morgan Stanley Global Alpha Investment Conference to Bloomberg TV about our Private Wealth Management business strategy in Asia and macro outlook. https://t.co/0XufJRz4st — Morgan Stanley (@MorganStanley) January 23, 2023 Fed decision ahead Inflation in the US economy fell again, but it is far from the 2% target desired by the Fed. Many investors have been watching the recent statements of Fed policy makers to assess the chances of slowing down rate hikes. The comments were hawkish again, but the market still hopes that a more lenient decision on 25bp hike will be made at the meeting in February. 25 bps at the Feb 1st meeting looking like a lock according to CME FedWatch. Question now is whether we start to see a bar to the left of 450 start sprouting up this week. What does everyone think? — Bespoke (@bespokeinvest) January 22, 2023
Economists At TD Securities Expect Gold Markets Return To A Downtrend

The U.S. Dollar Remains The Biggest Risk For Gold

InstaForex Analysis InstaForex Analysis 23.01.2023 12:51
The latest weekly gold survey shows that optimistic analysts have a slight advantage; however, most analysts have stepped aside as they believe the precious metal looks slightly overvalued. At the same time, the survey shows that retail investors are optimistic about gold prices for the current week; however, the low level of participation in online surveys does not add confidence to the positive market sentiment. Sean Lusk, co-director of commercial hedging at Walsh Trading, said it's hard to ignore gold's bullish momentum. He explained that the growing headwinds to the U.S. economy are creating a lot of uncertainty about the Federal Reserve's monetary policy, which benefits gold. "I think this rally has some room to move higher," he said. "The whisper number is $2,000 and that is when you will see investors take profits on their long positions. As long as gold can stay above $1,920, I think it has a shot of going higher." On the other hand, Colin Cieszynski, chief market strategist at SIA Wealth Management, said he expects gold to consolidate at current levels before resuming gains. "While the longer-term trend remains positive for Gold, technically, it has had a good run lately and is looking a bit tired and due for a brief pause," he said. Last week, 18 Wall Street analysts took part in the survey. Among the participants, eight analysts, or 44%, were optimistic about gold for the current week. At the same time, four analysts, or 22%, are bearish, and six analysts, or 33%, believe prices are trading sideways. Meanwhile, 783 votes were cast in online polls. Of these, 500 respondents, or 64%, expect prices to rise this week. Another 169 voters, or 22%, said the price would come down, while 114 voters, or 15%, were neutral in the near term. Participation in online surveys dropped to a low last week. The overall bullish mood in the market is due to the fact that the gold market has been demonstrating growth for the fifth consecutive week. Adrian Day, president of Adrian Day Asset Management, said he also expects the price of gold to fall this week, but sees any drop in the market as a long-term buying opportunity. "Gold needs a break after the strong run-up and it could be sparked by commentary around the Federal Reserve's upcoming meeting. Given current expectations, there is more potential for disappointment than a pleasant surprise. After a brief and shallow pullback, gold will be strong again; nothing has changed the story for the year," he said. For many analysts, the U.S. dollar remains the biggest risk for gold. The U.S. dollar index ended last week relatively unchanged. Analysts believe its 10.5% drop from September's 20-year high is a big reason why gold would rise 5% in the first month of 2023. However, some analysts see the dollar's sell-off as somewhat exaggerated and suggest that the greenback may find some support ahead of the Federal Reserve's monetary policy meeting next month. The central bank is expected to raise interest rates by 25 basis points, slower than previously expected. According to Darin Newsome, senior technical analyst at Barchart.com, Gold is short-term overbought and the U.S. dollar index is short-term oversold. Relevance up to 10:00 2023-01-26 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/332983
The USD/JPY Price Seems To Be Optimistic

The Japanese Yen Fell And USD/JPY Reached Level Of 130, The EUR/USD Pair Lost Its 1.09 Level And Agian Is Around 1.0880

Kamila Szypuła Kamila Szypuła 23.01.2023 13:44
The US dollar fell today on the possibility of less aggressiveness from the Fed. Poor trading conditions are likely to continue as many major hubs in Asia are closed for Lunar New Year celebrations. Two very important data will be published in the US this week: first look at US GDP in Q4 on Thursday followed by Core PCE on Friday. USD/JPY The Japanese yen fell towards 130 to the dollar, moving further back from multi-month highs as the Bank of Japan remains committed to its ultra-low interest rate policy despite rising inflation and increasing market pressure. Last week, the central bank countered speculation about another policy adjustment by keeping interest rates very low and leaving its yield control policy unchanged. Meanwhile, traders are eyeing the BOJ meeting in March for a potential move as well as April when a new BOJ governor will step in. The USD/JPY pair started the week below 129.50, but rose quickly and passed the 130.00 level. At the time of writing, USD/JPY is trading at 130.3640. EUR/USD The euro hit a nine-month peak against the dollar on Monday as comments on European interest rates signalling additional jumbo rate rises contrasted with market pricing for a less aggressive Federal Reserve. The euro is also being supported by an easing of recession fears amid a fall in natural gas prices. ECB Governing Council member Klaas Knot said on Sunday: "expect us to raise rates by 0.5% in February and March, and that we will not be done by then, and the next steps will be taken in May and June." His colleague Olli Rehn he noted that he saw grounds for significant interest rate hikes. The ECB's hawkish expectations coupled with increased bets on a slowdown in the pace of US Federal Reserve (Fed) tightening are helping to reduce the monetary policy divergence between the two central banks, which in turn favors the EUR/USD pair's rally. EUR/USD pair has lost its traction and pulled away from the multi-month it set above 1.0900 earlier in the day. Read next: British Pub Earnings Will Suffer Significantly| FXMAG.COM GBP/USD Economic affairs in the UK are somewhat calmer with attention being paid to the current round of industrial action hitting the UK and the perceived unfreezing of UK-EU relations. The British currency recently fell 0.32% to $1.2359 and lost more against the euro. The core CPI, which excludes energy, food, alcohol and tobacco and which some economists consider a better guide to inflation trends, remained unchanged at 6.3%. Market prices point to a 70% chance of a 50 basis point rate hike at the Bank of England's February meeting. Sterling pulled back from a seven-month high against the dollar on Monday, which hit during the Asian hours. GBP/USD turned and fell towards 1.2350 during the European trading hours on Monday. AUD/USD The RBA did not rule out another rate hike at its February meeting as mentioned in previous minutes and remains divided between no change and a 25 basis point increase, Wednesday's inflation printout could bring more clarity. On a positive note for the Australian dollar, commodity prices are projected to remain elevated throughout 2023, mainly based on China reopening and coal exports to European countries. AUD/USD is hovering around 0.6980-85, defending early week gains on a weak Monday morning in Europe. The pair of the Australian failed to stay above $0.70, but is trading close to this level, so a re-breakout cannot be ruled out. Source: investing.com, finance.yahoo.com
ECB cheat sheet: Wake up, this isn’t the Fed!

Rates Daily: The ECB Has No Appetite To Move Away From Its December Forecast That There Will Be Another 50bp Rate Hike At The February Meeting

ING Economics ING Economics 24.01.2023 08:49
Central bank comments have helped draw a line under euro market rates. We think 2% is a decent bottom for 10Y Bund yields. The rally is also at risk of higher gas prices, or if today’s PMIs don’t confirm the market’s rosy price assumptions Robust vs gradual, 50bp hikes have the edge at the ECB European Central Bank (ECB) officials are making full use of the last days before their pre-meeting quiet period starts this Thursday. There appear to be little appetite to deviate from the guidance given in December that the February meeting will see another 50bp hike. Whether the same holds for the March meeting is less certain, but only a couple of national central bank governors came out in favour of a more gradual pace of increases going forward, understood to mean 25bp increments. We wouldn’t overplay the importance of ECB guidance more than one meeting ahead In a sense, we wouldn’t overplay the importance of ECB guidance more than one meeting ahead. The March meeting will feature a new set of staff economic forecast which will go a long way towards shaping policy decision. Our base case is that, out of consistency at least, President Christine Lagarde will repeat the March 50bp guidance at next week’s meeting, but we think market direction is more likely to be dictated by economic releases, for instance today’s PMIs, and especially the components related to inflation. 10Y Bund and swap rates have held the bottom of their ranges at 2% and 2.5% respectively Source: Refinitiv, ING Hawkish skew helps draw a line under EUR rates What happens after that is the object of less discussion but is of no less importance. The hawks are already positioning for hikes at the May and June meetings although few doubt that, by that point, more dovish members will have managed to push for a downshift to 25bp increments. Similarly, there has been comparatively fewer pot shots taken at market expectations of up to 100bp worth of rate cuts by end-2024. There is no doubt in our mind that pricing policy easing this far from the end of the tightening cycle is presumptuous, even if we assume that markets are right about the amount of Fed cuts to be delivered by that time. We suspect that short-term longs are likely to take profit before next week’s Fed and ECB meetings All these considerations have acted as a barrier to 10Y Bund yields crossing below 2%, and for 10Y EUR swaps approaching 2.5%. We identified both levels as the likely bottom of the range for EUR rates this year and we think ECB policy will be instrumental in enforcing it, at least before the midway point of 2023 is reached. Meanwhile, we suspect that short-term longs are likely to take profit before next week’s Fed and ECB meetings, and a rebound in natural gas prices has also pressured rates higher. ECB rate cut expectations have inverted the swap curve, this will take time to reverse Source: Refinitiv, ING Today's events and market view Today’s economic highlight is a first glimpse of January PMIs in Europe. Following the improvement in economic surprise indices as well as market economic sentiment, consensus is for a rebound in both services and manufacturing PMIs. Any comment on respondents’ price expectations will be particularly relevant in assessing the sustainability of the January bond market rally. We think it has run out of steam already. The same indices will be released for the UK and US later in the day. UK data also feature CBI orders and prices, whilst two regional Fed surveys will be the highlight in the US, from the Philadelphia and Richmond Feds. The Netherlands are scheduled to sell 30Y bonds for €2bn, and Germany to sell €1.5bn of a green bond maturing in just under three years’ time. The EU also mandated banks for a syndicated tap of a 30Y bond. Today’s roster of ECB speakers include Klaas Knot, Boris Vujcic, and Christine Lagarde. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Weekly Commitment of Traders update - Buying of crude oil moderated, ICE gas oil net long reduced to a 30-month low

The Crude Oil Price Is Struggling To Find Direction

TeleTrade Comments TeleTrade Comments 24.01.2023 09:14
WTI oscillates in a limited territory around $81.50 amid the absence of a potential trigger. The upside in the oil price is capped amid rising worries about the US recession. While better prospects for the Chinese economy after the lifting of pandemic controls are supporting the oil price. West Texas Intermediate (WTI), futures on NYMEX, is displaying back-and-forth moves in a narrow range around $81.50 in the early European session. The oil price is struggling to find direction as the upside is capped due to escalating recession worries in the United States while the downside is restricted amid optimism over economic recovery in China. The Chinese economy has lifted pandemic controls and the street is expecting a sheer recovery in the oil demand in CY2023. Optimism for China’s recovery is supporting firmer bets for price extensions in oil and other commodities. Chinese administration and the People’s Bank of China (PBoC) are expected to favor fiscal stimulus and expansionary monetary policy to spurt the scale of economic activities. Meanwhile, rising worries about the US recession are capping the upside of the oil price. Economic activities in the United States have shrunk dramatically as the Federal Reserve (Fed) has hiked interest rates at a sheer pace. Fed chair Jerome Powell and other policymakers have been advocating the consistency of higher interest rates at peak for a longer period to contain the sticky inflation. This might restrict firms from borrowing funds to avoid higher interest obligations. Read next: The Japanese Yen Fell And USD/JPY Reached Level Of 130, The EUR/USD Pair Lost Its 1.09 Level And Agian Is Around 1.0880 | FXMAG.COM On the supply front, fresh headlines that the United States administration is considering the cancellation of the planned sale of oil from its Strategic Petroleum Reserve (SPR) in CY2023 are supporting oil bulls. US President Joe Biden is looking to refill the oil reserve as one was eased firmly to tame soaring oil prices in CY2022 as reported by Energy Intelligence.  
US CPI Surprises on the Upside, but Fed Expectations Unchanged Amid Rising Recession Risks

Layoff In Spotify, AUD/USD Pair Has Traded Back Above 0.7000

Saxo Bank Saxo Bank 24.01.2023 09:43
Summary:  US equities sprinted to new local highs yesterday, with the S&P 500 crossing back above the 200-day moving average ahead of the heart of earnings season set to swing in motion today on Microsoft and other large companies reporting, with the earnings calendar heavy through next week. The US dollar trades weaker across the board as the Fed enters its quiet period ahead of next week’s FOMC meeting.   What is our trading focus? Equities: Momentum is building with breakout in technology stocks US equities rose yesterday with S&P 500 futures reaching their highest close since mid-December and Nasdaq 100 futures rallied all the way to 12,000 before closing a bit lower. Sentiment is improving on technology stocks due to the significant layoff announcements improving the outlook for profitability. The US leading indicators were weaker than estimated and the level observed fits with a high degree of certainty of a recession, so it feels like the equity market is balancing on a knife-edge. Today is an important earnings session with the key focus being Microsoft after the market close, but ahead of the market open earnings from industrials such as GE and 3M will set the tone on the opening. FX: USD falters again as risk sentiment bulls higher The greenback has traded weaker since yesterday, although yesterday’s high water mark in EURUSD above 1.0900 yesterday has not yet been surpassed as the USD weakness was more pronounced against more pro-cyclical currencies like AUD and SEK within the G10 on the strong surge in risk sentiment, even as the anticipation of Fed rate cuts for late this year and through next year has eased significantly (about 30 basis points for the policy rate priced by end of 2024 from the trough of late last week). The Fed has entered a quiet period ahead of next Wednesday’s FOMC meeting, with little data in the interim save for the December PCE inflation data this Friday. Elsewhere, New Zealand and Australia report Q4 CPI tonight in the Asian session and a Bank of Canada decision is up tomorrow (see preview below). Crude oil (CLH3 & LCOH3) supported by firm diesel prices ahead of sanctions Europe’s diesel market reached a two-month high on Monday with the ICE gasoil (FPc1) contract trading above $1000 per ton. A development being driven by EU’s ban on seaborne imports of Russian fuel products from February 5, and increased demand for jet fuel as travel continues to recover. Overall, the focus stays with China amid hopes of a recovery in fuel demand more than offsetting potential weakness in the US as economic data points to slowdown. National holidays across Asia, especially in China and Singapore kept trading to a minimum. In Brent, traders will now be looking for $90 next while support is in the $84 area. Gold trades higher on US recession concerns Gold reached a fresh nine-month high overnight after US leading indicators saw another sharp fall in December, and together with weak company earnings and layoffs and last week's weak retails sales it raises the risk of a US recession in the near term. A senior director at The Conference Board said: “Overall economic activity is likely to turn negative in the coming quarters before picking up again in the final quarter of 2023”. Developments that raises the potential for just one more US rate hike before the FOMC decides to pause. ETF holdings, which has been drifting lower this month finally saw a small pickup in demand while silver’s plunge remains a concern. At one point on Monday, it dropped 5% on technical selling and long liquidation below $23.20 before recovering to trade $23.60 this am. US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) yields continue to edge higher US treasuries continue to soften, taking yields modestly higher after the 10-year benchmark’s move below the prior significant 3.40% low was rejected. This morning sees the 10-year benchmark trading back above 3.50% with company earnings and guidance in focus as the heart of earnings season swings into motion today. Yields at the front of the US yield curve have also rebounded from new lows posted last week in the wake of weak US Retail Sales and a dovish BoJ meeting, with the 2-year rising from a low of 4.03% last Thursday to 4.23% currently. The US treasury will hold a 2-year auction today. What is going on? Biden administration confronts China, accusing Chinese companies of supporting Russia’s war effort Citing “people familiar with the matter”, a Bloomberg article claims that the Biden administration has confronted China with evidence that state-owned Chinese companies are supplying “non-lethal” military and other assistance that amounts to a support of Russia’s war effort in Ukraine, while stopping short of “wholesale evasion” of US sanctions. More positive signs the travel sector is roaring back in Asia; on land and in the air Chinese road traffic congestion increased 22% from a year ago, as measured across 15 key cities. This is a positive sign that Chinese residents are striving to return to normalcy. Moving to air traffic, we believe the broader Asian-Pacific regional will likely report stronger numbers for Q4 of 2022 and Q1 of 2023, supporting higher revenue in the travel and tourism sector. Despite airlines travel returning, airlines costs are also rising with fuel costs higher after the oil price has bounced up 17% off its December low. Growth has a high ceiling for domestic Chinese air travel, with passenger traffic in November (the most recent available data point) at some 75% below late 2019 levels. The Aussie dollar above 0.7000. Australia CPI next test AUDUSD has traded back above 0.7000, nearly matching the highest levels since last August. The Aussie initially jumped to 0.7045 today in Asia after Australia’s service sector data improved, even though the Services PMI print remained in contractionary phase. The Q4 Australian CPI report is out tomorrow and is expected to rise to 5.8% YoY from 5.6% (for the important trimmed mean CPI), amid tighter energy markets, and higher metal prices. Spotify to cut 6% of workforce Like the rest of the technology sector Spotify announced yesterday that it is cutting 6% of its workforce to offset the top line weakness and improve profitability. The initial reaction in Spotify shares was strong but was faded during the session. The US Leading Indicator (LEI) fell sharply again in December It continues to signal recession for the US economy in the near term said Ataman Ozyildirim, Senior Director, Economics, at The Conference Board. “There was widespread weakness among leading indicators in December, indicating deteriorating conditions for labor markets, manufacturing, housing construction, and financial markets in the months ahead. Meanwhile, the coincident economic index (CEI) has not weakened in the same fashion as the LEI because labor market related indicators (employment and personal income) remain robust. Nonetheless, industrial production— also a component of the CEI—fell for the third straight month. Overall economic activity is likely to turn negative in the coming quarters before picking up again in the final quarter of 2023.” What are we watching next? Bank of Canada meets tomorrow – most see a 25-basis point hike tomorrow followed by a pause Most observers are looking for the Bank of Canada to hike one last time for this cycle tomorrow to take the policy rate to 4.50% and to indicate a pause to assess inflationary and labor market conditions before deciding on next steps. The Bank of Canada hiked rapidly in 2022 in an attempt to catch up with galloping inflation but has contrasted with the Fed in signalling a pause in the hike cycle before the Fed, which has been slow to signal that peak rates may be nearing. USDCAD trades near the lows since last November at 1.3350 this morning, with the 200-day moving average creeping higher and near 1.3200. Earnings to watch The Q4 earnings season accelerates this week with key earnings from Microsoft, ASML, Tesla, Visa, and Chevron. The aggregate earnings surprise for the S&P 500 companies that have reported earnings is currently 4.1% and the market has responded positively to the Q4 earnings reported so far with Netflix’s 8.5% jump on its strong outlook for its advertising business being the clearest evidence. Today’s key earnings focus is Microsoft (read our earnings preview here) with expectations of lower revenue growth and lower operating margin. Other important earnings today are from J&J, Texas Instruments, GE, and 3M. Today: Nidec, Microsoft, J&J, Danaher, Verizon, Texas Instruments, Raytheon Technologies, Union Pacific, Lockheed Martin, Intuitive Surgical, GE, 3M, Halliburton, DR Horton Wednesday: ASML, Lonza Group, Tesla, Abbott Laboratories, NextEra Energy, IBM, Boeing, ServiceNow, CSX, Freeport-McMoRan, Lam Research, Norfolk Southern Thursday: Tryg, Novozymes, Kone, Nokia, LVMH, Christian Dior, STMicroelectronics, SAP, Diageo, Atlas Copco, Volvo, SEB, Visa, Mastercard, Comcast, Intel, Blackstone, Valero Energy, Archer-Daniels-Midland, Dow, Nucor, L3Harris Technologies, Southwest Airlines, American Airlines Friday: Fanuc, Chevron, American Express, Colgate-Palmolive Economic calendar highlights for today (times GMT) 0810 – ECB’s Klaas Knot to speak 0815-0900 – Eurozone Jan. Flash Manufacturing and Services PMI 0930 – UK Jan. Flash Manufacturing and Services PMI 0945 – ECB President Lagarde to speak 1100 – UK Jan. CBI Business Optimism and Trends in Total Orders/Selling Prices 1300 – Hungary Central Bank Rate Decision 1330 – Philadelphia Fed Non-manufacturing Survey 1445 – US Jan. Flash Manufacturing and Services PMI 1500 – US Jan. Richmond Fed Business Conditions 1800 – US Treasury auctions 2-year notes 2130 – API's weekly report on US oil inventories 2145 – New Zealand Q4 CPI 0030 – Australia Q4 CPI Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: Financial Markets Today: Quick Take – January 24, 2023 | Saxo Group (home.saxo)
Bitcoin Maintains A Steady Bullish Potential

Bitcoin Maintains A Steady Bullish Potential

InstaForex Analysis InstaForex Analysis 24.01.2023 11:57
Despite the obvious overbought, Bitcoin continues its upward movement. The asset broke through the $23k level, where the price is consolidating for further upward movement. At the same time, there is no significant increase in daily trading volumes, which may indicate a weakening of the bullish trend. The $23k–$23.4k resistance zone does not allow the cryptocurrency to continue a confident bullish rally, and the slowdown in the upward trend of trading volumes complicates the situation. Another reason for Bitcoin's slowdown may be important economic reports that will appear this week. Today, the publication of Microsoft's financial statements is expected, and its results will have a direct impact on stock indices, and therefore on Bitcoin. Read next: Salesforce Is Being Tested As Its Growth Slows Down| FXMAG.COM Also, on Thursday and Friday, the indicators of the durable goods market and the level of core inflation will be released. All these publications will be a prelude to the Fed meeting next week, and therefore we can expect a gradual increase in volatility in key markets, including cryptocurrency. Fundamental incentives for further growth At the current stage of the price movement, it is extremely beneficial for Bitcoin to maintain a high level of correlation with stock indices. For example, Carlson experts note that the end of January is historically one of the strongest periods in the stock market. As a result, SPX broke through the $4,000 level, and Bitcoin climbed above $23k. At the same time, CoinShares notes a significantly increased interest in financial products based on cryptocurrencies. The inflow amounted to $37 million, which is also the result of a local thaw in the global economy. JPMorgan experts, analyzing the state of the global economy, change the pessimistic forecast, adding a little hope to it. The bank's analysts believe that 7 out of 9 classes of financial assets indicate a decrease in the probability of a recession in the United States to 50%. Recall that at the end of 2022, JPMorgan believed that the probability of a recession in the United States was 85%–100%. A similar opinion was expressed by Philadelphia Fed President Patrick Harker, who said that the agency predicts U.S. GDP growth in 2023 by 1%. Thus, the financier believes the United States may avoid an economic recession. At the same time, JPMorgan analysts note that in the near future we should expect profit-taking on stock instruments. The same applies to cryptocurrencies because the growth of the asset in January allows, at least, to fix a breakeven. BTC/USD Analysis In a fundamental way, nothing has changed on the Bitcoin daily chart. The cryptocurrency is in a consolidation phase near the $22.9k–$23.1k area. The bearish positions remain strong, as evidenced by the retest of the $23k level for four days in a row without visible success. At the same time, the bears fail to develop a downward trend, as buyers instantly absorb volumes near the $22.9k level. This indicates a strong bullish trend and an early breakout and consolidation above $23k. In the medium term, Bitcoin remains extremely overbought. The technical RSI and Stochastic indicators have been moving above the 85 levels since the beginning of January, and the stubbornness of the bulls will eventually lead the market to a deeper correction. Results Bitcoin maintains a steady bullish potential, which greatly increases the full-fledged breakdown of the $23k level in the coming days. Despite the need for a correction, the asset will continue to hold the $22.9k level and move upward. At the current stage, BTC correction is not expected, as there has been a significant activation of buyers. Considering this local decline, we should expect it in the presence of a combination of factors, including mass profit taking, increased volatility and the activation of large sellers.   Relevance up to 10:00 2023-01-25 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/333101
The AUD/USD Pair’s Downside Remains Off The Table

The Aussie Pair Is Above 0.70$, GBP/USD Pair Lost Its Level Of 1.24$

Kamila Szypuła Kamila Szypuła 24.01.2023 12:56
The dollar traded near a nine-month low against the euro and lost its recent gains against the yen on Tuesday as investors weighed the risk of a US recession with the Federal Reserve's monetary policy outlook. USD/JPY The Japanese yen gained slightly against the US dollar today after Jibun Bank's composite PMI was 50.8 in January from 49.7 previously. The manufacturing component was the same as last month's 48.9, but the services component was 52.4, above the previous reading of 51.1. These are diffusion ratios, and an index above 50 is seen as positive for the economy. The dollar fell to 127,215 yen last week, the weakest since May, before the Bank of Japan's policy review, as investors assumed the BoJ would begin to end its stimulus program. However, the BJ left the policy unchanged, giving the dollar some respite. Analysts believe BOJ change will come sooner rather than later as policy makers make tweaks to their yield curve control mechanism. USD/JPY drops towards 129.00 but rebounded and trades above 130.00 again. EUR/USD The eurozone showed resilience in late 2022 with plenty of positive data that so far seemed to carry over to 2023. The hawkish rhetoric of ECB policymakers continues to strengthen the euro while optimism about avoiding recession is growing. The euro, on the other hand, gained almost 0.8% last week, which was boosted by a wave of officials from the European Central Bank. ECB President Christine Lagarde also reiterated on Monday that the central bank will continue to raise interest rates rapidly to curb inflation, which is still more than five times higher than the 2% target rate. PMIs in the euro zone were higher than expected. Only Germany's Manufacturing PMI fell from 47.1 to 47.0. EUR/USD lost grip and fell towards 1.0850 after the release of mixed PMI data from Germany and the euro zone. Ahead of the US S&P Global PMI survey, the US dollar index has been stable above 102.00. The EUR/USD pair is trading close to 1.0870 at the time of writing. Source: investing.com GBP/USD The British pound was lower on Tuesday after data showed economic activity weakened further in January, underlining the risk that Britain could slip into a recession in 2023. After an impressive December services PMI report, markets were hoping for another encouraging reading in January given a slightly brighter outlook now that inflation seems to be headed in the right direction. This was not to be the case as the new year brought with it a sustained decline in private sector business activity in the UK. The flash UK PMI Composite was 47.8 (December: 49.0). lowest in 24 months. In contrast, the UK industrial production index was 46.6 (December: 44.4). The highest in 6 months. UK Services PMI Business Activity Index at 48.0 (December: 49.9). The Bank of England is still expected to raise its key interest rate for the tenth consecutive time on Feb. 2 after its next scheduled meeting. The cable pair also lost amid emerging reports. GBP/USD pair trades below 1.2400 again and is now at 1.2318 AUD/USD The Australian dollar was nearing a five-month high from last week at 0.7063 as the US dollar comes under increasing pressure. While the CPI is the main target of the RBA's mandate of targeting 2-3% over the business cycle, the Producer Price Index (PPI) may also play a role. The PPI will be released this Friday and if it accelerates in the fourth quarter, it could be a problem for CPI this quarter. Companies face higher costs. It's also worth noting that the Australian and New Zealand dollars hit multi-month highs on Tuesday as investors refocused on risky assets, easing recession fears and a less aggressive Federal Reserve. The pair of the Australian Dollar, despite not maintaining previous imports, remains above 0.70. The Aussie Pair is currently trading at 0.7023. Source: investing.com, fiance.yahoo.com, dailyfx.com
EUR/USD: Looking beyond the market’s trust issues with the Fed and ECB

The Euro Is Doing Well, Fed Expectations Become Alarmingly Soft

Swissquote Bank Swissquote Bank 25.01.2023 11:47
Trading in the US was eventless, except for the wild moves that marked the opening bell at the NYSE. S&P500 The S&P500 swung around the 4000, without any major moves up or down, as investors remained undecided faced with mixed company earnings, and mixed economic data. Microsoft  Microsoft announced better-than-expected results yesterday, but the 5% rally in the afterhours trading rapidly faded. Tesla is due to announce its earnings today. Forex In the FX, the US dollar remains under the pressure of soft data, and worryingly softening Fed expectations. The EURUSD is testing the 1.09 resistance on encouraging PMI data, while sterling is softer on growing slowdown worries. Bank of Canada In Canada, the Bank of Canada (BoC) is preparing to announce its final 25bp hike. The dollar-CAD puts increasing weight into clearing the 1.3350 support, but crude oil is not helping, as the price of a barrel of American crude continues bumping its head against the solid $82pb wall, the 100-DMA, without being able to break it to the upside. Read next: The Department Of Justice's Lawsuit Against Google | FXMAG.COM Watch the full episode to find out more! 0:00 Intro 0:38 S&P500 flat around 4000 1:55 Fed expectations become alarmingly soft 2:55 Microsoft earnings may not boost sentiment in S&P500 4:43 Tesla earnings due after the bell 6:26 US softer, euro stronger 7:29 Deteriorating UK outlook is not a concern for FTSE 100 8:48 BoC to announce a final 25bp hike 9:00 Crude oil: $82pb resistance too strong to clear… Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Tesla #Microsoft #earnings #ChatGPT #Nvidia #PMI #data #Fed #ECB #expectations #USD #EUR #GBP #BoC #rate #decision #CAD #crude #oil #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
Supply Trends Resurface: Analyzing the Impact on Market Dynamics

The Aussie Pair Is Gaining Strong Positive Traction Agian, USD/JPY Drops Below 130.00

Kamila Szypuła Kamila Szypuła 25.01.2023 13:27
The dollar gained on Wednesday during limited trading. Traders broadly expect the Fed to raise interest rates by 25 basis points next Wednesday, down from the 50 bp hike in December. Earlier, investors will look at the US economic growth data for the fourth quarter, which will be released on Thursday. Moreover, a drop in global energy prices and a resulting slowdown in inflation in advanced economies has spurred speculation the Fed and other central banks might soon stop raising interest rates. USD/JPY Spot prices struggle to capitalize on the move and held steady at 130.00 through the early European session. USD/JPY is trading below this level. EUR/USD The chances of a bigger interest rate hike by the ECB are growing rapidly. As reported by Bloomberg, ECB policymaker Gediminas Simkus reiterated on Tuesday that the ECB should continue raising interest rates by 50 basis points in the face of mounting wage pressure. The euro gained thanks to optimism about the euro zone's economic prospects. As for the future of the euro, economists at CIBC Capital Markets said the improving macroeconomic situation and further policy tightening by the ECB herald the strength of the euro in 2023. During the Asian trading hours, the EUR/USD pair rose until it broke above the 1.0900 level. The momentum fails to sustain and the pair trades below that level at around 1.0870. Read next: The Department Of Justice's Lawsuit Against Google | FXMAG.COM AUD/USD The Aussie pair is gaining strong positive traction for the fourth day in a row and is recovering from 0.7100 for the first time since mid-August during the Asian session on Wednesday. The Australian dollar rose to a more than five-month high on Wednesday after higher-than-expected inflation data, bolstering the case for further interest rate hikes. Australian headline inflation (CPI) continues to pick up, as does the preferred trimmed CPI, on both a month-on-month and year-on-year basis. Australia is set to benefit from the Chinese reopening now that the Chinese government has stated that the nation has already reached a peak in infections and hospitalization rates. The reopening has resulted in increased purchases of Australia’s top export, iron ore, as prices have trended higher. The daily AUD/USD chart shows this pair in an uptrend. The pair managed to record gains over the course of three consecutive days. The AUD/USD pair performed well in the early stages of 2023, driven in large part by the continued downtrend of the dollar. Today, the pair gained above 0.7100, but failed to hold and is below this level again. GBP/USD Details of the UK Producer Price Index (PPI) for January may be of interest to GBP/USD investors ahead of Thursday's key US Q4 GDP and next week's Fed meeting. Sterling fell against the dollar and euro on Wednesday after data showed British manufacturers unexpectedly lowered prices in December, suggesting inflation could be easing ahead of next week's Bank of England policy meeting. The news that UK factories have lowered prices is likely to ease the burden on Bank of England policymakers who need to consider how far to raise interest rates in the fight to bring down inflation. The market expects the BoE to raise interest rates for the tenth time since late 2021 as it fights inflation. Markets are currently evaluating a 75% chance of a 50 point rate hike. The cable pair is still trading below 1.2400, close to the 1.2300 level. Source: finance.yahoo.com, investing.com
The ECB Has Made It Clear That Rates Will Remain High Until There Is Evidence That Inflation Is Falling Toward The Target

Rates Daily: The ECB’s Vasle Argued That 50bp Hikes At The Next Two Meetings Were Needed

ING Economics ING Economics 26.01.2023 10:09
Usually with US auctions this strong we're in the midst of a bond market rally with considerable room for more. But the downside moves have been tame in fact, despite the recession talk to boot. We think that's because the curve is so inverted that it does not leave glaring value in longer dates Solid US auctions show good demand, but it's heavy going on the downside test The strong demand at auction in Treasuries has continued this week. Previous weeks saw a good test of demand for duration as 10yr, 20yr and 30yr auctions were snapped up. This week we’ve had the 2yr and 5yr auctions so far, and today will see the 7yr auction. The dominant theme has been solid auction results. It’s not that the paper was well covered. It’s more that the indirect bid has been so consistently large and solid. The indirect bid will typically be bolstered by foreign demand, and in shorter dated auctions especially, will be populated by the demand from global central banks. On top of that, the primary dealer takedown has tended to be on the low side, primarily as their support has not been needed very much, which is a good thing from the context of the quality of the auction results. And finally, the pricing at all of the auctions has been solid. None of them have tailed. Downside to yields is supported by the growing evidence of recession and falling inflation. Despite all of that, we still see the 10yr at or about 3.4% to 3.5%. It seems this is an area of perceived fair value right now, or at the very least a point of equilibrium. Downside to yields is supported by the growing evidence of recession and falling inflation. But there is still upside risk coming from the pronounced inversion of the curve which sees the 10yr optically rich to the front end. This is why next week’s Federal Open Market Committee meeting is crucial. The market has convinced itself that a dovish 25bp hike is coming. If the Fed instead goes for a more hawkish hike, it stretches that 10yr valuation even more. There is a route to lower yields, but its far from straightforward should the Fed stick to the hawkish tilt. ECB struggles to push up rate expectations beyond the next few quarters upcoming Source: Refinitiv, ING ECB speakers' final hawkish push with fading impact out the curve European Central Bank officials have used the final day ahead of the quiet period to reiterate their hawkish message. With the job of reining in inflation not done yet, the ECB’s Vasle argued that 50bp hikes at the next two meetings were needed. Both the Bundesbank’s Nagel and Ireland’s Makhlouf would not exclude that rates will need to rise further after March. The longer end of the EUR curve is increasingly taking its cues from the US, not the ECB The market discount is broadly aligning with the ECB comments regarding the next couple of meetings with the forwards pricing rates 92bp higher with the March meeting and good chances for at least one 25bp hike in the following months. Thereafter if market pricing diverges from the ECB narrative that rates may have to be held in restrictive territory for some time for underlying is finally tackled. The longer end of the EUR curve is increasingly taking its cues from the US where the Fed is seen close to the end of its cycle and a recession angst taking over. Front-loaded issuance is sending steepening impulses Source: Refinitiv, ING In the euro area supply proves more of a headwind While yesterday’s last hawkish ECB comments seem to have helped turn the market during the session, halting a rally in Bunds that saw the 10Y dipping briefly below 2.10% again, we think this would overstate the ECB’s ability to influence the long end of the yield curve in current markets. Rather we think the ECB got another assist from long end core government bond supply. Not only were the results if the German 15Y and 20Y bond auctions yesterday on the softer side, but later in the day Finland also mandated a 3bn 15Y bond deal which some might have had in the cards only for early February. Overall this year's supply has been much more front loaded compared to the past years. Today's events and market view Central bankers have had their say ahead of the upcoming policy setting meetings. In the meantime, markets will have to turn to data and supply for cues, though we also see a risk of profit taking closer to next week’s meetings themselves. For today the market will have to digest US fourth quarter GDP data, which is expected to have expanded still in excess of an annualised 2%. That should not distract from expectations that the outlook for GDP is already decisively weaker for the next few quarters. The durable goods orders release today should paint a weak underlying picture once a one-off in aircraft orders is stripped out. We will also get the weekly initial jobless claims data. In supply the EUR rates could see steepening pressure from the 15Y deal out of Finland, which should be today’s business. We will see shorter dated bond auctions from Italy. In the US the focus is on the US$35bn 7Y auction, which caps off this week’s supply. It follows a streak of well received auctions that have underpinned market strength that has also spilled into EUR rates. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Pound Slides as Market Reacts Dovishly to Wage Developments

In Europe Investors Reacted Positively To Reports

Jakub Novak Jakub Novak 26.01.2023 14:10
The sharp growth of US tech stocks boosted market sentiment amid optimistic earnings forecasts from electric car maker Tesla Inc. Futures contracts on the Nasdaq 100 index rose by about 0.5%. Tesla jumped more than 8% during premarket trading in New York after beating earnings and sales estimates. Futures on the S&P 500 index added 0.3%, and the industrial Dow Jones gained 0.2%. Europe stocks In Europe, investors reacted positively to reports from Nokia Oyj Telecommunications Group and chipmaker STMicroelectronics NV, which helped the Stoxx 600 index gain more than 0.5%. Although companies are not boasting of high figures they are not disastrous either, which keeps the demand for risky assets, including stocks. The January growth is exaggerated given the recession risks. However, next week's Federal Reserve meeting may confirm that the market and investors were right. China The buoyant market sentiment was also linked to China, where data on holiday and tourism spending showed that the country's recovery is gaining momentum. On the first trading day after the Lunar New Year, the Hang Seng Index jumped by 2.4% and closed at its highest level since March 1, 2022. US GBP Expectations of a soft landing of the US economy and that the Federal Reserve is nearing the end of its rate hike cycle are also pushing investors to buy cheaper assets. US GDP reports for Q4 this year are expected today, as well as employment data, which will help determine the Fed's future policy course. Euro The euro is down slightly, but it is getting continued support from statements by European Central Bank officials, who continue to argue in favor of further significant policy tightening in the coming months. Bond yields in the Eurozone rose by several points. Oil and Bitcoin Oil prices continued to rise amid expectations of a rebound in demand in China. Bitcoin fell by more than 2%, wiping out much of Wednesday's gains. S&P 500 index As for the S&P 500 index, the situation remains on the side of bulls. The index may continue to grow but bulls need to protect the support level of $4,010 as well as take control over $4,038. After that, we may expect a more confident spurt to $4,064. At the same time, it would be difficult to reach above $4,091. If the pair declines and we see weak activity from bulls at $4,010, they will have to protect $3,980 and $3,960. Breaking through this level, the index may be pushed to $3,923.   Relevance up to 12:00 2023-01-27 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/333364
Unraveling UK Inflation: The Bank of England's Next Move

GBP/USD Pair Is Struggling To Extend Previous Highs, EUR/USD Pair Continued Its Gains

Kamila Szypuła Kamila Szypuła 26.01.2023 12:06
The Bank of Canada's interest rate decision appears to have put sentiment risk back as markets hope other central banks will follow suit. The BoC announced a pause in interest rate hikes to assess the impact of the recent hikes on the Canadian economy. Given that the BoC was the first major central bank to raise interest rates, market participants seem to see yesterday's announcement as a sign that the Federal Reserve and the ECB may follow suit. The dollar fell to an eight-month low against its peers on Thursday as a dismal US corporate earnings season fueled recession fears ahead of many central bank meetings next week. The Fed's policy-setting committee will begin a two-day meeting next week and markets have priced in a 25 basis point (bp) rate hike, down from the central bank's 50bp and 75bp hikes recorded last year. USD/JPY The Japanese yen gained against the US dollar on Wednesday, taking advantage of the US dollar's significant weakness. Despite minor recent changes by the Bank of Japan towards policy normalization, the BoJ remains the most dovish developed central bank. USD/JPY is down for the third day in a row and touches a new weekly low around 129.00 during the Asian session on Thursday. Fresh speculation that high inflation could lead the Bank of Japan (BoJ) to be more hawkish later this year continues to support the JPY. Bets were lifted by data released last week that showed Japan's nationwide core inflation hit 4% in December - its highest annual print since December 1981. Although USD/JPY fell in the Asian session, in the European session the pair gained and traded close to 129.90. AUD/USD Trade was a bit weak as Australia was closed for the holidays. The Australian dollar's rally against the US dollar is gaining momentum on the back of rising optimism over China's reopening and rising commodity prices. AUD/USD has been trading nicely in an uptrend since October. Earlier this month, the pair rose above a key resistance. The Australian pair is doing quite well and trading above 0.7100 during the European trading session. EUR/USD EUR/USD continued its gains from yesterday, holding above 1.09 after opening in Europe. The euro gained strength against the dollar yesterday as the domino effects of the Bank of Canada's interest rate decision swept through the market. ECB Governing Council member Gabriel Makhlouf said on Wednesday: "We must continue to raise interest rates at our meeting next week - taking a similar step to our December decisions," and added that the same should happen at the next March meeting. EUR/USD remains stable at around 1.0900 during the European session. Traders refrain from placing new EUR/USD bets ahead of critical US GDP releases. Read next: Musk Intends To Cut Costs In Tesla On Everything| FXMAG.COM GBP/USD The Bank of England is set to raise interest rates by half a point to 4.0% to tackle double-digit inflation, while markets are split on how much further rates will rise beyond that. Britain's inflation rate moved further away from October's 41-year high. Meanwhile, the risk of the UK slipping into recession continued to weigh on sentiment after the latest PMI survey showed the UK business economic activity fell. GBP/USD is struggling to extend previous highs at around 1.2400 during European trading hours. The US dollar is licking its wounds with weaker US Treasury yields amid dovish Fed betting. Source: investing.com, finance.yahoo.com, dailyfx.com
Assessing 'Significant Upside Risks to Inflation': Insights from FOMC Minutes

Federal Reserve: Back to 25bp hikes as slowdown fears mount

ING Economics ING Economics 27.01.2023 09:19
Last year saw the most aggressive policy tightening path in four decades, but Fed officials have laid the groundwork for more modest 25bp hikes in February and March. Recessionary forces are building though and inflation looks set to slow sharply from here, implying rates cuts will be on the agenda later in the year US Federal Reserve Chair Jerome Powell 25bp with more still to come Having raised the Fed funds target range by 425bp in 2022, including 75bp and 50bp moves, expectations are firmly centred on the Federal Reserve opting for a more modest 25bp interest rate increase on Wednesday – taking the target range to 4.5-4.75%. While inflation is still well above target and unemployment is at a cycle low, there are signs that the economy is responding to tighter monetary policy and the Fed will be cognisant of fears that hiking rates too hard and fast risks toppling the economy into recession. Officials certainly appear to be backing "standard" 25bp increases from now on after enacting their most aggressive hiking cycle for 40 years, but most are warning that there is still more work to be done. Consequently, we expect to hear that ongoing interest rate hikes are "appropriate" with the balance sheet shrinking strategy remaining in place. Scenarios for the Federal Reserve meeting Source: ING   Officials are unlikely to switch to a “data dependency” narrative just yet, fearing that adopting too dovish a line could fuel market expectations for eventual rate cuts. In turn, this could lead to an unwanted loosening of financial conditions that contribute to inflation staying higher for longer. Conversely, signalling 25bp but then hiking by a more aggressive 50bp would generate a large risk-off reaction with sharply higher borrowing costs. The majority of the committee would likely consider this too risky an option given the potential to intensify recessionary forces that could end up excessively dampening inflation. With no new Federal Reserve forecasts at this meeting, the accompanying press conference is likely to re-affirm that it is appropriate to move in smaller 25bp steps from now on and we are not at the endpoint yet. The Fed could over and/or under-hike other rates for technical reasons, but likely won't Apart from the headline funds rate range of 4.25% to 4.50%, the Fed will also adjust higher the rate on the reverse repo facility and on excess reserves. These are currently at 4.3% and 4.4% respectively, and are often seen as the tighter corridor within which the effective fed funds rate sits (currently 4.33%). There is constant speculation on the likelihood of the Fed deciding to under-hike the rate on the reverse repo facility, to bring it to flat to the fed funds floor (it’s currently 5bp over). The logic would be to encourage less use of this facility, which routinely takes in US$2tr in excess liquidity on a rolling daily basis. However, in all probability, repo would simply trade down to the same area, without a material effect on volumes. There is a similar argument to instead over-hike the rate on excess reserves, say by 30bp (instead of 25bp). The idea here would be to encourage a downsize in the use of the reverse repo facility in place of an upside in bank reserves (higher relative remuneration). This would allow the Fed to better manage bank reserves, ensuring that it doesn't fall too fast, as it gradually ratchets its balance sheet lower through the ongoing soft quantitative tightening programme (as it allows $95bn of bonds per month to roll off the front end). In all probability, it won’t do this either. It is already a 10bp spread between the reverse repo window and the excess reserves one, and widening that to 15bp might not make a material difference. That said, a spread of 20bp just might, and is something the Fed could consider down the line i.e. under-hiking the reverse repo rate and over-hiking the rate on excess reserves. On this occasion, there would be quite a surprise if it did anything along these lines, at least not at this juncture. The Fed could also upsize the quantitative tightening agenda, but likely won't either The Fed has also been quite quiet on the balance sheet roll-off programme. It seems that’s the way it likes it – churning away quietly in the background, and not causing too many market ripples. The big question in this space is whether the Fed could consider outright selling some bonds off its books, and thereby engage in a harder version of quantitative tightening. It would be huge if it did. There is certainly an appetite for bonds in the market if the recent Treasury auctions are anything to go by. However, such selling of bonds outright would likely be a step too far at this juncture, as it would likely generate a tantrum. But it's always there should the Fed start to feel that the fall in longer-dated market rates is acting contrary to its hiking efforts on the front end. Even a mention that it is looking at this down the line would have a material effect. Not expected, but these are potential market movers that we need to cross off as the meeting outcome unfolds. Importantly, any mention of potentially upsizing the bond roll-off in the future or considering any bond selling (e.g. of the longer-dated mortgage portfolio) would signal it was uncomfortable with where longer-dated market rates are at. But the outlook is darkening and the peak is close We think that the Fed will probably hike once more on 22 March, but that will mark the top for the policy rate. We are concerned that signs of a slowdown will spread and intensify with a recession our baseline forecasts. Residential construction has fallen in each of the past six months, industrial production has been down for the past three months and retail sales have dropped by 1% or more in both November and December. Unfortunately, business surveys offer no hint of a turn with both the manufacturing and service sector ISM indices in contraction territory and the Conference Board’s measure of CEO confidence at the most depressed level since the Global Financial Crisis – a clear signal that businesses will be focusing more on cost-cutting rather than revenue expansion this year. At the same time, the heavy weighting of shelter and vehicles within CPI and clear signs of softening corporate pricing power mean that inflation will be close to 2% by the end of this year. Rents have topped out in most major cities while vehicle prices are now falling, with the National Federation of Independent Businesses survey on price intentions pointing to a sharp slowdown in core inflation through the second quarter into the third quarter of this year. As for the jobs market, while headline payrolls growth remains impressive there are flashing warning lights with the temporary help component reporting falling employment numbers in each of the past five months. This is concerning because this grouping of workers is typically easier to hire and fire by the nature of the position so they tend to lead broader shifts in payrolls. Worryingly, the declines are getting bigger each month, suggesting the momentum in the jobs market is souring. In an environment of weak activity, falling inflation, and mounting job losses, we doubt the Fed will raise rates beyond March with rate cuts the order of the day from the third onwards. FX: Things are getting interesting It has been pretty much one-way traffic for the dollar bear trend since early November. Clear signs of easing US price pressures and a slowing economy have upended the prior narrative of a Fed forced to tighten into a recession. Risk assets have rallied strongly. Data shows that the EUR/USD six-hour reaction to last year’s Federal Open Market Committee (FOMC) decisions triggered moves of anywhere between +/- 0.7%. And the FX options market has a 90 pip range priced for EUR/USD over the period which covers both the Fed and the ECB meetings next Wednesday/Thursday.  We were about to say that an expected 25bp rate hike from the Fed and a relatively unchanged statement would have little impact on FX markets. Yet we have just seen FX markets move on the Bank of Canada’s decision to halt its tightening cycle at 4.50%. The dollar was marked lower on this decision, presumably on the minority view that the Fed could also be ready to call time on its tightening cycle. This suggests that the FOMC meeting could prove more interesting than the market has priced. Our base case would assume that EUR/USD continues to trade near 1.08/1.09 after the FOMC meeting. Any suggestion that the Fed was virtually done tightening could send EUR/USD through 1.10. While aggressive Fed push-back against the 50bp of 2023 easing already priced by the market could briefly send EUR/USD to 1.07. In the bigger picture, we expect EUR/USD to head higher this year – perhaps to the 1.15 area in the second quarter – this will be the time when US inflation is falling more sharply and China re-opening is providing a tailwind to the pro-cyclical currencies, including the euro. Read this article on THINK TagsUS Recession Interest rates Federal Reserve Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Bank of Canada keeps the rates unchanged. After the release of the US inflation, Fed's Barkin drew attention to cooling demand, but still strong labour market and inflation

The Canadian Dollar (CAD) Was The Clear Outperformer Across The G10 Board

Saxo Bank Saxo Bank 27.01.2023 10:16
Summary:  U.S. equities gained and Treasuries sold off on stronger-than-expected U.S. data headlines, including a 2.9% growth in Q4 GDP, a decline in the initial claims to 186K, a 5.6% increase in durable goods orders, and a rise in new home sales. The Nasdaq 100 closed above its 200-day moving average for the first time since March last year. Hong Kong came back from the Lunar New Year holiday rising 2.4% on high-frequency data that pointed to a strong recovery in traffic and consumption during the Lunar New Year holiday in mainland China. Today all eyes are on the PCE data as it may set the direction of the next move of equities and bonds.   What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) rallied on slower but better-than-expected economic growth The major US indices had a choppy day of trade, with the S&P 500 rebounding and ending up 1.1%, and the Nasdaq 100 finishing the session 2% higher. Investors digested slower US economic GDP growth data but better-than-expected from the fourth quarter, as it tends to suggest that the US economy could make a soft landing. Nasdaq 100 closed above its 200-day moving average for the first time since March last year. 10 of the 11 S&P 500 sectors gained with energy, up 3.3%, and consumer discretionary, up 2%, leading the charge higher. Tesla shares charge, investors look past falling auto margins Tesla’s shares jumped 11% on Thursday, extending its rally from its January 6 intra-day low to over 57%, with earnings and revenue beat expectations, while investors looked past automotive gross margins grinding to its lowest figure in five quarters, 25.1%. Also, despite a streak of quarterly sales (deliveries) coming up short of expectations, Musk teased the potential to produce 2 million vehicles this year, and minimise the effects of drastic price cuts to its EVs. Other company news American Airlines Group expects profit this year to exceed estimates following a slow start, as steady demand for air travel keeps an industry recovery going into 2023. Mastercard warned revenue growth would slow even faster than expected this quarter, stoking fears that inflation has put a damper on consumer spending. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) rose on stronger-than-expected economic data U.S. Treasures sold off after the stronger-than-expected economic headlines. Real GDP grew at 2.9% annualized in Q4, faster than the 2.6% median forecast, though more than half of the increase came from a rise in inventories. Initial jobless claims fell to 186K instead of rising as in the consensus forecasts. New home sales rose 2.3% sequentially against expectations for a decline. Durable goods orders grew 5.6% M/M while the median forecast expecting for a decline. The 7-year auction had strong demand with a strong bid-to-cover ratio of 2.69 times and was awarded 2bps richer than the market level at the time of the auction. Yields on the 2-year notes settled 6bps higher at 4.18% and the 10-year finished the session cheaper at 3.49%. Hong Kong’s Hang Seng Index surged 2.4% as mobility and consumption picked up in the mainland On the first trading day of returning from the Lunar New Year holiday while the mainland bourses remain closed, Hang Seng Index surged 2.4% and Hang Seng TECH Index jumped 4.3%. According to Xinhua News, the State Council estimates that passenger trips over the whole Lunar New Year peak transportation period are reaching 2.1 billion, almost doubled the number from last year. Separately, data from the Ministry of Transport showed that daily passenger trips between 7 and 25 January averaged nearly 37 million, a 50.8% growth from last year. Tourism consumption data from Ctrip and cinema box offices have also been encouraging. It added to the optimism that the initial Covid outbreak when pandemic containment measures were lifted has not stalled the rebound in mobility and economic activities. Xiaomi (01810:xhkg), surging 12.5%, was the best performer within the benchmark Hang Seng Index, following the leak of an EV blueprint design being considered as an indication of the mobile phone and electronic device maker is on track to launch its first EV in 2024. FX: CAD boosted by higher oil prices; JPY stronger on Tokyo CPI The US dollar was modestly higher on Thursday with upbeat US GDP and claims data supporting the case for a soft landing. Focus now turns to PCE and the earnings season ahead of the Fed meeting next week where the broad consensus is still for a step down to a 25bps rate hike. CAD was the clear outperformer across the G10 board, despite Bank of Canada’s dovish tilt this week as higher oil prices supported. USDCAD now testing a break below 1.33. EURUSD still getting rejected close to YTD highs of 1.0930, but JPY was one of the underperformers as USDJPY traded back above 130 amid somewhat higher US yields but a dip back below 129.70 was seen in early Asia as Tokyo CPI for January came in above expectations. AUDUSD holds higher despite Australian producer prices slowing. US PCE today & RBA decision Tuesday next test Australian producer inflation (as measured by the Producer Price Index), has been trending higher, however today’s data from Q4 suggests producer prices are easing. However we believe that this is not an accurate reflection of reality. Not only is the data quarterly, but raw material prices (oil, electricity, fuel, copper, rent) are trending higher. As such the Australian dollar holds at 0.7127, after rising up 0.2%. The next test for the Aussie dollar will be Friday’s PCE data from the US and Tuesday’s RBA commentary with an expected 0.25% (25bps) hike on the cards. All in all, we believe the AUD is supported higher over the medium term, following a series of hotter than expected CPI prints, while China’s reopening is supporting the AUD with commodity demand rising. Still we continue to watch if the 50 day simple moving average crosses above the 200 day, marking a ‘golden cross’, which could lead to another quick run up. Crude oil (CLG3 & LCOH3) prices jump higher The demand outlook for commodities got another boost on Thursday with upbeat US GDP report for Q4 and a still-low initial claims weekly print highlighting the tight jobs market. Th30e recovering demand outlook in the short run also saw Brent structure flipping to backwardation from contango. Brent futures were up 1.7% to $87.50 but our Head of Commodity Strategy, Ole Hansen, writes that Brent is likely to find resistance at $100 in the short-term, with recession risks offsetting an expected rebound in Chinese demand and supply concerns related to the February 5 introduction of an EU embargo on Russian seaborne sales of fuel products. WTI futures inched back above $81/barrel. Gold (XAUUSD) rejected at 1950 With the upbeat US economic data releases on Thursday, there was increasing conviction that the Fed could still deliver a soft landing vs. a deep recession that some had started to forecast at the end of 2022. This prompted some profit-taking in Gold which closed at a nine-month high and very close to the key resistance of $1950 a day before. Spot prices slumped close to 0.9% to close near $1930, with support seen at $1900 with resistance at $1963, a Fibonacci level. Copper shorter term correction risk Copper prices lift 0.5% to $4.27, and are now up 32% from their lows. The wiring and industry metal outlook remains bright amid the clean energy transition, while mines will need to produce more than needed over the next two years to meet demand. However there is a risk Latin America will ramp up output, which could see prices correct.  Read next: Trump Returns To Social Media, Meta Will Restore The Former President's Account| FXMAG.COM  What to consider? US economic data continues to point to soft landing, eyes on PCE The advance print of US GDP came in at a stronger-than-expected +2.9% YoY (vs. 2.6% YoY exp) for the fourth quarter from 3.2% YoY in Q3. While the strong headline, together with another sub-200k print for the weekly jobless claims, coming in at 186k vs. 205k expected, suggested that the US economy was holding up strongly in the wake of rapid Fed tightening, the details were still patchy. Importantly, personal consumption, key to gauge how the consumers are holding up, climbed at a weaker-than-expected pace of 2.1% YoY. Focus now turns to Fed’s preferred inflation gauge, the PCE data, due to be released today. The disinflation impulse is likely to stretch further, as has been evident from CPI releases lately, likely continuing to build a case for a 25bps rate hike by the Fed next week. IMF urges the Bank of Japan to consider policy flexibility The BOJ should consider increasing flexibility in long-term yields, the IMF said, highlighting that the risks to inflation are tilted to the upside with exceptionally high uncertainty. Options include raising its 10-year yield target, widening the trading band, switching back to a quantity goal for bond buying and aiming at a shorter-maturity yield. Japan needs to see a 3% across-the-board rise in nominal wages to anchor CPI above the BOJ's 2% target, fund Deputy MD Gita Gopinath said. EU considering $100 cap on Russian diesel The European Union is floating a plan to cap the price of Russian diesel at $100 a barrel from February 5 (the same date as the EU will ban almost all imports of refined Russian products). For reference, diesel futures are currently trading at $130/barrel, as they usually trade at a premium to crude. A lower $45 threshold would be set for discounted fuels like fuel oil, but member states will need to unanimously agree to the final figures. The objective remains to keep the Russian flows coming but cut Moscow’s revenues. Japan’s Tokyo CPI beats expectations Tokyo CPI for January came in above expectations, with the headline rising to 4.4% YoY from a revised 3.9% YoY previously and estimate of 4.0% YoY. The core measure rose to 4.3% YoY from 3.9% YoY while the core-core measure was also higher at 3.0% YoY from 2.7% YoY in December. This makes way from another beat in the overall CPI for January as well, and saw USDJPY down by about 50pips in response to 129.70 after a modest rise in the US session as US yields rose. Asia’s inflation surge from Australia to New Zealand to Japan is raising concerns on how China’s reopening could potentially fuel another leg of price pressures globally as commodity prices surge. In Australia, the ASX200(ASXSP200.I) seems supported by China reopening Consider Australia is often considered an investment proxy for China and Aussie exchange-traded funds (ETFs) could draw flows as China's economy reopens from Covid. The Australian equity market is frequently a dividend and commodity play, tilting heavily to financial and materials sectors. Mining company BHP Group expects dividend growth of 17% while the top iron ore miners are expected to ramp up shipments, underpinning higher earnings. Insurers, banks and financials could benefit most from RBA rate hikes with QBE and Westpac most sensitive to rising interest rates, with 60% and 40% profit boosts expected for them this year amid higher earnings on assets. The ASX200 is up 16% from its low and total aggregate earnings growth of over 30% is likely to unpin further growth for the market.   For a look ahead at markets this week – Read/listen to our Saxo Spotlight.   For a global look at markets – tune into our Podcast. Source: Market Insights Today: Tesla leads; US GDP beats estimates – 27 January 2023 | Saxo Group (home.saxo)
Oanda Podcast: US Jobs Report, SVB Financial Fallout And More

Yesterday's Economic Data From The US Eased Fears Of Recession

Saxo Bank Saxo Bank 27.01.2023 10:24
Summary:  Despite some improvement in the growth narrative recently, the Fed has limited new trends of the US economy to take note of at their January 31-February 1 meeting. The recovery in Q4 GDP comes with a weakening consumer spending, and incoming data remains volatile at best. This means there is reason to believe that the Fed will want to lengthen its tightening cycle, and go in smaller steps, in order to buy more time to assess the growth and inflation dynamics. Improving US economic momentum The expectations of a soft landing have picked up since the start of the year, relative to the rising recession bets seen in H2 of last year. Meanwhile, inflation has been on a steady downtrend in the last six months, which has allowed the Fed to downshift to a 50bps rate hike in December after a spate of rate hikes in 75bps increments before that. Yesterday’s US economic data, including the Q4 GDP or durable goods, further supported the case for sustained economic activity and eased recession fears. The advance print of Q4 GDP came in at a stronger-than-expected +2.9% YoY (vs. 2.6% YoY exp) for the fourth quarter from 3.2% YoY in Q3. In addition, sustained labor market strength was once again signalled by another sub-200k print in the weekly jobless claims. Massive tech layoffs at odds with labor market strength The wave of layoffs seen in the tech sector is now even extending to other sectors. But broader US labor market data, including nonfarm payrolls or weekly jobless claims, continues to signal sustained tightness in the US labor market. These divergent data signals are underpinned by several factors: Layoffs so far have been mostly concentrated in a few sectors (especially tech) that was bloated to start with, and some of the hiring freezes are just a step back from years of hiring sprees Services and lower wage sectors such as healthcare, education and hospitality still have a lot of job openings The mass layoff announcements from big tech companies are largely global headcount reductions, and not just for the US Overall, most of the layoffs appear to be steps to control costs in the current scenario of margin pressures and an impending slowdown, but do not really signal any fears of a prolonged recession. Read next: Trump Returns To Social Media, Meta Will Restore The Former President's Account| FXMAG.COM Fed speakers have broadly guided for a smaller hike at the next meeting Besides the Fed’s most hawkish member, James Bullard, all other FOMC members have broadly hinted at a further slowdown in the pace of rate hikes. Bullard does not vote this year or next, and the overall Fed committee composition for 2023 hints at a slightly more cautious to dovish stance ahead unless inflation shoots up again. Most recently, two of this year’s voters, Waller and Harker, have backed a clear preference for 25bps rate hikes from February onwards. Volatility of economic data vs. easing financial conditions Economic data recently has been extremely volatile. Moreover, the fourth quarter GDP report may have been above expectations on the headline, but details are still patchy. Consumer spending grew 2.1%, which was below the 2.9% rate expected, suggesting that the consumers may be starting to pullback after using their excess savings last year. The recent activity data in January, from retail sales to ISM surveys, suggests pressure may be building for Q1 growth. This means there is some reason to believe that Powell and team may be aiming to lengthen the hiking cycle in order to buy more time to assess both the incoming data and the impact of their previous aggressive rate hikes. This warrants a smaller rate hike of 25bps at the February 1 decision. The key risk factor, favouring another 50bps rate hike, could be the financial conditions which are the easiest since April 2022 or the risks of another shoot higher in inflation due to China’s reopening and the resulting rise in commodity prices. Source: Bloomberg, Saxo Markets   Source: Macro Insights: Will the US Fed step down its rate hike trajectory again? | Saxo Group (home.saxo)
The ECB to Hike, But Euro Rally May Be Short-Lived as Dollar Strength Persists

Visa Earnings Beat Expectations And Mastercard Report Was Still Below Expectations

Saxo Bank Saxo Bank 27.01.2023 10:31
Summary:  The market mood remained upbeat yesterday, with US equities posting their highest close since early December, although an ugly earnings report after hours took chip giant Intel down nearly 10%. Treasury yields rebounded in the US after the lowest weekly jobless claims number since last May and a firmer than expected first estimate of Q4 GDP. The good mood was not shared by India, where equities tumbled after an attack by a short-shelling outfit on Adani’s network of companies.   What is our trading focus? Equities: US equity hits new highs since early December, but weak Intel weighs after hours The market rallied again yesterday, closing at new high since early December, with a broad advance across most sectors. The rally took the S&P to within hailing distance of the next key resistance area, the range highs into 4100, while the tech-heavy Nasdaq 100 closed just a hair above its 200-day moving average on the cash index and north of 12,000, the highest close since last September. A weak earnings report from Intel (more below) marred sentiment in late trading as the chip giant’s shares were marked sharply lower. Hong Kong’s Hang Seng (HIF3) consolidated, holding onto weekly gainsy Hang Seng Index fluctuated between modest gains and losses after yesterday’s strong post-holiday rally and ahead of the resumption of trading in the mainland bourses on Monday. High-frequency data on multi-mode traveling activity and holiday consumption continued from various sources continued to be positive and pointed to a solid recovery. Chinese developers and Macao casino operators were among the top gainers. Country Garden (02007), rising nearly 6%, was the best performer within the benchmark Hang Seng Index after the developer secured a 3-year bank loan. FX: USD avoids further drop on strong US data The latest weekly US jobless claims posted a new low for the cycle at 186k and since May of last year, with the first Q4 GDP estimate marginally stronger than expected. This helped US treasury yields rebound slightly and generally helped the USD avoid a further drop, although volatility in US yields has eased. EURUSD can’t seem to decide whether to take out 1.0900 after having criss-crossed the level for several days running, just as GBPUSD has been unable to take 1.2400 and the pivot high of 1.2446 from December after several over the last seven trading days, and USDJPY has meandered without conviction in the 130.00 area, with new lows in US long yields or some further indication of policy action from the Bank of Japan or both likely needed to post new lows. A dip back below 129.70 was seen in early Asia as Tokyo CPI for January came in above expectations. The next event risk for USD traders is today’s December PCE inflation data release ahead of the Fed meeting next week where the broad consensus is still for a step down to a 25bps rate hike.  Crude oil (CLG3 & LCOH3) prices range-bound Crude oil trades near unchanged on the week with an underlying positive sentiment, as China demand optimism offsetting slowdown and recession risks elsewhere. Trafigura Group sees “a lot of upside” for oil markets as pent-up demand is unleashed, especially as Chinese consumption rebounds after the nation dismantled its strict Covid Zero policy. The market is also focusing on a potential risk to supply from EU sanctions on Russian fuel shipments from February 5, and a plan under consideration to introduce a price cap on diesel at $100 a barrel against a current market price of $130. Brent is currently trading within nine-dollar wide up trending channel within a medium-term downtrend, both offering firm resistance in the $89-$90 area. Ahead of channel support at $80.35 some support is likely to be provided by the 21- and 50-day moving averages, currently around $83.50.  Gold (XAUUSD) rejected at $1950  Gold is heading for its first, albeit small, weekly loss in six weeks and following Thursday’s rejection at $1950 an upbeat US GDP report for Q4 and a still-low initial claims weekly print helped send yields and the dollar a tad higher, thereby reducing the appeal. Given gold’s steep ascent during the past two months a period of consolidation is long overdue and whether it’s consolidation or correction will depend on the yellow metals ability to hold trendline and the 21-day moving average both currently around $1890. Watching ETF holdings which reached an 11-week high following a modest increase, and US breakeven and inflation swaps which have started to move higher, thereby challenging the markets outlook for sub-2.5% inflation. Focus now turns to next week's FOMC and in the meantime the dollar remains the key source of short-term trading strategies. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) rose on stronger-than-expected economic data  U.S. Treasures sold off after the release of overall stronger-than-expected economic headlines. Real GDP grew at 2.9% annualized in Q4, faster than the 2.6% median forecast though more than half of the increase came from a rise in inventories. Initial jobless claims surprisingly fell further to 186K the lowest print since last May. New home sales rose 2.3% sequentially against expectations for a decline. Durable goods orders grew 5.6% M/M while the median forecast expected a decline. The 7-year auction had strong demand with a strong bid-to-cover ratio of 2.69 times and was awarded 2bps richer than the market level at the time of the auction. Yields on the 2-year notes settled 6bps higher at 4.18% and the 10-year bounced back to 3.49% on the close and rose to 3.52% into early European hours What is going on? IMF urges the Bank of Japan to consider policy flexibility  The BOJ should consider increasing flexibility in long-term yields, the IMF said, highlighting that the risks to inflation are tilted to the upside with exceptionally high uncertainty. Options include raising its 10-year yield target, widening the trading band, switching back to a quantity goal for bond buying and aiming at a shorter-maturity yield. Japan needs to see a 3% across-the-board rise in nominal wages to anchor CPI above the BOJ's 2% target, fund Deputy MD Gita Gopinath said. Intel sent nearly 10% lower after hours on revenue miss, dire forecast The chip giant reported weaker than expected results for Q4, as it continues to deal with the post-pandemic slump in demand after the work-from-home and IT infrastructure upgrade wave boosted sales the prior two years. Even worse, the company posted a revenue forecast for the current quarter at $10.5 to $11.5 billion, far short of consensus estimates of $14 billion (the year ago quarter was north of $18 billion). In part, the weak estimate is due to customers having stockpiled significant inventories that must be worked through before demand for components rises again. The company predicted an earnings loss of 15 cents/share for the upcoming quarter as well, the first such prediction in decades. Indian stocks crater further on Hindenburg short-seller report on Adani. The network of Adani companies saw their prices fall steeply again, after Indian markets were closed yesterday, with Adani Enterprises down over 8% in late trading overnight. Adani is said to be preparing a detailed response to the short-selling outfit’s allegations. Visa and Mastercard report slower rise in card spending than expected Visa earnings beat expectations, but the company only reported a +1.7% rise for the quarter in card spending, some 5% below expectations. Mastercard reported a growth of 11% on the quarter, but that was still below expectations. The companies report that customers are shifting to cheaper brands for some of their spending. Mastercard closed 0.4% higher, having reported before the market open, while Visa reported after hours. EU considering $100 cap on Russian diesel The European Union is floating a plan to cap the price of Russian diesel at $100 a barrel from February 5 (the same date as the EU will ban almost all imports of refined Russian products). For reference, diesel futures are currently trading at $130/barrel, as they usually trade at a premium to crude. A lower $45 threshold would be set for discounted fuels like fuel oil, but member states will need to unanimously agree to the final figures. The objective remains to keep the Russian flows coming but cut Moscow’s revenues.   Japan's Tokyo CPI beats expectations Tokyo CPI for January came in above expectations, with the headline rising to 4.4% YoY from a revised 3.9% YoY previously and estimate of 4.0% YoY. The core measure rose to 4.3% YoY from 3.9% YoY while the core-core measure was also higher at 3.0% YoY from 2.7% YoY in December. This makes way from another beat in the overall CPI for January as well and saw USDJPY down by about 50pips in response to 129.70 after a modest rise in the US session as US yields rose. Asia’s inflation surge from Australia to New Zealand to Japan is raising concerns on how China’s reopening could potentially fuel another leg of price pressures globally as commodity prices surge. Iron ore price hits new 2022 high, on Fortescue seeing China demand pick up in 1H2023 In thin trade with China’s market still on public holidays, iron ore (SCOA), the key steel making ingredient, hit a new six month high price today, $126.20 a ton, not only driven by expectations China will increase buying after the Lunar new year holiday, but also as Australia’s large pure play iron ore company, Fortescue sees stronger sales in the first half of 2023. Fortescue reported China increased buying of port side iron ore in the prior quarter to 4.0mt, and it sees sales in the first half increasing to 9.3mt. All in all, iron ore supply is still lower than it was a year ago, and demand is increasing which underpins price supports. The iron ore price is now up 67% from its low, which has boosted optimism that iron ore companies will guide for stronger outlooks. Australia, an investment proxy for China reopening sees biggest monthly rally since 2020 Australia’s ASX200 (ASXSP200.I) has recorded its biggest monthly rally since November 2020, up 6.5% so far with Australia being considered an investment proxy for China's reopening. We see Australian investment instruments and exchange-traded funds drawing flows in 2023 as China’s economy emerges from covid19. Australia’s equity market, considered a dividend and commodity play, is heavily made up of financial and materials companies. Mining giant BHP Group expects 17% dividend growth, with iron ore miners forecasting higher demand for high-grade iron ore from China, which supports higher earnings. Australian insurers, banks and financials will likely benefit from the RBA’s rate hikes with QBE and Westpac as examples, see 60% and 40% profit boosts amid higher earnings on assets. What are we watching next? Lower output in the Black Sea region reducing world supplies key crops Ukraine’s corn and wheat production is set to fall for a second year in 2023, with corn output not expected to exceed 18 million tons and wheat production 16 million tons as farmers reduce planting due to the war, a grain sector group said on Thursday. Ukraine’s agriculture minister said last month that 2022 corn production could fall to 22-23 million tons from 41.9 million tons in 2021. Wheat production is estimated to have fallen to about 20 million tons last year. In addition, the USDA said on Thursday it saw Russia’s official wheat crop estimate as “not feasible”. Because of disrupted wheat supplies and strong demand, Thai rice, a benchmark for Asia, has soared to the highest in almost two years. Rice is a staple for half the world, and while wheat soared to a record in March last year, rice was relatively subdued for most of 2022, constraining food inflation in Asia. US December PCE Inflation is up today While focus has pulled away from inflation a bit recently on the significant deceleration in its trajectory, the market may be somewhat poorly prepared for a hotter than expected number today. The headline figure is expected at 0.0% MoM and +5.0% YoY vs. +5.5% YoY in November. The core is expected in at +0.3% MoM and +4.4% YoY vs. +4.7% YoY in November. Earnings to watch Earnings reports are few and far between on a Friday, but a couple of interesting names are on the docket today, including Chevron, which has declared it will buy back $75 billion of its own stock and increase its dividend, and major US consumer products company Colgate Palmolive.  Next week’s sports an ongoing big blast of earnings reports, which will include most of the remaining mega-caps after Microsoft this week (Apple, Alphabet and Amazon reporting next Thursday). Today: Fanuc, Chevron, American Express, Colgate-Palmolive Economic calendar highlights for today (times GMT) 1330 – US Dec. PCE Inflation1500 – US Dec. Pending Home Sales1500 – US Jan. Final University of Michigan Confidence1600 – US Jan. Kansas City Fed Services Survey Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher     Source: Financial Markets Today: Quick Take – January 27, 2023 | Saxo Group (home.saxo)
A Better-Than-Expected US GDP Read, Nvidia Extends Rally

A Better-Than-Expected US GDP Read, Nvidia Extends Rally

Swissquote Bank Swissquote Bank 27.01.2023 10:41
US equities rallied on Thursday, boosted by a decent rally in Tesla and Chevron stocks, and a better-than-expected GDP read in the US. But be careful! The US growth number was good, but not necessarily for good reasons. US data The US will reveal another gauge of inflation, the PCE data, that is closely watched by the Federal Reserve (Fed). A slower than expected core PCE would be a cherry on top for closing a week where the S&P500 rallied past its 2022 bearish trend top, and which could soon confirm a cup and handle pattern above the 4100 mark. But beware, Intel slumped 10% in the afterhours trading after revealing a worse-than-expected quarterly loss due to a steeper than expected fall in PC chip sales, and giving a weaker-than-expected forecast for the current quarter. Forex In the FX, the US dollar is better bid on the back of a strong GDP report, while gold is down from the $1950 resistance. The EURUSD is again below the 1.09 mark, while Cable consolidates below 1.24, with a clear resistance forming into the 1.2450 mark. The AUDUSD on the other hand extends gains above 71 cents level as the heated inflation report this week boosted the Reserve Bank of Australia (RBA) hawks. The market remains strongly short the Aussie, meaning that if the Aussie gains further momentum to the upside, we could see a short covering that could further emphasize the bullish trend. Read next: GBP/USD Pair Is Struggling To Extend Previous Highs, EUR/USD Pair Continued Its Gains| FXMAG.COM Watch the full episode to find out more! 0:00 Intro 0:25 S&P extends rally to bullish era 0:39 Tesla rallies 11% on record profits 1:41 Chevron jumps near 5% on stock buyback, pre-earnings 2:02 US GDP growth is good, but not for good reason 4:30 Luxury is the new Tech! 7:05 Watch US PCE data today! 7:40 Intel down 10% post-earnings, Nvidia extends rally 8:32 FX update: Aussie’s ascent could trigger a short squeeze! Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Intel #Nvidia #Tesla #Microsoft #Chevron #earnings #US #GDP #inflation #data #Fed #expectations #USD #EUR #GBP #AUD #crude #oil #XAU #China #Covid #reopening #luxury #rally #Burberry #Hermes #LVMH #Swatch #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
Alphabet Reports Strong Q2 2023 Results with Growth in Advertising and Cloud Services - 24.07.2023

The Aussie Pair Is Holding Above 0.7100, The Major Currency Pairs Are Waiting For US PCE Report

Kamila Szypuła Kamila Szypuła 27.01.2023 13:15
The dollar strengthened on Friday, moving away from multi-month lows against the euro and sterling as investors began to focus on the many important central bank meetings next week. The US Federal Reserve, European Central Bank and Bank of England are due to make interest rate decisions next week as they assess what policy adjustments may be needed to fight rampant inflation in a challenging global economic environment. In today's expected audience session, the core US PCE data for December will be released. This is the Fed's preferred measure of inflation and price pressures are expected to ease further. USD/JPY Annual inflation in Japan's largest city, Tokyo, continues to climb, with the base rate hitting 4.3% in January, the highest level in more than four decades. The USD/JPY pair in the European session is trading close to 130.00, at 129.96. Earlier, the couple managed to break the level of 130.00 but failed to maintain it. The couple is waiting for the publication of the US PCE report. EUR/USD The US dollar draws support from the mostly upbeat US macro data released on Thursday, which in turn is seen as a key factor putting some pressure on EUR/USD. Expectations for a more hawkish nature of the European Central Bank (ECB) should additionally contribute to limiting deeper losses. It is worth recalling that several ECB officials supported additional interest rate hikes in the coming months to fight stubbornly high inflation. Today European Central Bank (ECB) President Christine Lagarde is set to speach. The frequency of Lagarde's speeches in recent times has almost reduced her impact on the financial markets and the euro, which leads me to believe that today's forecasts may not have a significant impact. However, the market's attention will remain focused on key risks related to the central bank's events next week. The Fed will announce its policy decision at the end of its two-day meeting on Wednesday. This will be followed by the ECB monetary policy meeting on Thursday, which in turn will play a key role in determining the next stage of the EUR/USD directional move. The EUR/USD pair broke above 1.09 in the morning but fell again. Currently, the EUR/USD pair is trading in the range of 1.0875-1.0880. Read next: Ukraine Is Calling For More Sanctions Against Russia| FXMAG.COM GBP/USD Given the volatility of the market, the GBP/USD pair may witness a further sideways move ahead of the US PCE price index for December. British Finance Minister Jeremy Hunt's willingness to accelerate growth is unimpressive to GBP/USD buyers as the Chancellor defends his position on a tax hike despite heavy criticism from other Conservatives. Alternatively, the growing calls for Brexit solutions, at least from Irish diplomats, appear to be helping the GBP/USD pair bearish. Investors expect the British economy's slowdown to end the Bank of England (BoE) tightening cycle soon. The Cable pair (GBP/USD) broke above 1.24 at the beginning of the day, but similarly to the EUR/USD pair, it failed to hold and fell. Currently, the GBP/USD pair is trading in the range of 1.2360-1.2370. AUD/USD The Australian dollar, tied to sentiment, rose cautiously on Thursday after US GDP data boosted Wall Street's risk appetite. In the fourth quarter of 2022, the US economy grew by 2.9% q/q. This is more than the consensus of 2.6%. The Australian dollar traded at around $0.71, hovering near its highest in almost eight months as rising inflation in the country fueled bets on further central bank policy tightening. Annual inflation in Australia rose 7.8% in December, the largest increase since 1990 and above market forecasts of 7.5%. The Aussie pair is holding above 0.7100 despite having dropped earlier. Source: investing.com, finance.yahoo.com, dailyfx.com
The US PCE Data Is Expected To Confirm Another Modest Slowdown

The US PCE Data Is Expected To Confirm Another Modest Slowdown

Michael Hewson Michael Hewson 27.01.2023 13:26
European markets have struggled for direction this week, finishing the day modestly higher after two days of minor losses.   US markets on the other hand finished the day strongly higher, with the Nasdaq 100 leading the way higher on the belief, rightly or wrongly, that the US economy is heading for a soft landing whatever the Fed does next week.   Yesterday's Q4 GDP numbers showed the US economy expanded by 2.9%, while weekly jobless claims fell again to 186k from 192k the week before.   If there are any concerns that the US economy is on the brink of a recession it's certainly not being reflected in the economic data, which still looks solid, as we look towards next week's Federal Reserve rate meeting.   Today we get a look at the latest personal spending numbers for December, after seeing a sizeable slowdown in the November numbers to 0.1%, after a strong October showing of 0.9%.   If we get a similar weak reading today, and all the forecasts suggest we might, then that would suggest a rising caution amongst US consumers about how the economy is evolving as we head into 2023. We've already seen US banks setting aside hefty loan loss provisions in their most recent earnings numbers, a move which might suggest rising unease that consumers are becoming more frugal with their spending, or that a slowdown might result in credit losses.   Expectations are for December personal spending to decline by -0.1%, which seems somewhat conservative given that retail sales showed a decline of -1.1% a couple of weeks ago.   Whatever numbers we get today it seems almost certain that we will see the Federal Reserve raise rates by another 25bps next week, and judging by the rally in US stocks yesterday, the market has increasingly priced in that outcome instead of what might have been a 50bps move.   The big concern is what markets aren't pricing, and while the Bank of Canada earlier this week signalled a pause in its rate hiking cycle, that doesn't mean the Fed will follow a similar path, even though markets appear to be pricing exactly that sort of outcome.   While yesterday's GDP numbers increasingly appear to support the prospect of a soft landing, the labour market data also suggests that the Fed has the headroom to continue to be much more aggressive.   Today's PCE Core Deflator inflation data is expected to confirm another modest slowdown from 4.7% to 4.4%, and the lowest reading since October 2021. It would also support the case for a more modest 25bps next week, however as we get nearer to the end of the Fed's rate hiking cycle there is some divergence with respect to what might come next.   Judging by the bond market reaction which saw yields move higher there may be a realisation that rates are likely to remain higher for longer, while the strong close for stocks might suggest the market believes rate cuts might not be too far away.   That seems doubtful if last night's Tokyo CPI is any guide, after inflation there surged to a new 42 year high at 4.4%, well above expectations of 4%. This suggests that global inflation is likely to be stickier than markets are currently pricing.   We'll soon see who is right when Fed chair Powell speaks next week, but if markets think a pause is coming, they could be in for a bit of a wake-up call.   EUR/USD – another fairly tight range yesterday with resistance at 1.0927 and the highs this week, as well as wider resistance at the 1.0950 area which is 50% retracement of the move from the 2021 highs to last year's lows at 0.9536. A move through 1.0950 opens up a move towards 1.1110. Support remains back at the 1.0780 area.   GBP/USD – made another attempt to move towards the 1.2450 resistance area yesterday, before slipping back. We need to see a move through the 1.2450 area to target further gains towards 1.2600. A move below 1.2250 could see a move towards 1.2170.    EUR/GBP – the failure to make progress through the 0.8850 area has seen the euro slip back. Also have resistance at the previous highs at 0.8900. Still have support above the 50- and 100-day SMA which we saw last week at the 0.8720/30 area. Below 0.8720 targets 0.8680.   USD/JPY – needs to break through the 131.00 area to target a move back towards 132.60. While below the risk is for further declines towards the lows at 127.20. We have interim support at the 128.20 area initially.   FTSE100 is expected to open 13 points higher at 7,774   DAX is expected to open 44 points higher at 15,176   CAC40 is expected to open 3 points higher at 7,099   Email: marketcomment@cmcmarkets.com   Follow CMC Markets on Twitter: @cmcmarkets Follow Michael Hewson (Chief Market Analyst) on Twitter: @mhewson_CMC
Oil Prices Soar on Prospect of Soft Landing, Eyes Set on $80 Breakout

The S&P500 Rallied Past Its 2022 Bearish Trend Top

Ipek Ozkardeskaya Ipek Ozkardeskaya 27.01.2023 13:36
eur to usd, eur usd, eur/usd, convert eur to usd, 1 eur to usd, eur vs usd, 100 eur to usd, euro to usd, what is euro?, what is dollar?, what is us dollar? US equities rallied on Thursday, boosted by a decent rally in Tesla and Chevron stocks, and a better-than-expected GDP read in the US.   The latest US GDP update was a strong beat. The US economy grew 2.9% in Q4, down from 3.2% printed a month earlier, but significantly better than the 2.6% penciled in by analysts.   But be careful! The US growth number was good, but not necessarily for good reasons.   Inventory adjustments and government spending were the main boosters of the GDP in the latest quarter, while domestic purchases increased just around 0.2%, down from 2% printed in Q1.   Plus, the housing sector took a massive 27% hit on annual basis, business inventories grew around 0.6% versus 6% printed a quarter earlier, and trade with other countries was good, but not because Americans exported more, but because they imported less.   In summary, the latest GDP data was boosted by government spending and inventory adjustments, but the growth engines, which are consumption and investment - that hint at the health of the future economy did quite poorly.   So what do you make of the data?  In one hand, slowing demand is great news for the Fed because their aggressive tightening policy hammers demand, and that should further ease inflation and further soften the Fed's policy. And all that, with the weekly jobless claims headed further down as a sign that the jobs market is still not feeling the pinch of the higher rates and the slower demand – although IBM announced it will cut 3900 jobs, and SAP 3000 this week. But oops, IBM is down 4.5% after the news. Too bad.  On the other hand, weaker demand is not great news, as it means that your favorite companies will be selling less stuff and will be making less money.   But there is always this hope that the Chinese could fill in the gap this year, thanks to the pandemic savings that will be flowing into the stuff that Chinese like to buy the most in the coming months. In this sense, Burberry and Swatch shares look nothing less exciting than the tech stocks during the pandemic. And that despite the war and a global cost-of-living crisis.  Focus on US PCE  The US will reveal another gauge of inflation, the PCE data, that is closely watched by the Federal Reserve (Fed). A slower than expected core PCE would be a cherry on top for closing a week where the S&P500 rallied past its 2022 bearish trend top, and which could soon confirm a cup and handle pattern above the 4100 mark.  But beware, Intel slumped 10% in the afterhours trading after revealing a worse-than-expected quarterly loss due to a steeper than expected fall in PC chip sales, and giving a weaker-than-expected forecast for the current quarter.  Aussie shines  The US dollar is better bid on the back of a strong GDP report, while gold is down from the $1950 resistance.   The EURUSD is again below the 1.09 mark, while Cable consolidates below 1.24, with a clear resistance forming into the 1.2450 mark.   The AUDUSD on the other hand extends gains above 71 cents level as the heated inflation report this week boosted the Reserve Bank of Australia (RBA) hawks. The 50-DMA crossed above the 200-DMA, confirming a golden cross formation on the daily chart, while the market remains strongly short the Aussie, meaning that if the Aussie gains further momentum to the upside, we could see a short covering that could further emphasize the bullish trend.   
Hawkish Fed Minutes Spark US Market Decline to One-Month Lows on August 17, 2023

The Agressive Rate Hikes By The Fed Did Not Lead To A Deeper Recession

InstaForex Analysis InstaForex Analysis 27.01.2023 13:45
The key takeaway from yesterday's Q4 GDP report was that economic growth in the US was strong at the end of 2022, thanks to the strong labor market and lower inflationary pressures. The BEA (Bureau of Economic Analysis) said inflation-adjusted GDP is up 2.9% year-on-year for the 4th quarter of 2022. However, compared to Q3 2022, the figure is lower because the growth back then was 3.2%. Most likely, the reason for growth is the consumer spending report, which rose by 2.1%. The second half of last year was also very different because the beginning of 2022 was a time of economic recession. The US has recovered since then, and the agressive rate hikes by the Fed did not lead to a deeper recession. However, it should be noted that the average GDP growth was only 1% last year, much lower than that of 2021's, which is 5.7%. If the Federal Reserve does not raise rates by more than a percentage point at the next two FOMC meetings, bullish sentiment will persist in the precious metals market. Currently, the core PCE report is forecast to show a decrease from 4.7% in November to 4.4% in December. Many analysts believe that inflation will continue to fall, but will stop at a certain level that is well above the Fed's target of 2%. If this assumption comes true, the Fed will face more problems, that is, raise the 2% target or remain aggressive for a longer period. Relevance up to 10:00 2023-01-28 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/333459
Long-Term Yields Soar Amidst Hawkish Fed: Will They Reach 5%?

Key events in developed markets next week - 28.01.2023

ING Economics ING Economics 28.01.2023 08:59
Next week is packed with central bank meetings. We see the Federal Reserve raising rates by 25 basis points, given inflation is moving in the right direction. For the European Central Bank, a rate hike of 50bp looks like a done deal, and we believe the Bank of England is likely to follow in the ECB's footsteps, given wage growth is persistently high In this article US: A slowdown in the pace of tightening UK: Bank of England to stick to 50bp hike following recent inflation data Eurozone: ECB to hike by 50bp; Lagarde to make hawkish statement   Shutterstock US: A slowdown in the pace of tightening Two major events in the US will shape market sentiment next week. First is the Federal Reserve policy meeting, where we expect it to raise the policy rate by 25bp. Having raised rates by 75bp on four consecutive occasions last year and then lifted the policy rate by 50bp in December, this marks a clear slowdown in the pace of tightening and appears justified given inflation is moving in the right direction and activity is slowing. However, the Fed remains wary and will again suggest that this is not the end for interest rate increases. The central bank will also be keen to dismiss the notion that it is preparing for potential rate cuts later this year. Financial conditions have loosened given movements in the dollar, Treasury yields and credit spreads and it may feel that any further loosening, fuelled by talk of potential policy easing in the second half of the year, could undermine its current actions in fighting inflation. We will then be looking at the January jobs report. Employment creation remains strong for now, but job lay-off announcements are coming in thick and fast. We are nervously watching what happens to the temporary help component, which has already experienced five consecutive monthly falls. Given the nature of the role, which is easier to be hired into and fired from, this tends to lead to broader shifts in employment. As such, we expect to see a softer non-farm payrolls increase than seen in recent months, but it is still likely to be well above 100k given the large number of job vacancies that remain. Read our full Fed preview here. UK: Bank of England to stick to 50bp hike following recent inflation data The Bank of England looks more likely to follow the European Central Bank than the Federal Reserve next Thursday, and we expect a 50bp rate hike for the second consecutive meeting. While the minutes of the December meeting appeared to open the door to a potential downshift to a 25bp move next month, the reality is that the recent data has looked relatively hawkish. Wage growth is still persistently high, both in the official numbers and the BoE’s own business surveys. Headline inflation came in a little lower than the Bank projected back in November, but services CPI – seen as a better gauge of domestically-driven inflation – has come in above expectations. Still, if we get a 50bp hike on Thursday then it’s likely to be the last. BoE officials have suggested that much of the impact of last year’s rate hikes is still to show through, and cracks are forming in interest-rate-sensitive parts of the economy. We expect one final 25bp hike in March, taking the Bank Rate to a peak of 4.25%. The key question for Thursday is whether the Bank itself acknowledges its work is nearly complete. We suspect it’s more likely to keep its options open. Read our full preview here. Read next: The Aussie Pair Is Holding Above 0.7100, The Major Currency Pairs Are Waiting For US PCE Report| FXMAG.COM Eurozone: ECB to hike by 50bp; Lagarde to make hawkish statement When the European Central Bank meets next week, all eyes and ears will once again be on communication. A rate hike of 50bp looks like a done deal, but how far and how fast the ECB will go from there is still unclear. We expect hawkish comments by ECB President Christine Lagarde in order to prevent another drop in market interest rates. Current market expectations about ECB rate cuts in 2024 are premature. Read our full ECB preview. Key events in developed markets next week Refinitiv, ING TagsUS UK Monetary policy Eurozone   Read the article on ING Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  
Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

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

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

Forex Weekly Summary: USD/JPY Ended At 129.80, AUD/USD Closed Above 0.71

Kamila Szypuła Kamila Szypuła 28.01.2023 14:29
The US dollar was flat in trading this week. Next week's economic calendar is filled with high-impact events such as the Fed on Wednesday or the BoE and ECB on Thursday. And if the major central banks aren't enough, there will be an NFP report on Friday, and given the stance taken by the Fed on Wednesday, this jobs report could be even more important than usual as the FOMC monitors the data for signs of a slowdown from massive rate hikes from last year. USD/JPY USD/JPY started the trading week at 129.2700. Then it increased and exceeded the level of 130.00. On Tuesday, USD/JPY crossed the 131.00 level and recorded the highest trading level of the week at 131.0650. The level above 131.00 was not maintained and the pair fell below 130.00 again. Following this decline, USD/JPY hit a week-high trading low close to 129.00, 129.0400 to be exact. The pair then increased and broke above 130.00 again, but USD/JPY failed to hold above that level and ended the week at 129.8000. GBP/USD The Cable pair (GBP/USD) started the week trading quite high at 1.2399 and rose to a week high of 1.2446. The GBP/USD pair then declined and hit a trading low of 1.2274 on Tuesday. After that, the GBP/USD pair rose and traded above 1.2350. The cable pair ended the week just below 1.2400 at 1.2395. The British pound is gearing up for the week ahead which includes the Bank of England (BoE) and Federal Reserve interest rate decisions respectively. The BoE suggested another hike of 50 basis points, which is confirmed by prices in the money market. At the last meeting the majority voted for 50 bp, but taking into account new economic data, votes may be divided between 50 bp and 25 bp. The BoE is likely to remain unchanged - this would likely cause a bearish reaction on the pound. EUR/USD The major pair (EUR/USD) is holding above 1.08 and this week's trade was extremely favorable for the pair. The EUR/USD pair started the week trading at 1.0874. The EUR/USD pair then rose. Weekly trading was mostly above the 1.0860 level. EUR/USD peaked above 1.09 at 1.0930. The week's trading low for the pair was below 1.0850, while the EUR/USD record low was at 1.0841. EUR/USD ended the week at 1.0874. The market's attention will remain focused on the key risks related to the central bank's events. The Fed will announce its policy decision at the end of its two-day meeting on Wednesday. This will be followed by the ECB monetary policy meeting on Thursday, which in turn will play a key role in determining the next stage of the EUR/USD directional move. AUD/USD The Australian pair (AUD/USD) performed best on Wednesday in the major currency pairs. AUD/USD started the week trading at 0.6971. Then the Aussie pair rose and passed the 0.70 level, maintaining this level in the following trading days. On the first day of trading, AUD/USD traded below 0.70 and thus recorded the lowest trading level of the week at 0.6965. The highest trading level of the Australian pair was above 0.7100, at the level of 0.7138. The Aussie Pair finished the week just above 0.7100. Australia’s annual inflation jumped 7.8% in the December quarter, the biggest increase since 1990 and above market forecasts of 7.5%. The strong reading was more than twice the pace of wage growth and cemented expectations that the Reserve Bank of Australia will hike interest rates by 25 basis points in February. Source: investing.com, finance.yahoo.com
ECB's Tenth Consecutive Rate Hike: The Final Move in the Current Cycle

Inflation Is Falling, But Does It Mean That The Fed's February Decision Will Be Dovish?

Kamila Szypuła Kamila Szypuła 29.01.2023 16:48
The Federal Reserve Policy-making Committee will meet January 31-February 1, 2023, and their decision will be a tough one, harder than any of their choices in 2022. US Inflation Inflation is the number one concern for the Fed, and the news is pretty good. The Fed is watching the price index for personal consumer spending excluding food and energy, while labor markets continue to show strong strength in the economy. The United States recently released its Consumer Price Index (CPI) report for December 2022. It was mostly in line with expectations, pointing to a slowdown in both headline and core inflation. There is no doubt that the pressure has eased and inflation is coming down. The monthly total CPI fell by 0.1% in December, the first drop since June 2020. The core CPI, which removes the effects of volatile items such as food and energy, hit a monthly low of 0.3%. On the other hand, food inflation remains stubbornly high due to Covid-induced supply chain disruptions, extreme weather conditions in some parts of the world and the Russo-Ukrainian war. Given that food security is likely to remain an issue in 2023, the decline in food prices may take longer than expected. As such, any increase in commodity prices would only add fuel to the fire and is still an upside risk in the fight against inflation. Forecast The market predicts the Fed will hold interest rates steady or even start cutting them later in 2023. Economists say the Federal Reserve will cut its interest rate to a 25 basis point hike at its upcoming interest rate meeting. Despite this, many Fed policymakers continue to comment that rates are likely to rise to more than 5%. This is contrary to what the market expects. The widely anticipated quarter-point interest rate hike will raise the Fed's reference rate to a range of 4.5%-4.75%. Prices were close to zero last March. Investors who trade the federal funds futures markets now expect the Fed benchmark rate cap to be 4.5% at the end of this year and 2.9% at the end of 2024. Economic growth In the last three months of 2022, the US economy grew by 2.9% compared to the same period last year. Growth was driven by increases in consumer spending, business investment, and government spending. Consumer spending in the US also increased by 2.1% compared to the same period last year. This spending remained high as inflation began to fall. And the US job market remained tight. Overall, for the full year, GDP grew by 2.1% compared to 2021. Despite an overall increase in 2022, the economy showed signs of cooling in the fourth quarter, declining slightly from 3.2% in the third quarter. Retail sales also fell in the last two months of 2022. Recession? However, the US economy is not clear. Solid growth in the October-December quarter will do little to change the widespread view among economists that a recession is very likely later this year. Elevated lending rates and persistently high inflation are expected to gradually weaken consumer and corporate spending. In response, companies are likely to cut spending, which could lead to layoffs and higher unemployment. And a likely recession in the UK and slower growth in China will reduce the revenues and profits of US corporations. Such trends are expected to trigger a recession in the United States in the coming months. Source: investing.com
Oz Minerals’ Quarterly Copper Output Hit A Record High, Brent Futures Rose

Oz Minerals’ Quarterly Copper Output Hit A Record High, Brent Futures Rose

Saxo Bank Saxo Bank 30.01.2023 09:20
Summary:  Megacaps drove NASDAQ higher to outperform on Friday, and will be in focus this week as Apple, Amazon and Google report results. US PCE data was broadly as expected, but details sounded an alarm on the weakening consumer again. Still, range-bound trading in yields and dollar continued, but that may come into question as we enter a pivotal event-driven week. China returns from Lunar New Year holiday and focus on consumption and imports drives gains in commodities. Geopolitical tensions on watch with explosions in Iran.   What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) finished higher; Tesla, American Express surged Nasdaq 100 climbed 1% and S&P 500 edged up 0.3% on Friday, bringing the benchmarks to advance 4.7% and 2.5% respectively over the week. Tesla (TSLA:xnas) led the charge higher with an 11% gain on Friday, extending its post-Q4-result rally. American Express (AXP:xnys) reported Q4 EPS of USD2.07, missing the consensus estimate by 6.6% and falling 5% Y/Y but raising its dividend by about 15% and providing upbeat guidance for 2023 and aspirations for 2024. The shares of the card payment and travel company surged 10.6%, making it the second biggest gainer within the S&P 500, behind Tesla on Friday. On the other hand, Intel (INTC:xnas) tumbled 6.4% after an earnings miss and downbeat guidance. Toy maker Hasbro (HAS:xnas) plunged 8.1% on lower revenue and layoffs. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) finished mixed on Friday Treasuries got cheaper by 4bps to 6bps across the curve during Asian hours on a stronger-than-expected Tokyo-area CPI before paring losses throughout New York hours. The much anticipated PCE deflators were in-line with expectations and did not create much fanfare. Yields on the 2-year and 5-year finished the Friday session 2bps cheaper and those on the 10-year were 1bp cheaper. However, the 30-year outperformed with a strong rally in the New York afternoon to finish 2bps richer. Hong Kong’s Hang Seng Index gained 2.9% in a holiday shortened week Hang Seng Index gained 2.9% in a shortened week to start the Year of the Rabbit while the mainland bourses remained closed for the Lunar New Year holiday. Hang Seng China Enterprises Index rose 3.9% and Hang Seng TECH Index surged 5.4% for the week. Most of the gain was registered on Thursday as investors reacted on their return to the encouraging high-frequency data on a strong recovery in traveler traffic and holiday consumption in mainland China during the Lunar New Year holiday. On Friday, Hang Seng Index traded sideways and managed to add 0.5% to the weekly gain. Chinese developers and Macao casino operators were among the top gainers on Friday. Country Garden (02007), rising 6.2%, was the best performer within the benchmark Hang Seng Index after the developer secured a 3-year bank loan. Another leading developer Longfor (00960:xhkg) surged 4.3%. Sands China (01928:xhkg) climbed 4.1%. The China reopening drives the biggest monthly jump in Australian stocks since 2020 Australia’s share market, the ASX200(ASXSP200.I) is outperforming the S&P500 and Nasdaq, with a gain of 16% from its low - while also recording its biggest monthly gain since November 2020, (up 6.4%). Australia’s market - a dividend and commodity play, as well as being an investment proxy for China's reopening could also continue to outperform the US this year, given its heavy in materials such as iron ore, copper and aluminium, as well as financial companies - benefiting from higher interest rates. Mining giant BHP Group expects 17% dividend growth, Fortescue Metals sees higher sales in the first half of 2023 to China. Also consider, the iron ore price hit a new 2023 on the notion demand will rise. However, the iron ore (SCOA) price could be at risk of short-term correction, given it has rallied up almost 70%. So consider potentially taking profits given BHP shares are up 46% from their July low, Rio Tinto’s up 43%, Fortescue is up 53%. Although there is a risk of a short-term correction, as supply is lower than a year ago, the price over the longer term seems underpinned. Also consider sales to China have been increasing with Fortescue reporting greater buying of port side iron ore to 4.0mt (in the prior quarter), while guiding for H1 sales to rise to 9.3mt. Lastly, consider Australian insurers, banks and financials will likely benefit from the RBA’s rate hikes - QBE and WBC are expected to report profit jumps of over 30%. FX: Dollar at risk of a breakout this week The USD has been range-bound over the last two weeks, but mega week ahead with a slew of key data (ISM, jobs) and events (Fed, BOE and ECB) to be key catalysts. USDJPY testing a break above 130 again, with JGB yields hitting the new 0.5% yield cap again. USDCAD testing November lows of 1.3300 as oil prices gained traction again. EURUSD and GBPUSD will be watching not just the Fed meeting, but also the ECB and BOE meetings this week. EURUSD is struggling to take out 1.0920 but the scope for a hawkish surprise remains limited. GBPUSD keeps 1.2450 on the line. The AUDUSD is down 0.2% to 0.7100 US. We continue to watch if the 50 day simple moving average crosses above the 200 day, marking a ‘golden cross’, which could lead to another quick run up. However should the Fed be more hawkish on Wednesday (in US time) the rally in the AUDUSD could be reversed. As for Australian economic news to watch; Australia retail sales are out for December on Tuesday, building approval for December are out on Thursday. Crude oil (CLG3 & LCOH3) prices recover as China reopens WTI crude prices jumped back over the $80/barrel mark early in Asia after slumping lower on Friday and closing the week with its first loss for the year amid technical factors. However, focus has moved back to China’s return today, with reports of consumption and import recovery taking the headlines. Pivotal week ahead with a slew of data and central bank meetings, which will continue the argument between recession and soft landing, driving energy markets. Meanwhile, OPEC+ meeting will also be on watch although no material changes are expected. The recent surge in geopolitical tensions may be at play as well with the explosions in Iran. Brent futures rose back above $87/barrel.  Read next: Inflation Is Falling, But Does It Mean That The Fed's February Decision Will Be Dovish?| FXMAG.COM What to consider? Pivotal week for equities; Fed meets, Apple, Amazon and Alphabet report earnings It’s a critical and hugely pivotal week for markets with Fed meets, the ECB, and BOE to decide on interest rates. Thinking about US equites, for the bullish narrative to continue we firstly need to see a 0.25% hike as expected (taking rates to 4.75%) and we need the FOMC to indicate they are at the end of their tightening and avoid the words “we have more work to do”. Secondly, major tech company earnings are out from Apple, Amazon and Alphabet which could set the tone and direction for equities. We need to see optimistic outlooks. However if we see a margin squeeze and damper outlooks like Microsoft last week, we could see equities change direction. So when it comes to trading and investing, you may like to consider taking profits and buying downside optionality (puts). Considering for example Apple is up 12%, Amazon is up 21%,  while the S&P500(US500.I) and the Nasdaq 100 (NAS100.I) are up 13%. And consider tight stops. Fed’s inflation gauge, PCE, rises as expected but keeps services in focus The Core PCE Price index rose 0.3% MoM, in line with expectations and up from the prior pace of 0.2%, while YoY cooled to 4.4% from 4.7% previously, also in line with expectations. While this confirmed that the Fed could continue to take comfort in the inflation trajectory, the breakdown showed that services inflation remains sticky. The prices for goods showed a continued decline, falling 0.7%, accelerating from the prior decline of 0.4% in November. However, the services prices, accelerated to +0.5% from +0.4%. The other key concern was the miss in personal consumption, highlighting that the consumer may be starting to pull off after a similar signal from the breakdown of the GDP data last week. December Personal consumption fell 0.2% (exp. -0.1%), with the prior revised lower to -0.1% from +0.1%. Lunar New Year consumption in China rose 12.2% from last year According to the VAT data released by the State Taxation Administration, sales in consumption-related industries grew by 12.2% during the Lunar New Year holiday from the same lunar calendar period last year. Sales of goods grew 10% and services consumption climbed 13.5% Y/Y. Dining-in spending surged 53% Y/Y. Tourist agency sales soared 130% Y/Y, and tourist hotel lodging was up 16.4% Y/Y. Budget hotel sales increased by 30.6%. Movies’ box office exceeded RMB6.7 billion. China reiterated its push for domestic consumption; extended stimulus measures from its monetary toolbox China’s State Council, in a meeting chaired by the outgoing Premier Li Keqiang, pledged to boost domestic consumption as a key driver to support economic growth in 2023. Separately, the People’s Bank of China extended some lending facilities to support investments that reduce carbon emissions, develop clean use of coal, and the transport and logistics industries. The Netherland and Japan agreed to join the U.S. to restrict advanced chip-making technology export to China After months of discussion since the U.S. imposed export controls over advanced chip-making machinery to China, the Netherlands and Japan agreed to join the U.S. on such restrictions. The Netherlands’ ASML and Japan’s Nikon Corp and Tokyo Electron are dominant players in advanced chip-making machinery. Surge in rice prices threatens food inflation in Asia Due to disrupted wheat supplies from Ukraine and strong demand, Thai rice, a benchmark for Asia, has soared to its highest in almost two years. Rice is a staple for half the world, and while wheat soared to a record in March last year, rice was subdued for most of 2022, constraining food inflation in Asia. Meanwhile, the Rough Rice contract traded in Chicago is up 21% year-on-year and, apart from a brief covid outbreak spike in 2020, trades near a 14-year high. Explosions in Iran could raise geopolitical tensions There are reports of multiple drone strike targeting factories in Iran. Reports state that the drones came from an Israeli airbase in Azerbaijan. Many of the reports are centered around Isfahan, which is a central city that's reportedly home to some military plants, perhaps the ones supplying drones to Russia for the war in Ukraine. Intel (INTC:xnas) earnings missed and gave downbeat guidance Intel reported an 8% Q/Q and 28% Y/Y decline in Q4 revenue and non-GAAP EPS of USD0.10, 47% below the street consensus of USD 0.19. Inventory overhang in servers and CPU in PCs adversely affected Intel’s results.  The chip-making giant guided revenue to fall 22% Q/Q and 40% Y/Y and a non-GAAP loss of USD0.15 per share in Q1 2023. The management did not provide full-year guidance, citing a lack of visibility. Australia’s biggest pure play Copper company reported quarterly output hit a record Oz Minerals’ (OZL) quarterly copper output hit a record high and it sees higher production over 2023, while slightly less gold production compared to 2022 while also guiding for slightly higher costs. However, raw materials price strength in copper and gold could likely underpin its revenue and earnings growth. Also consider the company is recommending it is taken over by BHP.   For a global look at markets – tune into our Podcast.   Source: Market Insights Today: Mega week of data, central bank meetings & earnings; China returns – 30 January 2023 | Saxo Group (home.saxo)
Oil Could Be Ready To Pop, The Bank Of England Market Pricing Is More Mixed

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

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

Philips In The Netherlands Is Reporting Layoffs, Multiple Drone Strike Targeting Factories In Iran

Saxo Bank Saxo Bank 30.01.2023 09:40
Summary:  The Asian session saw a significant swoon in risk sentiment for the first time in weeks as Chinese mainland markets sold off steeply after a gap opening higher in their first session after the long holiday closure. This contrasts with US equity markets, which squeezed sharply higher once again Friday as financial conditions continue to ease aggressively ahead of this Wednesday’s FOMC meeting. Will the Fed want to spring a hawkish surprise to make this market take it seriously?   What is our trading focus? Equities: It is all about technology earnings this week Friday’s price action in S&P 500 futures ended on a high note with the index futures closing at their highest level since mid-September. US financial conditions remain in a negative trend and long-term bond yields are still well in the range and well-behaved leaving little macro headwinds for US equities, except for the warning signals flashing out of the leading indicators. The Q4 earnings season has so far been mixed with big names such as Intel and Microsoft reporting a deteriorating outlook. This week it is all about earnings with the most important to watch being those from Apple, Alphabet, and Amazon reporting late Thursday after the market close. This morning the S&P 500 futures are rolling over from Friday’s highs trading around the 4,063 level which is just above the intraday low from Friday’s session. Hong Kong’s Hang Seng (HIG3) retreated; China’s CSI300 (03188:xhkg) pared gains After advancing 2.9% in a holiday-shortened trading week, the Hang Seng Index gave back most of the gain from last week on profit-taking as well as disappointing property sales during the Lunar New Year. As of writing, Hang Seng Index lost 2.2%, with Chinese developers and mega-cap internet names leading the decline. Leader developer Country Garden (02007:xhkg) plunging 7.4% was the top loser within the Hang Seng Index, followed by Alibaba (09988:xhkg) which tumbled 7.1. CSI300 gapped higher by over 2% at the open when the Chinese market returned from a week-long holiday but pared most of it and was up only 0.5% as of writing. Auto, defence, electric equipment, and electronics were among the outperformers. FX: Dollar eyes a bounce this week The USD has been range-bound over the last two weeks, but a huge week ahead looms with a slew of key data (ISMs on Wednesday and Friday, the jobs report Friday) and central bank meetings (Fed, BoE and ECB) key catalysts. Any of three scenarios might support a USD comeback this week, at least consolidating some of its weakness over the past couple of months. The primary risk might be a Fed that is in the mood to challenge the market’s complacency and easing financial conditions as the market has priced a deceleration in rate tightening and eventual rate cuts later this year. Secondarily, stronger than expected US data would be a surprise and could boosts the US dollar by driving US yields higher. Finally, significantly weak US data could reverse the wild squeeze higher in equity markets, offering safe-haven support for the greenback. Elsewhere, the ECB may find it impossible to surprise hawkish, while the BoE may be happy to err on the side of dovishness as sterling has bounced back comfortably and energy prices have eased. Crude oil (CLH3 & LCOH3) lower despite Iran strikes Crude oil prices trade softer following Friday’s big drop which left the sector down on the week. An Israeli drone strike against a target in Iran only had a temporary positive price impact with the market instead focusing on signs of increased Chinese demand as the country reopens after the LNY break. Friday’s correction was primarily driven by profit taking from recently established longs after another failed attempt to break key resistance in the $89-$90 area in Brent. Pivotal week ahead with a slew of data and central bank meetings, which will continue the argument between recession and soft landing, driving energy markets. Also focus on the impact of fresh sanctions on Russian esports from February 4 and this week's OPEC+ meeting although no material changes are expected. Gold (XAUUSD) focus turns to FOMC Gold ended last week unchanged and has so far traded close to flat during the APAC session. Overall, it remains in a steep bullish trend with local support at $1920 being followed by trendline and 21-day moving average support around $1900. The Israeli strike on targets in Iran had limited positive impact with the market instead focusing on Wednesday’s FOMC meeting for confirmation of a less hawkish 25 bp rate hike as well as Friday’s US job report. Eight consecutive weeks of buying has lifted the hedge fund long in Comex gold futures to a nine-month high of 107k lots (10.7m oz) while total ETF holdings remain flat, the latter a worry as it raises the risk of a correction from non-sticky speculative and technical driven longs. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) rose on stronger-than-expected economic data U.S. yields are rangebound ahead of important event risks this week, including the first week of the month economic data noted above in the USD section, but also over the FOMC meeting this Wednesday. The 10-year yield benchmark continues to coil in the 3.50% area as the yield curve remains steeply inverted and the market predicts a soft landing for the economy and Fed easing beginning later this year. What is going on? Explosions in Iran could raise geopolitical tensions There are reports of multiple drone strike targeting factories in Iran. Reports state that the drones came from an Israeli airbase in Azerbaijan. Many of the reports are centred around Isfahan, which is a central city that's reportedly home to some military plants, perhaps the ones supplying drones to Russia for the war in Ukraine. Australia’s biggest pure-play Copper company reports production record, but flags risk of higher electricity costs Oz Minerals’ (OZL) quarterly copper output hit a record high in Q4, while it sees higher production over the year again, with slightly less gold production compared to 2022. The miner noted inflation risks in forward guidance, forecasting higher costs in 2023 amid rising power prices, and a higher Australian dollar. This sets the tone for what we can potentially expect from some of Australia’s and the world’s largest miners when they report 2022 results next month. That said, raw material price strength in copper and gold could underpin Oz Minerals’ revenue and earnings, with consensus expecting 19% revenue growth in 2023, and 45% earnings growth. The company recommended shareholders approve its $9.6 billion takeover by BHP. Philips reports cut of 6,000 employees The wave of layoffs is continuing among technology companies and this morning Philips in the Netherlands is reporting layoffs corresponding to 8% of the workforce in a drive to cut costs to offset weakness across the business and costly recalls in its consumer medical device business. Copper’s supply disrupted rally Copper’s 20% rally since early November has primarily been driven by speculation that the reopening of China will support an overall increase in demand despite recession risks weighing elsewhere. But while that pickup has yet to materialise, thereby exposing copper and other recent highflying industrial metals to a correction, the risk to supply has increasingly become a stickier source of support for copper. Morgan Stanley estimates that close to 7% of global copper production is currently disrupted or at risk, while Chile’s output continues to disappoint. Lunar New Year consumption in China rose 12.2% from last year According to the VAT data released by the State Taxation Administration, sales in consumption-related industries grew by 12.2% during the Lunar New Year holiday from the same lunar calendar period last year. Sales of goods grew 10% and services consumption climbed 13.5% Y/Y. Dining-in spending surged 53% Y/Y. Tourist agency sales soared 130% Y/Y, and tourist hotel lodging was up 16.4% Y/Y. Budget hotel sales increased by 30.6%. Movies’ box office exceeded RMB6.7 billion. China reiterated its push for domestic consumption; extended stimulus measures from its monetary toolbox China’s State Council, in a meeting chaired by the outgoing Premier Li Keqiang, pledged to boost domestic consumption as a key driver to support economic growth in 2023. Separately, the People’s Bank of China extended some lending facilities to support investments that reduce carbon emissions, develop clean use of coal, and the transport and logistics industries. Read next: Inflation Is Falling, But Does It Mean That The Fed's February Decision Will Be Dovish?| FXMAG.COM What are we watching next? Market conditions thickening the plot for this week’s FOMC meeting The FOMC meeting this week was meant to confirm the Fed’s further downshift in the pace of its rate hikes with a 25-basis point rate hike and offer few surprises. But the market has lurched into an aggressive back-up in risk sentiment, with easing financial conditions as the market prices the Fed to likely have reached its peak interest rate for the cycle after only another 25 basis points of further hiking after this week’s presumed hike, which would take the Fed Funds policy rate to 4.75-5.00%. The Fed continues to object to the market’s expectation of an eventual rate cutting campaign set to begin by later this year, and it may attempt to surprise somehow on the hawkish side after especially the latter part of the “higher for longer” message from the Fed has been ignored. What does that look like? Difficult to say: a 50 basis point move would be bold but would come as a profound shock to markets. Perhaps the most hawkish message the Fed can deliver on rates would be a refusal to guide for an end of the rate-hike cycle just yet, somehow noting that financial conditions are too easy for it to consider that its policy is sufficiently tight. BP seeing an accelerated energy transition Russia's war in Ukraine will accelerate the shift away from oil and gas, with a much sharper decline in demand for fossil fuels seen in 2035, according to BP's annual energy outlook out today. Nations are prioritizing domestic renewable energy sources as a way to boost supply security while also cutting carbon emissions. Still in BP’s most conservative scenario in terms of climate goals, global oil demand would still be around 73 million barrels a day by 2050, only down 25% from 2019. OPEC will continue to gain market shares over the coming years because it has lower costs. The war will also cause global GDP to be at least 2% lower by 2025, compared with the expectation a year ago (from Bloomberg). Earnings to watch The Q4 earnings season kicks into gear this week around 218 companies among those we track during the earnings reporting. The three most important earnings are Apple, Alphabet, and Amazon due to their size in the equity indices and the economy. The first earnings to move markets will be Snap and Caterpillar tomorrow with both reflecting cyclical components in the economy. Today: Ryanair, UniCredit, Sumitomo Mitsui Financial Group, Canon, Philips, NXP Semiconductors, GE HealthCare Technologies Tuesday: Canadian Pacific Railway, Daiichi Sankyo, Fujitsu, UBS Group, Exxon Mobil, Pfizer, McDonald’s, UPS, Caterpillar, Amgen, AMD, Mondelez, Marathon Petroleum, Electronic Arts, Spotify, Snap Wednesday: Novo Nordisk, Orsted, Keyence, Hitachi, GSK, BBVA, Novartis, Meta, Thermo Fisher Scientific, Southern Copper Thursday: DSV, Dassault Systemes, Siemens Healthineers, Infineon Technologies, Deutsche Bank, Sony, Takeda Pharmaceutical, Shell, ING Groep, Banco Santander, Siemens Gamesa Renewable Energy, Nordea, Roche, ABB, Apple, Alphabet, Amazon, Eli Lilly, ConocoPhillips, Qualcomm, Honeywell, Starbucks, Gilead Sciences, JD.com, Ford Motor, Ferrari Friday: Coloplast, Sanofi, Intesa Sanpaolo, Denso, CaixaBank, Naturgy Energy, Assa Abloy, Regeneron Pharmaceuticals Economic calendar highlights for today (times GMT) 0800 – Spain Flash January CPI 1000 – Eurozone Jan. Confidence Surveys 1530 – US Jan. Dallas Fed Manufacturing Activity 2330 – Japan Dec. Jobless Rate 0030 – Australia Dec. Retail Sales 0130 – China Jan. Manufacturing and Non-manufacturing Survey Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – January 30, 2023 | Saxo Group (home.saxo)
ECB cheat sheet: Wake up, this isn’t the Fed!

ECB cheat sheet: Wake up, this isn’t the Fed!

ING Economics ING Economics 30.01.2023 10:14
A 50bp hike by the European Central Bank, and a repeat of its December guidance, are set in stone but a pushback against subsequent cut expectations will move 5Y euro rates higher Source: ING Front-end pricing talk but it's a red herring Much has been said and written about the next two ECB meetings’ rate hikes. The upshot is, as our colleagues highlight, the ECB still has a licence to hike, and a 50bp increase is pretty much set in stone this week. In all likelihood, guidance for a 50bp March hike will be repeated too but the March meeting will also feature a new set of forecasts that should heavily influence the ECB’s decision. As a result, markets will be tempted to rely more on their anticipation of how the ECB staff forecast will evolve at that meeting, rather than on president Christine Lagarde’s guidance. In all likelihood, guidance for a 50bp March hike will be repeated As our economics team noted in their preview, "If everything else remains the same as it was in December, the ECB’s headline [March] inflation projections could easily be lowered by 0.3 to 0.5 percentage points for 2024 and 2025". Cut-off for the FX, rates, and energy market prices is a little under one month away but, as things stand, this would imply 2025 inflation at 1.8%, under the ECB’s 2% target. Worse, this would be premised on a curve that implies 80bp of cuts between the mid-2023 rate peak and end-2024. To cut a long story short, we wouldn’t overstate the importance of the next two meetings for interest rates markets. We now have more hawkish ECB expectations than the market Source: Refinitiv, ING Eyes on the prize, the belly's where the battle really is The curve is pricing a rapid decline in rates after they reach their peak in 2023. For a central bank expected to hike at least three more times, this is problematic. Lagarde is sure to be asked about this anomaly. If recent history is any guide, she’ll likely take that opportunity to guide market rates higher. We doubt she’ll manage to completely dis-invert the curve, however. The shape of the euro term structure cannot be seen entirely in isolation and some remnant of easing is likely to persist as long as the Fed is expected to cut more than 200bp by end-2024. But, at least, she should manage to delay cut expectations. The part of the curve most likely to be affected is the 5Y point. We think hike expectations are correctly set for the next few meetings which imply that short-dated bonds and swaps, say up to 2Y, are also correctly priced. Longer tenors, on the other hand, depend on more structural factors such as where investors think the long-term interest rate equilibrium lies. This is not something the ECB will change at this meeting. This leaves the maturity in between, aptly called the belly of the curve, as the sector most at risk of a pushback against cut expectations. What happens to the slope of the curve, for instance 2s10s, depends in greater parts on the tone of the ECB from one meeting to the next. We have a view (it will be hawkish) but given its recent unpredictability, we have a greater conviction on our outright (higher rates) and curvature (5Y rates to rise faster than other maturities) calls.  5Y rates are most at risk if the ECB pushes back against rate cut expectations Source: Refinitiv, ING 'Detailed parameters' on quantitative tightening to come, but the market-moving information is already out The ECB has promised “detailed parameters” for the reduction of its asset purchase programme portfolio. With laying out the headline volumes already at the last meeting, the most market-moving aspects are already known. What we could expect is details about whether the reduction will be proportionate across the different asset classes. Within the public sector specifically, how the ECB will maintain alignment with the capital key distribution across countries. We do not anticipate the ECB to diverge from previous targets here, though we might get information on how special situations will be dealt with. For instance when overall redemptions in a month are below the targeted reduction volumes. A rebalancing towards supranational debt with their larger share of green bonds would make sense Keeping in mind the focus the ECB and Isabel Schnabel in her recent speeches have put on “greening” the central bank’s portfolios, there is a chance that this also translates into more concrete action in the public sector portfolio. A rebalancing towards supranational debt with their larger share of green bonds would make sense, and it would not impact the capital key alignment. It would also address the rising prominence of the European Union as an issuer. We doubt though that such tweaks by themselves will impact the market's currently benign take on sovereign spreads. This time they are more likely to take their cues from the overall tilt of the ECB’s communication. This isn't a litmus test for the euro rally While it’s undeniable that the ECB doubling down on its hawkish rhetoric has contributed to the strengthening of the euro since December, we don’t see this week’s policy meeting as a litmus test for the sustainability of the euro rally. The reasons are two-fold. First, EUR/USD may well return to being predominantly a dollar story this week. A Fed approaching peak rate and facing a worsening economic outlook has more room to surprise on the hawkish side, and we think it could offer a breather to the dollar. In contrast, as discussed above, we would not overstate the importance of the next two ECB meetings for rates. The ECB’s communication hiccups have likely eroded the market's trust in Lagarde’s guidance This leads us to the second reason: the ECB’s communication hiccups have likely eroded the market's trust in Lagarde’s guidance. Only a few hours after the December meeting, the news that many members had preferred 75bp was leaked. And if ECB members aligned behind the 50bp guidance in recent weeks, a probably more debated 50bp move in March may well cause sparse communication again after the February meeting. This – in our view – may lead markets to be more forward-looking than what Lagarde will wish them to be. Ultimately, data may remain a larger driver than Lagarde’s guidance for the euro. If gas prices stay capped and economic surveys keep pointing up, a correction in EUR/USD after a hawkish Fed should not last long. We expect EUR/USD to trade around 1.07-1.10 for most of February. Another big break higher may need to wait for an official pivot by the Fed: we see this materialising in the second quarter, where we forecast a move to 1.15.   Read this article on THINK TagsInterest Rates FX ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Despite The Improvement In The Outlook Due To Falling Energy Prices, The Economic Environment In Britain Remains Difficult

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

Swissquote Bank Swissquote Bank 30.01.2023 10:44
The new week kicked off with Chinese equities jumping into a bull market as traders returned from their Lunar New Year holiday. S&P500 and Nasdaq The S&P500 and Nasdaq also freed themselves from the 2022 bearish trend, while global bond markets had their best January since 1990. And if the equity rally is still on a shaky ground – due to fear that the slowing economy could hit company earnings – the future in bonds looks brighter. Policy verdicts In the macro front, the Federal Reserve (Fed), the European Central Bank (ECB) and the Bank of England (BoE) will be announcing their latest policy verdicts, between Wednesday and Thursday. Fed For the Fed, there is extremely little doubt that this week’s rate hike won’t be anything more than a meagre 25bp hike. BoE The ECB is expected to hike by 50bp this month, while we don’t know by how much the BoE will be raising its rates. In one hand, the BoE should continue fighting against inflation – which remains in the double-digit zone in Britain. On the other hand, the economic outlook for Britain is so morose – with country-wide strikes adding salt and pepper to the gloomy picture that Bailey cannot throw a series of 50bp hikes in the middle like Madame Lagarde. Stocks market Elsewhere, the Indian markets are being shaken by the Adani scandal. OPEC will meet this week, and big US companies including Amazon, Apple, Google, Meta, Exxon, Starbucks and Ford are due to announce earnings throughout this week! Watch the full episode to find out more! 0:00 Intro 0:39 China steps into bull market 1:01 S&P500, Nasdaq extend rally into bullish zone 2:04 Bonds record best Jan since 1990 & more gains are in the store 3:18 What to expect from the Fed, US jobs data this week? 6:10 50bp from ECB, and what else? 7:16 Will the BoE dare a 50bp hike? 8:53 Also this week: India shaken by Adani scandal, OPEC to hold fire, Apple, Amazon, Google & Meta to post Q4 results Ipek Ozkardeskaya  Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Fed #ECB #BoE #OPEC #meeting #Apple #Amazon #Google #Meta #Exxon #earnings #US #inflation #NFP#data #Fed #expectations #USD #EUR #GBP #crude #oil #China #bull #market #Adani #scandal #Nifty #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
WTI Oil Shows Signs of Short-Term Uptrend Amid Medium-Term Uptrend Phase

Major Currency Pairs Are Waiting For Central Banks Decisions, USD/JPY Pair Rose Above 130.00,

Kamila Szypuła Kamila Szypuła 30.01.2023 13:15
The dollar weakened on Monday to near an eight-month low ahead of a series of central bank meetings this week. The US Federal Reserve is likely to continue to ease the pace of monetary policy tightening at its upcoming meetings and plans to raise interest rates by 25 basis points at its next two policy meetings. USD/JPY USD/JPY pair struggled to hold significant gains above the psychological 130.00 level. The strength of the yen was limited by dovish comments from the BoJ president. BoJ Governor Kuroda continues to maintain his lenient stance on monetary policy. This comes as investors grow optimistic that rising inflation will result in a hawkish move away from the BoJ. Any further hawkish change from the BoJ seems unlikely with Governor Kuroda at the helm and could happen when the governor steps down in April. Driven by the risk associated with key central bank events, investors seem reluctant to bet on an aggressive bear market around the USD/JPY pair. In addition, comments from BoJ chairman Kuroda Haruhiko that the central bank must continue its easing policy and keep the inflation target at 2% limit the gains for the JPY. USD/JPY Pair started the week at 129.8040 and then increased. Currently, the pair is holding above 130.00. EUR/USD Higher Spanish inflation data supported the euro. The euro surged above $1.09 in late January, hovering around its highest level since April last year as investors awaited multiple central bank meetings this week as they digested stronger than expected Spanish inflation figures. The European Central Bank is due to raise interest rates by 50 basis points on Thursday, bringing borrowing costs to their highest level since 2008, while investors will also be on the lookout for signs of slowing the pace of monetary policy tightening at its March meeting. Read next: Glovo Planned To Lay Off 250 Workers Worldwide, The Middle East Is Already Suffering From A Water Shortage| FXMAG.COM EUR/USD pair gained traction and climbed above 1.0900 during the European session, but failed to hold and fell to 1.0893. GBP/USD The cable price (GBP/USD) was similar to the EUR/USD rate, i.e. it rose above 1.24 in the European session, but it did not hold and fell to 1.2384. The slight selling pressure around the US dollar ahead of key central bank policy announcements this week appears to be helping the pair push higher. GBP/USD traders can expect interest rate decisions from both sides of the pair this week, with the US Federal Reserve and Bank of England expected to make February moves on Wednesday and Thursday respectively. The Bank of England is to raise its base rates by half a percentage point. That would take them to 4%, the highest level since the 2008 financial crisis, with further increases expected. However, there have been some objections to the interest rate setting by the Monetary Policy Committee and it seems that a smaller hike is still on the table. AUD/USD AUD/USD prices have fallen to a three-day low of around 0.7075 in the last hour, although any significant drop still seems elusive. The Aussie pair has lost its momentum above 0.7100 but is not falling significantly and is trading at 0.7076. The Australian remains supported by expectations of further policy tightening from the Reserve Bank of Australia amid soaring inflation and China's swift reopening after Covid restrictions have boosted the global economic outlook. Australia's annual inflation rose 7.8% in December, the RBA has already raised the cash rate by a total of 300 basis points at eight consecutive meetings in 2022, bringing borrowing costs to a 10-year high of 3.1%. Source: investing.com, finance.yahoo.com, dailyfx.com
FX Daily: Hawkish Riksbank can lift the krona today

The US Dollar Index Has A Potential For Bullish Reversal

Oscar Ton Oscar Ton 31.01.2023 08:35
Technical outlook: The US dollar index dropped through the 101.26-28 intraday lows on Monday to terminate its ongoing triangle consolidation before turning higher. The index has rallied sharply since then and is seen to be trading just below 102.00 at this point in writing. The recent rally could be seen as the first leg of a potential bullish breakout above the 102.20-50 zone. As depicted on the 4H chart here, the US dollar index has completed its larger-degree drop from 114.70, which began in September 2022. Prices are expected to produce a meaningful rally towards 106.50 and up to 109.50. Also, note that the above rally could be corrective and just a retracement of the entire drop between 114.70 and 101.10. The US dollar index could find strong intraday support around the 101.40-50 zone and it might be seen as an opportunity to add further long positions. On the other side, please keep a watch on 102.20, as a break higher would confirm that the bulls are back in control and want to accelerate the rise. Only a consistent break below 101.00 would negate the bullish scenario. Trading idea: Potential bullish reversal against 100.00 Good luck!   Relevance up to 07:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/310718
The Commodities Feed: OPEC+ meeting ahead

The Commodities Feed: OPEC+ meeting ahead

ING Economics ING Economics 31.01.2023 09:11
Commodity markets will be eagerly watching what the Fed decides at its FOMC meeting this week. For oil markets, no change in output policy is expected from OPEC+ when they meet on Wednesday Energy- market awaits Fed decision The oil market sold off yesterday, with a lack of fresh catalysts in the market. ICE Brent fell more than 2% on the day to settle at US$84.90/bbl, after the market failed to successfully break above the 100 day moving average. There are several key events that participants will focus on this week. Firstly, the OPEC+ meeting on Wednesday, where there is no change in output policy expected given the current uncertainty in the market. This will be followed by the FOMC meeting later that day, where our US economist expects the Fed to hike by 25bps. Finally, on 5 February the EU ban on Russian refined products comes into force. The full effect will likely take some time to be seen although, according to Bloomberg, Russia is planning to boost diesel exports from Baltic and Black Sea ports to 2.74mt - the highest levels in three years. It will be interesting to see where this ends up if shipped, given that historically the EU has been the key market. The European gas market continues to see TTF prices consolidating in the EUR55-60/MWh region, with current storage remaining comfortable. The latest data indicates that storage in Europe is 73% full, compared to the 5-year average of 53% full. This should allow the EU to get through this winter in a comfortable manner. Prospects for the region also look better for the 2023/24 winter. Metals - Philippines considers taxing nickel exports Nickel prices settled 1.1% higher yesterday, after the Philippines said it is considering taxing nickel ore exports amid a push for miners in the country to invest in processing capacity rather than shipping raw materials. The Philippines, the world’s second-biggest supplier of nickel, plans to follow Indonesia’s strategy. Indonesia banned exports of nickel ores in 2020 and limited shipments to refined products. The Philippines government is considering whether to impose an export tax on raw nickel exports or ban ore shipments completely. In copper, the latest LME data shows that total on-warrant stocks for copper reported inflows of 3,800 tonnes (the biggest daily addition since 29 December) to 54,375 tonnes as of Monday. The inflows were driven by an increase in German warehouses. MMG’s Las Bambas, one of Peru’s biggest copper mines, will stop production on Wednesday if transport disruptions due to nationwide political unrest don’t stop. The copper mine will be unable to keep producing copper from Wednesday amid a “shortage of critical supplies” caused by road blockages in the area, MMG said in a statement on Monday. In aluminium, Glencore delivered 40,000 tonnes of the Russian metal into LME warehouses in the South Korean port of Gwangyang, according to a report from Reuters. This could raise concerns in the aluminium market that LME prices will weaken as stocks build up. After an industry consultation last November, the LME decided to take no action on Russian metal. The exchange said at the time that a significant portion of the market still planned to buy Russian metal in 2023. Agriculture – Sugar rallies Sugar prices continued to rally yesterday with No.11 raw sugar up almost 1.2% yesterday to settle at USc21.21/lb - the strongest close we have seen in the sugar market since 2016. The strength in the market comes as there are concerns that India may not approve further exports with worries over the domestic crop. Late last year, the Indian government approved a little over 6mt of sugar exports in the 2022/23 season, with the potential for further exports if the domestic balance allowed. The latest data from Ukraine’s Agriculture Ministry shows that the nation exported 26.3mt of grains as of 30 January so far in the 2022/23 season, a decline of 31% YoY. Total corn shipments stood at 15mt (+1.7% YoY), while wheat exports fell 44% YoY to 9.4mt. Read this article on THINK TagsUS Fed TTF Sugar OPEC+ Nickel Natural gas Aluminium Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
ECB press conference brings more fog than clarity

Rates Spark: Economic releases in the driving seat today

ING Economics ING Economics 31.01.2023 09:14
Central banks are increasingly perceived to be behind the curve and participants are forming their own view based on economic data. A dovish bias exposes bonds to more losses today. European inflation and lending are the highlights, followed by US employment indicators Expect volatile markets in the run up to central bank meetings The closer markets get to this week’s central bank events, the more unpredictable day-to-day price movements will get. That said, we stick to our view that the next couple of days are likely to be dominated by profit taking on longs and, in the case of euro markets, by the realisation that pricing rate cuts in 2024 is premature. However, 5Y swaps, the sector of the curve most at risk in case of a hawkish push back from the European Central Bank, has already moved 30bp higher since its mid-January low. We think higher euro rates and yields are the right macro move, but the scope for more movement before the ECB meeting is now reduced. Higher euro rates and yields are the right macro move One potential driver of short-term rate moves is today’s long list of economic releases (see events section below). A surprise jump in core Spanish inflation has proved a warning shot to investors too complacent in their view that inflation is on the decline. The magnitude of the sell-off means that it would take at least as large an upside surprise in the French inflation release today to push rates much higher. This is not excluded, however, and the eurozone-wide print tomorrow will feature an estimated German component as the national statistics office has delayed its own inflation report until the end of the month. 2s5s10s butterflies show curves geared towards rate cuts, prematurely in the case of the euro curve Source: Refinitiv, ING ECB tightening is working its way through but euro-dollar rates differentials should shrink So far, so hawkish for the European Central Bank, but investors might find solace in the fact that policy tightening already implemented is working its way through the economy. If the ECB lending survey confirms the picture painted by December credit growth numbers, it will at least reassure the governing council on that front. This is also an important piece of the jigsaw for central bankers and investors trying to anticipate the path for core inflation. Lower energy costs have shielded growth from the worst of the energy crisis, but also mean less of a drag on demand and non-energy inflation. One of the most notable trend this and next quarters should be the convergence between euro and dollar rates One has to acknowledge that for all the too optimistic inflation view priced by euro rates, this will most likely affect markets on a relative basis. Our US economics team thinks the Fed is winning its fight against inflation, a slowdown in today’s Employment Cost Index would be a further evidence of this, and the economy is heading into a recession. Although this will likely not be on a linear path, this means dollar rates are right to decline, and we think they should reach a trough of 3% later this year in the case of 10Y Treasuries. As result, one of the most notable trend this and next quarters should be the convergence between euro and dollar rates. 5Y EUR swaps are off their January lows but should climb further, especially relative to other currencies Source: Refinitiv, ING Today's events and market view In the run up to tomorrow’s eurozone-wide HICP (inflation) release, today brings France’s CPI print. Yesterday’s surprise surge in Spanish core inflation proved two things: that markets are leaning towards an inflation view that may be correct for the US but is too dovish for the eurozone. It also proved that releases can be volatile, especially around changes in the weighting of price indices. Away from inflation, German unemployment data will be closely scrutinised for signs of a turn in a still tight labour market, and the ECB lending survey will be a key indicator for the central bank to assess how quickly its tighter monetary stance is transmitting to the economy. Finally, we will get a first look at eurozone and Italy fourth quarter GDP after German and French growth surprised to the downside. Bond supply will consist in German 2Y and Italian 5Y and 10Y debt. US releases will be no less relevant for rates markets. The employment cost index for the fourth quarter isn’t a very timely indicator but it is a well-regarded gauge of underlying wage pressure. One day before the Fed meeting concludes, and at a time its focus is increasingly shifting to non-housing core services, this is an important data point. Consensus is for a slowdown to 1.1% quarterly from 1.2% previously. Other US release include house price index, Chicago PMI, and conference board consumer confidence. The latter is geared towards the labour market so any dip in the job-related sub-indices will be another clue about a potential turn in the labour market. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Australian dollar against US dollar - "It seems that the currency will soon hit a price above 0.68"

Commodities See Short Term Pull Back Risks, The Aussie Dollar Down 0.8%

Saxo Bank Saxo Bank 31.01.2023 09:37
Summary:  Markets see red on concern FAANG’s will bite into markets, while there is worry the Fed won’t cut rates this year like the market expects, this has resulted in traders booking profits ahead of end of month. Commodities see short term pull back risks, with prices already down from fresh peaks; oil is down 5.6%, iron ore, copper and aluminium lose 2% ahead of the Fed meeting. While Australian shares hold steady, defying negative leads from Wall Street. In FX the US dollar picks up, pushing most currencies off course, with the Aussie dollar down 0.8%. What's the short vs long term narrative. Markets see red on concern FAANG’s will bite into markets, while there is worry the Fed won’t cut rates this year as markets has priced in Ahead of the Fed, ECB, and BOE meeting this week, for the first time in 2023, with the central banks potentially setting the course of interest rates for the year, risk management resulted in traders and investors booking profits ahead of end of month, which dragged the S&P500(US500.I) down 1.3% and the Nasdaq 100 (NAS100.I) 2.1%. The worry is that the market believes the Fed will only hike by 0.25% this week and 0.25% next month. Two and done, before cutting in July. There is also a risk the Fed says it has “more work to do”, which could send equities into a tailspin. Our view is given financial conditions have improved, and there is a 20% chance of a recession, the Fed can keep rates higher for longer. This is why we think there could be a short term potential correction, so potentially consider taking profits and buying downside optionality (puts), and consider tight stops. Secondly, the worry is that major tech company earnings will continue to slump, with average overall  earnings down 0.3% this quarter, across the 145 of the S&P500 companies. This is why profit taking in Facebook, Apple, Amazon and Google parent Alphabet is occurring ahead of them reporting results. Ultimately, we think their outlooks could set the tone for equities this year. Consider FAANG names like Facebook/Meta are up 61%, Apple is up 10%, Amazon is up 20% and Google’s parent Alphabet is up 12% from recent lows. Click here for more on US earnings. Read next: Major Currency Pairs Are Waiting For Central Banks Decisions, USD/JPY Pair Rose Above 130.00, | FXMAG.COM Commodity short term pull back risk – with prices already down from fresh peaks; oil down 5.6%, iron ore, copper and aluminium lose 2% ahead of the Fed   On Monday oil dropped 2.4%, while most commodities lost almost 1%, with the markets awaiting further evidence China is picking up demand - just as BHP, Rio and FMG alluded to in their quarterly results. It seems traders are torn between real demand physically rising, but awaiting the Fed’s decision this week, which could result in the US dollar spiking, that would ultimately pressure commodity prices down. So these factors raise the risk of a short-term correction across the board. That said, resources prices have been really strong up 17-70% on from their lows. In 2023 alone iron ore and copper are up 9%, Aluminium up 11%, spot gold up 5%. However, with commodity prices falling, it also raises the alarm that Aussie dollar and the Aussie share market could be at risk of a short term correction or consolidation as well. The key is to watch the US dollar index. However keep in mind, over the longer term, commodity prices are supported higher, underpinned by rising demand over course of the year, and lower physical supply. For more on commodities, see Saxo’s Commitments of Traders report, that highlights broad buying slowed in recent weeks. Australian shares hold steady, defying negative leads from Wall Street. Australian retail sales fall off a cliff, borrowing falls Australia’s share market, as measured by the ASX200(ASXSP200.I) opened 0.3% higher today at 7,501 defying the futures and US markets negative lead. Not only are Australia shares outperforming US shares this year, but also UK’s FTSE. However, given materials prices could be at risk of a shorter term pull-back, it’s worth pointing out the technical indicators suggest the ASX200’s uptrend is weakening. Our Technical Analyst suggests a possible short term correction down to 7,167 should not be ruled out. However, over the longer term, we think upside in the ASX200 is intact with mining companies to report some of the strongest earnings on record, and provide their strongest outlooks in several years amid China reopening. For stocks, ETFs and baskets to watch, click here.  In company news today, Gold Road Resources (GOR) reported a drop in production in the prior quarter and higher costs due to inflationary pressure, but guided for higher grades in 2023. This follows Oz Minerals (OZL) also guiding for higher costs, which paints a picture of what we can expect for full year earnings season next month. In economic news, retail sales fell 3.9% in December, shocking the market, which expected sales to only decline 0.3%. On top of that, borrowing data also missed expectations. Borrowing rose 0.3% in December, vs consensus expecting lending to rise 0.5%. Today’s data is telling as it shows interest rates have taken effect on the consumer, and supports the market thinking that the RBA could potentially pause and then cut rates later this year.   In FX the US dollar picks up, pushing most currencies off course The US dollar index has bounced up off it low and risen 0.5% and pressured most currencies lower, with the Aussie dollar (AUDUSD) falling 0.8% from its high, with the Aussie buying 0.7061 US. The Aussie against the US has fallen under its 200-day moving average, while there is caution the Fed’s Wednesday’s decision could cause the US dollar to rise. Should the Fed only hike by 0.25% as expected and guide for one more hike, or if the Fed mentions its hikes have been effective, or that it sees interest rates having a lag effect, then the AUDUSD could potentially rally back up. Supporting longer term upside in the Aussie is the rise of China’s economy and commodity buying. From a technical perspective, the bulls may like to hear the 50 day moving crossed above the 200, indicating the longer term rally could remain intact, despite the RSI indicating, there are currently more sellers right now, than buyers.  Stay tuned to Saxo's inspiration page for trading and investing ideas. For a global look at markets – tune into our Podcast.   Source: Video: Will FAANGs results bite into markets and what if the Fed says it won’t cut rates this year, like the market thinks | Saxo Group (home.saxo)
The Commodities Feed: Specs continue to cut oil longs

Brent Crude Oil Is Testing Support, Stocks In The Hong Kong And Mainland Bourses Extended The Decline

Saxo Bank Saxo Bank 31.01.2023 09:46
Summary:  Markets suffered a jarring reversal in sentiment yesterday, as US stocks posted their worst session in weeks, with the Nasdaq 100 suddenly back below its 200-day moving average ahead of tomorrow’s FOMC meeting. It’s a busy three-day sprint to the end of this week, with a monthly calendar roll into tomorrow after a blistering performance for equities until yesterday, and a heavy US economic calendar and BoE and ECB meetings up Thursday.   What is our trading focus? Equities: Reversal of fortune Ugly session yesterday in equities with S&P 500 futures erasing the gains from the previous two sessions without any big change in interest rates or new macro releases. It was most likely a reversal of positions and the market repositioning itself ahead of crucial earnings and the FOMC rate decision on Thursday. The picture of equities almost priced for perfection remains the same with the downside risks being larger than the upside risks as leading indicators are suggesting a high probability of recession and earnings indicating significant margin compression. Today’s sentiment will be formed by earnings from UPS, Caterpillar, and Snap as the aggregate information from these earnings will provide a broad-based view of economic activity across many different sectors of the economy. Hong Kong’s Hang Seng (HIG3) and China’s CSI300 (03188:xhkg) extended decline Stocks in the Hong Kong and mainland bourses extended the decline from their recent highs on a risk-off day. After the strong gains in January on the positive development in the potential peaking of the exit wave of inflection in China, traders booked their profits ahead of the U.S. Fed’s rate decision as well as fear about the risk of escalation of tension between the U.S. and China on the technology front.  A recent Politico story on the Biden administration’s plan to ban U.S. investments from investing in certain high-tech areas in China, such as AI, quantum, cyber, 5G, and advanced semiconductors triggered profit-taking in mega-cap China internet stocks heightens such concerns. The Hang Seng Index fell by 1.6% and CSI 300 Index declined by 1% as of writing. FX: Dollar recovers as risk sentiment deteriorates ahead of Fed The USD was broadly higher against the entire G10 pack on Monday as risk sentiment was hurt by higher-than-expected Spanish inflation fuelling concerns on global inflation remaining higher-for-longer. Mid-2024 Fed rate expectations are up some 37 basis points from less than two weeks ago, for example. Lower commodity prices and weak AU Retail Sales also fuelled some profit taking in AUDUSD which is now testing the support at 0.7050. EURUSD made another attempt at breaking above 1.0900 yesterday as ECB rate hike bets picked up further after the hot Spanish CPI release, but retreated below 1.0850. GBPUSD also slid to 1.2350 as the UK is the only G7 economy the IMF forecasts will suffer a recession this year. Higher yields saw USDJPY back above 130.50 at one point overnight. Crude oil (CLH3 & LCOH3) slumps as speculators cut positions Crude oil prices tumbled further on Monday with Chinese demand, tomorrow’s Fed meeting and the stronger dollar in focus.  On balance the outlook for crude oil demand looks supportive as China recover while the supply outlook remains uncertain with the upcoming threat to supply from the next round of sanctions against Russian sales of fuel products. However, having failed to break resistance in the $89 to $90 area in Brent last week, speculators have started to sell some of the 127 million barrels they bought during a two-week period to January 24. The trigger has been the stronger dollar ahead of Wednesday’s FOMC meeting. An OPEC+ monitoring meeting on Wednesday as well is expected to recommend no change in production. Brent is testing support at $83.90, the 21-day moving average, with a break signalling further loss of momentum and long liquidation. Gold (XAUUSD) strength being tested Gold trades lower for a fourth day as the dollar strengthens ahead Wednesday’s FOMC meeting which is expected to deliver a 25-basis point hike accompanied by hawkish comments in order to send home a message that cuts are not on the table anytime soon. In addition, US bond yields rose across the curve after Spanish inflation rose 5.8% instead of an expected drop to 5%, highlighting difficulties in getting the inflation genie back in bottle. Gold has rallied by more than 300 dollars since early November, thereby attracting fresh demand from traders, not least from hedge funds who held 107k lots (10.7m oz), a nine-month high, in the week to January 24. Key support remains at $1900 where the trendline from the November low and the 21-day moving average meet. Below, the market may focus on the 38.2% retracement level at $1822.  Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) yielding few clues amidst tight ranges U.S. yields are coiling within tight ranges, wary of a Fed that may express disapproval at tomorrow’s FOMC meeting of the drastically easing financial conditions over especially the last several weeks, now the easiest according to the Chicago Fed’s measure since March of last year. The FOMC meeting tomorrow and US macro data through Friday’s Jan. ISM Service survey and Jan. Job data will likely have a bearing on yields at the front and longer end of the curve. For the 10-year yield, the 200-day moving average is creeping into the picture from below, now coinciding almost exactly with the cycle low of 3.32% from mid-Jan. Read next: Glovo Is Planning To Layoff 250 Workers Worldwide, The Middle East Is Already Suffering From A Water Shortage| FXMAG.COM What is going on? China’s PMI data bounced back to the expansionary territory China’s manufacturing PMI bounced back to 50.1 in January from 47.0 in December as economic activities have picked up as expected. Non-manufacturing PMI rose more strongly than expected to 54.4 in January from 41.6 in December. The services sub-index jumped to 54.0 driven by the release of strong pent-up demand for in-person services, particularly dining, tourism, and entertainment. The construction sub-index improved to 56.4 from 54.4. The headline new orders index surged to 52.2 from 39.1, while the business activities expectation index rose to 64.9, a decade high IMF expects China to grow at 5.2% in 2023 and 4.5% in 2024 In its World Economic Outlook Update released today, the IMF expects China’s real GDP growth to be at 5.2% in 2023 and then to fall to 4.5% in 2024. The medium-term growth rate in China is expected to settle at below 4% due to “declining business dynamism and slow progress on structural reform”. Spanish CPI for January prints far higher than expected It is perhaps too early for the European Central Bank (ECB) to pause. In January, Spain’s Consumer Price Index (CPI) rose 5.8 % year-on-year. This is higher than in December (5.7%). This is also the first increase since July – something which might worry the ECB a bit. Core inflation (which strips out volatile elements) is not improving as hopes either. It was out at 7.5 % year-on-year in January versus the prior 7.0 % in December. Remember that history is littered with central banks who declared victory over inflation too soon. The ECB does not want to make a similar mistake. Samsung and NXP Semiconductors earnings recap NXP Semiconductors reported earnings last night after the US market close with Q4 revenue and earnings in line with estimates while Q1 revenue outlook of $2.9-3.1bn misses estimates of $3.2bn pushing down the shares down by 3% in the extended trading. Samsung Q4 earnings release show significant margin pressure with Q4 operating profit at KRW 4.3trn vs est. KRW 5.8trn due to pricing pressures across some businesses including the memory chip business. Samsung expects demand for chips to fall in the first half of the year in its foundry business, but then sees a recovery in the second half. Mixed messages for Australian dollar: Coal cargoes head to China, but retail sales slump and borrowing disappoints With commodity prices falling across the board from their highs, and the DXY rising, the Australian dollar continued its 3-day pullback, falling below the 200-day moving average. Adding to the negative short-term picture, weaker than expected Australian retail trade for December (with sales down 3.9% MoM), along with weaker than expected borrowing added to the woes. The weak data is pushing RBA expectations for another rate hike next week lower. More Aussie supportive was the news of two cargos of Australian metallurgical coal making their way to China’s steel production centre, officially ending China’s two-year Australian coal ban. BHP struck the deal with China Baowu Steel earlier this month. The other major miners see China picking up iron ore demand through 2023. What are we watching next? Market conditions finally blink ahead of tomorrow’s FOMC meeting The FOMC meeting tomorrow was meant to confirm the Fed’s further downshift in the pace of its rate hikes with a 25-basis point rate hike and offer few surprises. The anticipation of the Fed reaching peak rates after a presumed additional 25 basis point hike at the March or May FOMC meeting has seen the an at times aggressive back-up in risk sentiment, with a powerful easing of financial conditions The Fed continues to object to the market’s expectation of an eventual rate cutting campaign set to begin by later this year, and it may attempt to surprise somehow on the hawkish side after especially the latter part of the “higher for longer” message from the Fed has been ignored. What does that look like? Difficult to say: a 50 basis point move would be bold but would come as a profound shock to markets. Perhaps the most hawkish message the Fed can deliver on rates would be a refusal to guide for an end of the rate-hike cycle just yet, somehow noting that financial conditions are too easy for it to consider that its policy is sufficiently tight. Yesterday’s chunky back-down in sentiment, the monthly calendar roll and a busy economic US data calendar are other important factors in the mix through this Friday. The Adani saga poses some key questions on India for foreign investors India’s corporate governance has come back in focus with the Adani rout, alarming foreign investors who had been looking at India as a potential long-term opportunity especially with a shift away from China. While the extent of collateral damage can be contained and Modi’s popularity will be protected by a lack of coherent opposition, the key concern is how deeply the investor confidence gets dented and whether markets start to question India’s premium valuation. Read our Market Strategist Charu Chanana’s full report here. Earnings to watch Key earnings day coming up today with our focus on earnings from UPS, Caterpillar, and Snap as these companies typically move markets due to their cyclicality; read our earnings preview from yesterday here. Other key earnings to watch today are from ExxonMobil, McDonald’s and Marathon Petroleum which will provide insights into the global energy sector and especially the market for refined products and availability. We are especially curious about whether energy companies are accelerating their capital expenditures. Today: Canadian Pacific Railway, Daiichi Sankyo, Fujitsu, UBS Group, ExxonMobil, Pfizer, McDonald’s, UPS, Caterpillar, Amgen, AMD, Mondelez, Marathon Petroleum, Electronic Arts, Spotify, Snap Wednesday: Novo Nordisk, Orsted, Keyence, Hitachi, GSK, BBVA, Novartis, Meta, Thermo Fisher Scientific, Southern Copper Thursday: DSV, Dassault Systemes, Siemens Healthineers, Infineon Technologies, Deutsche Bank, Sony, Takeda Pharmaceutical, Shell, ING Groep, Banco Santander, Siemens Gamesa Renewable Energy, Nordea, Roche, ABB, Apple, Alphabet, Amazon, Eli Lilly, ConocoPhillips, Qualcomm, Honeywell, Starbucks, Gilead Sciences, JD.com, Ford Motor, Ferrari Friday: Coloplast, Sanofi, Intesa Sanpaolo, Denso, CaixaBank, Naturgy Energy, Assa Abloy, Regeneron Pharmaceuticals Economic calendar highlights for today (times GMT) 0855 – Germany Jan. Unemployment Change / Rate 0930 – UK Dec. Consumer Credit / Mortgage Approvals 1000 – Eurozone Q4 GDP estimate 1330 – Canada Nov. GDP 1400 – US Nov. S&P CoreLogic Home Price Index 1445 – US Jan. Chicago PMI 1500 – US Jan. Consumer Confidence 2130 – API's Weekly Crude and Fuel Stock Report 2145 – New Zealand Q4 Employment and Earnings data 0145 – China Jan. Caixin Manufacturing PMI   Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: Financial Markets Today: Quick Take – January 31, 2023 | Saxo Group (home.saxo)
EXMO.COM analyst: Currently, Tesla is still trying to conquer the market by prioritising revenue over profit

Tesla Triggers EV Price War, The IMF Raised Its Growth Forecast

Swissquote Bank Swissquote Bank 31.01.2023 10:21
Stock investors kicked off the week on a cautious note, as the Federal Reserve (Fed) is expected to kill joy when it announced its latest decision tomorrow, and earnings announcements may not save the day. S&P500 The S&P500 gave back 1.30% on Monday. US crude fell 2% yesterday and slipped below the 50-DMA this morning. Interestingly, however, the latest news on the macro front is not bad. The Chinese reopening is now well reflected through the first set of economic data. Released today, both the manufacturing and services PMI jumped into the expansion zone. IMF And the cherry on top, the IMF raised its growth forecast for this year by 0.2% to 2.9% citing the resilience of US spending and the Chinese reopening. This is the kind of news that the energy markets normally cheer. But not this time, apparently. Forex In the FX, the US dollar is gaining some positive momentum into the Fed meeting, as investors know that the Fed won’t declare victory over inflation despite the falling inflation, and position accordingly. Fed The Fed will certainly hike by 25bp, but there is little chance it will announce the end of the tightening. But more importantly, Jerome Powell will likely reveal whether we have one more rate hike, or two more rate hikes to go before pause. And that simple ‘s’ could make all the difference. Read next: Glovo Is Planning To Layoff 250 Workers Worldwide, The Middle East Is Already Suffering From A Water Shortage| FXMAG.COM Watch the full episode to find out more! 0:00 Intro 0:21 Market update 2:39 Apple did good in China in Q4 3:47 Tesla triggers EV price war 4:45 Good news from China and IMF (don’t bring oil bulls back…) 7:34 Why Powell will have to pluck some doves’ wings? Ipek Ozkardeskaya  Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Fed #FOMC #meeting #Apple #Amazon #Google #Meta #Snap #Exxon #earnings #China #PMI #EUR #inflation #IMF #growth #GBP #crude #oil #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
Jerome Powell Will Certainly Try To Calm Down Market Joy

Jerome Powell Will Certainly Try To Calm Down Market Joy

Ipek Ozkardeskaya Ipek Ozkardeskaya 31.01.2023 13:18
Stock investors kicked off the week on a cautious note, as the Federal Reserve (Fed) is expected to kill joy when it announced its latest decision tomorrow, and earnings announcements may not save the day.   Some profit taking  US equities kicked off the week on a negative note, as many investors preferred booking profits before the deluge of earnings announcements and the Fed decision.    And they are certainly not wrong to be scared, because the Fed expectations became increasingly dovish in January, as investors saw the easing inflation figures combined with softening economic activity.   The S&P500 gave back 1.30% on Monday. The  index is still above the 2022 bearish trend and above the 200-DMA, but we can't rely on Jerome Powell to keep the party going; only stronger-than-expected earnings, and ideally sufficiently good profit guidance from companies could do it – and spitting out a good guidance won't be a piece of cake for a good amount of them.   Crude oil down despite strong China PMI, encouraging IMF growth forecast   US crude fell 2% yesterday and slipped below the 50-DMA this morning.   Interestingly, however, the latest news on the macro front is not bad, at all. The Chinese reopening is now well reflected through the first set of economic data. Released today, both the manufacturing and services PMI jumped into the expansion zone.   And the cherry on top, the IMF raised its growth forecast for this year by 0.2% to 2.9% citing the resilience of US spending and the Chinese reopening.   This is the kind of news that the energy markets normally cheer. But not this time, apparently.    Read next: The Government Pension Fund Global Suffers Losses| FXMAG.COM Won't call victory over inflation...  The US dollar is gaining some positive momentum into the Fed meeting, as investors know that the Fed won't declare victory over inflation despite the falling inflation, and position accordingly.  Why? Because the trend could reverse suddenly.   The Spanish inflation came as a punch to the Europeans' face yesterday as it advanced to 5.8% in January instead of falling to 4.7% as expected. French and German readings could reveal similar surprises.  And nothing guarantees that the same U-turn won't happen in the US. Gasoline prices surged 12.5% over the past month on the back of winter storms and a rising global demand – partly thanks to the ban on Russian oil and the Chinese reopening, and food price inflation remains high.   So, the Fed will certainly hike by 25bp, but there is little chance it will announce the end of the tightening.   And Jerome Powell will certainly try to calm down market joy – given that the actual market environment suggests that the financial conditions in the US have become as loose as last February, before the Fed started tightening its purse's strings.   And the more the market fights the Fed, the more aggressive the Fed should become to achieve what they need to achieve.   In summary, the Fed will likely reveal that there will be at least one more rate hike, or two more rate hikes to go before pause.  And that simply 's' could make all the difference.   
Further Upward Price Movement Of The AUD/USD Pair Is Expected

AUD/USD Pair Remains Under Strong Selling Pressure, The EUR/USD Pair Has Been Falling But Remains Above 1.08$

Kamila Szypuła Kamila Szypuła 31.01.2023 14:48
The US dollar was on an upward trend against its major trading partners early Tuesday ahead of a busy schedule of data releases for markets. The Fed is coming soon. The US central bank is expected to raise interest rates again to fight inflation. However, fears seem to be growing that the price of victory here may be a recession. USD/JPY The Japanese yen (JPY) continues to be supported by fresh speculation that high inflation could lead the Bank of Japan to adopt a more hawkish stance later this year. Also, the overall weaker tone around stock markets further reinforces the safe haven for the JPY. This, along with the underlying bearish sentiment around the US dollar, puts some downward pressure on USD/JPY. The pair lost in the earlier trading hours but is trading above 130.10 again. EUR/USD The euro fell to USD 1.08 in the last session of January, but remains close to nine-month highs. Investors await the ECB's monetary policy decision on Thursday, with the central bank expected to raise interest rates by 50 basis points, bringing borrowing costs to their highest level since 2008. At the same time, data indicating an unexpected growth in the euro area in Q4 2022 by 0.1%, beating market forecasts of a decrease of 0.1%, and fresh CPI data for France and Spain, showing an increase in inflation in January, gave hope that The ECB will soon end its tightening cycle. On the negative side, retail sales in Germany fell by 5.3%MoM in December, much worse than expected. The EUR/USD pair has been falling since the morning, even significantly in the European session, but remains above 1.08 and trades at 1.0850. Read next: The Government Pension Fund Global Suffers Losses| FXMAG.COM GBP/USD The cable continued its decline in the early hours of the Asian session, falling below the 1.2350 level. GBP/USD saw a slight rebound to trade just above the 1.2350 level heading into the European open where the dollar bull returned pushing GBP/USD towards the 1.23000 handle. The GBP/USD pair remains under bearish pressure and is currently trading at 1.2321. The rally on the GBP/USD pair appears to have lost momentum, however, given the key risk events, the move could be due to market participants repositioning ahead of the storm. With the focus on central banks, there is still a real possibility of a policy divergence between the FED and the BoE, which should benefit the cable in some way. The Fed is expected to raise interest rates by 25 basis points while the Bank of England by 50 basis points as it fights persistent inflation. ING strategists said they expected BoE's decision to have a broadly neutral impact on the pound against the dollar. AUD/USD AUD/USD remains under strong selling pressure for the second day in a row on Tuesday and drops to more than a week low ahead of the North American session. The Australian dollar fell towards $0.70, retreating further from recent highs after data showed the country's retail sales fell much more than expected in December as heightened inflationary pressures and higher interest rates dampened consumer spending. Still, Australians are supported by expectations that the Reserve Bank of Australia will continue to fight inflation, expectations for a 25 basis point rate hike in February and China's swift reopening after Covid restrictions have boosted the global economic outlook. Source: investing.com, finance.yahoo.com, dailyfx.com
Disappointing activity data in China suggests more fiscal support is needed

Asia Morning Bites - 01.02.2023

ING Economics ING Economics 01.02.2023 09:09
Weak Korean exports and possible PBoC tweaks to CNY currency management. Market noise about Fed May "pause" isn't causing much reaction with markets already there Source: shutterstock Macro Outlook Global Markets: Tuesday was almost a complete reversal of Monday for US stocks, which rallied, possibly taking comfort ahead of the FOMC from some reports that the Fed may pause their hiking after the next couple of meetings. So much for the so-called blackout period! Chinese stocks declined for a second consecutive day. The Fed pause story only seems to have confirmed what markets were already suspecting, and 2Y US Treasury yields only dropped 3.3bp, with 10Y yields down a similar amount to 3.507%. Currency markets don’t seem to be affected much either. EURUSD remains in the upper half of the 1.08s, the AUD in the mid-0.70s, Cable has retreated slightly to 1.2312. And the JPY remains close to 130.  Other Asian FX was on the weaker side yesterday. The INR, THB and MYR all lost more than half a per cent to the USD. The CNY remained firm at 6.7553 after some solid PMI data (see also below) G-7 Macro: The Eurozone just managed to eke out a positive 4Q22 GDP figure, though 0.1%QoQ is not particularly impressive either. Today will be all about the FOMC decision and subsequent press conference. The decision is at 3 am Singapore time, so will be ready for your cornflakes tomorrow. A 25bp hike looks all but assured, and the real question is whether the pause story currently doing the rounds will get any further endorsement, or if Powell will push back and try to engineer some tighter financial conditions. Inflation is now below where the Fed was forecasting it to be back at their December meeting, so they would be within their rights to acknowledge the progress made. Recent talk about service sector inflation ex-housing is all very well and good, and you can keep stripping away the bits of inflation that are falling to keep pretending that you still have a problem, but it gets less and less credible with each passing month. Wages will, without doubt,  follow the headline rate of inflation lower – slowly, and with a lag, but they are already turning down, and that is giving you a fairly helpful forward-leaning clue. It’s the ECB and BoE tomorrow to add to the excitement. Both are expected to raise rates 50bp. China: There has been some market speculation that the People's Bank of China may lift previous counter-cyclical measures in light of the recent strengthening of the RMB. This could include the removal of the 20% risk reserve on foreign exchange forward buying or maybe feature an increase in the foreign exchange deposit reserve ratio. This "speculation" comes from Premier Li's urging for a stable exchange rate and financial sector. The current USDCNY level at around 6.7 is around the middle of the range for the past five years. It may be a bit early to remove the risk reserve on FX forward purchases or any similar actions. 6.5 seems to be a more reasonable level. However, we cannot rule it out as the Chinese government wants the economy to recover smoothly during the reopening period. If there is anything that could hurt the economy at the moment, the government is likely to try to minimise the risk. Assuming the PBOC does remove the 20% risk reserve, we do not think that this will have a long-term impact on the RMB but there could be some short-term volatility in the FX market similar to the opposite operational impact we have seen during previous CNY depreciations. South Korea: Korea’s exports fell 16.6% YoY in January (vs -9.6% in December, -11.1% market consensus) mainly due to sluggish chip exports (-44.5%). Imports dropped modestly (2.6% YoY), resulting in a trade deficit of 12.7 billion USD, which is the largest on record. We think that January’s weaker-than-expected export result adds more downside risk to first-quarter growth. As the downcycle of semiconductors is only expected to bottom out by the end of the 2nd quarter, we think poor exports will likely continue for the time being. Indonesia: Indonesia reports January inflation today.  Headline inflation will likely moderate further to 5.4%YoY (from 5.5% previously) although core inflation could inch higher to 3.5%.  Bank Indonesia (BI) Governor Warjiyo warned that price pressures would remain in 2023 which was the main consideration for BI's rate hike in January.  We expect BI to take their queue from core inflation and we could see BI reversing their stance should core inflation head back towards the central bank target of 3%.   What to look out for: Regional PMI readings, US ADP report and the FOMC decision New Zealand unemployment (1 February) South Korea trade balance (1 February) Japan Jibun PMI (1 February) Regional PMI manufacturing (1 February) China Caixin PMI manufacturing (1 February) Taiwan industrial production (1 February) Hong Kong GDP (1 February) Indonesia CPI inflation (1 February) US ADP employment change (1 February) ISM manufacturing (1 February) FOMC meeting (2 February) South Korea CPI inflation (2 February) ECB policy meeting (2 February) US initial jobless claims, durable goods orders and factory orders (2 February) Japan Jibun PMI services (3 February) China Caixin PMI services (3 February) Singapore retail sales (3 February) US non-farm payrolls and ISM services (3 February) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Bearish WASDE Report Impacting Corn, Soybeans, and Wheat

The Commodities Feed: FOMC day

ING Economics ING Economics 01.02.2023 09:13
OPEC+ meet today, which is expected to be a non-event. However, today’s FOMC meeting will likely be of more interest to market participants Energy - OPEC+ to meet The oil market had a choppy trading session over the last day of January. Brent initially came under pressure, although a broader risk-on move saw oil still manage to settle higher on the day. API numbers released overnight were relatively bearish. The numbers show that US crude oil inventories increased by 6.3MMbbls over the last week. In addition, crude inventories at the WTI delivery hub, Cushing, are reported to have increased by 2.7MMbbls and justify the contango that we are seeing at the front end of the WTI forward curve. The bearishness did not stop at crude with both gasoline and distillate stocks increasing by 2.7MMbbls and 1.5MMbbls respectively. The EIA will release its weekly inventory report later today. Today will also see a handful of OPEC+ members gather for the Joint Ministerial Monitoring Committee meeting. Given that this meeting will not consist of all OPEC+ members, we will not see the group agree to any changes in output policy. The meeting could shed some more light on how the group sees the outlook evolving in the months ahead and also whether the sub-group has any recommendations on output policy. We believe any recommendation will be to keep output targets unchanged, given the level of uncertainty in the market.   Metals – Gold demand jumps to a decade high Gold demand in 2022 climbed to its highest level since 2011, driven by a surge in buying from central banks, according to the World Gold Council. Annual gold demand increased 18% last year to 4,741 tonnes. Purchases by central banks more than doubled to 1,136 tonnes, with most of this buying occurring over the second half of the year. Central bank purchases of the precious metal hit 417 tonnes in the last quarter of the year, about 12 times higher than the same quarter a year ago. Only about a quarter of the Q4 central bank purchases were reported to the IMF. Reported purchases in 2022 were led by Turkey, which took in almost 400 tonnes, China, which reported buying 62 tonnes in November and December, and Middle Eastern nations. During times of economic and geopolitical uncertainty and high inflation, banks appear to be turning to gold as a store of value. Given that the current unsettled geopolitical environment is likely to persist, we believe central banks will continue to add to their gold holdings in the coming months. Refined copper output in China rose 3.6% YoY to 961kt in December, according to the latest data from the National Bureau of Statistics. Cumulative copper output rose 4.5% YoY to 11.1mt for the full-year 2022. Among other metals, zinc output rose 4% YoY to 620kt, while lead production increased by a marginal 0.8% YoY to 756kt last month. The latest data from China Iron and Steel Association (CISA) shows that steel inventories at major Chinese steel mills rose to 16.1mt in mid-January, up 7.9% compared to early January. Crude steel production at major mills also edged higher to 1.94mt/d during the above-mentioned period. Agriculture – ISMA lowers Indian sugar production estimates The Indian Sugar Mills Association (ISMA) revised its estimate for domestic sugar production down from 36.5mt to 34mt for the 2022/23 season. This latest estimate is also below the 35.8mt produced last season. There have been concerns expressed over the Indian crop in recent weeks as heavy rainfall in some growing regions cut cane availability, which will likely force some mills to end the current season earlier than expected. Expectations of a lower crop also raise concern over whether the Indian government will allow further sugar exports this season. Late last year, the government approved the export of a little over 6mt of sugar and depending on how the crop developed, said further exports could be allowed. Obviously, it is looking less likely that we will see a further tranche of exports approved. This means a tighter global sugar market, particularly during the Center-South Brazilian off-crop. No.11 raw sugar prices rallied by more than 2.5% yesterday on the news and traded to their highest levels since November 2016. Read this article on THINK TagsSugar Steel OPEC+ JMMC Gold Federal Reseve Copper API Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
All Eyes On Capitol Hill, Jerome Powell Will Appear Before The Senate Banking Committee

Rates Spark: It’s not all about the Fed today

ING Economics ING Economics 01.02.2023 09:17
A lot of data releases and looming central bank meetings means markets will remain choppy without much direction. These releases will shape the way markets react to central banks' tone, starting with the Fed tonight. We suspect investors are biased to buying dollar bonds on dips We expect the Federal Reserve to raise rates by 75 basis points The Fed could over and/or under-hike other rates for technical reasons, but likely won't Apart from the headline funds rate range of 4.25% to 4.50%, which will be adjusted higher by 25bp today, the Fed will also adjust higher the rate on the reverse repo facility and on excess reserves. These are currently at 4.3% and 4.4% respectively, and are often seen as the tighter corridor within which the effective Fed funds rate sits (currently 4.33%). There is constant speculation on the likelihood for the Fed deciding to under-hike the rate on the reverse repo facility There is constant speculation on the likelihood for the Fed deciding to under-hike the rate on the reverse repo facility, to bring it to flat to the Fed funds floor (it’s currently 5bp over). The logic would be to encourage less use of this facility, which routinely takes in US$2trn in excess liquidity on a rolling daily basis. However, in all probability, repo would simply trade down to the same area, without a material effect volumes. There is a similar argument to instead over-hike the rate on excess reserves, say by 30bp (instead of 25bp). The idea here would be to encourage a downsize in use of the reverse repo facility in place of an upside in bank reserves (higher relative renumeration). This would allow the Fed to better manage bank reserves, ensuring that they don’t fall too fast, as they gradually ratchet their balance sheet lower through the ongoing soft quantitative tightening programme (as they allow US$95bn of bonds per month to roll off the front end). There is a similar argument to instead over-hike the rate on excess reserves In all probability they won’t do this either. There is already a 10bp spread between the reverse repo window and the excess reserves one, and widening that to 15bp might not make a material difference. That said, a spread of 20bp just might, and is something the Fed could consider down the line, ie, under-hiking the reverse repo rate and over-hiking the rate on excess reserves. On this occasion, there would be quite a surprise if they did anything along these lines, at least not at this juncture. Widening the RRF-IOER spread would slow the fall in bank reserves Source: Saint Louis Fed, ING The Fed could also upsize the quantitative tightening agenda, but likely won't either The Fed has also been quite silent on the balance sheet roll-off programme. It seems that’s the way they like it – churning away quietly in the background, and not causing too many market ripples. The big question in this space is whether the Fed could consider outright selling of some bonds off its books, and to thereby engage in a harder version of quantitative tightening. It would be huge if they did. There is certainly appetite for bonds in the market, if the recent Treasury are auctions are anything to go by. The big question is whether the Fed could consider outright selling of some bonds off its books However, such selling of bonds outright would likely be a step too far at thus juncture, as it would likely generate a tantrum. But its always there should the Fed start to feel the fall in longer dated market rates is acting contrary to their hiking efforts on the front end. Even a mention that they are looking at this down the line would have a material effect. Not expected, but these are potential market movers that we need to cross off as the meeting outcome unfolds. Importantly, any mention of potential upsizing the bond roll-off in the future or on considering any bond selling (eg, of the longer dated mortgage portfolio) would signal they were uncomfortable with where longer-dated market rates are at. Today's data will frame how markets react to central bank policy We started the week by saying that investors are increasingly relying on their own analysis of economic data, rather than on central bank guidance, to form their opinion about the direction of monetary policy. This is still true. Even in the run up to tonight’s Federal Open Market Committee (FOMC), and tomorrow’s European Central Bank, meetings, data should play a greater role in shaping policy expectation, and the direction of interest rates. Central banks are purposefully behind the curve One of the reasons is that central banks are purposefully behind the curve. Their past mistake in anticipating the inflation surge means they’re unlikely to acknowledge it is going back to target until they have a much higher degree of confidence than now. The other reason is that markets are correctly priced for the next few meetings. We anticipate 50bp more hikes from the Fed, the curve is pricing 58bp, and 125bp from the ECB, the market is pricing 150bp. Swap curves are pricing rate cuts in 2024. The ECB should be more successful in pushing back than the Fed Source: Refinitiv, ING More labour data from the US, and inflation numbers from Europe Where the debate gets more interesting, from the point of view of rates markets, is when one forecasts what will happen next. For the Fed, today’s employment indicators (job openings and ADP) will determine how much credence the market gives its ‘higher for longer’ stance. So far, Fed communication isn’t a success: the curve is pricing almost 200bp of cuts by end-2024. This is despite one having to look very closely at data to see the cracks forming in the labour market. Any change in this state of play could have the curve price even more cuts. Fed communication isn’t a success: the curve is pricing almost 200bp of cuts by end-2024 As things stand, we expect the ECB to be more successful than the Fed in pushing back against rate cut expectations, but they may well be given an assist by today’s eurozone inflation print. This month’s release is proving even more difficult than usual to forecast due to the annual re-weighting of components, and due to Germany delaying its own release until later in February. Spain’s inflation surprised to the upside, France’s didn’t, so markets are none the wiser about today’s release. These releases point to choppy trading without much direction into the key central bank meetings, but they may well shape the way markets react to their tone. Our hunch so far is that investors would be minded to fade any jump in rates on a hawkish FOMC, while a hawkish ECB would be more credible and push euro rates higher, especially at the 5Y point. Today's events and market view The run up to tonight’s FOMC meeting will not be a boring one, for those into economic numbers at least. The main release is eurozone and Italian CPI, with the added uncertainty that the German component will be a temporary estimate. As usual core inflation will be the most important data point for markets trying to anticipate the ECB’s next move. Consensus is for core to slow down from 5.2% to 5.1% on an annualised basis but we suspect market expectations are skewed higher. Other European data publications, manufacturing PMIs, will be less market moving, barring significant revisions from the flash prints. The deluge of economic releases will be interrupted by a 10Y debt sale from Germany. US releases will feature PMI and ISM manufacturing. A fall in the ISMs below 50 last month was instrumental in shifting investor expectations towards our call for a US recession this year, and for rate cuts. If this wasn’t enough, there will also be the ADP employment report, and JOLTS job opening to look out for, all instrumental in assessing when the labour market will allow the Fed to contemplate rate cuts. This busy day will culminate in the evening with the FOMC meeting and Chair Jerome Powell’s press conference. Read this article on THINK
BRICS Summit's Expansion Discussion: Impact on De-dollarisation Speed

FX Daily: Peak? What peak?

ING Economics ING Economics 01.02.2023 09:20
Everything is pointing to the fact that today's well-telegraphed 25bp hike by the Fed will be the penultimate move before ending the cycle. However, Chair Powell and the FOMC may see little interest in sounding materially less hawkish just yet. Ultimately, a push-back against a pivot and rate-cut speculation could hit risk assets and lift the dollar today Federal Reserve Chair Jerome Powell USD: Hawkish Fed can lift the dollar The dollar enters FOMC day after having shown some resilience over the past few sessions, which was likely the consequence of some defensive positioning ahead of key central bank meetings, which kept risk assets capped. Still, the last important piece of data before the Federal Reserve announcement – yesterday’s Employment Cost Index – offered more reasons to think the Fed is indeed close to the peak. Labour costs eased for a fourth consecutive quarter in 4Q, moving from 1.2% to 1.0%, the same levels as the fourth quarter of 2021. This is likely easing some concerns in Washington about inflation stickiness, and underpins a scenario where slowing price pressures favour less hawkish rhetoric. The question is whether such unwinding in the hawkish narrative will already emerge in today’s FOMC announcement. We doubt that. As discussed in our FOMC preview, we expect a 25bp rate hike today, which is the consensus view and is fully priced in by the swaps market. We think that Fed Chair Jerome Powell and his colleagues simply have little interest in sending strong signals that they are indeed close to the peak, which only risks generating a premature fall in interest rates. A reiteration that ongoing rate increases remain appropriate, inflation is high and that the jobs market remains tight despite slowing growth, seems to us the most likely content of today’s communication “package” by Powell. He will most likely be asked about the current market pricing for around 50bp of easing in the second half of the year. Using the same rationale, Powell still has all the interest in pushing back against rate cut speculation. In practice, we suspect the Fed will end up cutting more than 50bp as the US economic slack deepens, but that is not a story for today’s announcement. So, we are in the camp of expecting Powell to maintain his hawkish rhetoric despite this appearing less appropriate given the backdrop of slowing inflation and growth. This outcome may ultimately have some negative implications for risk and give the dollar some support, as bets on a pivot, and potentially on rate cuts, are scaled back. Any communication missteps or deliberate dovish tilts, on the other hand, can surely revive that dollar bear trend that appears to have halted lately. We also have some US data to watch today: ISM manufacturing, ADP payrolls and JOLTS jobs openings. Substantial surprises on those releases are likely needed to drive major dollar moves ahead of such a big event like the FOMC. Francesco Pesole EUR: Inflation surprise already priced in? EUR/USD will inevitably be heavily impacted by the post-FOMC reaction today. In line with our view for a positive impact on the dollar, we think the 1.0800 support could be heavily tested after the Fed announcement. Before that, however, all eyes will be on the eurozone inflation figures, which should show more stickiness than previously thought after evidence of persistent price pressure in Spain and France. We suspect much of this inflation story has now been priced in, and a still quite hawkish pricing for European Central Bank tightening (150bp of hikes by June) suggests the room for further increases in rate expectations – and by extension, for another big ECB-driven EUR rally - has shrunk for now. We think that EUR/USD will ultimately come out weaker from these two days of central bank activity (here’s our ECB market preview). An exploration of the 1.0700-1.0750 range is surely possible in the near term, even though the longer-term outlook keeps pointing to a dollar decline and EUR/USD strength. Francesco Pesole GBP: Downside risks from a hawkish Fed Stronger ECB rate expectations are likely to be blamed for the strengthening in EUR/GBP beyond the 0.8800 level. As discussed in the EUR section above, we think there is now less scope for the ECB to push the euro even higher, which means more fuel to the EUR/GBP rally may be mostly a function of risk sentiment rather than monetary policy divergence. Indeed, since the pound tends to be more sensitive to global risk sentiment than the euro, the risks are skewed to the upside for EUR/GBP today given our baseline scenario for a hawkish Fed weighing on risk assets. Cable may drop to the 1.2200 mark today. Francesco Pesole SEK: Krona undermined by domestic woes The Swedish krona has been a negative standout in the G10 space over the past few days, as unstable risk sentiment offered a breeding ground for rising bearish bets linked to a worsening domestic outlook in Sweden. We analyse this theme in more detail in “Sweden: Krona increasingly pricing in domestic woes”. In short, EUR/SEK is currently 2.5% overvalued in the near term as markets appear to be pricing in the increasing likelihood of a pessimistic scenario for the Swedish property market and the economy. Since we don’t believe the risk of a black swan scenario in Sweden has materially increased, we think that SEK will recover gradually over the coming months. Looking at the very short-term however, SEK’s sensitivity to risk sentiment still puts it in a vulnerable position today ahead of the Fed announcement. EUR/SEK is currently trading around 3% below its historic highs (11.68 in 2009), and risks that those levels will be tested in the short-term (although not our base case) have admittedly risen lately. We still target sub-11.00 levels before the summer, as recently discussed in our EUR/SEK scenario analysis. Francesco Pesole Read this article on THINK
Asia week ahead: Policy meetings in China and the Philippines

China’s Manufacturing PMI Bounced Back To 50.1, The Australian Dollar Continued Its 3-Day Pull Back

Saxo Bank Saxo Bank 01.02.2023 09:29
Summary:  Equities ended January on a positive note, jumping higher yesterday as easing Q4 employment cost index and consumer confidence further supporting the case for a smaller rate hike of 25bps from the Fed later today. Earnings remained a mixed bag with GM and Exxon delivering a beat, but most other signaling margin pressures and dampening consumer growth. Gold and most industrial metals reversed the recent downtrend, helping AUDUSD to rebound from post-retail sales slump lows. Today’s focus will be on Eurozone CPI, US ISM manufacturing and the Fed announcement.   What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) rallied on cooler worker compensation trend After consolidating for one day, U.S. stocks resumed their charge higher, being aided by a softer print of the Employment Cost Index that increased the odds of a pause by the Fed in March or May this year. Nasdaq 100 rose 1.6% and the S&P500 gained 1.5%. The rally was broad-based as all 11 sectors within the S&P500 advanced. Materials, consumer discretionary, real estate, and industrials outperformed. General Motors (GM:xnys) jumped 8.3% on earnings and revenue beats. Exxon Mobil (XOM:xnys) gained 2.2% as the oil major reported record profits. Leading home builder PuteGroup (PHM:xnys) surged 9.5% following reporting Q4 earnings beating estimates. United Parcel Service (UPS:xnys) rose 4.6% on a 2023 business outlook largely in-line with expectations. Caterpillar (CAT:xnys) slid 3.5% after the construction and mining machine maker’s Q4 earnings missed expectations and said that sales in China will be softer in 2023. McDonald’s (MCD:xnys) declined 1.3% on weaknesses in Q4 as well as the 2023 operating margin outlook dragged by inflation pressure. Snap (SNAP:xnys) tumbled 14.4% in extended-hour trading following reporting Q4 revenue in-line with expectations and earnings beat but expecting a decline in revenues in Q1 this year, citing significant headwinds. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) 2bps to 4bps richer as the Employment Cost Index softened Bids came into the front end to the belly of the Treasury curve following the growth in the U.S. employment cost index, a preferred wage and benefit barometer of the Fed came in at 1% in Q4, below the 1.1% expected, and decelerated from 1.2% in Q3. The 5-year notes outperformed with a 5bp drop in yield to 3.62%. Yields on the 2-year and the 10-year were 3bps lower to 4.20% ad 3.51% respectively. Gabriel Rubin and Nick Timiraos of the Wall Street Journal suggested that the cooler worker compensation gains increased “the possibility of a pause in rate rises this spring”. Hong Kong’s Hang Seng (HIG3) and China’s CSI300 (03188:xhkg) extended decline Stocks in the Hong Kong and mainland bourses extended the decline from their recent highs on a risk-off day. After the strong gains in January on the positive development in the potential peaking of the exit wave of inflection in China, traders booked their profits ahead of the U.S. Fed’s rate decision as well as in response to fear about the risk of escalation of tension between the U.S. and China on the technology front.  In addition to the recent Politico story on the Biden administration’s plan to ban U.S. investments from investing in certain high-tech areas in China, Financial Times reported on Tuesday that the U.S. Commerce Department has stopped issuing licenses to companies seeking to export to China’s Huawei. Hang Seng Index and CSI 300 Index each fell by around 1%. Hang Seng Index was partly dragged down by Hang Lung Properties (00101:xhkg), which tumbled 5.3% following reporting underlying profit falling 3.8% Y/Y and below expectations. EV stocks advanced. BYD rose 2.3% after reporting a preliminary 2022 profit of RMB 6.7 – 7.7 billion which represents a 425% to 458% growth from a year earlier. Li Auto (02015:xhkg) climbed 1.5% following confirmation that its new EV model L5 would not be a SUV, implying less cannibalization of existing models. In A-shares, Chinese white liquor, food and beverage, semiconductors, pharmaceuticals, and electronics were the major laggards while property developers, petrochemicals, farming and fishery, and machinery stocks gained. FX: Dollar reversed gears to drop as Fed decision nears The dollar index made a further recovery to 102.60 on plunging German retail sales data, but the index slumped lower as US data including Fed’s preferred wage measure came in softer than expected. USDCAD hit a low of 1.3300 amid a rebound in WTI prices. EURUSD continues to struggle to break above 1.0900 ahead of EZ CPI and ECB decision due today. AUDUSD reversed the drop below 0.7000 after the plunge in AU retail sales, with metals gaining traction again. Crude oil (CLG3 & LCOH3) recovers ahead of Fed and OPEC Crude oil reversed the early drop from Tuesday as sentiment shifted amid signs of cooling inflation and wage pressures emerging from the US economic data (details below) ahead of the key Fed decision due today, and the US dollar slipped. Further, Exxon CEO post-earnings said he sees potential for continued tight global oil markets and tight supplies as some producers pull back. WTI rebounded back above $79 while Brent was above $85. Meanwhile, API inventory data for crude oil suggested another built of 6.3 million barrels, as stockpiles of gasoline and diesel also increased. Reports also suggested that OPEC is likely to maintain a cautious path on oil policy as it awaits clarity on China’s reopening. Gold (XAUUSD) finds support at $1900 Gold snapped a three-day downtrend with US employment cost index and consumer confidence data suggested that there remains scope for the Fed to slow its rate hikes. Lower US yields prompted interest in the yellow metal, reversing it from key support level of $1900 and it reached close to $1930, bringing the recent high of 1949 in focus again. The World Gold Council reported that gold demand reached a decade high in 2022 amid strong buying from central banks.  Read next: AUD/USD Pair Remains Under Strong Selling Pressure, The EUR/USD Pair Has Been Falling But Remains Above 1.08$| FXMAG.COM What to consider? Where has the most momentum been in markets and can it continue? It’s vital to reflect on the global equity markets rally in January  - and where momentum has been. In the US the Nasdaq gained 10%, the S&P500 5.6%, with EV names, Lucid and Tesla up 40-70% off their lows. In Europe the biggest 50 stocks (Stoxx 50) gained 10% with designers such as Hermes and LVMH providing the most heat, up 18% on expectations of higher earnings as China reopens. Australia’s ASX200 lifted 6.2% with lithium miners Sayona Mining and Pilbara Minerals up the most, 37-27%. Ultimately the Fed's decision in interest rates and it outcome this week, along with the ECB's put some of these companies on notice.  The Fed is expected to downshift again The expectations of a soft landing have picked up since the start of the year, relative to the rising recession bets seen in H2 of last year. Meanwhile, inflation has been on a steady downtrend in the last six months, which has allowed the Fed to downshift to a 50bps rate hike in December after a spate of rate hikes in 75bps increments before that. The consensus expects the FOMC will downshift again to lift its Federal Funds Rate target by 25bps to 4.50-4.75% on February 1, although some still expect the central bank to hike rates by a larger 50bps increment. Fed speakers have also broadly guided for a smaller hike at the next meeting. With economic data remaining volatile, there is some reason to believe that Powell and team may be aiming to lengthen the hiking cycle in order to buy more time to assess both the incoming data and the impact of their previous aggressive rate hikes. This warrants a smaller rate hike of 25bps at the February 1 decision. The key risk factor, favouring another 50bps rate hike, could be the financial conditions which are the easiest since April 2022 or the risks of another shoot higher in inflation due to China’s reopening and the resulting rise in commodity prices. Read our full preview here. US economic data still supporting a smaller rate hike The Fed’s preferred measure of wage gains, the employment cost index, slowed to 1% last quarter from +1.2% in Q3, coming in a notch softer than the expected at 1.1%. The fall was led by wages and salaries falling to +1.0% from +1.3%, while benefit costs fell to +0.8% from +1.0%. While the report signals that wage pressures may be easing and could mean that the Fed’s against inflation is working, more data will be needed to confirm the trend. Meanwhile, US consumer confidence in January dipped to 107.1, short of the expected 109.0 and the prior, revised higher, 109.0. The present situation index encouragingly rose to 150.9 (prev. 147.2), but the forward-looking expectations index declined to 77.8 (prev. 82.4). Chicago PMI slightly declined in January to 44.3 from 45.1, beneath the expected 45.0. Eurozone CPI on the radar today as the ECB meets With Spain and France’s inflation getting another bump higher in January, and Germany’s inflation release postponed to next week due to technical issues, jitters are running high for the Eurozone inflation print due today. More so, it comes a day ahead of ECB’s policy decision, where a 50bps rate hike in baked in with a small chance of a 75bps. Slowing energy and electricity prices mean that headline inflation can come in softer, but the focus will be on the core measure which is likely to remain firm. Bloomberg consensus expects the Eurozone headline inflation to slow to 8.9% in January from 9.2% in December, but the core measure at 5.1% from 5.2% previously. China’s PMI data bounced back to the expansionary territory; strong recovery in services China’s manufacturing PMI bounced back to 50.1 in January from 47.0 in December as economic activities have picked up as expected. The new orders sub-index jumped to 50.9 in January from 43.9 in December while the new export orders sub-index was below 50 for 21 consecutive months at 46.1, rising modestly from December’s 44.2. The improvement in employment was also lackluster, with the employment sub-index coming in at 47.4, staying in the contraction territory for 22 consecutive months.  Non-manufacturing PMI rose more strongly than expected to 54.4 in January from 41.6 in December. The brightest spot was the services sub-index which jumped to 54.0 in January from 39.4 in December, driven by the release of strong pent-up demand for in-person services, particularly dining, tourism, and entertainment. The construction sub-index improved to 56.4 from 54.4. Caixin China Manufacturing PMI is scheduled to release today Unlike the official NBS manufacturing PMI, the private Caixin China Manufacturing PMI which has a bigger representation of SMEs in the eastern coastal regions is however expected, according to the survey by Bloomberg, to improve only moderately to 49.8 and stay in the contractionary territory in January from 49.0 in December. IMF upgrades global growth; expects China to grow at 5.2% in 2023 and 4.5% in 2024 In its World Economic Outlook Update released yesterday, the IMF has marginally increased its global growth forecast for 2023 to 2.9% from 2.7% previously. Meanwhile, the IMF expects China’s real GDP growth to be at 5.2% in 2023 and then to fall to 4.5% in 2024. The medium-term growth rate in China is expected to settle at below 4% due to “declining business dynamism and slow progress on structural reform”. Australian full year earnings season kicks off; will mining companies deliver triple digit growth   February is an important time of year with full earnings season kicking off. ASX200 companies will report their 2022 profits and earnings, and guide for 2023, which could set the course for equites for the next few months. A company’s shares will generally do well if the company reports a better than expected outlook and results, and inversely their shares will typically sink if they disappoint. That said, the most earnings growth is expected to come from the Mining sector with well over 100% earnings growth (consensus); with gold and lithium companies are expected to outperform. BHP as an example, could report 17% dividend growth and it could give a rosy outlook after kicking off coal exports to China for the first time in two years. Energy companies are expected to report a 30% earnings jump and 300% revenue growth. For a list of stocks and inspiration refer to the Australia Resources basket. Today, Credit Corp reports results, Pinnacle on Thursday, NewsCorp Friday. In the third week of February the season ramps up with CBA and Fortescue reporting Feb 15, on Feb 21, BHP reports, with Rio the next day, followed by Qantas. Mixed messages for the Australian dollar; Coal cargoes head to China, but retail sales slump and borrowing disappoints With commodity prices falling across the board from their highs, the Australian dollar continued its 3-day pull back, falling below the 200-day moving average. Adding to the bearish short-term picture, weaker than expected Australian retail trade was released for December (with sales down 3.9%), while weaker than forecast borrowing data also added to Aussie woes. On the positive side, Australia sent two cargos of metallurgical coal to China’s steel production centre, officially marking the end of China’s two-year Australian coal ban. Earlier this month BHP struck the deal with China Baowu Steel. So although the RBA could potentially pause rate hikes sooner, longer term upside could be underpinned by Aussie commodity demand. We continue to monitor short term risks, for the Aussie, especially if the USD thunders up ahead and after the Fed meeting, while further commodity price weakness could also pull the Aussie down. Meta’s Q4 may help investors gauge the health of digital advertising While the importance of Meta Platforms (META:xnas) to the market has declined substantially over the past year, investors and traders have their eyes on the social platform’s Q4 results and outlook for 2023, to be released on Wednesday, to provide an early glimpse to the state of health of the digital adverting before the Q4 results from the heavy-weight Alphabet (GOOGL:xnas) on Thursday. The weakness in the guidance from Snap on Tuesday added to investors’ concerns about softening digital advertising amid macro headwinds. For what is ahead at markets this week – Read/listen to our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: Market Insights Today: Easing US wage pressures; Fed decision eyed – 1 February 2023 | Saxo Group (home.saxo)
ECB's Tenth Consecutive Rate Hike: The Final Move in the Current Cycle

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

Saxo Bank Saxo Bank 01.02.2023 09:32
  Summary:  A slew of key central bank meetings are on the horizon, with the Fed decision due today and the Bank of England (BOE) and European Central Bank (ECB) announcements due tomorrow. Fed Chair Powell has little reason to turn dovish at this point, with risks to inflation emanating from easing financial conditions and China reopening. But a hawkish Powell may only shift the focus back to data. ECB’s hawkishness has some more room to run, much as the BOE’s divide. Key central bank meetings are due over the next two days, presenting a host of event risks. Markets however remain rather upbeat and are showing no signs of nervousness, with VIX sitting below 20 and S&P500 staring at a key resistance of 4100. Although part of the market rally this week could be attributed to month-end flows, there is some reason to believe we are going into these central bank meetings with dovish-to-neutral assumptions. Let us consider what we can get. Fed: Powell to emphasize higher-for-longer With economic data in a Goldilocks situation in the US, the Fed’s likely downshift to 25bps rate hikes makes the most sense as it buys them more time to assess the growth and inflation trajectories. We wrote a preview for the Fed meeting here, but it is worth noting that it is becoming extremely necessary for Powell to push back on the 2023 equity rally and the easing financial conditions especially with the recent rise in commodity prices starting to lift inflation expectations. But will the market care? Despite Powell’s repeated messages on higher terminal rates, market pricing seems to continue to chart its own path. The key message at this meeting needs to move away from terminal rates to the push back against excessive easing that the market is pricing in, and an emphasis on higher-for-longer interest rates with risks to inflation skewed to the upside. There is little reason for Powell to be dovish, as he would certainly want to push back on excessive easing priced in by the markets. But a neutral-to-hawkish Powell is widely expected and may likely invoke only a knee-jerk reaction from the markets, offering some tactical opportunities. The US dollar may have some scope to make a recovery but the economic data trends are a bigger piece of the puzzle as of now, and will be a guiding the path for the USD more than the Fed itself. Only a firmer commitment from Powell in either direction, such as a 50bps rate hike or signaling a clear pause (like the BOC), would drive a market reaction that sticks. Read next: AUD/USD Pair Remains Under Strong Selling Pressure, The EUR/USD Pair Has Been Falling But Remains Above 1.08$| FXMAG.COM ECB: Still scope for upward repricing in the front-end curve The European Central Bank has surpassed its peers in the hawkishness quotient recently, and will likely repeat that this week. A 50bps rate hike is expected, along with the guidance for another 50bps in March which still has the scope to bump up front-end pricing with markets looking at 93bps of rate hikes over the next two meetings. Looking further out, about 160bps of rate hikes are priced in for the ECB until mid-year and that limits the scope to surprise on the hawkish side. If Fed proves to be more hawkish than the ECB this week, EURUSD can potentially move towards 1.07. But incoming data, including the Spanish CPI report this week, give the ECB enough ammunition to preserve its current hawkish stance this Thursday. But the 1.0920 resistance has proved tough for EURUSD, and without an upward repricing in the ECB path, that will remain difficult to overcome. EURGBP appears to be an easier pick for this week, with ECB and BOE policy and economic divergences much more evident. Bank of England: 50 and BOC? The Bank of England will likely be the trickiest given the indecisive market pricing as well as the scope for a split vote. Broader consensus hints at another 50bps rate hike this week, but a pause signal, potentially not as clear as the one from Bank of Canada (BOC), may also be on the cards. For this, investors will need to read through the Bank’s quarterly inflation forecasts which are also due to be reported this week. Downward revisions to inflation forecasts from November estimates of 1.8% for 2024-end and 0.4% for 2025-end will mean further pricing out of tightening. Growth risks for the UK economy are also more significant than the other major economies, as also highlighted by the latest IMF forecasts (see below). While the Bank’s own growth forecasts may be subject to an upward revision after a recession was highlighted previously, and data has been more hawkish since, it still seems that the market pricing of the BOE’s path from here remains prone to downside revisions. This leaves little scope of upside on the sterling.   Source: Macro Insights: Central banks on the agenda – Fed, ECB and Bank of England | Saxo Group (home.saxo)
Demand For Gold Rose Around 20% In 2022, Coffee Prices Jumped

Demand For Gold Rose Around 20% In 2022, Coffee Prices Jumped

Saxo Bank Saxo Bank 01.02.2023 09:45
Summary:  Another day brought another sharp direction change as markets rallied steeply from the prior day’s funk, with the Nasdaq 100 index crossing back above the 200-day moving average, which has been in play in recent days. Heavy anticipation ahead of tonight’s FOMC meeting and whether the Powell Fed will confirm the market’s view of imminent peak rates at the next meetings or two after today’s. Key US economic data also up through Friday’s US jobs report. What is our trading focus? Equities: Earnings breathed new life into momentum The earnings releses yesterday helped aggregate earnings q/q to improve for Q4 easing some of the concerns around earnings recession, but despite better than feared Q4 figures many companies are still cautious on their Q1 outlook. Indicators suggesting wage costs are easing in the US also helped drive sentiment back into positive mood on top of the market betting the Fed might blink after all tonight on its monetary policy trajectory. S&P 500 futures rallied 1.9% from the intraday lows yesterday into the close around the 4,085 level. US equity futures are stabilising this morning around yesterday’s close and we expect little action ahead of tonight’s FOMC rate decision. Hong Kong’s Hang Seng (HIG3) and China’s CSI300 (03188:xhkg) pause during lackluster session The Hang Seng Index took a pause in its retreat and consolidated with a modest 0.6% gain. CSI 300 traded sideways and was up 0.3% as of writing. Caixin China Manufacturing PMI came in weaker than expected at 49.2 in January (vs consensus: 49.8; Dec: 49.0), the sixth month in the contraction territory. According to the chief economist at Caixin, optimism has improved in the manufacturing sector but both domestic and external demand, and logistics were yet to fully recover. Baidu (09888:xhkg) and BYD (01211:xhkg) each surged 5.8% and were the biggest winners within the Hang Seng Index. Shares in Baidu, the Chinese search engine, were boosted by chatters that Baidu was developing an AI-powered chatbot similar to ChatGPT. BYD extended yesterday’s gain after reporting a preliminary 2022 profit of RMB 6.7 – 7.7 billion which represents a 425% to 458% growth from a year earlier. ChatGPT concept stocks also advanced in the mainland’s A-share market. FX: Dollar pounded back lower on broad sentiment recovery Yesterday brought another sharp direction change in sentiment, with a souring mood suddenly gathered up by the beginning of the US session yesterday after the US dollar had rallied sharply, seemingly in recognition of the blitz of event risks in coming days, starting of course with tonight’s FOMC meeting. EURUSD found support ahead of 1.0800 and rallied back toward 1.0875 into this morning. AUDUSD found support just below 0.7000 and bounced back, etc. A key test for central bank guidance and how much the market buys into that guidance in coming days, as the market continues to price for imminent peak Fed policy rate, with perhaps one more 25 basis point hike after tonight’s presumed 25 basis point hike before a pause. The ECB, meanwhile, is seen hiking 50 basis points tomorrow and then tacking on at least another 100 basis points of hiking at coming meetings. Will markets listen to central bank guidance, or will incoming data rule the day in coming days and weeks? The market has persistently ignored Fed guidance for policy beyond the next few meetings. Crude oil (CLH3 & LCOJ3) recovers as long liquidation pressures ease ahead of OPEC and Fed Crude oil prices found support on Tuesday as technical, not fundamental, selling pressure from funds started to ease. Money managers added 95 million barrels during a two-week period to January and but the failure to break higher last week triggered a period long liquidation. With that pressure reduced the market may once again focus on current fundamentals which on balance remains supportive as China recover while the supply outlook remains uncertain with the upcoming threat to supply from the next round of sanctions against Russian sales of fuel products. Focus on FOMC meeting, OPEC+ JMMC recommendations, and EIA’s weekly stock report after the API reported a 6.3-million-barrel increase. Gold (XAUUSD) holds its line of support Gold passed its first proper correction attempt since mid-December with flying colours on Tuesday, when a slump to key support in $1900 area was followed by a 30-dollar bounce back, supported by a weaker dollar after it also failed in its correction attempt to move higher. The US employment costs eased last quarter (see below), thereby supporting an expected 25bp rate hike from the FOMC today, action that is expected to be followed up by hawkish comments in order to send strong a message that cuts are not on the table anytime soon. The World Gold Council reported that demand for gold rose around 20% in 2022 to its highest since 2011, driven by “colossal” central bank demand, at 1,136 tons the highest in 50 years. It highlights the reason why gold did so well last year despite surging real yields and the much stronger dollar. Support at $1900 & $1865. Copper’s shallow correction points to more strength Copper, just like gold, managed to find support after an end of month selloff was halted before the technical picture managed to turn negative. HG Copper bounced before reaching its 21-day moving average, today at $4.13/lb (LME at $9100), and its 38.2 fibo retracement at $4.11/lb (LME at $9030). The bounce back being supported by a weaker dollar following the weaker-than-expected US employment cost index. Focus on the FOMC and its impact on the dollar as well as ongoing supply disruptions in Peru underpinning prices while awaiting an expected pickup in demand from China. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) dip as the Employment Cost Index softened. Bids came into the front end to the belly of the Treasury curve following the growth in the U.S. employment cost index, a preferred wage and benefit barometer of the Fed came in at 1% in Q4, below the 1.1% expected, and decelerated from 1.2% in Q3. The 5-year notes outperformed with a 5bp drop in yield to 3.62%. Yields on the 2-year and the 10-year were 3bps lower to 4.20% and 3.51% respectively. Gabriel Rubin and Nick Timiraos of the Wall Street Journal suggested that the cooler worker compensation gains increased “the possibility of a pause in rate rises this spring”. Read next: AUD/USD Pair Remains Under Strong Selling Pressure, The EUR/USD Pair Has Been Falling But Remains Above 1.08$| FXMAG.COM What is going on? US earnings recap: Caterpillar, UPS, and Snap Q4 earnings have been mixed relative to expectations so far but yesterday’s earnings releases lifted the mood. But not all earnings were positive. Caterpillar delivered Q4 revenue of $16.6bn vs est. $15.9bn while EPS missed slightly against estimates. Despite putting out a positive outlook for 2023 due to favourable prices, shares were down 4% during the trading session. Caterpillar said on the conference call that prices in 2023 will offset manufacturing costs and North America construction is seeing good momentum while China is still slow and will be below 2022 levels. UPS misses on revenue but EPS beats despite average revenue per package coming in lower than estimated most likely due to cost cutting exercises. The logistics company is authorizing a new share buyback programme of $5bn. UPS 2023 outlook on revenue came in lower than expected and management said on the conference call that Europe is likely in a recession in the first half of 2023 and China should recover after Q1; it also said that Amazon’s share of volume declined to 11.3% in 2022 from 11.7% in 2021. Snap reported after the market call Q4 revenue of $1.3bn in line with estimates and EPS was $0.14 vs est. $0.11. Snap said revenue was down 7% year-to-date vs their own internal forecast of -10% to -2%. Shares were down 15%. Strong earnings from Novo Nordisk driven by obesity drug Novo Nordisk has reported Q4 earnings this morning in Europe with Wegony (obesity drug) revenue at DKK 2.5bn vs est. DKK 1.7bn helping overall revenue to beat estimates. The company is additionally putting out a very optimistic 2023 outlook on revenue and operating income of 13-19% on top of a big share buyback programme of DKK 28bn. US economic data still supporting a smaller rate hike The Fed’s preferred measure of wage gains, the employment cost index, slowed to 1% last quarter from +1.2% in Q3, coming in a notch softer than the expected at 1.1%. The fall was led by wages and salaries falling to +1.0% from +1.3%, while benefit costs fell to +0.8% from +1.0%. While the report signals that wage pressures may be easing and could mean that the Fed’s against inflation is working, more data will be needed to confirm the trend. Meanwhile, US consumer confidence in January dipped to 107.1, short of the expected 109.0 and the prior, revised higher, 109.0. The present situation index encouragingly rose to 150.9 (prev. 147.2), but the forward-looking expectations index declined to 77.8 (prev. 82.4). Chicago PMI slightly declined in January to 44.3 from 45.1, beneath the expected 45.0. The coffee short squeeze gathers momentum Coffee jumped 6.7% on Tuesday, thereby adding momentum to the strong recovery that has seen the quality bean surge 29% during the past two weeks to reach a three-month high at $1.82/lb. The fundamental driver being a deteriorating outlook for coming season in Brazil forcing a major turnaround from hedge funds who in recent weeks had amassed the biggest net short in more than three years. It highlights the importance of watching the weekly COT update as a change in the technical and/or fundamental outlook can have an outsized impact on elevated positions. What are we watching next? Test of central bank messaging and whether market is listening. The FOMC meeting is up tonight, with the general narrative that the FOMC and Chair Powell will continue to push back against expectations for the Fed to reach peak policy rates after perhaps one more 25 basis point hike after today’s and then begin cutting rates by year-end. But as the market has ignored Chair Powell’s protestations on the market’s forward expectations before, it is tough to see how he makes a strong impression unless taking drastic (and unlikely) measures like hiking the policy rate 50 basis points. Incoming data, starting with the upcoming ISM’s (today and Friday) and the Friday jobs and earnings data, may weigh more in the pricing of the Fed policy rate from here. The ECB is up tomorrow and is expected to confirm the markets view of significant further tightening in the pipeline after another 50 basis point hike. The Bank of England tomorrow is less certain, as the BoE may try to sneak in more cautious guidance, given the weak performance of the UK economy. Earnings to watch Our US earnings focus today is Meta and Southern Copper with Meta likely to reflect the weakness in online advertising that Snap communicated last night in their Q4 earnings release. Meta is expected to report Q4 revenue growth of –6% y/y and guide Q1 revenue growth of –2% y/y which could prove to be too positive given Snap’s indications on year-to-date revenue growth of –7%. Southern Copper is expected to report Q4 revenue growth of –13% y/y and EPS of $0.81 down 31% y/y. Today: Novo Nordisk, Orsted, Keyence, Hitachi, GSK, BBVA, Novartis, Meta, Thermo Fisher Scientific, Southern Copper Thursday: DSV, Dassault Systemes, Siemens Healthineers, Infineon Technologies, Deutsche Bank, Sony, Takeda Pharmaceutical, Shell, ING Groep, Banco Santander, Siemens Gamesa Renewable Energy, Nordea, Roche, ABB, Apple, Alphabet, Amazon, Eli Lilly, ConocoPhillips, Qualcomm, Honeywell, Starbucks, Gilead Sciences, JD.com, Ford Motor, Ferrari Friday: Coloplast, Sanofi, Intesa Sanpaolo, Denso, CaixaBank, Naturgy Energy, Assa Abloy, Regeneron Pharmaceuticals Economic calendar highlights for today (times GMT) 0815-0900 – Eurozone Final Jan. Manufacturing PMI 1000 – Eurozone Jan. CPI estimate 1315 – US Jan. ADP Private Payrolls change 1500 – US Jan. ISM Manufacturing 1530 – EIA's Weekly Crude and Fuel Stocks Report 1900 – FOMC Meeting 1930 – US Fed Chair Powell press conference      2130 – Brazil Selic Rate 0030 – Australia Dec. Building Approvals 0030 – Australia NAB Business Confidence Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – February 1, 2023 | Saxo Group (home.saxo)
Market Focus: European Data Releases, ECB Survey, US FOMC Minutes, and UK Bond Supply

The New Zealand Dollar (NZD) Remained Extremely Volatile

TeleTrade Comments TeleTrade Comments 01.02.2023 09:53
NZD/USD is scaling towards 0.6450 as the USD Index has retreated after a short-lived pullback. Federal Reserve is widely anticipated to announce a 25 bps interest rate hike to 4.50-4.75%. Reserve Bank of New Zealand might continue its hawkish stance despite weak Employment data. NZD/USD is testing the consolidation breakdown and is likely to display a fresh downside ahead. NZD/USD has stretched its recovery above the critical resistance of 0.6440 in the early European session. The Kiwi asset displayed a recovery move after testing Tuesday’s low around 0.6415 due to subdued performance by the US Dollar Index (DXY). The USD Index is demonstrating topsy-turvy moves in a 101.70-101.80 range and is likely to display a downside break due to less anxiety among investors than usual ahead of the interest rate decision by the Federal Reserve (Fed). S&P500 futures are failing to square off their losses that emerged in the Asian session, portraying a caution despite overall optimism in the market mood. Widely anticipated expression of further decline in the policy tightening pace by the Federal Reserve is not compelling the market participants to dump risk-sensitive assets. However, emerging United States recession fears due to the expectation of further stretch in the interest rate have shifted investors to the sidelines. The return generated by 10-year US Treasury bonds is hovering around 3.51% after a mild correction. Lower Labor cost and consumer spending bolsters the case of the less-hawkish Fed’s policy The Employment Cost Index (Q4) released on Tuesday was trimmed to 1.0% vs. the consensus of 1.1% and the prior release of 1.2%. Easing negotiation power for labor costs is music to the ears for the Federal Reserve, which is working hard to achieve price stability in the United States. Also, the Personal Consumption Expenditure (PCE) price index released last week showed that consumer spending contracted in December Christmas celebrations, which claims that the downside trend in the US Consumer Price Index (CPI) will continue further. Economists at Goldman Sachs have come up with expectations for dictations by Federal Reserve chair Jerome Powell in February’s monetary policy meeting. They believe that "Since the FOMC last met in December, incoming data on wage growth and inflation have been encouraging, while signals on activity growth have been mixed and at times concerning. This ended up making the case for slowing the pace of rate hikes to 25bp this week quite easy.” For further guidance, Goldman Sachs expects two additional 25bp hikes in March and May, but fewer might be needed if weak business confidence depresses hiring and investment. US Employment data remains key ahead of Federal Reserve policy The tight US labor market is losing its luster as firms are ditching the recruitment process due to a bleak economic outlook. Higher interest rates and lower retail demand has already forced the firms to suspend their expansion plans for some time. Also, a few firms are not operating at full capacity, which has trimmed the requirement of hiring fresh talent. This has also trimmed the negotiation power of employees to determine talent acquisition costs. As per the consensus, the US Automatic Data Processing (ADP) (Jan) Employment data is seen at 170K, significantly lower than the former release of 235K. The declining scale of job additions due to weaker economic projections is going to delight the Federal Reserve as it will trim inflation projections further. Apart from the Employment data, US ISM Manufacturing PMI (Jan) will be of significant importance. Manufacturing activities are expected to be slowed to 48.0 vs. 48.4 in the prior release as firms are not deploying their entire operating capacity. However, the New Order Index is seen higher at 46.1 vs. the former release of 45.2. An upbeat forward demand might provide some cushion to the USD Index. Read next: AUD/USD Pair Remains Under Strong Selling Pressure, The EUR/USD Pair Has Been Falling But Remains Above 1.08$| FXMAG.COM New Zealand Dollar holds strength despite weak job data The New Zealand Dollar remained extremely volatile in the Asian session due to the release of the Employment data (Q4) and Caixin Manufacturing PMI data. The Employment Change dropped to 0.2% from the expectations of 0.3% and the former release of 1.3%. While the Unemployment Rate has increased to 3.4% from the consensus and the prior release of 3.3%.  Apart from that Quarterly Labor cost index has landed at 1.1% lower than the estimates of 1.3% but similar to the prior release of 1.1%. Steady employment bills and declining labor demand might delight the Reserve Bank of New Zealand (RBNZ), which is working with immense enthusiasm and zeal to achieve price stability. Reserve Bank of New Zealand Governor Adrian Orr might continue hiking interest rates as the inflation rate is still above 7%. The Caixin manufacturing PMI landed at 49.2 lower than the expectations of 49.5 but higher than the former release of 49.0. It is worth noting that New Zealand is one of the leading trading partners of China and an unimpressive PMI has a vital impact on the New Zealand Dollar. NZD/USD technical outlook NZD/USD has sensed selling interest after testing the strength of the consolidation breakdown in the 0.6450-0.6470 range on a four-hour scale. On a broader note, the kiwi asset demonstrated signs of bearish reversal after a Double Top chart pattern around December 13 high at 0.6515. An absence of stellar buying interest while attempting to surpass the 0.6515 resistance triggered selling pressure for the New Zealand Dollar. The 50-period Exponential Moving Average (EMA) at 0.6460 is acting as a major barricade for the New Zealand Dollar. Meanwhile, the Relative Strength Index (RSI) (14) has also slipped into the bearish range of 20.00-40.00, which indicates that the downside momentum is active now
Saxo Bank Podcast: A Massive Collapse In Yields, Fed's Tightening Cycle And More

Euro Rebounds On Stronger GDP Read, All Eyes On Fed Decision

Swissquote Bank Swissquote Bank 01.02.2023 10:29
Weak economic data ran to the rescue of the equity bulls on Tuesday. The S&P500 rallied almost 1.50%, while Nasdaq jumped more than 1.50%. The Federal Reserve (Fed) President Jerome Powell will be thrown to the spotlight today, to potentially shoot a couple of doves down to the ground. But there is always a hope that the falling price and wages inflation will get the Fed to the pivot point. US  The US dollar failed to consolidate and extend gains as the weaker economic data keeps strengthening the Fed doves’ hands. EUR/USD The EURUSD eased as low as 1.08 yesterday, but the pair found buyers on the back of a strong looking GDP data from the Eurozone. China Elsewhere, today’s PMI data from China, released by Caixin, were not as rosy as the one compiled by China Federation and released yesterday. Crude Oil And the barrel of American crude tipped a toe below the 50-DMA yesterday, as the API data revealed another big build in US inventories last week. The more official EIA data is due today, and the expectation is a 1 mio barrel decline, leaving room for further weakness in oil prices. Watch the full episode to find out more! 0:00 Intro 0:36 Equities extend gains on weak US data 2:01 GM, Spotify, Exxon Mobil & Snap posted mixed earnings 5:05 What does Powell think of weak data?! 8:04 Euro rebounds on stronger GDP read, but how strong was the read? 9:25 US crude tips a toe below 50-DMA on large inventory build Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Fed #FOMC #meeting #Spotify #Snap #GM #Exxon #earnings #China #PMI #EUR #GDP #ECB #crude #oil #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
Turbulent Times Ahead: Poland's Central Bank Signals Easing Measures

India's Adani Group May Have Passed A Key Test, Positive EU CPI Report

Kamila Szypuła Kamila Szypuła 01.02.2023 12:10
Recently, there has been a lot of talk about the impact of the Hindenburg Research report on India's Adani group. It seems that the company will cope with the current problems. Another positive is the report on inflation in the euro zone, CPI fell again. In this article: Headline-topping news India's Adani group may have passed a key test The 9th International Conference on Financial Markets EU CPI drop The European Union, 20-country region underwent a major price surge in 2022 after the Russian invasion of Ukraine pushed energy and food costs up across the bloc. However, the latest data provide further evidence that inflation has started to ease. Inflation in the euro zone fell for the third month in a row in January due to a significant drop in energy costs. According to preliminary data published on Wednesday, headline inflation in the euro zone amounted to 8.5% in January. In December this indicator amounted to 9.2%. Energy remained the biggest cost driver in January, but fell once again from previous levels. Now investors of the EUR/USD pair will counter at the Fed meeting and will await tomorrow's decision of the ECB. Euro zone inflation dips for a third straight month as energy prices continue to fall https://t.co/Fy81jgxCKf — CNBC (@CNBC) February 1, 2023 India's Adani group may have passed a key test The world's third richest man completed a $2.4 billion stock sale in a Hindenburg short sale attack. India's Adani group may have passed a key test by raising $2.5 billion in the face of a short-selling attack, but its response to the allegations and results of regulatory probes will shape its outlook, analysts and investors say. Most of the conglomerate's shares fell Wednesday, bringing losses to $84 billion after last week's Hindenburg Research report. Moreover, looking at India, the country is set to be the world's fastest-growing major economy in the year to March 2024 as the post-pandemic retail boom and recent bank balance sheet repairs attract new investment, fueling demand for everything. From @Breakingviews: Gautam Adani completed a $2.4 billion share sale amid Hindenburg’s short-seller attack. His group now faces refinancing challenges. Local lenders may step up, but funding will be pricier with more strings attached, says @ShritamaBose https://t.co/WMdi9lLFf9 — Reuters Business (@ReutersBiz) February 1, 2023 Read next: Intel's Cost Reduction Also Includes Executive Compensation | FXMAG.COM The 9th International Conference on Financial Markets In 2020, the world was stopped by the COVID-19 pandemic, which highlighted the importance of cooperation, flexibility and readiness for unforeseen challenges both in everyday life and in the economy. The year 2022 brought new trials. The war in Ukraine started by Russia has led to turbulence in various sectors, from energy to financial. The 9th International Conference on Financial Markets "Strengthening Recovery, Developing Resilience", co-organized by the Ministry of Finance of the Republic of Lithuania and the Lithuanian Banking Association, brings together high-level decision makers and business practitioners for leadership and ideas exchange on topical topics related to financial markets and more. The forum will discuss the needs of the EU and Baltic capital markets and the actions required. In addition, the further development of capital markets for the Baltic States and an overview of the implementation of digitization and innovation in the sector will be discussed. The Director of the IMF European Department, Alfred Kammer, will participate in a panel discussion at the International Financial Markets conference, focused on capital markets in the Baltics, their challenges and the need for action. Registration: https://t.co/KkDPKQTRM3 pic.twitter.com/F4w5t7Px01 — IMF (@IMFNews) February 1, 2023
Metals Market Update: Decline in LME Copper On-Warrant Stocks, Zinc and Lead Surplus Continues, Nickel Market in Supply Surplus

USD/JPY Pair Drop Below 130.00, GBP/USD Is Trading Below 1.2330, The Australian Dollar Remains Generally Up

Kamila Szypuła Kamila Szypuła 01.02.2023 13:28
As investors price the Fed nearing the end of its rate hike cycle, the dollar index is far from its 20-year high of 114.78. Investors said Fed Chairman Jerome Powell's words would be watched closely. Aside from the main event of the Fed meeting, investors will also focus on the ISM manufacturing and job vacancies data due for release on Wednesday for further guidance on the state of the US economy and labor market. Moreover, the ECB and the Bank of England are expected to raise interest rates by 50 basis points (bps) on Thursday. USD/JPY USD/JPY has struggled to gain any significant traction and has fluctuated between small gains and small losses throughout the early part of Wednesday's European session. Spot prices remain below mid 130.00 as investors appear reluctant and eagerly await outcome of two-day FOMC meeting. USD/JPY pair trades below 130.00, at 129.7970. Driven by the risk associated with key central bank events, investors seem reluctant to bet on an aggressive bear market around the USD/JPY pair. In addition, comments from BoJ chairman Kuroda Haruhiko that the central bank must continue its easing policy and keep the inflation target at 2% limit the gains for the JPY. EUR/USD On Tuesday, flash readings of gross domestic product (GDP) in the euro zone in the fourth quarter (Q4) increased by 0.1% q/q against 0.0% expected and 0.3% earlier. The year-over-year printouts also showed a rosy picture for the block as it surged above the 1.8% market consensus to 1.9%, down from 2.3% previously. However, retail sales in Germany fell by 5.3%MoM in December, much worse than expected. According to data from the European Union's statistical office, Eurostat, headline inflation in the euro area fell sharply in January, while the core index remained unchanged from the previous month. Investors said that data on inflation in the euro zone are unlikely to influence Thursday's monetary decision of the European Central Bank (ECB). On Thursday, the bloc's central bank will raise interest rates by 50 bps as traders look to see if officials signal they are likely to maintain a similar pace of hikes at the March meeting, or suggest a slowdown in policy tightening. EUR/USD was little changed after the release, with the pair finding and now stuck below 1.0900. Source: investing.com Read next: India's Adani Group May Have Passed A Key Test, Positive EU CPI Report| FXMAG.COM GBP/USD Fed policy makers emphasized the need to keep interest rates at a higher level for a longer period of time in order to lower inflation. This, in turn, suggests that the Fed will continue to sound hawkish, which in turn provides some support for the US dollar and acts as wind in the sails for the GBP/USD pair. As such, investors will look to the accompanying monetary policy statement and remarks by Fed Chairman Jerome Powell at the post-meeting press conference for clues on the path ahead of interest rate hikes. This will play a key role in influencing USD price dynamics and provide a significant boost to the GBP/USD pair. Then focus will shift to Thursday's Bank of England (BoE) meeting. The cable pair was trading close to 1.2300 during the morning trading hours. It then rose above 1.2330 before falling back and trading at 1.2325. AUD/USD The Aussie pair was rising today and traded above 0.7070 in the European session. The next upward move is likely to remain limited ahead of the key US central bank risk. Overall, the Australian dollar remains generally up. Source: finance.yahoo.com, investing.com
All Eyes On Capitol Hill, Jerome Powell Will Appear Before The Senate Banking Committee

The Fed Is Coming To The End Of The Cycle Of Monetary Policy Tightening

InstaForex Analysis InstaForex Analysis 02.02.2023 08:07
The EUR/USD pair, reacting to the results of the February meeting of the Federal Reserve, tested the resistance level of 1.1000 for the first time since April last year. And although bulls failed to impulsively conquer the 10th figure, the pair remains bullish. The Fed did not become an ally of the US currency, despite the hawkish messages of Fed Chairman Jerome Powell. The central bank expectedly slowed down The formal results of the February meeting fully coincided with market expectations. The central bank slowed down the rate increase to 25 points, raising it to 4.75%, the highest since October 2007. Let me remind you that last week the market estimated the probability of a 25-point scenario at 90% (according to the CME FedWatch Tool). On the eve of the February meeting, this probability increased to 99.5%. In other words, there was no intrigue here - if the central bank had made any other decision, it would have provoked serious turbulence in the markets, which is unacceptable (and uncharacteristic) for Powell. It is noteworthy that after the announcement of the immediate results of the February meeting, the pair fell to 1.0890. And only an hour later the price soared to the borders of the 10th figure, reacting to the rhetoric of Powell. Traders were primarily interested in further prospects for tightening monetary policy, and, judging by the reaction of the pair, the head of the Fed still disappointed the dollar bulls. It is obvious that the Fed is coming to the end of the cycle, and this fact can no longer be overshadowed by verbal "pumping". What the Fed said Powell traditionally tried to maintain a balance in his rhetoric - on the one hand, he said that the central bank "has a lot of work to do", thus hinting at a further increase in the interest rate. The central bank also retained in the accompanying statement the wording that "further tightening of monetary policy parameters is justified." On the other hand, the head of the Fed stated the slowdown in inflationary growth. In this context, he said that the members of the Committee discussed the possibility of raising the rate "a few more times" before the end of the current cycle of tightening the monetary policy. At the same time, Powell stressed that the central bank does not intend to make a temporary pause, after which the process of raising the rate will be resumed. The central bank intends to complete the cycle and put an end to it, after which the Committee will keep the rate at the achieved level for a "long period of time". As a result of the meeting, the US dollar index fell to 100.83 (the lowest value since April 2022), ignoring the general hawkish mood of Powell. Dollar bulls were clearly embarrassed by the "final notes" in the rhetoric of the head of the Fed. In particular, he said that now we can talk about "a couple more rate hikes before the Central Bank moves to an adequate restrictive regime." At the same time, he added that "we are not very far from this level." At the same time, Powell acknowledged that the disinflationary process has already begun in several sectors, for example, in the housing sector. Accents have shifted In the text of the accompanying statement, the "inflationary wording" was also somewhat softened. As a result of previous meetings, the central bank noted imbalances in supply and demand and high energy prices. In the February final communique, the central bank said that the price increase "weakened somewhat", although it is at elevated levels. One more phrase can be noted, for which, apparently, the bulls got hooked. The Fed said it would "take into account the cumulative scope of monetary tightening and the lagging effects of monetary policy" when it comes to determining the way forward. Assessing the pace of future rate hikes, Fed members also noted that they would take into account "delays in the transfer of higher rates to the real economy, the level of inflation and the state of the economy." Let me remind you that the updated "point forecast" of the Fed will be published following the results of the next - March - meeting. Based on the results of the February meeting, one can make a cautious conclusion that the central bank is preparing the markets for the finalization of the process of tightening monetary policy. The shift in emphasis in rhetoric points to the imminent end of the cycle. If the January and February inflation figures show a downward trend again, rumors will be circulating in the market that the central bank will limit itself to another - the last - 25-point increase (despite Powell's assurances of several increases). Such discussions will put pressure on the greenback. I note that at the moment the probability of maintaining the status quo following the results of the March meeting is estimated at 15% (according to the CME FedWatch Tool). This is quite a lot, given the hawkish attitude of the head of the Fed. Findings The Fed is gradually preparing markets for the finale of the current cycle of monetary policy tightening. Powell dismissed the most dovish scenarios (pause in rate hikes, rate cuts within 2023), but also made it clear that the movie is nearing its conclusion, and the final credits are just around the corner. Now the US macroeconomic indicators (primarily inflation) will be viewed by the market through the prism of the most important questions: will the current cycle end in May or still in March? Will the central bank maintain its 25-point pace or will it cut the pace of rate hikes again? In general, such discussions are not in favor of the dollar, regardless of the probability/likelihood of the options being discussed. But despite the bullish mood, longs are still risky. One more test for the pair is ahead, and this time it is the test given by the European Central Bank. Results of the ECB's February meeting will either open the door for traders to the area of 10-11 figures or pull the pair back to the range of 1.0700-1.0850.   Relevance up to 00:00 2023-02-03 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/333944
Assessing 'Significant Upside Risks to Inflation': Insights from FOMC Minutes

The US Policymakers Signaled That There Might Be Two More Rate Hikes

Ipek Ozkardeskaya Ipek Ozkardeskaya 02.02.2023 08:55
'It is gratifying to see the disinflationary process now getting underway' said the Federal Reserve (Fed) President Jerome Powell at his press conference yesterday.  'Disinflation process is getting underway'.   That was the major - and the only take - of his speech yesterday, and sent the markets rallying. The US yields fell, the S&P500 reversed course and rallied more than 1% higher, while Nasdaq jumped more than 2%. The dollar index slumped.   But besides the 'disinflationary process', things went quite according to the plan at yesterday's FOMC meeting. The Fed increased the interest rates by 25bp, as expected. Powell said that they are happy with the falling inflation, but warned that the US jobs market remains tight, and wages growth is still too strong.   Powell didn't call the end of the rate hikes, just yet. On the contrary, the US policymakers signaled that there might be two more rate hikes before a pause, and that the tightness in the jobs market is a risk on inflation.   But all that fell on deaf ears after investors heard that 'disinflationary process started'.   Maybe the surprisingly low ADP report – that revealed that the US economy added a little more than 100'000 jobs last month, suggested that the labour conditions in the US might be easing just before Powell announced the latest FOMC decision? But the weakness in ADP report was mostly due to harsh winter conditions, and the job openings jumped past 11 mio.   Anyway, the Fed meeting was a boon for risk investors.   Note that, at the wake of the meeting, activity on Fed funds futures gives around 83% chance for the next FOMC meeting to deliver another 25bp hike, which would take the rates to 5% mark, as promised by Fed members.   But for equities, there is no reason to think that the bullish sentiment would reverse anytime soon. The S&P500 will certainly make an attempt on its 100-week moving average which stands a couple of points above the 4200 mark, and the 20% rally in Meta shares in the afterhours trading could keep the rally going today.  Apple, Amazon, Google, Ford and Qualcomm are due to announce their earnings today.  
Rates Spark: Action at Both Ends of the Curve - US 10yr Treasury Yield and European Rates

Lower Curde Oil Price Support The Indian Rupee (INR)

TeleTrade Comments TeleTrade Comments 02.02.2023 09:01
USD/INR has shown a rebound move as the USD Index has gauged an intermediate cushion around 100.50. Fresh signals of a decline in inflation projections indicate that the Fed might pause the rate hike cycle. The Indian government has trimmed its fiscal deficit target to 5.9% of GDP below the prior target of 6.4%. The USD/INR pair has rebounded after dropping to near 81.65 in the Asian session. The asset has found demand as the US Dollar Index (DXY) has shown signs of a pullback move after refreshing its nine-month low at 100.50.  The USD Index is still in an extremely negative trajectory, therefore, the pullback move could be capitalized as a selling opportunity by the market participants. S&P500 futures are holding the majority of their extra gains recorded in the Tokyo session above the stellar gains recorded on Wednesday, portraying that the risk-appetite theme is extremely solid. The demand for US government bonds is declining, which has pushed 10-year US Treasury yields above 3.41%. Read next: India's Adani Group May Have Passed A Key Test, Positive EU CPI Report| FXMAG.COM In its interest rate decision, the Federal Reserve (Fed) slowed down its policy tightening pace again to 25 basis points (bps) after slowing it already to 50 bps in December’s meeting. Fed chair Jerome Powell has confirmed that the policy tightening cycle will continue for now as the central bank wants to strengthen itself in the battle against inflation. While the street is expecting that the Fed might pause its interest rate hiking spree due to the availability of various evidence of further inflation softening. On the Indian rupee front, Union Budget presented by Finance Minister Nirmala Sitharaman failed to provide strength to the Indian equities. According to the Fiscal Budget 2023-24, the administration has increased the scale of tax slabs, which will support individuals having annual earnings up to Rs. 7 lakhs. Apart from that, the government has trimmed the Fiscal Deficit target to 5.9% of the Gross Domestic Product (GDP) from the 6.4% announced in the prior period.  A lower fiscal deficit target might strengthen the Indian Rupee ahead. Meanwhile, the oil price has turned sideways after a recovery move from below $76.50. On Wednesday, the oil price plunged after the United States Energy Information Administration (EIA) reported a build-up of oil stockpiles by 4.14M for the week ending January 27. It is worth noting that India is one of the leading importers of oil and lower oil price support the Indian rupee.
WTI Bulls Struggle To Cheer The Broadly Risk-On Mood

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

Saxo Bank Saxo Bank 02.02.2023 09:41
Summary:  The Fed delivered a 25bp rate hike and a basically unchanged policy statement as widely expected. The remarks by Fed Chair Powell at the press conference saying that the disinflationary process had started saw stocks swing from losses to a 1.1% gain in the S&P 500 and a 2.2% advance in the Nasdaq 100. The interest rate futures market is pricing in 50 bps of rate cuts in the second half of 2023. The yield on the 10-year Treasury dropped to 3.42%.   What’s happening in markets? Positive reaction to Fed: Risk-on rally in Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) The Nasdaq 100 reversed its weakness after an ISM manufacturing index print a full point lower to 47.4 during early trading and advanced to finish the session 2.2% higher after the dovish remarks from Fed Chair Powel at the post-FOMC press conference. The S&P500 climbed 1.1% to close at its highest level since August 26, 2022. Powell’s comments raised the market’s hope for rate cuts in the 2nd half of 2023. 10 of the 11 sectors within the S&P 500 gained, led by information technology which advanced by 2.3%.  Energy, falling 1.9%, was the laggard. Advanced Micro Devices (AMD:xnas) jumped 12.7% on a revenue beat and upbeat sales forecasts. Electronic Art tumbled 9.3% on a disappointing business outlook. Meta Platforms (META:xnas) kicked off major tech earnings with a bang. Perhaps a good sign of what we can expect from Apple, Amazon and Google Meta shares surged more than 19% in extended hour trading, after announcing a $40 billion boost to its share buyback, as it’s guiding for stronger revenue for Q1 this year, seeing revenue hit $26 to $28.5 billion. Q4 revenue beat expectations, falling to $32.2 billion, vs $31.7 billion expected. The business sees outgoing expenses dropping more than expected to $89-95 billion and lower capital expenditure. Also on the positive, FB’s daily users improved more than the market expected. From a technical perspective Meta shares closed above their 200-day simple moving average. It also appears, a golden cross is forming which could trigger quant trader buying. That’s something to watch, which could trigger more upside. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) dropped as hopes for rate cuts in H2 heightened The Fed delivered a 25bp rate hike, bringing the Fed Fund target to 4.50%-4.75% as widely anticipated and a statement largely unchanged from the previous one, reiterating that “ongoing increases” in the policy Fed Fund target “ will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive,”  The strong market reactions came from the response to Powell’s dovish comments in the post-meeting press conference. Powell said the Fed “can now say, I think for the first time, that the disinflationary process has started” though he cautioned that “the job is not fully done.”  Powell’s remarks saw the June-Dec 2023 SOFR spread widen to 54.5 bps, fully pricing in 50bps of rate cuts in the 2nd half of 2023 after only one more 25bp hike in March. The yield on the 2-year and the 10-year tumbled 9bps each to 4.11% and 3.42% respectively. The weaker ISM manufacturing and ADP private payrolls but stronger JOLTS job openings data released during the day took a backseat to the FOMC drama. The Australian share market, the first to the react to the Fed, sees a strong risk on rally Risk on assets such as tech stock are charging today, with the sector up 2.8% while gold equities are being bid after the gold price rallied 1%. Long-term investors will be watching the tech index, given it’s down 30% from its high. Also consider the overall market, the ASX200 has a PE at 15.2 times. Cheaper than Nasdaq’s 57 times earnings. And S&P500’s earnings multiple of over 19 times.  Hong Kong’s Hang Seng (HIG3) and China’s CSI300 (03188:xhkg) rallied around 1% The Hang Seng Index rallied 1.1% and the Hang Seng TECH Index surged 3.4%. Baidu (09888:xhkg) soared 9% on market chatters that the search engine platform was developing an AI-powered chatbot similar to ChatGPT. EV makers outperformed. The largest Chinese EV maker, BYD (01211:xhkg) surged 6.1%, extending gains after Tuesday’s preannouncement of the preliminary Q4 profit range. XPeng (09868:xhkg) surged 10.3% after its subsidiary received license approval for its flying cars. Geely (00175:xhkg) climbed 5.1% as the EV maker is launching its 3rd model and its Lotus unit went public via SPAC at a USD5.4 billion valuation. Macao casino stocks gained 2% to 5% on a much stronger-than-expected 82.5% growth in gambling revenues to MOP 11.6 billion (USD1.4 billion). In the mainland’s A-share market, ChatGPT concept stocks and EV names also rallied strongly. Non-ferrous metal, computing, and non-bank financials were other outperformers. CSI 300 finished the Wednesday session 0.9% higher. FX: USD bears back in action The USD was weaker across the board after the Fed Chair Powell stayed away from pushing back aggressively on the easing priced in by the markets for this year or the loosening of financial conditions. EURUSD broke above the 1.0930 resistance and was trading above 1.1000 in the Asian morning. If ECB maintains its hawkishness today, we could see these gains sustaining. USDJPY slumped back below 128.50 with focus turning to BOJ chief nominees. AUDUSD rose to 0.7150 but USDCAD was choppier as lower oil prices weighed on loonie. Crude oil (CLG3 & LCOH3) supported after the overnight slump Oil prices slid over 2% overnight with EIA inventories climbing 4.1 million barrels in the week ended Jan 27, its sixth consecutive weekly build. However, Fed’s dovish outcome came back in focus later, and expectations that demand will continue to run higher as Fed nears an end of its tightening cycle underpinned. OPEC+ recommended keeping crude production unchanged as expected, amid the volatility of Chinese demand and Russian sanctions. WTI futures were back above $77 after touching lows of $75 in the NY session. Gold (XAUUSD) broke above $1950 on dovish Fed Gold broke above the resistance at 1950, reaching fresh cycle highs, as the lack of a committal Powell at the FOMC press conference continued to allow market to price in rate cuts for this year. Next on watch will be $1963, the 76.4% retracement of the 2022 correction, following which there is no major level of resistance before the psychologically important $2000 level.  Read next: India's Adani Group May Have Passed A Key Test, Positive EU CPI Report| FXMAG.COM What to consider? Fed hikes rates by 25bps, hints at a ‘couple more’ rate hikes to come The Fed hiked rates by 25bps to 4.5-4.75% as expected, with Chair Powell giving mixed and non-committal signals at the press conference. The statement continued to use the phrase "ongoing increases" in the Fed rate being appropriate to signal more rate hikes, and there was also a hint of a “couple” more rate hikes suggesting both March and May meetings could see 25bps rate hikes again. But Powell hinted at disinflationary pressures, and did not push back enough on the easing financial conditions. US ISM manufacturing shifting the narrative to low growth/high inflation ISM manufacturing declined for a fifth consecutive month to 47.7 from 48.4, short of the consensus of 48.0. While prices paid lifted to 44.5 (exp. 39.5, prev. 39.4), suggesting upside pressures in inflation sustaining, production and new orders fell to 48.0 (prev. 48.6) and 42.5 (prev. 45.1), respectively. Employment was also softer but still remained above the 50-mark at 50.6 from 50.8 previously. JOLTS job openings in December ramped back up to 11.012mln from the prior 10.44mln, surprising expectations for a fall to 10.25mln and now at their highest level since July. Overall, inflation risks are not going away yet, while growth concerns seems to be settling as well. Eurozone inflation softens marginally January headline inflation data in the Eurozone came in softer at 8.5% YoY from 9.2% YoY mostly underpinned by softer energy inflation, which still remains high at 17.2% YoY (vs. 25.5% YoY in December). While the trend seems encouraging, inflation still remains elevated and unlikely to deter the ECB from being any less hawkish at their announcement due today. German inflation print due next week also remains on watch. Caixin China Manufacturing PMI remained in the contraction territory Caixin China Manufacturing PMI came in weaker than expected at 49.2 in January (vs consensus: 49.8; Dec: 49.0), the sixth month in the contraction territory. According to the chief economist at Caixin, optimism has improved in the manufacturing sector but both domestic and external demand, and logistics were yet to fully recover. The Caixin reading was weaker that the official National Bureau of Statistics Manufacturing PMI, which bounced back to the expansion territory. The softer Caixin survey may be a result of its larger representation of small and medium-sized private enterprises in the coastal regions, as opposed to the NBS Manufacturing PMI’s higher weight in large state-owned enterprises as well as the difference in the timing of the survey. The Caixin survey was conducted in mid-January, about a week earlier than the NBS survey conducted between January 20 to 25, and therefore the former was likely to be more severely affected by the initial “exit wave” of infection. President Xi called for moving faster to establish the new development pattern In the second study session of the Chinese Communist Party’s new Politburo, China’s President Xi called for the country to move faster toward establishing a new development pattern, a concept that he first introduced in April 2020. He emphasized the importance of boosting domestic demand and deepening supply-side structural reform. President Xi also pledged to bring forward the construction of more new infrastructure projects and focus on the real economy and new industrialization. He also called for strengthening the measures against monopoly and unfair competition, as well as guiding and supervising the healthy development of private capital according to the law. The readout from the Politburo meeting mentioned neither “preventing disorderly expansion of private capital” nor “common prosperity”. Hong Kong Q4 GDP shrank 4.2% from a year ago The decline of 4.2% in Hong Kong’s Q4 GDP improved on the downward revised -4.6% in Q3 but was much softer than the -2.9% forecasted by economists surveyed by Bloomberg. On a sequential and seasonally adjusted basis, Hong Kong’s GDP growth bounced to flat Q/Q in Q3 from a 2.6% decline in Q3. The growth in goods export plunged to -24.8% Y/Y while goods import slid to 22.8% Y/Y. Gross domestic fixed capital registered a smaller 11.2% Y/Y in Q4, against 14.4% in Q3. Private consumption picked up to +1.7% Y/Y. Earnings from Apple, Alphabet, and Amazon eyed   The most-watched U.S. corporate earnings this week are from Amazon (AMZN:xnas), Alphabet (GOOGL:xnas), and Apple (AAPL:xnas) which are scheduled to be released today. Amazon has been hard hit by its overinvestment during the pandemic. Things improved in Q3 with accelerating revenue growth but analysts remain skeptical for Q4 expecting only 6% revenue growth Y/Y and adjusted EPS of $0.53 up 10% Y/Y. With the weak outlooks from Intel and Microsoft, there is nervousness in the air ahead of these giant earnings releases. Analysts expect Apple to report the first negative revenue growth rate in three years down 2% Y/Y and a 7% decline Y/Y in EPS. The indications from memory chip manufacturers all indicate a significant slowdown in consumer electronics and it would be weird if Apple could escape those headwinds. Analysts expect Alphabet to report its second straight quarter of negative earnings growth with EPS at $1.32 down 6% Y/Y. Alphabet is the talk of the town due to Microsoft’s $10bn investment in OpenAI and its ChatGPT technology and many are saying is a threat to Google’s search business; in an equity note here, Saxo’s Head of Equity Strategy, Peter Garnry, dives into this discussion and provides our views on the matter. ECB and Bank of England meetings on the horizon After the Fed’s tone being interpreted as dovish by the markets, focus turns to ECB and BOE meetings today. The European Central Bank has surpassed its peers in the hawkishness quotient recently, and will likely repeat that this week. A 50bps rate hike is expected, along with the guidance for another 50bps in March which still has the scope to bump up front-end pricing with markets looking at 93bps of rate hikes over the next two meetings. The Bank of England will likely be the trickiest given the indecisive market pricing as well as the scope for a split vote. Read our full preview here.     For what is ahead at markets this week – Read/listen to our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: Market Insights Today: Stocks rallied and bond yields dropped after Powell declared the disinflationary process had started – 2 February 2023 | Saxo Group (home.saxo)
AUD: RBA Maintains Rates as New Governor Upholds Continuity

Meta Announced A Lower-Than-Expected Operating Expense, Gold Reached A Fresh Cycle High

Saxo Bank Saxo Bank 02.02.2023 09:53
Summary:  Traders felt that the FOMC failed to push back sufficiently against market expectations for the Fed to reach peak rates soon and begin cutting rates by year end, which drove a fresh rally in equities and took the US dollar to new cycle lows almost across the board. Let’s see if the key US data up on Friday further encourages the USD bears. In the meantime, the Bank of England and ECB are on tap today. What is our trading focus? Equities: Momentum continues on Powell declaring part victory over inflation While the Fed is still cautious and wants to send hawkish signals including a goal of moving the policy rate to 5% or slightly more, Powell’s comments about inflation is beginning to ease was extrapolated in the equity market. S&P 500 futures rallied another 1% in yesterday’s session and this morning they have opened just below the 4,150 level suggesting traders are eyeing the 4,200 level which was the approximate air pocket area last time S&P 500 futures visited this area back in August of last year. The truth is that Powell did say anything new but as long as the message was not too hawkish the equity market had the excuse it needed for continuing higher. Adding to positive sentiment was Meta’s better than expected outlook announced after the US cash equity market closed. Hong Kong’s Hang Seng (HIG3) and China’s CSI300 (03188:xhkg) little changed in lackluster trading The Hang Seng Index advanced modestly on the back of a strong rally in U.S. equities overnight and less upward pressure on domestic interest rates. Baidu (09888:xhkg), rising 7.3%, extended its strong recent gains on the ChatGPT concept and following BlackRock raised its stake to 6.6% from 5.4% in the Chinese search engine giant. Baidu was the best-performing stock on the Hang Seng Index for the second day in a row. Li Auto (02015:xhkg) climbed 2.4% after reporting delivery of 15,141 units of EV in January,  up 23% Y/Y. On the other hand, NIO (09866:xhkg) slid 4.3% following a 12% Y/Y decline in delivery to 9,652 units in January and on reports that the Chinese EV maker is cutting prices. Chinese mobile gaming stocks traded in the Hong Kong bourse soared with Forgame (00484:xhkg) leading the charge and jumping over 80%.  CSI 300 traded sideways and was flat to yesterday’s close as of writing. ChatGPT concept, eCommerce, Chinese white liquor, machinery, and semiconductor stocks outperformed. FX: USD bears back in action after dovish read of FOMC The USD was weaker across the board after the Fed Chair Powell stayed away from pushing back aggressively on the easing priced in by the markets for this year or the loosening of financial conditions. EURUSD broke above the 1.0930 resistance and was trading above 1.1000 in the Asian session. The ECB may need to match market pricing for further hawkishness today to sustain this level. An interesting test for EURGBP as it trades into the upper reaches of its range near 0.8900, by the way, on possible relative surprises from the ECB and Bank of England meetings today. USDJPY slumped back below 128.50 with focus turning to BOJ Governor nominees to replace Kuroda, who leaves in early April. AUDUSD rose to 0.7150 but USDCAD was choppier as lower oil prices weighed on the loonie. Crude oil (CLH3 & LCOJ3) starting February on the backfoot Crude oil started February by sliding more than 2.5% on Wednesday after US data showed a further inventory built. Crude stocks rose 4.1 million barrels, its sixth consecutive weekly build, to the highest since June 2021. OPEC+ meanwhile reaffirmed their commitment to current output quotas after meeting on Wednesday. It is monitoring the impact of China’s reopening on demand. On February 5, the EU will ban almost all seaborne imports of Russian refined products, and just like Russian crude, diesel is already selling at a heavy discount of more than 25 dollars a barrel. Oil staged a partial, but weak post-FOMC rebound as the dollar weakened. The Brent prompt spread remains in a bullish backwardation structure which points to some underlying strength. Gold (XAUUSD) breaks higher on dovish Fed Gold reached a fresh cycle high after the Fed announced a 25bp hike and Chairman Powell said the committee had concluded the disinflationary process had started, and despite using the phrase “ongoing increases” he failed to push back enough on easing financial conditions. As a result, the market concluded the end of the rate hike cycle is near, and this focus helped weaken the dollar to a fresh cycle low while supporting a rally in gold to $1957, its highest since mid-April 2022. Next on watch will be $1963, the 76.4% retracement of the 2022 correction, following which there is no major level of resistance before the psychologically important $2000 level. Minor support at $1935, $1920 ahead of $1912. Silver (XAGUSD) meanwhile managed, for a change, to keep up with gold resulting in the XAUXAG ratio declining to 81 from above 82.5. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) dropped as hopes for rate cuts in H2 heightened See more on last night’s FOMC dovish meeting below, but the general read is that Fed Chair Powell failed to push back against sufficiently hard against market expectations that the policy rate will soon peak and economic developments will see the Fed in easing mode in the second half of this year.  AFter a soft ISM Manufacturing data point and weak ADP payrolls growth, he yield on the 2-year and the 10-year tumbled 9bps each to 4.11% and 3.42% respectively. A stronger JOLTS job openings data (note: for December) failed to garner much attention. What is going on? Market reads FOMC monetary policy statement and presser as dovish. The Fed delivered a 25bp rate hike, bringing the Fed Fund target to 4.50%-4.75% as widely anticipated and a statement largely unchanged from the previous one, reiterating that “ongoing increases” in the policy Fed Fund target “will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive,” The strong market reactions came from the response to Powell’s dovish statement in the post-meeting press conference. Powell said the Fed “can now say, I think for the first time, that the disinflationary process has started” though he cautioned that “the job is not fully done.”  Powell’s remarks saw the June-Dec 2023 SOFR spread widen to 54.5 bps, fully pricing in 50 bps of rate cuts in the 2nd half of 2023, following another 25bp increase in March. The SOFR futures curve implies further 143 bps of rate cuts in 2024. These implied rates bring the Fed Fund target to 4.25%-4.50% by Dec 2023 versus the Fed’s December dot plot of 5%-5.25%, and to 2.75%-3.00% by December 2024, that is 125bps below the Fed’s projection of 4%-4.25% Meta earnings: greed triumph idealism Mark Zuckerberg did listen to investors after all acknowledging that the idealism of the Metaverse and the huge capital expenditures it requires were too much given the environment. Meta announced a lower-than-expected operating expense and capital expenditures level for FY23 and that was exactly what the market wanted to hear. The shares rallied 20% in extended trading on this aggressive cut in expected expenses. In Q4, the company lost another $4.3bn on its Reality Labs segment (Metaverse bet), but revenue was higher in this segment and overall, in the entire advertising business. On the Q1 outlook revenue guidance was $26-28.5bn vs est. $27.3bn indicating a slightly better performance than Snap indicated yesterday for Q1. Meta also authorized the share buyback programme to be increased to $40bn. US ISM manufacturing was weaker than expected, but Prices Paid above expectations. ISM manufacturing declined for a fifth consecutive month to 47.7 from 48.4, short of the consensus of 48.0. While prices paid lifted to 44.5 (exp. 39.5, prev. 39.4), suggesting upside pressures in inflation sustaining, production and new orders fell to 48.0 (prev. 48.6) and 42.5 (prev. 45.1), respectively. Employment was also softer but still remained above the 50-mark at 50.6 from 50.8 previously. JOLTS job openings in December ramped back up to 11.012mln from the prior 10.44mln, surprising expectations for a fall to 10.25mln and now at their highest level since July. Overall, inflation risks are not going away yet, while growth concerns seems to be settling as well. Eurozone headline inflation softens more than expected, but core inflation fails to drop. January headline inflation data in the Eurozone came in softer at –0.4% MoM and 8.5% YoY from 9.2% YoY mostly underpinned by softer energy inflation, which remains high at 17.2% YoY (vs. 25.5% YoY in December). While the trend seems encouraging, inflation remains elevated at the core at +5.2% YoY versus the small drop to 5.1% expected. This data is unlikely to deter the ECB from staying on course with further tightening. A delayed German inflation print for January is due next week. Read next: USD/JPY Pair Drop Below 130.00, GBP/USD Is Trading Below 1.2330, The Australian Dollar Remains Generally Up| FXMAG.COM China’s President Xi called for moving faster to establish the new development pattern In the second study session of the Chinese Communist Party’s new Politburo, China’s President Xi called for the country to move faster toward establishing a new development pattern, a concept that he first introduced in April 2020. He emphasized the importance of boosting domestic demand and deepening supply-side structural reform. President Xi also pledged to bring forward the construction of more new infrastructure projects and focus on the real economy and new industrialization. He also called for strengthening the measures against monopoly and unfair competition, as well as guiding and supervising the healthy development of private capital according to the law. The readout from the Politburo meeting mentioned neither “preventing disorderly expansion of private capital” nor “common prosperity”. Shell beats on Q4 earnings One of Europe’s largest oil and gas majors reported Q4 adjusted profit of $9.8bn vs est. $8.3bn driven by higher-than-expected oil and gas output for the quarter. Q4 dividends are lifted to $0.2875 per share vs est. $0.285. What are we watching next? ECB and Bank of England up today. The market read on the Fed was dovish after fearing that Powell might be on the warpath against market expectations. Expectations for today’s ECB meeting are rather different as hotter core CPI reads in Europe have the market fearing considerable further ECB tightening – but can the ECB deliver beyond market expectations, with more than 100 basis points after today’s 50 bps hike expected at coming meetings?. After last night’s reaction to the FOMC meeting, the 2-year yield in 2-year's time for the EU and US is virtually at parity coming into today’s ECB meeting. The Bank of England meeting today is less certain, as the BoE may try to sneak in more cautious guidance, given the weak outlook for the UK economy, even if that outlook has improved. Besides today’s expected 50 basis points hike, watch for a potential downshift in guidance to less pre-commitment to further tightening, backed up by possible adjustments to inflation forecasts that are also due for a refresh today. The EURGBP in an interesting pair to watch today for relative central bank surprises as it pushes towards the top of its range into 0.8900. Earnings to watch Today is the week’s big earnings day with key earnings from Apple, Alphabet, and Amazon all being released after the US market close. With the animal spirits unleashed this year and helped by Powell’s comments yesterday better than expected results from these three technology giants could unleash a rally into the weekend. Today: DSV, Dassault Systemes, Siemens Healthineers, Infineon Technologies, Deutsche Bank, Sony, Takeda Pharmaceutical, Shell, ING Groep, Banco Santander, Siemens Gamesa Renewable Energy, Nordea, Roche, ABB, Apple, Alphabet, Amazon, Eli Lilly, ConocoPhillips, Qualcomm, Honeywell, Starbucks, Gilead Sciences, JD.com, Ford Motor, Ferrari Friday: Coloplast, Sanofi, Intesa Sanpaolo, Denso, CaixaBank, Naturgy Energy, Assa Abloy, Regeneron Pharmaceuticals Economic calendar highlights for today (times GMT) 1200 – UK Bank of England Rate Announcement1230 – UK Bank of England Governor Bailey press conference1230 – US Jan. Challenger Job Cuts1315 – ECB Rate Announcement1330 – Q4 Unit Labor Costs / Nonfarm Productivity1330 – Czech National Bank Rate Announcement1330 – US Weekly Initial Jobless Claims1345 – ECB President Lagarde Press Conference1500 – US Dec. Factory Orders1530 – EIA's Weekly Natural Gas Storage Change1730 – Swiss National Bank’s Thomas Jordan to speak Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – February 2, 2023 | Saxo Group (home.saxo)
Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

The ECB And The Bank Of England Are Both Expected To Raise The Interest Rates By 50bp

Swissquote Bank Swissquote Bank 02.02.2023 10:33
It is gratifying to see the disinflationary process now getting underway’ said the Federal Reserve (Fed) President Jerome Powell at his press conference yesterday. ‘Disinflation process is getting underway’. Stock market That was the major - and the only take - of his speech yesterday, and sent the markets rallying. The US yields fell, the S&P500 reversed course and rallied more than 1% higher, while Nasdaq jumped more than 2%. The dollar index slumped. Fed At the wake of the meeting, activity on Fed funds futures gives around 83% chance for the next FOMC meeting to deliver another 25bp hike, which would take the rates to 5% mark, as promised by Fed members. And for equities, there is no reason to think that the bullish sentiment would reverse anytime soon. What else? Apple, Amazon, Google, Ford and Qualcomm are due to announce their earnings today. The European Central Bank (ECB) and the Bank of England (BoE) are both expected to raise the interest rates by 50bp today But it won’t be the same 50bp hike. Watch the full episode to find out more! 0:00 Intro 0:31 One phrase: ‘disinflationary process is underway’ 4:31 Facebook’s Meta pops 20% after earnings 6:33 ECB to hike by 50bp 8:17 BoE to hike by 50bp, as well, but… Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #ECB #BoE #Fed #FOMC #meeting #Powell #disinflation #Meta #Apple #Google #Amazon #Ford #Qualcomm #earnings #USD #EUR #GBP #FTSE #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
US Inflation Eases, but Fed's Influence Remains Crucial

Powell Admitted That The US Economy Is Mow In An Era Of Disinflation

Jakub Novak Jakub Novak 02.02.2023 10:53
Euro rose above 1.1000 after the Fed signaled a change in their stance on monetary policy. Their statements during yesterday's meeting were more dovish compared to December, with interest rates increasing by only 25 basis points to a range of 4.5%-4.75%. Powell was not objectively dovish At first, markets did not react much to the news as everyone was waiting for the speech of Jerome Powell. But when the Fed Chairman confirmed that they will no longer be aggressive in terms of interest rates, risk appetite surged. The decision was kind of in line with what everyone was expecting, that is, a more optimistic view of inflation and the economy. Of course, Powell was not objectively dovish, but neither was he overly hawkish, which was enough for the market. Speaking to reporters on Wednesday, Powell said they are forecasting "a couple more" rate hikes, but are ready to adjust their plans if price pressures eased faster than expected. When asked about easing conditions in financial markets that could complicate the central bank's path to return to its 2.0% inflation target, he did not sound particularly concerned. The 25 basis point hike The 25 basis point hike that was made yesterday was another step towards policy normalization after a half-point rate hike in December and four giant hikes of 75 basis points before that. Most likely, the soft inflation data in recent months has been persuasive enough for the Fed to consider suspending their rate hike campaign. Although the committee continues to cite high prices, the hint of two more 25 basis point hikes confirms market expectations of a final rate hike of 5.25%. Powell During the press conference, Powell admitted that the US economy is now in an era of disinflation with cooling price pressures. He stressed that more data is needed before they can declare victory, but did not specify how much they need to ensure that inflation is on the right track.  EUR/USD In terms of the forex market, demand for euro surged, but buyers need to protect 1.1000 in order to maintain the chance of rising above 1.1050. Possible price levels in such a situation are 1.1090 and 1.1125. In the event of a decline, EUR/USD could move below 1.1000 and head towards 1.0960 and 1.0920. GBP/USD For GBP/USD, the sideways trend persists, so buyers need to return above 1.2420 to regain their advantage. Only the breakdown of this resistance level will strengthen the hope of a rise towards 1.2470, after which it will be possible for the pair to reach 1.2540. If pressure returns and sellers take control of 1.2350, the pair will fall to 1.2290 and 1.2230.   Relevance up to 08:00 2023-02-03 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/333996
Any Upside Momentum For AUD/USD Is Likely To Remain Capped At Monday’s High

The Australian Dollar Surged Against Its US Counterpart After Fed Meeting

Kenny Fisher Kenny Fisher 02.02.2023 11:56
After a sluggish start to the week, AUD/USD bounced back on Wednesday with gains of 1.18%. The pair has edged lower on Thursday and is trading at 0.7137 in the European session. Powell sends US dollar lower The Federal Reserve raised rates by 25 basis points at the Wednesday meeting, as expected. The Fed noted that inflation has eased but reminded listeners that it remained much higher than the 2% target. Jerome Powell signaled that more rate hikes are coming and said he did not expect to cut rates this year. Sounds hawkish, right? Well, the US dollar initially recorded gains but headed lower after Powell acknowledged that the disinflation process had begun, which was sweet music to the ears of the financial markets. The result was a dovish hike and the Australian dollar surged against its US counterpart. The US dollar index is in retreat and has fallen to 100.99. There are two more inflation reports ahead of the Mar. 22 meeting and if they show inflation continues to fall, the Fed could wrap up the current rate-tightening cycle at that meeting. Besides inflation, the Fed is focused on employment data, which will make Friday’s nonfarm employment report an important factor in the Fed’s rate plans. In December, nonfarm payrolls fell from 256,000 to 223,000 and the downturn is expected to continue, with an estimate of 190,000 for January. The Reserve Bank of Australia meets next week and is expected to deliver a modest 25-basis point hike. The cash rate is currently at 3.10% and the markets are estimating that the peak rate will rise to somewhere between 3.6%-3.85%. This means that more hikes are on the way after February, but the pace of the rates will be data-dependent, especially on inflation reports. Read next: Resumption Of Cooperation Between Airbus And Qatar Airways| FXMAG.COM AUD/USD Technical AUD/USD faces resistance at 0.7181 and 0.7282 0.7071 has switched to support, followed by 0.7000 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Worst behind us for UK retail despite fall in sales

The BoE Is Hiking The UK Economy Into Recession, Meta Managed To Put A Smile On Investors’ Faces

Craig Erlam Craig Erlam 02.02.2023 13:07
Equity markets are off to a strong start on Thursday, buoyed it seems by the Fed’s latest decision and Meta earnings. While Powell was determined not to overplay the shift in the Fed’s views on inflation and interest rates, certain comments were well received by the markets. The acceptance that the disinflation process has begun, being one obvious comment, but this was also paired with him stressing that they need substantially more evidence and to hike a couple more times before monetary policy is appropriately restrictive. All things considered, I think there was enough there to conclude we’re almost at an end on tightening and market expectations of one more 25 basis point hike and maybe a couple of cuts later in the year look reasonable. Of course, there’s plenty of data to come before the next meeting in March so a lot could change in that time. What will the ECB and BoE deliver? Now it’s over to the ECB and BoE to deliver their decisions, both of which are expected to be 50 basis point hikes. But what comes next is the key question in both cases. The BoE is hiking the UK economy into recession but inflation remains stubbornly very high. The ECB meanwhile was very late to the party and has some catching up to do, while the economic backdrop looks a little better than it did in December. The BoE decision is also accompanied by a press conference with Governor Andrew Bailey and his colleagues, as well as the latest monetary policy report and new projections. That should make this event very interesting, indeed, as we’ll get a better insight into how effective the MPC believes past hikes have been, when we’ll see the results and how much more they think are necessary. Read next: Santander Bank Polska Shareholders Can Expect A Solid Dividend ,The ETH Liquid Staking Narrative Is Already Going Strong| FXMAG.COM Can big tech follow in Meta’s footsteps? Earnings season has been tough so far this quarter but Meta managed to put a smile on investors’ faces, announcing slightly better revenues than expected, a plan to reduce costs and make the company more efficient this year, and a $40 billion share buyback. That has seen the share price rise almost 20% in premarkets, and Nasdaq futures to rise more than 1%. The question now is can Apple, Amazon, Alphabet and others deliver similar results today. Oil drifts lower Oil prices drifted lower again on Wednesday on the back of weaker manufacturing activity data from the US and a strong build in the EIA inventory data. Prices have been on the decline over the last week or so as investors have become less confident in the strength of the outlook, something we could see change repeatedly in this first quarter due to the lack of visibility on interest rate and China’s Covid transition. Gold liked what Powell had to say Gold was clearly buoyed by what the Fed and its Chairman had to say, with the price rallying back above $1,950 and out of its recent range. It’s now trading around $1,955, the one concern being the weak momentum backing it. That could change of course but it likely faces strong resistance on approach to $2,000, with $1,975 being an interesting test last time around. Major resistance ahead Bitcoin has done very well in a much improved risk environment so far this year and it has taken another step in the right direction over the last 24 hours, hitting a new 6-month high in the process. It now faces significant resistance around $24,500-$25,500, a break of which could give it a massive psychological lift. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Impact of Declining Confidence: Italian Business Sentiment in August

USD/JPY Pair Is Trading At 128.48 The Aussie Pair Is Above 0.71$

Kamila Szypuła Kamila Szypuła 02.02.2023 13:53
Jerome Powell had a lot to say during the press conference after yesterday's FOMC decision to raise the Federal Funds rate by 25 basis points. He stressed that the inflation risk persisted despite favorable disinflation observed in most sectors. The European Central Bank (ECB) and Bank of England (BoE) will meet later today and both banks are expected to raise their interest rates by 50bps. USD/JPY The dollar slide against the Japanese yen, dropping to as low as 128.07, its lowest in two weeks. Prior to the FOMC event, USD/JPY rose, approaching the falling resistance of the trendline, and then fell. USD/JPY rebounded after finding an intermediate cushion around 128.20 in the Asian session. Considering the risk sentiment in the market, the downtrend is intact. Now the USD/JPY pair is holding above 128.35. As the Bank of Japan keeps the 10-year Treasury yield at 0.5%, the falling US equivalent continues to narrow the interest rate differential, indicating continued declines in the USD/JPY pair. EUR/USD EUR/USD hit a 10-month high at 1.1033 today. EUR/USD pulled back slightly after reaching its highest level since early April at 1.1033 during the Asian trading hours on Thursday. The pair's technical outlook points to overbought conditions in the short term, but market participants may bet on further strengthening of the euro if the European Central Bank (ECB) repeats its hawkish message. The ECB will raise the main interest rate by 50 bp. The decision itself is largely priced in and is unlikely to receive a significant backlash. Some ECB policymakers have advocated a further 50 basis point hike at the next meeting, and the euro could gain strength if a policy statement or ECB President Christine Lagarde confirms such an action. Additionally, EUR/USD could maintain its bullish momentum if the ECB refrains from being optimistic about the inflation outlook. The EUR/USD pair fell below the 1.1000 level but slightly and is trading at 1.0991. GBP/USD GBP/USD drops towards 1.2300 during European trading hours. Sterling remains under slight downward pressure as investors wait for the BOE decision on interest rates. Despite strong selling pressure around the US dollar late Wednesday, GBP/USD's gains remain contained, especially against EUR/USD. On Thursday, the BOE is expected to raise its key rate by 50bps to 4% from 3.5%, but the GBP/USD pair could extend the decline nonetheless. At this point, a BOE rate hike of 25 basis points would be a dovish surprise and weigh heavily on sterling. Read next: Santander Bank Polska Shareholders Can Expect A Solid Dividend ,The ETH Liquid Staking Narrative Is Already Going Strong| FXMAG.COM AUD/USD The Australian dollar appreciated past $0.71 to its strongest levels in nearly eight months, as the US Federal Reserve reduced the size of its rate hike and said it has made progress in the fight against inflation. The aussie also remains supported by expectations that the Reserve Bank of Australia will press on with its fight against inflation and by China’s rapid reopening from Covid curbs. From a technical point of view, the daily chart of AUD/USD suggests that the pair will continue to rise. Source: investing.com, finance.yahoo.com
Rates Spark: Balancing data and risk factors

Lagarde's Comments Put Pressure On The Euro (EUR)

InstaForex Analysis InstaForex Analysis 03.02.2023 08:11
The European Central Bank increased the interest rate by 50 points at this year's first meeting, while announcing a 50-point hike at the next meeting in March. Despite such hawkish results of the February meeting, the euro came under pressure. The single currency retreated from a multi-month price peak (1.1034) and returned to the area of the 9th figure. Anomalous, at the first glance, market reaction is due to several factors. Spring is near If you assess the February meetings of the Federal Reserve, Bank of England and ECB, you can take note of one general characteristic. On the one hand, central banks declared the continuation of a hawkish course, but on the other hand, they made it clear that aggressive monetary policies are coming to an end. That's why the dollar was under attack at the end of the Fed meeting, the pound was under pressure by the end of the BoE meeting, and the euro was losing ground by the results of the ECB meeting. At the same time, traders actually ignored the fact that the central banks announced further steps to monetary tightening. For example, ECB President Christine Lagarde without any vague wording, which is considered "straightforward", announced that the ECB intends to raise interest rates by another 50 basis points during the next meeting in March. According to her, the disinflationary process hadn't begun, despite the slowdown in the overall consumer price index (core inflation continues to show an uptrend). It would seem that such straightforward hawkish verbal signals should have served as a springboard for the euro. But instead of growth to the resistance level of 1.1090 (the upper line of the Bollinger Bands indicator on the weekly chart), the price turned 180 degrees and was marked in the area of the 8th figure, followed by the retreat to the area of the 9th price level. Why did this happen? First of all, Lagarde, while announcing monetary tightening in March, questioned the further growth of interest rates. According to her, after the March decision "the ECB will evaluate the subsequent path of monetary policy." At the same time, market expectations (in particular, currency strategists at Danske Bank and a number of other large conglomerates) are more hawkish. The assumed scenario includes a 50-point hike in March and a 25-point increase at the next meeting (by 50 points according to some other analysts). Therefore, Lagarde's "wrap-up" sentiment was negatively received by EUR/USD bulls. The single currency was under pressure as traders took the ECB's message as a sign that the central bank nears the end of its rate hike cycle. In my opinion, the market adequately assessed the situation and correctly perceived the signals of the ECB. Secondly, the ECB head emphasized her stance on problematic aspects - in particular, she said that economic activity in the European region has slowed down noticeably. At the same time, "high inflation and tighter financing conditions, these headwinds dampen spending and production,". Such comments put pressure on the euro. Nevertheless, despite the euro's negative response, the EUR/USD pair did not collapse into the area of 7-6 figures, but only retreated from the multi-month price high to the base of the 9th price level. The underlying reason for such stress tolerance is that Lagarde tried to maintain a balance in her rhetoric. On the one hand, she announced a "guaranteed" 50-point hike in March, on the other hand, she questioned further steps towards tightening. On the one hand, Lagarde complained about the slowdown in economic activity; but then she also admitted that the European economy has been more resilient than expected. Moreover, according to forecasts, the economy will show signs of recovery in the coming quarters. At the same time, the ECB head pointed to the optimism of entrepreneurs (obviously referring to the PMI and ifo indices), stable gas supplies to Europe and reduced interruptions. Conclusions Figuratively speaking, the scales are back in equilibrium again: The Fed put pressure on the dollar, and the ECB put almost as much pressure on the greenback. The bulls couldn't conquer the 10th figure, the bears couldn't pull the price down to the 7th figure (and even failed to get a foothold at the 8th price level). Now everything will depend on the values of the key macroeconomic indicators, first of all, in regards to inflation. If core inflation in the European region persistently climbs up, the ECB may raise the rate not only in March but also at the next meeting. The US faces a similar situation: the Fed chief has declared a hawkish course, "tying" the scope of monetary tightening to the dynamics of key inflation indicators. Each inflation report and each inflation component (both in the US and Europe) will be viewed through the prism of further central bank actions. Following the Fed and ECB meetings, the pair remained in the 1.0850-1.0970 range within which it has been trading for several weeks. In my opinion, in the mid-term perspective, the pair will fluctuate in the given price range, alternately pushing back from its limits, reacting to the current information flow.   Relevance up to 01:00 2023-02-04 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/334072
EUR/USD: Looking beyond the market’s trust issues with the Fed and ECB

EUR/USD: Looking beyond the market’s trust issues with the Fed and ECB

ING Economics ING Economics 03.02.2023 08:45
EUR/USD is trading close to 1.0900 after the Fed and ECB meetings, as markets showed little faith in the (modest) attempts by Powell and (fierce) attempts by Lagarde to stay hawkish. Markets’ doubts on ECB guidance may be a larger short-term driver, and delay another big EUR/USD rally to 2Q, when rate differentials may swing meaningfully in favour of the EUR Markets are doubting today's hawkish lines by Christine Lagarde today (pictured) and the ECB on Wednesday Why markets are doubting hawkish communication EUR/USD is trading close to 1.0900 at the time of writing, the same levels observed before Wednesday’s FOMC announcement. Remember, the pair touched a 1.1033 10-month high before the ECB meeting triggered a correction. The recurrent theme of these two days of central bank activity has been the diffidence by markets around the reiteration of hawkish rhetoric. Take the Fed: the message that “ongoing rate increases remain appropriate” was out-shadowed by: Mentions that the disinflation process has started A lack of an explicit pushback against dovish rate expectations An open-ended approach to the direction of Dot Plot adjustments in 2023 Those details, which emerged during Chair Powell’s press conference, triggered a dovish-surprise market reaction, with risk assets climbing and the dollar falling. On paper, the European Central Bank went the extra mile to cement its hawkish message, saying it intends to hike by another 50bp in March following today’s 50bp move. However, the market reaction also went in the opposite direction, with European bonds rallying (bunds -22bp, BTPs -39bp) and the euro falling. This reaction boils down to Lagarde essentially failing to convincingly justify the ECB’s tightening plans,as: The ECB also stated that the inflation outlook is no longer facing upside risk but is now more balanced The reiteration of a meeting-by-meeting approach seemed to clash with a commitment to another 50bp hike in March Lagarde refrained from providing direction on the size or pace of increases after March, offering a breeding ground for speculation on the dovish side Dovish bets on the Fed look more appropriate than on the ECB We think that markets' ongoing dovish repricing of the Fed’s rate expectations has more solid foundations compared to those of the ECB. First, because yesterday’s comments by Powell signalled no urgency to push back against the loosening of financial conditions, while Lagarde explicitly warned markets against not trusting the ECB hawkish guidance. Second, because the Fed’s higher policy rates inevitably leave more room for a readjustment lower by the end of the year, especially given the deteriorating growth outlook and ongoing decline in inflation. We currently estimate 125bp of tightening by the ECB and no cuts in 2023, while we expect only one more 25bp hike by the Fed and 100bp worth of cuts in 2H23. EUR/USD and short-term rate differential Source: ING, Refinitiv EUR/USD: Patience before another big rally All those considerations lead us to reiterate our core view that the EUR-USD rate differential is still more likely to swing in favour of the euro (largely on the back of falling USD short-term rates) this year. However, another big rate-driven EUR/USD rally may not be a story for this quarter, as the March meetings may see the Fed push back against rate cut speculation and the ECB still struggles to sell its tightening plans to the market.   The second quarter of this year is when the ECB-Fed divergence may emerge more distinctly, as we expect the ECB to deliver another 25bp and strongly signal rates won’t be cut for some time, while an acceleration of the slowdown in the US economy and inflation will heavily challenge any pledge by the Fed to keep rates at 5.0% for long. We target 1.15 in EUR/USD in 2Q23, and 1.12 in 4Q23.   Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
ECB Remains Cautious on Inflation, Italian Spreads Recover on Successful Retail Bond Sale

Stocks Could Potentially Continue To Rally, Gold Price Has Gained

Saxo Bank Saxo Bank 03.02.2023 09:24
Summary:  What investors need to perhaps consider now the S&P500 hit a new five-month high and marked its first ‘golden cross’ in 2.5 years. We cover what it could potentially mean for equities and investors over the next 6-12 months. Plus, why the longer term operating outlook for Gold companies is getting brighter; with some ETF flows surging 100-400% so far this year. What's happening in markets now and what investors need to consider     S&P500 continues its move up, to a new five-month high marking its first ‘golden cross’ in 2.5 years The S&P500 has now gained 19% since its October low. And overnight a key technical milestone was achieved for the first time in 2.5 years; the S&P500’s 50-day moving average crossed above the 200-day moving average, forming a “golden cross”. For investors, this means stocks could potentially continue to rally over the next six to12 months if history repeats itself. That said, this event doesn’t guarantee gains. A ‘golden cross’ event has occurred 52 times since 1930. In that time, stocks were trading higher one year later, in 71% of the instances. So while this is helpful to know  - suggesting stocks could have more room to run, we need more indicators for confirmation, such as for S&P500 earnings. They need to continue to beat expectations and also rise. And also we need to see more signs that US inflation is in ‘disinflationary phase’, as the Fed suggests. Read next: USD/JPY Pair Is Trading At 128.48 The Aussie Pair Is Above 0.71$| FXMAG.COM The long term operating outlook for Gold companies is getting brighter; and ETF flows surge Gold companies and ETFs are getting more popular among investors. Not only as the gold price has gained 17% from its cycle low, but importantly, gold companies outlooks could also improve if; gold continues to rally, hits $2000, and banks eventually ease interest rates. Throughout historically gold has generally rallied strongly when the Fed pauses and cuts interest rates. The market is perhaps pre-empting this. Another factor contributing to the ‘gold rush’ is that central banks are increasing their gold holdings, as we’ve been alluding. Positions in gold ETFs have grown considerably this year, with the largest gold ETF fund globally, VanEck Gold Miners ETF (GLD), seeing inflows rise 400%, suggesting retail are increasing their positions. Other popular gold ETFs so far this year include iShares Gold Producer UCITS ETF (IAUP) and iShares MSCI Global Metals and Mining Producers ETF (PICK) with inflows into those ETFs rising over 100% this year. For our global team's take on markets; head to Saxo's inspiration page. And follow our daily global Podcast here.  
BRICS Summit's Expansion Discussion: Impact on De-dollarisation Speed

FX Daily: Eyes back on data after Fed and ECB communication troubles

ING Economics ING Economics 03.02.2023 11:06
Markets questioned the hawkish message by both the Fed and the ECB this week, but we think Powell gave more reasons to reasonably fuel dovish expectations. Still, the ECB communication hiccups mean that EUR/USD may struggle to break higher before the end of the first quarter. Today, eyes on payrolls and ISM services: the dollar likely faces downside risks ECB President Christine Lagarde and Fed Chair Jerome Powell USD: Downside risks from data today The dollar has essentially erased all the post-FOMC losses after markets questioned the hawkish rhetoric by the ECB and European rates went on a huge rally yesterday. We analyse what the last two days of central bank meetings have meant for EUR/USD in this note.   It’s been quite clear that markets have doubted both Fed Chair Jerome Powell’s and ECB President Christine Lagarde’s attempts to hang on to hawkish communication, although dovish bets on the Fed appear more strongly founded at this stage. This is both because Powell seemed more relaxed about the easing in financial conditions and did not convey urgency in pushing back against rate cuts, and because the Fed has taken rates into a much more restrictive territory which inevitably leaves a larger room for easing in 2023. What is clear is that markets will continue to focus heavily on data. With volatility abating after the key Fed and ECB announcements and some of those defensive trades (due to the imminence of key risk events) being unwound, today’s non-farm payrolls release in the US brings mostly downside risks for the dollar, in our view. After all, a tight jobs market has already been factored in by the Fed (Powell even admitted inflation might fall without hurting employment), but it’s really the declining inflation story that is suggesting a peak in Fed funds rates is imminent. Accordingly, markets may focus more on the wage growth figures rather than the headline employment print. Any evidence that wage growth is losing pace and/or that hiring is slowing down materially would likely fuel rate cut expectations further, and hit the dollar. US 2-year rates are currently trading 10bp above the psychological 4.00% mark: a break below may exacerbate a dollar slump. Should such dollar weakness materialise, we think that high-beta currencies may emerge as key winners thanks to the positive impact on risk assets. ISM service numbers will also be closely watched after the latest release was a key driver of the negative re-rating in US growth. Francesco Pesole Read next: Starbucks Revenues Are High Despite High Costs| FXMAG.COM ECB: Dealing with unclear communication Should today’s payrolls trigger a dollar contraction, the euro may emerge as a laggard in the G10 space. Markets are strongly questioning the ability of the ECB to keep hiking at a “stable” pace (as the ECB said in its statement) beyond the March meeting. Here are the review notes from our economics team of yesterday’s statement and press conference. As our ECB watcher puts it, Lagarde’s press conference brought more fog than clarity. And we think it is indeed the communication hiccups in Frankfurt that is driving EUR/USD weakness. We remain of the view that at least 75bp of extra tightening will be delivered by the ECB, which still puts EUR/USD in a position for a big rally in the second quarter – when US short-term rates may come off more steadily. The ECB communication troubles may cap EUR/USD before then. Today, the balance of risks is still tilted to the upside for EUR/USD as US jobs data will be the key driver. The question is how comfortable markets are with re-testing 1.1000: we suspect a break above that level is a bit premature unless US figures come in very weak. Francesco Pesole GBP: BoE close to the peak The Bank of England hiked rates by 50bp yesterday, but offered a number of signals that it is indeed close to the peak. As discussed in our economics team’s reaction piece, a key hint that the MPC is laying the groundwork for the end of its tightening cycle is that it has dropped its pledge to raise rates “forcefully” (i.e. by 50bp). Incidentally, the BoE’s two-year inflation projection – a key driver of policy decisions – is now well below target. We still doubt this was the last hike of the cycle, and expect another 25bp move at the next meeting in March. Markets are torn around a move in either March or May, but are still fully pricing in an additional 25bp of tightening. The pound was slightly weaker after an initially positive reaction to the BoE statement. In practice, it appears that the BoE is not diverging much from market expectations, which means that it may be up to data in the UK to drive any large swings in the pound rather than surprises from the BoE. With markets doubting the ECB's hawkishness, EUR/GBP may manage to stay below 0.9000 for now, although a break higher seems highly likely over the coming months. Francesco Pesole CZK: CNB continues to support FX but is not a decisive factor The Czech National Bank (CNB) left rates and the FX intervention regime unchanged yesterday, in line with expectations. However, there was still room for a hawkish surprise. During the press conference, the Governor said that the record-strong koruna is not a problem for the economy and on the contrary, it is a welcome inflation-fighter. He thus implicitly confirmed that the intervention regime will be with us for a long time despite the fact that the CNB last intervened in September last year. Moreover, he told reporters that current expectations of significant rate cuts this year are wrong and rates will remain at higher levels for longer. However, the main driver at the moment, in our view, are global factors – falling gas prices and a higher EUR/USD – and the CNB is more of a complementary factor for the positive koruna. Moreover, the koruna still offers decent and stable carry. Thus, the main enemy at the moment is the market positioning, which was already the longest in the CEE before the CNB meeting in our view. Thus, the koruna may test 23.70 levels in the short term but the EUR/CZK move lower is limited in our view and the koruna will be rather stable compared to CEE peers. Frantisek Taborsky Read this article on THINK TagsFX EURUSD Dollar Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Softer New Jobs Reading Would Likely Weigh On The Canadian Dollar

Rate Cuts Are Not On The Horizon Any Time Soon, Only The Bank Of Canada Appears To Have Already Ended Its Tightening Cycle

Roman Ziruk Roman Ziruk 28.01.2023 09:57
Major central banks to bring hike cycles to a close We think that the aforementioned easing in inflation rates should herald an end to interest rate hikes for most of the major central banks in the first half of 2023. We think that the Federal Reserve will be done raising rates after its March meeting. At its final meeting of the year in December, the Federal Open Market Committee (FOMC) took its first baby steps towards ending its aggressive interest rate hike cycle, delivering a 50bp rate hike following four consecutive 75bp moves. In its ‘dot plot’, committee members indicated that an additional 75 basis points of hikes may be on the way this year, though futures are only pricing in 50. The key message was that rate cuts are not on the horizon any time soon, and are not expected until 2024. In our view, both the European Central Bank and Bank of England will follow suit in ending their respective hiking cycles in mid-2023. The ECB was the most hawkish of the three major central banks in December, as it announced a start date for quantitative tightening, while President Lagarde warned that multiple additional 50bp rate increases may be on the horizon. Meanwhile, we have little doubt that the Bank of England will continue to confuse markets this year, a hallmark of its communications in 2022. The BoE also raised rates by 50bps during its final meeting of the year, although the three-way voting split among MPC members provided little clarity to investors. We believe that the Reserve Bank of Australia, Swiss National Bank, Riksbank and Norges Bank may only have one or two more hikes left in them, while the Bank of Canada appears to have already ended its tightening cycle. The Reserve Bank of New Zealand is expected to be the most active central bank in the G10 in 2023, with markets finally beginning to price in a long-awaited rate hike from the Bank of Japan in the second half of the year. On the whole, most emerging market central banks are slightly ahead of their major counterparts and, for some, attention may soon turn to the timing of interest rate cuts. For many developing economies, inflation has, however, become deeply entrenched, and that may ensure higher rates for longer, a delayed pick-up in economic activity and a higher risk of default. Read next: Intentional Depreciation Of The Currency - Devaluation| FXMAG.COM Global downturns on the way? As inflation rates begin to trend lower, and central banks globally press pause on their hiking cycles, attention among market participants will increasingly turn towards the possibility of recessions. We have already seen signs of a deterioration in most indicators of economic activity. The G3 business activity PMIs, which provide the most timely gauge of growth in the services and manufacturing sectors, have printed below the level of 50 representing contraction. Indicators of consumer, business and investor sentiment have declined, as have a number of barometers of consumer spending activity. Generally speaking, we think that downturns in 2023 will be rather mild, and we’ve not seen any evidence in the data just yet that would indicate sharp recessions are on the way. We see a number of reasons to be optimistic about the global economic outlook, and believe that the pending downturns in activity won’t be as bad as currently expected by markets: Energy crisis fallout set to be limited. Natural gas prices have eased sharply, as shortages of natural gas appear unlikely this winter. Supply chains are normalising. Freight rates have declined almost back to pre-covid levels, with the impact of the war in Ukraine set to be less onerous in 2023. Inflation appears to be peaking in a handful of economic areas, as are interest rates. Labour markets are strong, characterised by very low unemployment rates, high job vacancies and solid nominal earnings growth. As of yet, we have seen little signs of a deterioration in labour market conditions. Households are well placed to withstand high prices, particularly given the extent of government support (fiscal policy remains supportive with no tightening in sight) and high savings accumulated during lockdowns. China is moving away from its zero-COVID policy. The country continues to lift its draconian restrictions as it prepares its society for living with the virus. In our view, the end to central bank interest rates hikes, and the possibility that downturns in global activity won’t be as bad as currently anticipated, provide a conducive environment for an appreciation in high-risk currencies. In anticipation of a dovish pivot from the Federal Reserve, the US dollar has shed around 8.5% of its value since its September peak. We think that this move has more room to run, and we are pencilling in advances in most currencies against the dollar, notably emerging markets, which we think remain broadly undervalued. The extent of these moves will likely depend on the resilience of economies to the pending downturn, and the timing of when central banks globally will both end their tightening cycles and begin cutting interest rates. 2022 was a highly volatile year in the foreign exchange market, and we suspect that 2023 will prove much the same. Written by: Enrique Diaz-Alvarez, Matthew Ryan (CFA), Roman Ziruk, Itsaso Apezteguia, Eduardo Moutinho, Michal Jozwiak – Ebury’s Market Analysts Source: 2023 FX Market Preview: Is a global recession on the way? (ebury.com)
Czech National Bank Prepares for Possible Rate Cut in November

2023 FX Market Preview: Every Country And Economic Area In The G10 Will Continue To Experience An Inflation Overshoot Through The End Of 2023

Matthew Ryan Matthew Ryan 28.01.2023 09:48
But what can we expect in the FX market in the next twelve months? Below, we outline our main calls for the coming year, providing an overview of the factors that we believe could have the most significant impact on currencies in 2023. Inflation rates to ease from highs - for now We have finally begun to see signs of an easing in price pressures in the past few months, suggesting that we may have seen the peak in inflation, at least in the short- and medium-term. Recent inflation prints have started to come in below both economists’ expectations, as represented by a sharp drop in Citigroups’s Inflation Surprise indices, and their respective peaks. This has been particularly evident in the US, where the CPI reports for both October and November came in well below projections. Much of these softer inflation prints can be attributed to the recent drop in energy prices. Core inflation rates, which strip out volatile components such as food and energy, remain elevated and have not yet shown any real signs of trending downwards in most cases. This will be key for central bank policy in 2023. Figure 1: Citigroup Inflation Surprise Indices (2012 - 2022) Source: Refinitiv Datastream Date: 04/01/2023 If peaks in inflation rates haven’t already materialised, we believe that these will emerge in early-2023, in large part due to the below: Energy prices have fallen sharply, particularly natural gas. Since peaking in late-August EU natural gas prices have dropped by approximately 75%, while in the US prices have declined by around 50%. A complete cutoff in Russian energy supply to Europe remains a risk factor. Energy shortages and rationing, however, appear highly unlikely this winter in light of high gas storage (still above 80% in EU at the time of writing), an oversupply of liquefied natural gas and rather mild winter weather in Europe thus far. Supply chains are improving. The main driver of the initial spike in prices in 2021 was the mismatch between the supply of goods and booming demand following the lifting of pandemic restrictions. These supply constraints have eased in recent months, and we believe will continue to do so in 2023. This is represented by a sharp drop in freight rates, which represent the cost of transporting goods from one place to another, an increase in port volumes and shorter shipping times. Economic activity globally is softening, in part due to tighter monetary policy. While economic slowdowns and recessions are an unfortunate byproduct of higher interest rates, they may be a prerequisite to bring down rates of inflation in a sustainable manner. The IMF expects global growth to slow to 2.7% this year, from 3.2% in 2022, with growth in advanced economies projected to drop to a mere 1.1%, less than half the expected pace for 2022 (2.4%). Inflation expectations have eased. For the most part, both the market’s and consumers' expectations for future inflation rates have either eased or stabilised in recent months. In the US, the two-, five- and ten-year breakeven inflation rates have all fallen to the 2.25-2.30% range, just above the Fed’s 2% target, from 4.9%, 3.6% and 2.9% respectively in March. Read next: Intentional Depreciation Of The Currency - Devaluation| FXMAG.COM We believe that a normalisation in inflationary pressures will likely be a gradual process, and the return to central bank targets remains some way off. According to the IMF’s most recent projections, every country and economic area in the G10, with the exception of Japan (-0.6%), will continue to experience an inflation overshoot through the end of 2023. In some instances, most notably the UK (+7.0%) and Sweden (+6.4%), this gap is expected to remain significant, though we believe that these estimates may soon be revised downwards. We suspect that China's reopening will be an important factor for inflation rates this year, as an increase in activity in the world's second-largest economy would likely present an upside risk to prices.   Written by: Enrique Diaz-Alvarez, Matthew Ryan (CFA), Roman Ziruk, Itsaso Apezteguia, Eduardo Moutinho, Michal Jozwiak – Ebury’s Market Analysts Source: 2023 FX Market Preview: Is a global recession on the way? (ebury.com)
FX Daily: Time for the dollar to pause?

The Message From The ECB Caused The Euro To Fall Sharply

Kenny Fisher Kenny Fisher 03.02.2023 12:56
The euro is catching its breath on Friday after some sharp swings over the past two days. EUR/USD is trading quietly at the 1.09 line. Fed, ECB send euro on a wild ride This week’s central bank rate announcements sent the euro on a roller-coaster ride. The Fed’s 25-basis point hike pushed the euro higher by 1.16%, while the ECB hike of 50-bp sent the euro down by 0.76%. The end result is that the euro is back to where it started the week, just below the 1.09 line. The Fed rate decision sent the US dollar broadly lower, as investors were heartened by Jerome Powell saying that the disinflation process had begun and that he expected another couple of rate hikes before the current rate-hike cycle wrapped up. The markets are expecting inflation to fall faster than the Fed is thinking and are counting on some rate cuts this year, even though Powell said yesterday that he does not expect to cut rates this year. The markets were looking for a dovish bend to Powell’s remarks and once they found it, stocks went up and the US dollar went down. The ECB meeting came a day after the Fed decision, and the rate hike of 50-bp was expected. Still, the euro fell sharply, perhaps due to a confusing message from the ECB. On the one hand, in its policy statement, the central bank signalled another 50 bp hike in March and kept the door open for additional hikes after March. At the same time, ECB President Lagarde said in a press conference that rate moves would be determined on a “meeting by meeting” basis seemed to veer away from the message in the policy statement. The ECB continues to have trouble communicating with the markets, which will only add to market volatility as investors try to figure out the central bank’s plans. The week wraps up with the US employment report. The Fed has said that the strength of the labour market is a key factor in its rate policy, so today’s release could have a strong impact on the movement of the US dollar. Nonfarm payrolls fell from 256,000 to 223,000 in December and the downturn is expected to continue, with an estimate of 190,000 for January. The ADP payroll report showed a decline in December, but unemployment claims and JOLT job openings both moved higher, making it difficult to predict what we’ll get from nonfarm payrolls. The markets will also be keeping a close look at hourly earnings and the unemployment rate.  Read next: Japanese Startup Aerwins Technologies Will Be On NASDAQ| FXMAG.COM EUR/USD Technical 1.0921 is a weak resistance line, followed by 1.1034 There is support at 1.0878 and 1.0826 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
Rates Spark: Balancing data and risk factors

Listen: Are we there yet?

ING Economics ING Economics 03.02.2023 14:12
In this podcast, ING's James Knightley, Carsten Brzeski and James Smith discuss whether interest rates in the US and Europe are close to a peak, what this could mean for the global economy, and whether rate cuts could be in the offing this year   Read next: Today's ECB Policymakers Comments Seem To Help The EUR/USD Pair, The Australian Dollar Fall Against Strong US Dollar| FXMAG.COM After one of the most aggressive tightening cycles in decades, the Federal Reserve and Bank of England signalled this week that their work is mostly complete. In contrast, the European Central Bank is still playing catch-up, warning that significant rate hikes lie ahead. In this podcast, ING's Rebecca Byrne asks economists James Knightley, Carsten Brzeski and James Smith what impact these decisions will have on the global economy in the year ahead. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Rates Spark: Crunch time

Today's ECB Policymakers Comments Seem To Help The EUR/USD Pair, The Australian Dollar Fall Against Strong US Dollar

Kamila Szypuła Kamila Szypuła 03.02.2023 14:06
The dollar rose slightly on Friday, maintaining some momentum after jumps in the previous session after a series of decisions by central banks in Europe. The rise in the USD can be attributed to some shift in trading position ahead of the closely watched US monthly employment report. Trading was relatively limited as markets awaited the latest US employment data later in the day, which could change US Federal Reserve policy. Weekly initial jobless claims in the US released on Thursday indicated strength in the labor market and boosted expectations for strong non-farm payrolls (NFP). USD/JPY The US dollar gained on the last day of the week and looks set to continue its bounce from the nine-month low recorded on Thursday, which is seen as a tailwind for USD/JPY. The Japanese yen, on the other hand, continues to benefit from expectations that high inflation could result in a more hawkish stance from the Bank of Japan (BoJ) later this year. Bets were lifted by Japan's nationwide core inflation, which hit its highest annualized level since December 1981. This is seen as another factor keeping USD/JPY in check, at least for now. The USD/JPY pair traded high around 128.80 at the beginning of the day, but fell in the following hours. Currently, the USD/JPY pair is trading below 128.40. EUR/USD Yesterday, the European Central Bank raised interest rates by half a percentage point on Thursday, but the euro fell below 1.0900 after ECB comments. During the ECB press conference, President Christine Lagarde acknowledged that the outlook for the eurozone has become less worrying for growth and inflation.  The ECB noted the likelihood of another similar rate hike next month, the meeting and its aftermath were in line with market expectations. Early Friday, ECB policymaker Gediminas Simkus said an interest rate cut this year was not likely. With a similarly hawkish accent, policymaker Peter Kazimierz noted that he did not see the March interest rate hike as the last one. These comments seem to help EUR/USD contain losses for now. The euro posted slight gains against the US dollar on Friday, thanks in part to news that the eurozone economy saw some gains last month. The EUR/USD pair in the European session is trading above 1.09 again at around 1.0940. Read next: Japanese Startup Aerwins Technologies Will Be On NASDAQ| FXMAG.COM GBP/USD The Bank of England raised interest rates for the tenth time but hinted that its tightening cycle may be coming to an end, while Federal Reserve Chairman Jerome Powell said in a press conference following the Fed's 25 bp rate hike that the process of "disinflation" in the United States seemed to be in progress. Moreover, BoE President Andrew Bailey said that inflation will continue to fall this year and faster in the second half of 2023. In fact, the central bank forecast that the annual CPI inflation in the UK will fall from the current 10.5% to around 4% in 2020. toward the end of the year. This, in turn, has fueled speculation that the current cycle of rate hikes may be coming to an end and weakening the pound sterling. GBP/USD gained momentum during the European trading hours and went positive above 1.2250 during the day. Currently, the GBP/USD pair is on the border of the level. AUD/USD The Australian dollar falls below $0.71, pulling back slightly from nearly eight-month highs on overall dollar strength. Despite this, Australians continue to be supported by expectations that the Reserve Bank of Australia will continue to tighten its policy. Currently, Aussie Pair is trading at around 0.7060. Source: investing.com, finance.yahoo.com
Assessing 'Significant Upside Risks to Inflation': Insights from FOMC Minutes

The FOMC Is Acting As If It Is Blind To Signs Of Retreating Inflation

Franklin Templeton Franklin Templeton 04.02.2023 08:15
Self-Preservation and Credibility Welcome to 2023 and not soon enough. Last year delivered negative returns across most asset classes, not to mention the worst global bond market rout in a century. Even cash failed to keep pace with inflation. The bad news is that the new year kicks off with a slew of last year’s known unknowns still unresolved. Will the Ukraine-Russia conflict turn nuclear? Will U.S.-China tensions escalate? Where will the drive to net-zero greenhouse gas emissions take energy prices? What is next for COVID-19? Will China’s U-turn on policy be enough to stabilize the economy? Will the Federal Reserve (Fed) overreact? Handicapping these unknowns remains difficult. What we do know is that a very unbalanced world economy entered the new year close to or already in recession. China was by far the weakest of the major economic blocs and quite deflationary. Still early days, the Chinese Communist Party rang in the new year with a dramatic U-turn in policy: an abrupt and chaotic end to its zero-COVID strategy and a blitz of growth-enhancing measures. In contrast, the U.S. entered the new year with the Fed hitting the brakes hard while offering a lot of tough talk that the fight against inflation will be bloody enough to cause recession. The world’s two largest economies seem set up for exactly opposite economic cycles this year. It is a complicated and fragmented collection of developments and prospects, but several themes seem likely to define this year’s macroeconomic road map and drive investment returns. The net of these factors calls for a disinflationary and soft first half of the new year; what happens later depends on the dynamics in the U.S. and China and the credibility of their policy leaders. Read next: Today's ECB Policymakers Comments Seem To Help The EUR/USD Pair, The Australian Dollar Fall Against Strong US Dollar| FXMAG.COM Federal Reserve Credibility This is not your normal business cycle. We still see economic developments as reflections of an economy attempting to normalize from a disaster while simultaneously adjusting to extreme swings in economic policy. It is possible that we are coming to the end of this process in 2023. Government-mandated lockdowns pushed the U.S. economy in 2020 into the deepest contraction since the Great Depression. However, the economy quickly rebounded on reopenings and then was chased dramatically higher with massive Modern Monetary Theory (MMT)-like fiscal and monetary stimulus. The combination of reopenings and historic stimulus sent money growth soaring along with financial asset, commodity, and real estate inflation. The economy boomed, and with a lag, so did price and wage inflation. Most of this booming recovery was ignored by the Fed. As recently as December 2021, the Federal Open Market Committee (FOMC) Economic Projections showed that the median FOMC member anticipated a meager 80-basis point increase in the federal funds rate for 2022 and a retreat in inflation to well below 3%. By March 2022, only three months later, the CPI inflation rate had risen 8.5% from the previous year and almost 11% over the previous three months (annualized). The Fed has a credibility issue. It is obvious that the central bank made a big mistake in 2021, underestimating the momentum behind inflation. It finally realized its error in March last year with its panicky U-turn. Since flipping, the Fed has presided over the fastest run-up in policy rates over any comparable period in its history while simultaneously shrinking the balance sheet. The dollar soared as the Fed tightened into a global economic downturn. Research from the Federal Reserve Bank of San Francisco calculates a shadow federal funds rate that takes account of the balance sheet and financial conditions. This measure has risen almost 700 basis points from its low. What has happened since the Fed’s pivot in March? In a word, deflation. Like watching a movie backward, everything that went up during the boom phase of the pandemic has been coming down and in sequence: across-the-board asset prices are deflating; industrial and energy commodities are in retreat; real estate prices have started to fall; and not only inflation rates but price levels are declining in a range of goods. The broad economy has remained supported by consumption, which, in turn, has been propped up by a drawdown of accumulated savings from the earlier fiscal stimulus. However, deceleration is evident almost everywhere in both real and nominal terms. Broad price inflation measures have been rolling over. U.S. headline Consumer Price Index (CPI), which peaked at 9% mid-2022, rose less than 2% over the last six months of data (annualized). Furthermore, survey data suggest lower inflation rates ahead, and there is a clear fall-off in nominal income growth evident from the latest labor reports. In the meantime, Fed stringency has reached a level not seen in decades: real money supply growth is lower than any time since 1980. Nominal money supply growth is contracting for the first time ever. Commercial bank lending standards are tightening. Despite these developments, the FOMC is acting as if it is blind to signs of retreating inflation as it was to signs of escalating inflation a year ago. Virtually every member of the FOMC signaled in December that rates need to go higher this year. But based on the yield curve, the market is not buying it. The intransigence of the central bank definitely increases the probability of recession, with the majority of economic forecasters suggesting one is already in the pipeline. With its credibility at stake, the Fed may have no option but to bombard the market with talk of persistent tightening. Otherwise, acknowledging the retreating nature of inflation too soon could invite a powerful rally in risk assets, which could put the Fed and the economy back in the same boat six months from now. However, if inflation falls as quickly as some current trends suggest to us, it is hard to believe the Fed would not react to these developments earlier. With oil prices down 40% from their peak, some of the “stagflationary” forces have reversed. Putting it all together, a timely response by the Fed to easing inflation could produce a shallow recession or soft landing. Unfortunately, the track record of intransigence implies it could take something more or some event to shift the Fed’s position. Author: Francis A. Scotland, Director of Global Macro Research This article is part of the report
The First Half Of 2023 Looks Like It Will Be Fairly Disinflationary For The Global Economy

The First Half Of 2023 Looks Like It Will Be Fairly Disinflationary For The Global Economy

Franklin Templeton Franklin Templeton 04.02.2023 08:15
The Global Economic Profile How do all these factors play out for the global trends that drive markets? The world’s two largest economies appear to be on completely opposite cycles: one stimulating and gunning for growth; the other very restrictive and prepared to incur a recession for the sake of reducing inflation. Sequencing will be important. Most leading indicators predict a softening in U.S. economic trends well into the year, based on what the Fed has already done, and further if the Fed continues to tighten. If inflation falls as fast as we suspect, and the Fed pauses, the growth slowdown would be more shallow but still slower for most of the year. In China, signs indicate that the pandemic may have already peaked across a range of big cities. How people react is unknown, particularly with another wave expected in May/ June. After years of indoctrination about the hazards of this virus, it may take a while to regain confidence. The measures to stimulate the economy are only beginning, and the scale of support required to turn the property sector around will have to be substantial. Netting it out, the first half of 2023 looks like it will be fairly disinflationary for the global economy, with spending and growth looking quite weak over the first six months of the year. Markets may front run the trends discussed here, but actual traction in the real economy, particularly in China, may not develop much momentum before the second half of the year. Read next: Starbucks Revenues Are High Despite High Costs| FXMAG.COM Definitions Deflation refers to a persistent decrease in the level of consumer prices or a persistent increase in the purchasing power of money. Disinflation is a temporary slowing of the pace of price inflation and is used to describe instances when the inflation rate has reduced marginally over the short term. Modern Monetary Theory (MMT), not widely accepted, has the following basic attributes: A government that prints and borrows in its own currency cannot be forced to default, since it can always create money to pay creditors. New money can also pay for government spending; tax revenues are unnecessary. Governments, furthermore, should use their budgets to manage demand and maintain full employment (tasks now assigned to monetary policy, set by central banks). The main constraint on government spending is not the mood of the bond market, but the availability of underused resources, like jobless workers. Author: Francis A. Scotland, Director of Global Macro Research This article is part of the report
US jobs surge catches everyone off-guard

US jobs surge catches everyone off-guard

ING Economics ING Economics 04.02.2023 08:34
The US added more than half a million jobs in January, way above what anyone expected given the softening economic newsflow and rising job lay-off announcements. Great news that ensures another 25bp hike in March, but we have to be wary of extrapolating from this one data point The US added 517,000 jobs in January, much higher than expected 517,000 Number of jobs the US economy added in January   Jobs surge with little sign of any weakness So US non-farm payrolls rose 517,000 in January versus the 188,000 consensus and way above any of the forecasts that were out there. There were also 19,000 of upward revisions to the past couple of months of data. Meanwhile the unemployment rate dropped to 3.4% from 3.5% (consensus 3.6%) with the household survey reporting an 894,000 increase in employment and a 28,000 drop in the number of people classifying themselves as unemployed. Average hourly earnings rose 0.3% month-on-month as expected. So despite this fantastic job creation story, employers are easily able to pick up new workers without needing to pay-up, which is surprising given how tight the jobs market is. The details show goods producing employment rose 46,000 with services adding 397,000 leaving private payrolls up 443,000. The government sector then added a huge 74,000 jobs. Pretty much every component rose with health & social assistance (+105k) and leisure and hospitality looking (+128k) particularly strong. It's difficult to rationalise given the economic data A real surprise, which is difficult to explain. We have to just take that on the chin and say despite seven consecutive monthly falls in residential construction output, three consecutive falls in industrial production and consumer spending disappointing in November and December firms are still happy to hire. Maybe the Fed will keep hiking for longer, but we will need to see the economy suddenly rebound to make this great job news continue. Surging lay-offs suggest employment will weaken Source: Macrobond, ING  Read next: Today's ECB Policymakers Comments Seem To Help The EUR/USD Pair, The Australian Dollar Fall Against Strong US Dollar| FXMAG.COM We have to be a little sceptical though given that confidence in America’s board rooms and the small business sector (Conference board survey of CEOs and the NFIB small business optimism index) are below the levels seen at the worst point in the pandemic. This would hint at a more defensive mindset that focuses more on cost reduction rather than business expansion. That is certainly the story from the Challenger job lay-offs series in the chart above. We are not looking another 500,000+ figure next month… Read this article on THINK TagsWages US Jobs Federal Reserve Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Inflation Numbers Signal Potential Pause in Fed Rate Hikes Amid Softening Categories

This could well be a ‘fool’s spring’

ING Economics ING Economics 04.02.2023 08:40
We should guard against the premature return of optimism even if things seem better than expected. Watch: New year optimism may be short-lived The first month of the new year brought a couple of positive surprises to the global economy. The less complicated-than-expected reopening of the Chinese economy, lower energy prices and a bout of optimism from soft indicators out of Europe didn't only fuel a stock market rally but also led to a wider upward revision of many growth forecasts. However, as much as in times of darkness, even a sunrise is mistaken for a sunset, first signs of optimism do not always point to an upcoming growth party. We have said it before, but better is not necessarily good enough. Up to now, the sheer fact that the European economy has been holding up better than feared and could even have avoided a winter recession brings welcome relief. The same holds for the US economy, where it takes longer than initially expected before higher interest rates finally take their toll. Together with the reopening of China, the global economy is definitely in a better place than feared only a couple of months ago. However, we don’t think that this is yet the right time to become overly optimistic. In fact, the list of potential risks - but also very real drags - on many economies is still long. In this regard, particularly the idea that the latest improvements in soft European indicators could signal an upcoming rebound of the economy looks premature. Given that the European economy has now been lagging behind that of the US on so many aspects, be it inflation, monetary policy or growth, it is hard to see why the European economy would rebound when the US is staging a soft or hard landing. The latest soft indicators in Europe could have been like those rays of sunshine in January: temporary relief but too early to foretell spring weather. Read next: Japanese Startup Aerwins Technologies Will Be On NASDAQ| FXMAG.COM The example of the US illustrates that textbook economics still works: excess demand fueled higher inflation, triggered a strong monetary policy reaction, and higher interest rates are now pushing the economy into recession. The first cracks in the labour market have become visible, and the housing market has started to come down. As inflation will retreat sharply, we still expect the Fed to cut rates in the second half of the year, even if a milder recession and somewhat higher core inflation could lead to second-guessing at the Fed. The example of the US economy is also a good reminder for Europe. Here, headline inflation has also started to come down, but core inflation remains stubbornly high, partly driven by the ongoing pass-through of last year’s higher energy prices but also partly driven by fiscal stimulus. The risk here is that what initially was a supply-driven inflation shock could become demand-driven inflation as a result of fiscal stimulus. In any case, the US example should tell the eurozone that higher interest rates do matter and can bring down economic activity: traditional economic wisdom. However, for a long while, the dampening impact of higher ECB interest rates on the eurozone economy seems to have been ignored by many experts and policymakers. Finally, remember that decoupling between the US and the eurozone economy has never really existed. With a slowing economy, it looks almost impossible to see an outperforming eurozone economy when at the same time, the full impact of ECB rate hikes still needs to materialise, the region is still facing an energy crisis, and the war in Ukraine mercilessly continues to drag on.  The outlook for the global economy has improved, but better is still not good enough. The list of risks is long and the probably most underrated risk is central banks’ action to defeat inflation. Nothing’s wrong with that, but please remember that at least in the US, eight out of the last nine times the Fed embarked on a series of interest rate hikes to rein in inflation, a recession followed. TagsMonthly Economic Update Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Key Economic Events and Earnings Reports to Watch in US, Eurozone, and UK Next Week

Quick-fire answers to your global economy questions

ING Economics ING Economics 04.02.2023 08:49
Give us a minute, and our economists will give you some answers to the global economy's biggest questions, notably around energy and China's reopening. And take a look at our three scenarios for the world as February begins In this article How far could gas prices rise from here, and what would be the major cause? Is Europe still heading for recession? If gas prices rise, have governments done enough to shield consumers/businesses in Europe? Is the end of zero-Covid in China a gamechanger? Is inflation really falling, and have markets been too quick to price in cuts? Can the US economy avoid recession? Can the recovery in risk assets continue?   Three scenarios for the global economy ING   ING   ING How far could gas prices rise from here, and what would be the major cause? We currently expect that European gas prices will average EUR 70/MWh over 2023, peaking in the fourth quarter with an average of EUR 80/MWh. However, clearly there are significant upside risks to this view. If remaining Russian gas flows to the EU were to come to a halt and if we were to see stronger than expected LNG demand from China this year, this would tighten up the European market significantly. Under this scenario, we would need to see stronger-than-expected demand destruction to keep the market in balance. As a result, prices would need to trade higher, potentially up towards EUR 150/MWh going into the '23/24 winter. The European Commission’s price cap of EUR180/MWh for TTF should provide a ceiling to the market, at least for exchange prices within the EU. Is Europe still heading for recession? Lower energy prices and high levels of national gas reserves as a result of the warm weather and lower energy consumption have helped the eurozone economy to avoid an energy crisis this winter. Fiscal stimulus has also supported the economy and prevented the eurozone from falling into a severe recession. However, the eurozone economy is not out of the woods yet. Industrial orders have weakened and once the post-pandemic boost is behind us, growth in the services sector could soften. With (core) inflation remaining stubbornly high and the full impact of ECB rate hikes still materialising (with activity in the construction sector particularly vulnerable), the eurozone is facing a longer quasi-stagnation. The worst-case scenario has been avoided for now but this doesn’t automatically lead to a strong recovery. If gas prices rise, have governments done enough to shield consumers/businesses in Europe? It took a while but at the end of last year, fiscal support measures in most eurozone countries had reached levels seen during the pandemic. For the eurozone as a whole, the announced fiscal stimulus amounts to around 5% of GDP. The stimulus packages are largely aimed at supporting household purchasing power but also at keeping companies’ energy costs at bay. However, if energy prices remain at current levels, the full amount reserved for energy price caps will not have to be used up. While these packages offer significant relief in the short run, they will not be able to shield consumers and businesses against structurally higher energy costs. Government expenditures in the eurozone already amount to around 50% of GDP and with the weighted eurozone government budget at 4.5% of GDP, any room to scale up deficit-financed stimulus, which is exclusively aimed at supporting consumption, looks limited. Is the end of zero-Covid in China a gamechanger? The surprise reopening of the Chinese economy will certainly boost demand, and we have revised up our GDP forecasts accordingly. What is still unclear is how much and when the reopening will boost domestic spending within China, especially on services. Household balances are swollen after prolonged inactivity, so some "revenge" spending seems plausible. How important these balance sheet effects are for spending within China is still being debated, with unemployment still high and wage growth still subdued. Of greater global relevance will be how strongly industry recovers, as this will dictate the strength of the recovery in demand for commodities, including energy. Our current thinking is that manufacturing recovers more slowly than domestic spending on services, and this should not result in a substantial boost to global commodities prices, though some upward price pressure is probable. With the economy just emerging from the Lunar New Year, and data clarity very low right now, this "goldilocks" view is offered with fairly low conviction. Is inflation really falling, and have markets been too quick to price in cuts? Headline inflation rates across the developed world should fall this year as the sharp rises in food, fuel and goods prices of late 2021-mid 2022 are unlikely to be repeated. Admittedly, of these three categories, food prices have probably the biggest potential to rise again significantly this year. With commodity prices – including food indices – having fallen in many cases, there is a case for a sharp reduction in goods-related inflation this year, and in some categories, outright price falls. This story is likely to be more aggressive in the US, where month-on-month increases in core CPI and PCE deflator readings have slowed from 0.5-0.6% in the middle of last year, to 0.2-0.3% more recently. That's still above the 0.17% MoM average required to take the year-on-year rate to 2%, but we're getting close. Rents are topping out, vehicle prices are falling and there is growing evidence that corporate pricing power is waning with businesses thinking more defensively as recession fears mount. We continue to forecast core inflation measures getting down to 2% by the end of 2023. In Europe, the story is likely to be more gradual. Core inflation is yet to peak, and the lagged impact of higher energy prices is continuing to put pressure on services pricing. The strong prevalence of collective bargaining in many European countries also suggests wage pressures will continue to feed through, too, and ongoing fiscal stimulus and government intervention could lengthen the inflationary pressure. The fear is that supply-side inflation could morph into demand-side inflation. The divergence between the EU and the US in terms of inflation suggests that markets are right to be pricing rate cuts from the Federal Reserve later this year, while the easing priced in from the ECB in 2024 looks premature. Can the US economy avoid recession? Possibly, but we need something to turn around quickly. We have a housing market correction coupled with six consecutive monthly falls in residential construction, three month-on-month drops in industrial production and two consecutive 1%+MoM falls in retail sales, which hint at a broadening slowdown. Meanwhile, the labour market is showing tentative signs of cooling after five consecutive months of decline in temporary help, which typically leads to broader labour market trends. With CEO confidence at the lowest level since the global financial crisis, implying a growing proportion of businesses adopting a more defensive stance, the risks are mounting that there will be a recession. However, strong household balance sheets and a robust-looking jobs market suggest it will be relatively short and shallow, assuming inflation falls as we expect and the Fed is able to offer stimulus later this year. Can the recovery in risk assets continue? It has been a strong start to the year for risk assets, underpinned by robust inflows. Equity markets are up as much as 9% in Europe and dedicated bond funds are up anywhere between 2-4%. But risk assets will struggle to post further near-term gains should our view for some tactical upward pressure on market rates bear fruit. It’s a non-consensus call though, and even if market rates were to fall it’s more likely that the market reads this as a measure of underlying angst, which can cause issues for risk assets, via an elevation in perceived default risk ahead. The strong rally in credit markets has lasted for over three months before which credit was pricing in a significant recession. The value that was evident then has evaporated. Nonetheless, with persistent inflows to the sector remaining a dominant theme, we remain constructive in the longer term and further returns in the sector will be a function of yield and carry, rather than spread tightening. In FX, growing headwinds to risk assets would provide some temporary support to the dollar and help cement a 1.05-1.10 EUR/USD trading range for the rest of the quarter. Later in the year, however, 1.15 levels are possible as the conviction builds over a Fed easing cycle. TagsEconomy Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Eurozone's Price Tension and Business Activity: Assessing the ECB's Challenge - 07.07.2023

Easing US inflation fears boost hopes for a Fed rescue

ING Economics ING Economics 04.02.2023 08:55
US recession fears linger on as softening activity spreads throughout the economy. There are also tentative signs that the labour market is cooling with increasing layoff announcements and slowing wage growth. Inflation pressures are subsiding and offer hope that the Fed will ride to the rescue with stimulus later this year In this article Real interest rates turn positive as Fed hikes continue Weakness is spreading Inflation pressures are cooling, allowing Fed rate cuts from the third quarter   The Fed's Jerome Powell may well start stimulating the US economy later this year Real interest rates turn positive as Fed hikes continue Inflation caught the Federal Reserve off guard last year and it had to catch up aggressively, implementing the most substantive series of interest rate increases in more than 40 years. Despite that, it has taken a further 25bp hike this week to finally get positive real interest rates; both the ceiling and the lower band of the Fed funds target rate range are above core inflation for the first time since 2019. US policy rates finally exceed inflation Macrobond, ING   This doesn’t mark the end of policy tightening. Inflation remains well above the 2% target and unemployment is at very low levels leaving the Fed wary that any relaxation of policy could allow inflation to reignite, especially with China reopening and the European story looking more positive. Moreover, many officials are concerned that financial markets are getting ahead of themselves in pricing interest rate cuts later this year. Lower Treasury yields, a softer dollar and narrowing credit spreads could boost growth and undermine the central bank’s attempts to control inflation. We don't share those concerns to the same extent. Instead, we expect a final 25bp interest rate increase in March. With inflation set to continue slowing and the outlook for both growth and the labour market deteriorating, we think that will be the peak and rate cuts will indeed be the story of the second half of the year. Weakness is spreading The economy is certainly feeling the impact of the Federal Reserve’s interest rate hikes and the knock-on effects for borrowing costs throughout the economy. The housing market has cooled rapidly in response to the surge in mortgage rates, with the number of transactions slowing sharply and residential investment contracting at an annualised 26.7% rate in the fourth quarter of 2022. In fact, we’ve had seven consecutive month-on-month falls in residential construction, three consecutive drops in industrial production plus 1%+ MoM falls in retail sales in both November and December. We need to see a turn quickly to prevent GDP from turning negative in the first half of this year, but with the ISM manufacturing and non-manufacturing surveys pointing to a flat to weaker trend, this is going to be difficult. Auto sales are looking OK, but we are concerned that the strong boost to growth from net trade and inventory building experienced in the fourth quarter of last year will not be repeated. We see a strong chance, therefore, that first quarter GDP growth will be negative. Moreover, the Conference Board’s measure of CEO confidence is now at the lowest level since the global financial crisis, which suggests that corporate America will turn increasingly defensive, implying a greater focus on cost control rather than a desire to expand businesses. Inflation pressures are cooling, allowing Fed rate cuts from the third quarter This isn’t encouraging from a labour market perspective. Job loss announcements are becoming more prevalent, and there have been five consecutive monthly falls in the temporary help component; historically, that's a strong leading indicator ahead of broader shifts in employment. If America’s boardrooms are as gloomy as surveys suggest, this does indeed indicate the threat of rising unemployment. Fewer companies are looking to raise prices Macrobond, ING   Wage pressures also appear to be cooling, with the latest Employment Cost index posting the slowest increase in a year; both wages and salaries, along with benefits are seeing this trend. Corporate pricing power also appears to be softening, as you can see in the chart above. With fewer firms planning to raise prices, falling inflation looks to be a strong bet even before we consider slowing housing rents and falling car prices which together account for more than 40% of the basket of goods and services used to calculate the inflation rate. A weak economy, a cooling jobs market and rapidly slowing inflation will, in our view, allow the Fed to cut rates from late in the third quarter. Remember that over the past 50 years, the average time elapsed between the last rate hike in a cycle and the first rate cuts has only been six months. We expect the fed funds ceiling to be cut to 4% by year-end. TagsUS Recession Jobs Inflation Federal Reserve   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
National Bank of Poland Meeting Preview: Anticipating a 25 Basis Point Rate Cut

Our view on the major central banks

ING Economics ING Economics 04.02.2023 09:05
The Fed and Bank of England are closing in on the end of their respective tightening cycles, while the ECB still has more work to do. Greater potential for an inflation pullback in the US suggests the Fed will be much earlier to cut rates than its European counterparts. Bank of Japan tightening is likely to be a gradual process In this article Federal Reserve European Central Bank Bank of England Bank of Japan   ECB President, Christine Lagarde with Croatia's Economy Minister at the World Economic Forum last month Federal Reserve After the most aggressive series of policy rate increases seen in more than 40 years, unsurprisingly, the US economy is now experiencing slower growth. Markets are now pricing recession, but Federal Reserve officials are concerned that lower Treasury yields and a softer dollar have loosened financial conditions, thereby undermining the Fed’s policy stance. They continue to warn that “unacceptably high” inflation means the economy needs to experience a “sustained period of below trend growth” for them to be confident price pressures will fade. Hence the latest 25bp hike with a further 25bp expected in March. However, job loss announcements are becoming more prevalent, and weakening price intentions, falling car prices and a clear topping out in housing rents offer encouragement that inflation will fall sharply. This should open the door to significant interest rate cuts from late in the third quarter of this year, with the Fed funds target rate potentially falling back to 2.5% next year. European Central Bank It took the ECB a while, but it seems to have got the hang of it: hiking interest rates. And as long as core inflation remains stubbornly high and core inflation forecasts remain above 2%, the ECB will continue hiking rates. The increasing probability that a recession will be avoided in the first half of the year also gives companies more pricing power, showing that selling price expectations remain elevated. The celebrated fiscal stimulus, which has eased recession fears, is an additional concern for the ECB as it could transform a supply-side inflation issue into demand-side inflation. These are two factors that could extend inflationary pressures in the eurozone, albeit at a lower level than we see at the moment. As a consequence, we expect the ECB not only to continue hiking into late spring but also to keep interest rates high for longer than markets have currently pencilled in. Bank of England The Bank of England has given its strongest hint yet that the tightening cycle is nearing an end - and perhaps even that February's 50bp hike was the last. In practice we're probably not quite there yet. UK headline CPI may have peaked, but the same can’t yet be said for wage growth or service-sector inflation. We therefore expect the BoE to pivot back to a 25bp rate hike in March but that's likely to be it. However unlike the Fed, it’s unlikely that the BoE will begin cutting rates later this year. The Bank's Chief Economist, Huw Pill, recently noted that the UK has the worst bits of the US inflation story (structural labour shortages) and the eurozone (energy crisis), arguing that core inflation could stay stickier as a result. That’s a line we’re likely to hear a lot of over the coming months and suggests a rate cut is unlikely for at least a year. Bank of Japan The Bank of Japan attracted the attention of market participants around the world after it surprised with an unexpected adjustment in the yield curve control policy in December. Governor Kuroda reiterated at the January meeting that the economy still needs easy monetary policy, and the BoJ’s sustainable inflation target of 2% has yet to be achieved. We think that it is highly unlikely that Kuroda will make another move in March, just before his retirement in early April. Indeed, markets are paying more attention to who will be the next governor, hoping the new leader may change the BoJ’s policy stance. We agree, but “Shunto”, the spring wage negotiations, will be key to watch. If wage growth is not strong enough to offset recent inflation, it will take longer than expected to normalise policy. We predict that the BoJ will keep its negative policy rate and yield curve control policy until the end of 2023 for now. TagsCentral banks Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Euro's Rally Stalls as Focus Turns to Inflation and Data Disappointments

Forex Weekly Summary: EUR/USD, GBP/USD And AUD/USD Fell Sharply, USD/JPY Ended Above 131.00

Kamila Szypuła Kamila Szypuła 04.02.2023 12:45
The dollar jumped on Friday after data showed that US employers created many more jobs in January than economists had expected, potentially giving the Federal Reserve more leeway to hold interest rate hikes. The dollar recently rose 1.12% to 102.92 on the day against a basket of currencies, the highest since Jan. 12 and is on track for its best day since Sept. 23. USD/JPY USD/JPY started the trading week at 130.4790. For a day and a half, the pair traded in the range of 129.80-130.45. Subsequently, the USD/JPY pair started its decline below the lower limit and dropped below the 129.00 level. Trading below 129.00 lasted until Friday where in the US session the USD/JPY pair sharply rebounded to above 131.00 and thus ended the trading week at 131.15. The final level was just below the week's high of USD/JPY at 131.1940. The difference between the highest and the nanny level of trading is quite large, because the pair reached the lowest level at 128.1160. EUR/USD The EUR/USD pair started the trading week at 1.0875. For a day and a half, the pair traded below 1.0900. After that, the EUR/USD pair rose above 1.0900 and reached a weekly high of 1.1030. Trading above 1.0900 continued until Friday, where in the US session the EUR/USD pair fell sharply below 1.0800 and thus ended the week of trading at the week's low at 1.0798. The European Central Bank (ECB) raised its key interest rates by 50 basis points as expected and said it intends to make another 50 basis point hike in March, comments from ECB President Christine Lagarde weighed on the euro. Early Friday, ECB policymakers Gediminas Simkus and Peter Kazimierz said an interest rate cut this year was not likely. Read next: The UK Economy Expects A Decline And Is Gearing Up For Recession| FXMAG.COM GBP/USD The Cable Pair started the week at 1.2404. For the next two days, the GBP/USD pair traded around 1.2300 until it broke out at 1.2400, after reaching the weekly high, the pair traded just below this level. The drop below 1.2300 came closer to Friday where the GBP/USD pair plummeted below 1.2100. GBP/USD ended the week at 1.2056, which is the lowest trading level of the week, the lowest since Jan. 6 and its worst day since Dec. 15. The Bank of England, as widely expected, raised its key rate by a further 50 basis points to 4%, its highest level since autumn 2008, indicative of more sustained price pressures. However, the BoE removed the wording that "they will respond with force if necessary." Moreover, BoE President Andrew Bailey said that inflation will continue to fall this year and faster in the second half of 2023. In fact, the central bank forecast that the annual CPI inflation in the UK will fall from the current 10.5% to around 4% in toward the end of the year. This, in turn, has fueled speculation that the current cycle of rate hikes may be coming to an end and weakening the pound sterling. AUD/USD The AUD/USD pair started trading at 0.7111. The pair then traded in the 0.7000-0.7075 range. On Thursday, the pair managed to break above 0.7100 and record a weekly high of 0.7156. Closer to Friday, the couple began their decline. The Aussie Pair ended the week at its lowest level of trade for the week, at 0.6924. The Australian awaits the RBA's interest rate decision on Tuesday 7 February. With the December quarter 2022 CPI print showing headline inflation is still running strong at 7.8 per cent, expectations are for a further increase in the cash rate. Source: finance.yahoo.com, investing.com
ECB cheat sheet: Difficult to pull away from the Fed

The Key Issue For The EUR/USD Pair This Week Is The Representatives Of The ECB And The Fed

InstaForex Analysis InstaForex Analysis 06.02.2023 08:09
The EUR/USD pair started the trading week rather quietly, without any gap, almost at the level of Friday's closing. This suggests that Friday's trading fuse has come to naught: the bears managed to pull the price under 1.0800, but further prospects for the downward movement were questionable. However, the quiet start of the trading week does not indicate that the pair will continue to move in the horizontal channel. On the contrary, we've got plenty of volatility ahead of us: bears will try to build on their success (or at least hold their positions within the frame of the 7th figure), while the bulls will be trying to take revenge to win back their lost positions. Every fundamental event will be used by traders to their advantage. Let's look at the main news of the week. Monday On Monday, February 6, markets will focus on European Central Bank President Christine Lagarde's speech. She will take part in a meeting with the president of the European Council, the head of the European Commission and the president of the Eurogroup. There are rarely any specific messages or intentions at this level of meetings, but given Lagarde's previous stance, she may repeat the hawkish signals indicating a willingness to raise rates at the March meeting by 50 points. This message won't have any impact on the euro (as it was mentioned at the ECB's February meeting). However, if the ECB head hints at further rate hikes, that's when the bulls will get a strong reason to launch a counterattack. Tuesday If Lagarde is the main newsmaker on the first trading day, then on Tuesday, February 7, traders will focus on her colleague Federal Reserve Chairman Jerome Powell. He will participate in a discussion hosted by the chairman of the Economic Club of Washington. The event is quite narrowly focused, so Powell is sure to comment on the latest Nonfarm. Let me remind you that the U.S. labor market data, released last Friday, turned out to be a pleasant surprise: the unemployment rate fell to a 53-year low (3.4%), and the indicator of employment growth jumped by 517,000(!). While the wage indicator (in annual terms) continued to show a downtrend. The latest figures allow Powell to be more confident not only about the March 25-point hike, but also about the longer term prospects. As of today, there is a 66% chance of a 25-point rate hike in May (according to the CME FedWatch Tool). But if Powell sounds indecisive in the face of strong Nonfarm (e.g. calling for inflationary growth), the dollar bulls will get a major blow and their position will shake considerably, even in the EUR/USD pair. Wednesday The economic calendar is not very eventful on Wednesday, February 8. The tone of the trades will be set by the Fed members, who will speak during the US trading session. You should pay attention to the stance of John Williams, head of the New York Fed. He has a permanent right to vote in the Committee and is considered one of the most influential members of the Fed. Ahead of the February meeting, Williams said that slowing rate hikes "makes sense" as "the Fed is nearing the end of its policy tightening cycle". If he reiterates that the end is near, the dollar will be under pressure. Actually, that was the reason why the greenback fell across the entire market after the Fed's February meeting: Powell made it clear that the central bank does not intend to exceed the previously declared target (5.25%), and possible calibration of the final point is only possible in the downward direction. If Williams voiced a similar position, the dollar will be under pressure. Also on Wednesday, the other Fed officials, Michael Barr (centrist) and Christopher Waller (predominantly hawkish), will speak. Read next: Elon Musk Was Found Not Guilty In The Tweets Case| FXMAG.COM Thursday Thursday's main report is Germany's inflation data. According to preliminary forecasts, the consumer price index will show an uptrend in January. The CPI may move up after two months of decline and post a reading of 8.9% (y/y). The harmonized consumer price index should similarly reflect an uptrend, coming in at 10.0% (after falling to 9.6%). If the real numbers match the forecasts (not to mention the greenback), the euro will receive substantial support. Let me remind you that last week's report on the growth of pan-European inflation turned out to be very contradictory: amid slowing overall inflation, the core index remained at a record high of 5.2%. The German figures may either reinforce concerns about price pressures in the European region or weaken the ECB hawks' position (the latter looks unlikely). Friday At the end of the trading week, two Fed members, Christopher Waller and Patrick Harker, will speak during Friday's U.S. session. They are considered as representatives of the "hawkish wing" of the Fed, so their comments may provide additional support to the greenback. There is also an important report on the Consumer Sentiment Index from the University of Michigan. It is a very important leading indicator of future consumer spending. According to preliminary projections, the index is expected to rise again (for the third month in a row), rising to 65.0 points (the highest since last April). Conclusions The forthcoming week is not full of important macroeconomic events. The key point is the ECB and Fed representatives (especially Lagarde and Powell) who are likely to assess the latest reports through the prism of future prospects. In addition, the German inflation report may lead to increased volatility in the EUR/USD pair. In general, at the moment, there are no signals that would indicate which position we should prioritize. Obviously, the "Nonfarm factor" has already played itself out for the most part, hence it is risky to enter selling. At the same time, Powell's more hawkish mood might encourage a bearish momentum: in that case, the pair might test the support at 1.0720 (the bottom line of the BB on the daily chart). But the alternative scenario in which the Fed chief (and his colleagues) remain cautious in spite of the strong Nonfarm is not excluded. In that scenario, bulls might seize the initiative (especially if Lagarde sounds hawkish and German inflation exceeds expectations). In this case, the price is likely to return to the range of 1.0850-1.0950. Relevance up to 02:00 2023-02-07 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/334201
Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

Rates: Reasons the upside can be tested

ING Economics ING Economics 06.02.2023 08:47
Most macro indicators argue for more downward pressure on market rates. However, we think things are more nuanced than that. Belated ECB and Bank of Japan tightening, and remarkably low US market rates versus the Fed’s ambitions, present reasons for market rates to back up a bit from here In this article Eurozone and Japanese rates primed to provide independent upside pressure In the US, it's a story of a remarkably stretched full curve inversion Never before (since the 1990s at least) has the 10yr been so rich at this stage of the cycle   Eurozone and Japanese rates primed to provide independent upside pressure One key element ahead is the probability that the ECB will hike by more than the Fed does in 2023. This is a factor that can push global market rates higher, as it implies a narrowing in the spread between Treasury and Bund yields, driven by independent upward pressure on Bund yields. A second related element is the upward pressure being brought to bear on Japanese government bond (JGB) yields. The 50bp cap on the 10yr JGB yield is yet again being tested by the market. This is another independent pressure that will act to narrow spreads to Treasuries, adding an upside excuse for core global yields generally. In the US, it's a story of a remarkably stretched full curve inversion In the US, the spread between the 10yr yield and front-end rates is remarkably stretched, as can be gleaned from the deep inversion of the curve. While an inverted curve is perfectly normal as we approach the end of a rate hiking cycle, it’s the degree of inversion that’s startling. There are many ways to measure this. The graph below is one. It shows the 10yr yield currently at 1.7% below the 6mth Libor rate (we use the 6mth tenor to incorporate future hikes). This has never been so stretched (on data going back to the 1980s). 6mth Libor is a staggering 1.7% above the US 10yr Basis points Macrobond, Federal Reserve, ING estimates Never before (since the 1990s at least) has the 10yr been so rich at this stage of the cycle There is another important element to consider – timing. It is not at all unusual for the 10yr to trade below money market rates as the Fed approaches the peak in the cycle. In fact, it’s like that in practically every cycle. But the extreme, where the 10yr trades most through money market rates, tends to be just before the Fed is about to execute a first cut (having held rates at a peak for a number of months). Here, however, we have similar extremes while the Fed is still hiking. This is unprecedented. To put some numbers on this, past cycles have typically seen the 10yr trade some 75bp below the Funds rate on the eve of a rate cut. The most extreme version was during the dot com bust when the 10yr was some 150bp through the Fed funds rate just before the first cut. Fast forward to today, and the 10yr yield is already 83bp below the Funds rate. If the 10yr yield remains here (at around 3.5%) that stretches to 108bp after the expected hike on 1 February, and if we get a March hike it stretches it further to 133bp. That’s against a backdrop where the Fed is nowhere near an actual rate cut. Bottom line, we identify the US 10yr as being exceptionally rich to the money market rates, and we see independent pressure for upside to market yields from the eurozone and Japan. That’s an important counter to weak macro data that’s been driving market yields lower since late 2022. TagsRates Monthly Economic Update Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Melbourne Institute Inflation Gauge For Australia Rose More Than Expected

The Melbourne Institute Inflation Gauge For Australia Rose More Than Expected

Saxo Bank Saxo Bank 06.02.2023 09:04
Summary:  With several Fed speakers talking this week it puts broad equities on notice, as well as the Australian dollar. Ford flopped last week, why could Toyota, Honda and Volvo follow? Suncorp reports results this week, kicking off bank earnings in Australia. In commodities, Orange Juices up, metals face pressures as the US dollar gains strength What’s happening in markets and what to consider   The US dollar jumps, broad equities soften ahead of Fed speakers talking this week and more US earnings After a hotter than expected US jobs report on Friday, equities and the VIX index, and the US dollar are on watch. Several Fed speakers are due to speak and they could disagree with the Fed’s dovish tilt last week, which could spark of a risk-off rally, and a flight to safety which could take the US dollar higher, and shave down broad indices. A bevy of EV and motor companies report this week and if Ford was something to go by last week, reporting weaker than expected profits, which resulted in its shares sinking 8% on Friday; then you may consider watching this week’s motor companies who report; Toyota Motor, Honda Motor and Volvo Car. RBA meeting ahead, putting AUDUSD and EURAUD on watch for a potential whipsaw The Melbourne Institute Inflation gauge for Australia rose more than expected MoM & YoY, while Australian retail sales beat expectations. These indicators, coupled with building approvals seeing one of their biggest jumps in a decade, gives the RBA power to keep hiking rates. The RBA is expected to hike by 25bp on Tuesday, with the market pricing in another 25bp hike. But, there is a small chance the RBA could keep hiking before pausing in July. The jury is still out. We are watching the AUDUSD and the EURAUD with the AUD having nose-dived as commodity prices fell from their highs, while the USD gathers strength. While the ECB hiked by 50bps last week. There is a risk the RBA could be aggressive in its commentary (more than prior meetings), which may perhaps trigger an AUD knee-jerk rally up. For more on FX, click here. Australian reporting season ramps up; banks and property groups results are on watch Financial results kick off with Suncorp reporting on 8th Feb- this could be a good indication of what we can expect from big banks such as CBA who reports next week. Data last year showed loan growth in regional banks grew slightly more than the big four banks; so we could see earnings surprises in Suncorp and Bank of Queensland. The market expects 25% earnings growth from Suncorp, and flat growth from CBA next week. The Telco giant, Telstra reports on Tuesday, with a flood of property groups reporting such as Centuria on Tuesday, BWP Trust – the Bunnings landlord, as well as Dexus on Wednesday, followed by Mirvac and Charter Hall Long WALE REIT reporting Thursday. For defensive plays; the plastics giant Amcor reports Tuesday. While interest rate sensitive Australian Tech companies, which are not traded very much at Saxo- start to report this week with Megaport reporting Thursday, and real estate-tech business REA on Friday. Commodities; metals head south; breakfast commodities charge The most strength is coming in breakfast commodities; orange juice, coffee, sugar, and soybeans, with prices mostly being supported by limited supply following the hurricanes last year. While wheat and lean hogs are lower. In metals, we’re seeing price weakness in commodities that have been benefiting from Chinese demand picking up. Iron ore, copper, and aluminum appear to be facing selling pressure, with investors and traders taking profits, awaiting more evidence of a pickup in activity in China. While the higher US dollar is also acting as a catalyst to take profits too. That said, longer term fundamentals in metals support higher prices over the longer term. Gold is also seeing a sharp pullback from its fresh cycle highs after the US dollar strengthened (following that very strong US jobs report). That said, gold ETFs like GLD, have seen increased buying throughout the year. Click here for Ole Hansen’s commodity report.   Source: Financial Insights for second week of February | Saxo Group (home.saxo)
Saxo Bank Podcast: The Bank Of Japan Meeting And More

Bank Of Japan’s Nominees For The New Chief Will Likely Continue To Send Market Jitters, Disney Is Expected To Report Revenue Growth

Saxo Bank Saxo Bank 06.02.2023 09:12
Summary:  This week, markets will be digesting the slew of central bank meetings from last week, along with the bumper jobs report, as more Fed speakers including Chair Powell take stage. The Reserve Bank of Australia may likely stay in the chorus and hike rates by 25bps as well, but focus will be on guidance. Bank of Japan’s nominees for the new chief will likely continue to send market jitters, while UK GDP is expected to dodge a recession. China’s inflation and credit data may throw further light on the economic momentum, but US-China tensions will also be on watch. Earnings calendar stays in full force with reports due from Disney, PepsiCo, Toyota as well as Adani Green. Powell’s speech, more Fed speakers on watch as the US dollar jumps After a hotter-than-expected US jobs report on Friday, equities and the VIX index, and the US dollar are on notice. Fed Chair Powell and several Fed speakers are due to speak this week and they could disagree with the Fed’s dovish tilt last week, which could spark a reversal of the risk-off rally we have seen since the start of the year. Powell will be speaking in Washington on Tuesday (1am SGT on Wednesday for Asia), followed by Barr, Williams, Cook, Kashkaru, Waller and Harker over the course of the week. Flight to safety could take the US dollar higher, and shave down broad indices. USD is also likely to find some support this week amid the rising US-China tensions after a suspected Chinese spy balloon was shot down over the weekend. RBA meeting ahead, putting AUDUSD and EURAUD on watch for a potential whipsaw The Melbourne Institute Inflation gauge for Australia rose more than expected MoM & YoY, while Australian retail sales beat expectations. These indicators, coupled with building approvals seeing one of their biggest jumps in a decade, gives the RBA power to keep hiking rates. The RBA is expected to hike by 25bp on Tuesday, with the market pricing in another 25bp hike. However there is a small chance the RBA could keep hiking before pausing in July. The jury is still out. We are watching the AUDUSD and the EURAUD with the AUD having nose-diving as commodity prices fell from their highs, while the USD gathers strength. While the ECB hiked by 50bps last week. However, there is a risk the RBA could be aggressive in its commentary (more than prior meetings), which may perhaps trigger an AUD knee-jerk rally up. For more on FX, click here. Bank of Japan’s nominee submissions and expectations for a policy pivot Monday morning reports from Nikkei that the government has approached Bank of Japan Deputy Governor Masayoshi Amamiya as a possible successor to central bank chief Haruhiko Kuroda sent jitters. The week was supposed to bring possible BOJ chief nominations, as the nominees list has to be presented to parliament on February 10. However, FM Suzuki refused to confirm Amamiya’s nomination. Amamiya has helped Kuroda since 2013 on monetary policies, and is considered the most dovish among the contenders, which is thrashing hopes that BOJ policy normalization could progress under the new chief. As more names are likely floated this week, there will potentially be some volatility in the Japanese yen and equities, with markets continuing to weigh up the possibility of a shift in Bank of Japan’s yield-curve control policy. German inflation on watch; Riksbank rate hike; UK GDP may confirm a delay in recession After a technical delay last week, Germany’s inflation prints for January will be due this week. Spain and France printed higher-than-expected CPI for the month, while the region-wide printed was softer last week. This suggests Germany’s inflation likely eased due to energy price increases being more subdued than previously expected. Meanwhile, adjustments in the CPI basket could also likely result in a softer print. Riksbank meeting next week is also likely to bring a 50bps rate hike, after a similar-sized hike by the Fed, ECB and Bank of England last week. While inflation still remains entrenched, the Governor has recently hinted at financial stability risks, limiting the scope of another 75bps rate increase this month. Lastly, the key in UK will be the preliminary GDP report for the fourth quarter which is likely to dodge a recession. Bloomberg consensus expect GDP growth to be flat QoQ in Q4 after a negative 0.3% QoQ print in the third quarter, underpinned by a strong labor market and fiscal easing. However, it is still hard to conclude that UK could avoid a recession, but only likely suggest a potential delay. If growth comes in weaker than expected, pressure on sterling could start to mount. China’s new loans expected to rise as banks frontloading lending Chinese banks typically deploy proportionally a larger part of their annual loan targets at the beginning of the year. According to Bloomberg’s survey, economists are forecasting new RMB loans jumped to RMB 4,200 billion in January from RMB 1,400 in December which represent around 11% Y/Y growth in outstanding RMB loans, marginally below the 11.1% in December. While mortgage lending likely remained slow, corporate and government bond issuance increased in January. As corporate lending and bond insurance picked up, new aggregate financing is expected to rise to RMB 5,400 billion in January from RMB 1,310 billion in December, but the implied 9.3% Y/Y growth in total outstanding aggregate financing was below the 9.6% in December. China inflation is expected to inch up China’s Inflation may have accelerated as the headline CPI is forecasted to bounce to 2.2% Y/Y in January from 1.8% in December. A surge in in-person service consumption after the reopening may have underpinned some price increases but the upward pressure on the general level of inflation has remained moderate. Rises in vegetable and fruit prices were likely damped by a decline in pork prices. The decline in producer prices is expected to narrow to -0.4% in January from -0.7% in December as industrial metal prices bounced offsetting a decline in coal prices. This week’s earnings focus: Walt Disney, Siemens, and Toyota The Q4 earnings season is not over yet with 243 companies in the S&P 500 Index having reported earnings. This week’s earnings calendar will provide plenty of information for investors to chew on. The list below highlights the absolute most important earnings to watch and out of those the three most key earnings are from Walt Disney, Siemens, and Toyota. The entertainment giant Disney is expected to report revenue growth of 7% y/y and EPS of $0.76 up 21% y/y and a lot of focus will be on Nelson Peltz, the activist investor that has gone into the company, and his quest for higher streaming profitability and potentially changing the asset portfolio of Disney. Siemens, one of Europe’s largest industrial companies, is expected to show revenue growth of 11% y/y and unchanged operating income compared to a year ago as cost pressures remain a key challenge for Siemens. Last quarter the order book and net new orders looked healthy, so the question is whether this will flow through into the outlook for 2023. Toyota is expected to report revenue growth of 19% y/y as demand for cars have come back, but the real interesting focus point on Toyota is further details on the new CEO’s aggressive move towards offering many more fully electric vehicles rather than hybrids. Toyota has recently indicated that they have made errors in their technology bet and looking to aggressively invest in battery EVs. Toyota, Honda and Volvo company earnings are on watch and could disappoint like Ford A bevy of EV and motor companies report this week including Toyota Motor, Honda Motor and Volvo Car. We think there could be a risk they report weaker than expected results, similar to Ford; which sent Ford shares 8% lower on Friday. Ford is struggling to make money on its EV business and blamed supply shortages. Metal commodities are a large contributor to car manufacturers costs. And we’ve seen components of EVs rise significantly in price, amid limited supply vs the expectation China will increase demand.  For example consider the average EV needs about 83 kilos of copper- and its price is up 26%, 250 kilos of aluminium are needed - and its price is up 20% from its low. These are some headwinds EV makers are facing, in a market where consumer demand is restricted amid rising interest rates. Australian reporting season ramps up; banks and property groups results are on watch Financial results kick off with Suncorp reporting 8th Feb- this could be a good indication of what we can expect from big banks such as CBA that reports next week. Data last year showed loan growth in regional banks grew slightly more than the big four banks, so we could see earnings surprises in Suncorp and Bank of Queensland. The market expects 25% earnings growth from Suncorp, and flat growth from CBA next week. The Telco giant, Telstra reports on Tuesday, with a flood of property groups reporting such as Centuria on Tuesday, BWP Trust – the Bunnings landlord, as well as Dexus on Wednesday, followed by Mirvac and Charter Hall Long WALE REIT reporting Thursday. For defensive plays; the plastics giant Amcor reports Tuesday. While interest rate sensitive Australian Tech companies, which are not traded very much at Saxo; start to report this week with Megaport reporting Thursday, and real estate-tech business REA on Friday. Adani Group companies start to report earnings this week After over $100 billion in losses over the last two weeks, focus will remain with the Adani Group stocks this week in India as some of the companies start to report earnings. Adani Green Energy reports earnings this week, and investors will be looking out for comments on corporate governance, response to Hindenburg’s fraud allegations as well as the company’s financial position and debt trajectory. Adani Green is one of the most highly indebted companies in the group, and a big player for India’s net zero ambitions. Macro data on watch this week: Monday 6 February New Zealand, Malaysia Market Holiday Australia Retail Trade (Q4) Germany Industrial Orders (Dec) Germany Consumer Goods (Dec) Eurozone S&P Global Construction PMI (Jan) Germany S&P Global Construction PMI (Jan) Eurozone Sentix Index (Feb) United Kingdom S&P Global/CIPS Construction PMI (Jan) Eurozone Retail Sales (Dec) Germany CPI (Jan, prelim) Indonesia GDP (Q4) Tuesday 7 February Japan All Household Spending (Dec) Australia Trade Balance (Dec) Australia RBA Cash Rate (Feb) Malaysia Industrial Output (Dec) Germany Industrial Output (Dec) United Kingdom Halifax House Prices (Jan) Taiwan Trade (Jan) United States International Trade (Dec) Canada Trade Balance (Dec) Wednesday 8 February Japan Current Account Balance (Dec) India Repo and Reverse Repo Rate United States Wholesale Inventories (Dec) Thursday 9 February Taiwan CPI (Jan) United States Initial Jobless Claims Friday 10 February Australia RBA Monetary Policy Statement (Feb) China (Mainland) CPI and PPI (Jan) United Kingdom monthly GDP, incl. Manufacturing, Services and Construction Output (Dec) United Kingdom GDP (Q4, prelim) United Kingdom Goods Trade Balance (Dec) Canada Unemployment Rate (Jan) United States UoM Sentiment (Feb, prelim) Taiwan GDP (Q4, revised) India CPI Inflation (Jan) China (Mainland) M2, New Yuan Loans, Loan Growth (Jan) Earnings on watch this week: Monday: Activision Blizzard, IDEXX Laboratories Tuesday: Carlsberg, BNP Paribas, Siemens Energy, SoftBank Group, Nintendo, BP, Linde, Vertex Pharmaceuticals, KKR & Co, Fortinet, DuPont, Illumina, Enphase Energy Wednesday: A.P. Moller – Maersk, Vestas Wind Systems, TotalEnergies, Societe Generale, Deutsche Boerse, Adyen, Equinor, Yara International, Walt Disney, CVS Health, Uber Technologies Thursday: KBC Group, Brookfield, Thomson Reuters, L’Oreal, Vinci, Credit Agricole, Siemens, Toyota Motor, NTT, Honda Motor, AstraZeneca, Unilever, British American Tobacco, ArcelorMittal, DNB Bank, Volvo Car, Zurich Insurance Group, Credit Suisse, AbbVie, PepsiCo, Philip Morris, PayPal, Cloudflare Friday: Enbridge, Constellation Software Source: Saxo Spotlight: What’s on the radar for investors & traders this week? Powell’s speech, RBA meeting; Bank of Japan’s nominee submissions; UK GDP; and more earnings from Disney, Toyota, PepsiCo, Adani Green | Saxo Group (home.saxo)
UK PMI Weakness Supports Pause in Bank of England's Tightening Cycle

Markets Are Still Too Optimistic On Inflation And Central Banks Will Not Rush To Pull All Stops, Driving Rates To Zero

Franklin Templeton Franklin Templeton 06.02.2023 09:21
Does the latest US data confirm the battle against inflation has already been won? Franklin Templeton Fixed Income CIO Sonal Desai says markets are overly optimistic. Bond investors have started the new year on a very upbeat tone. They seem convinced that the battle against inflation has already been won. The Federal Reserve (Fed) might nudge rates up a bit more to stay on the safe side, but soon enough we’ll go back to a world of very low interest rates—this seems to be the consensus view based on the price action. The encouraging US December Consumer Price Index (CPI) print solidified this view—headline inflation fell 0.1% from the previous month, pushing the year-over-year rate down to 6.5% from November’s 7.1%. Core inflation (excluding food and energy) slowed to 5.7% from 6.0%. Mission accomplished? I believe not. I think markets are still too optimistic on inflation, and underestimate a very  important shift in central banks’ attitudes. In this post I will summarize my thinking in four points. First. Macro policies are still relatively loose. It’s true that supply shocks are fading out, rent inflation will likely soon peak, and there is some weakening in economic activity. But this weakening is nowhere near enough of what’s needed to pull inflation down to 2%-3%, because there are a number of inflationary forces still at work. In particular: Fiscal policy remains very loose; we are looking at a fiscal deficit in excess of 5% of gross domestic product (GDP) with a relatively robust economy; on top of this, Congress passed a US$1.7 trillion funding bill that increases discretionary spending by 6%. Social Security and disability checks have just increased by close to 9% for 70 million people—that’s close to 30% of the adult population. The Fed’s balance sheet is still way larger than pre-crisis, with an expansionary impact on monetary policy. Second. I think markets and many analysts have a “glass half-full” view of wage growth and inflation expectations: We have different measures of wage growth, and some show an encouraging decelerating trend. But others do not. The latest available data from the Atlanta Fed’s Wage Growth Tracker show wage growth treading water at a rather elevated level. In December, wages for workers switching jobs rose 7.7% year over year; but wages for workers staying in their jobs also increased a hefty 5.3%, showing that employers are having to give robust wage raises to retain workers.1 Overall wage growth increased  6.1%. We keep hearing that long-term inflation expectations are still well anchored, and indeed the New York Fed survey of consumer expectations has five-year ahead expectations just over 2%.2 But one-year ahead expectations are 5.2%. Inflation has run above 5% for a year and a half already, and consumers expect it to stay above 5% for another year. To me that means that while consumers do believe that eventually inflation will come back to target, for the time horizon relevant to most of their economic decisions, they expect inflation to remain much higher. To summarize, we have a strong US labor market with the unemployment rate still at 3.5%, wage growth running at 6% and one-year ahead inflation expectations above 5%. It seems very unlikely that we can halve the inflation rate by the end of this year with just a reduction in job openings. I think we are more likely to end the year with inflation at 4%-5%. Atlanta Fed Wage Growth Tracker Pointing to Still-Elevated Wage Pressures Atlanta Fed Wage Growth TrackerJanuary 1998–December 2022   Sources: Bloomberg. As of January 18, 2023. Shaded area represents a recession as defined by the National Bureau of Economic Research (NBER).   Third. Financial conditions remain loose, and this could turn the markets’ confidence in lower rates into a self-defeating prophecy. Markets keep testing the Fed. The Fed keeps promising that it will hike more and then keep policy tight for quite a while. Markets bet that as soon as growth weakens a bit more the Fed will blink and start cutting rates. But as looser financial conditions offset part of the Fed’s tightening effort, the central bank runs a higher risk of inflation pressures becoming entrenched at an uncomfortably high level. This cat-and-mouse game is one reason why I think the Fed will have to raise the policy rate to 5.00%-5.25% and leave it there for the remainder of this year. Read next: Difficult Decision Ahead Of The RBA, The Market Expects A 25bp Rate Hike| FXMAG.COM Inversion in the Yield Curve Suggests Bond Markets Expect the Fed to Pivot Soon Two-Year US Treasury Minus Three-Month US Treasury Yield SpreadJanuary 2000–January 18, 2023   Sources: Bloomberg. As of January 18, 2023. Shaded area represents a recession as defined by the National Bureau of Economic Research (NBER). Past performance is not an indicator or guarantee of future results.   Fourth and most important. I believe financial markets are misguided in thinking that central banks will end up regarding this inflation episode as simply a temporary aberration. Just like the global financial crisis (GFC) caused a long-lasting change in the attitude and stance of monetary policymakers, the inflation surge of the past couple of years will have a similar long-lasting effect. The GFC did not result in a new great depression. But central banks became nonetheless much more sensitive to the risk of deflation, and for the next 10 years reacted to every shock with an overwhelming monetary easing. Similarly, the recent inflation surge will not result in hyperinflation or even in a 1970s-style inflation spiral, but it will make central bankers much more sensitive to the risk of entrenched higher inflation. Central bankers now understand that prolonged loose monetary policy contributed to a multi-year inflation overshoot that they have not yet brought back under control. You can see it in statements from monetary policymakers in both the Fed and the European Central Bank. As a consequence, as the economy slows and possibly dips into contraction, central banks will not rush to pull all stops, driving rates to zero and launching a new stage of quantitative easing. I think they will instead limit themselves to more traditionally sized rate cuts. This is reinforced by another consideration: over the past decade and a half, central banks could rely on important disinflationary forces, especially the surge in labor supply from China and deepening global supply chains. These forces allowed massive monetary easing to support asset prices without boosting goods and services inflation. This is no longer true. In their book, “The Great Demographic Reversal,” authors Manoj Pradhan and Charles Goodhart make a compelling case on the demographics. As China’s population ages, it contributes more to demand than to supply, and therefore has an inflationary impact—the opposite of when a younger Chinese population entered the global market and boosted supply more than demand. Similarly, the energy transition and companies reducing their reliance on global supply chains tend to raise costs, and are therefore inflationary. We are therefore likely to see a structural change in central banks’ attitudes, and markets have not come to terms with it yet. They will have to. In my view, we are facing a multi-year period where markets will relearn to price risk without such a strong central bank safety net. There will be a lot more volatility—we have gotten a taste of it already. The silver lining is that this adjustment brings new investment opportunities, particularly in fixed income, where the focus can finally shift squarely onto the analysis-driven search for value, rather than an obsessive hunt for yield at greater and greater risk. Endnotes Source: Federal Reserve Bank of Atlanta, data as of December 2022. Source: Federal Reserve Bank of New York December 2022 Survey of Consumer Expectations. There is no assurance that any estimate, forecast or projection will be realized. WHAT ARE THE RISKS All investments involve risks, including possible loss of principal. The value of investments can go down as well as up, and investors may not get back the full amount invested. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in an investment portfolio adjust to a rise in interest rates, the value of the portfolio may decline. The information provided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio. This is not a complete analysis of every material fact regarding any industry, security or investment and should not be viewed as an investment recommendation. This is intended to provide insight into the portfolio selection and research process. Factual statements are taken from sources considered reliable but have not been independently verified for completeness or accuracy. These opinions may not be relied upon as investment advice or as an offer for any particular security.   Source: On My Mind: Transitory tightening? | Franklin Templeton
US Inflation Rises but Core Inflation Falls to Two-Year Low, All Eyes on ECB Rate Decision on Thursday

Combination Of Improved Valuations And An Uncertain Near-Term View Leaves Us Moderately Bearish Toward Risky Assets

Franklin Templeton Franklin Templeton 06.02.2023 09:37
Key Points • Valuations reset across most assets in 2022, leading to a rise in expectations for longterm returns for many risky assets, including high-yield bonds and equities. • We view valuations as a better long-term asset allocation signal than a justification for short-term portfolio changes. • Despite improved long-term return expectations, our cautious near-term macro-outlook— with significant recession risk—leads to a less favorable view of risky assets, such as high-yield bonds and equities, over the next several quarters. • Putting it all together, the improvement in valuations currently leaves us moderately bearish on risky assets given our cautious cyclical outlook. Introduction Franklin Templeton Investment Solutions (FTIS) is optimistic about the performance potential for risky assets over the long term, which we consider to be a full business cycle, or about 10 years. However, our short-term preference (over the next 12 months) for risk assets is more cautious, based on our macro outlook. Some might notice these opposing viewpoints and wonder what signals would make an investment manager bearish in the short-term and bullish over the long-term, and how they balance this tension in a portfolio. Here, we attempt to provide the rationale behind these opposing views. While generally applicable to all risky assets, we will focus specifically on high-yield bonds and equities. Long-term return expectations have improved Our long-term return expectations have risen across every asset class, due largely to the market declines in 2022, which have reset valuations (Exhibit 1 on the next page). In equities, lower price-to-earnings (P/E) multiples (and thus higher earnings yield) now mean that valuations are a tailwind over the foreseeable future, rather than a headwind. In fixed income, interest rates have risen across the yield curve. Higher rates and wider credit spreads make high-yield bonds look more appealing to us over the long term. Historically, valuations have been helpful indicators of long-term returns. As an asset class gets cheaper (i.e., yields increase), generally the long-term return expectations increase. However, valuations are much less effective at predicting shorter, one-year returns (Exhibit 2 on the next page). Focusing on the long term We believe it’s hard to argue against the long-term case of high-yield bonds and equities, assuming they fit an investor’s risk parameters and investment horizon. Historically, high-yield bonds have produced a total return somewhere in between US stocks and investment-grade corporate bonds. And they have achieved these returns with less volatility than equities, resulting in what we believe to be strong risk-adjusted returns (see Exhibit 3). High-yield issuers usually have less equity and/or more leverage on their balance sheets, which raises their default risk and leads to a higher credit spread when compared with their investment-grade counterparts. The higher credit spread leads high-yield bond returns to move more in lockstep with the perceived financial strength of their issuers. Thus, they usually respond to the strength of the economy (similar to stocks) more so than changes in interest rates, which tend to impact investment-grade corporate bonds to a greater degree. Put simply, high-yield bonds have more exposure to the economic growth factor, while investment-grade bonds have more exposure to the interest-rate factor. Investors are compensated for this extra credit risk with excess returns—at least when times are good, and the default rates are low. What about when times are bad? Of course, like equities, high-yield bonds are not impervious to downturns. But so far, we have never observed two straight calendar years of negative returns in the high-yield asset class1 (see Exhibit 4). With a streak like that, should investors consider high yield? Our view (short-term vs. long-term) Our near-term macro outlook for 2023 remains cautious. While inflation may have peaked, we believe it will remain above the US Federal Reserve’s (Fed’s) target levels of 2% for some time. The Fed has repeated that it is unconditional in its fight against inflation, with the hope that it can lower job openings (weaken wage inflation) without materially affecting employment. We think this will be difficult to achieve. We also believe that growth and employment need to weaken to fully normalize inflation. FTIS’ odds for a US recession over the upcoming year remain high at 65%. The implications of this viewpoint for asset allocation are straightforward. Risky assets, such as equities and high yield, have performed poorly heading into recessions (see Exhibit 5). During recessions, the high-yield risk premium, or spread over Treasuries, typically spikes up to compensate for anticipated higher defaults. At its peak, the default rate has reached more than 10% in a recession and spreads often widened past 7%. We do not think high-yield bonds are currently pricing in a recession from a spread valuation perspective (see Exhibit 6). In other words, the market, in our view, is not pricing in the much tighter financial conditions and weaker financial performance for issuers that often comes with a market downturn and can lead to an increase in defaults. A volatile year ahead At the opening of 2022, we believed the Fed was walking a tightrope heading into the year.2 Unfortunately, it is still on the same tightrope, in our view, as the central bank tries to engineer a soft landing in 2023. The Fed will likely try to pause its interest-rate hikes at some point in 2023, fearful of driving the US economy into recession. The market is pricing in Fed rate cuts in 2023 due to growth worries. We find this scenario unlikely, and think the Fed is likely to keep rates restrictive throughout 2023. As always, what ultimately happens will depend on a number of variables, many outside the Fed’s control, including the US economy’s sensitivity to higher interest rates, and how geopolitical developments evolve. The performance of risky assets will depend on these variables, among others. Returns at year end don’t reflect the volatility experienced along the way. Prices will likely be volatile until the market has an unobstructed view of clear skies ahead—and that will likely begin with the Fed’s policy actions. This is why we believe that nimble, active management is important, especially in times like these. Our own viewpoint will change as our cyclical outlook changes. Conclusion Improved valuations have increased the long-term expected return outlook for multi-asset portfolios in general. However, in the near term, we weigh our cyclical outlook more heavily, which leaves us defensively positioned given our view of significant US recession risk. This combination of improved valuations and an uncertain near-term view leaves us moderately bearish toward risky assets, such as high yield and equities. Source: ftis-high-yield-0123-us.pdf (widen.net)
The Commodities Feed: US announces SPR purchase

US Crude Oil Is Back Into Last Year’s Bearish Trend, The Latest US Jobs Data Will Likely Support The USD Bulls

Swissquote Bank Swissquote Bank 06.02.2023 11:52
Very strong US jobs data released last Friday hit the Federal Reserve (Fed) doves, sent equities lower, the US yields and the US dollar higher.And the latest US jobs data will likely support the US dollar bulls this week, as we don’t have much on the economic calendar that could temper Friday’s monstrously strong NFP read, and remind us that the US economy is still slowing. Japan Plus, the fresh selling pressure on the Japanese yen will likely give an extra hand to the Fed hawks, on weekend news that the potential new Bank of Japan (BoJ) Governor, Masayoshi Amamiya will be dovish. In the light of the latest macroeconomic developments, a revision to medium term outlook is necessary. Forex • The dollar-yen’s latest jump above the 130 mark could be sustainable in the short to medium run.• The EURUSD traders may be happy to call it a good trade and retreat to the sidelines. • Cable could sink into bearish consolidation zone. Adani Elsewhere, the Adani selloff enters the third week, and things go from bad to worse as in increasing number of banks don’t accept Adani holdings as collateral anymore. US vs China The Chinese spy balloon that was flying over some strategic points in the US renewed tensions between US and China, and that could throw a floor under the gold’s selloff. Curde Oil And US crude is back into last year’s bearish trend, with however risks of tight supply, and Chinese reopening hanging in the air. Read next: The US Judge Denied The FTC's Request, Giving The Meta An Important Victory| FXMAG.COM Watch the full episode to find out more! 0:00 Intro 0:31 That monstrously strong US jobs data shakes market dynamics 2:39 Next thing to watch! 3:48 Equities dive 5:33 USDJPY to extend gains above 130 6:59 EURUSD to pause rally 8:30 GBPUSD to slip below 1.20 9:43 XAU boosted by US-China’s ballooned tensions 10:14 US crude slips into last year’s bearish trend Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #US #NFP #wages #jobs #data #Fed #FOMC #inflation #expectations #Powell #USD #EUR #GBP #JPY #XAU #US #China #spy #balloon #Adani #selloff #crude #oil #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
The Commodities Feed: Brent Breaks Above $80, Energy Market Dynamics and Trade Data Analysis

Gold's Correction Could Last Until February 14

InstaForex Analysis InstaForex Analysis 06.02.2023 14:05
Investors waiting for an opportunity to enter the gold market found their chance on Friday, when the US released an unexpectedly strong employment report for January. The data said 517,000 jobs were created in January, well above the expected gain of around 193,000. This led to prices falling by more than 2%. However, some analysts said there was a downside risk because the growing momentum in the US labor market could force the Fed to keep its aggressive policy longer than expected. The central bank mentioned before that it needs to see a softening of the labor market before they become confident that inflation is under control. A survey was conducted last week in which 44% of participants were bearish in the short term. 17% were optimistic, while 39% believe that prices will trade horizontally. There was also an online poll, where 61% said gold will rise this week. 25% said the price will fall, while 14% were neutral. This mixed view on gold is due to the fact that prices fell by 3.5% at the end of the week. It went under $1,900 an ounce, making analysts foresee support around $1,850 an ounce. Bannockburn Global Forex managing director Marc Chandler said gold's correction could last until February 14, when the next inflation data will be released. This could give the Fed an opportunity to slow its aggressive monetary policy. Darin Newsom, a senior technical analyst at Barchart.com, said $1,850 could be the first stop in this correction. However, some analysts, such as Adrian Day, president of Adrian Day Asset Management, see near-term downside potential for gold prices   Relevance up to 10:00 2023-02-11 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/334243
InstaForex's Ralph Shedler talks Euro against Japanese yen

USD/JPY Pair Is Trading Above 132.00, The Aussie Pair Is Near 0.6900

Kamila Szypuła Kamila Szypuła 06.02.2023 14:35
The US dollar surged against its major trading partners early Monday ahead of a weak week of economic data and speeches by Fed officials resumed. The week starts calmly on Monday without key data. The US Monthly Employment Report (NFP) released on Friday showed that the economy added 517,000 jobs in January. jobs, significantly exceeding the consensus estimate. Moreover, the unemployment rate unexpectedly fell to 3.4%, the lowest level since May 1969. USD/JPY The prevailing risk-avoiding environment – as indicated by the generally weaker tone in equity markets – provides a safe haven for the Japanese Yen (JPY) and acts as a headwind for USD/JPY. The yen came under pressure during the Asian session after it was reported that the Japanese government had approached Bank of Japan (BoJ) Deputy Governor Masayoshi Amamiyi as a possible successor to Governor Kuroda. Market participants are of the opinion that Lieutenant Governor Amamiya will continue the policy of Governor Kuroda. The Japanese government has since dispelled rumors that it had approached Amamiya with a new BoJ governor to be announced in February. So USD/JPY started the week with a pattern above 132.00. Over the course of the day, the pair moved back below 132.00 but has now recovered and is trading at 132.1530. EUR/USD Rising tensions between the United States and China add to the bleak mood. On Friday, President Joe Biden postponed US Secretary of State Blinken's upcoming trip to China after a suspicious Beijing observation balloon that was flying in US skies was shot down. In terms of data, European figures were disappointing. On the one hand, Germany published December's factory orders, which fell by 10.1%YoY, much worse than expected. On the other hand, retail sales in the euro zone fell by 2.7% MoM in January. Moreover, we are likely to hear more aggressive statements from Lagarde, citing higher core inflation and growth forecasts. The EUR/USD pair stopped trading below 1.0790. At the beginning of the week, the EUR/USD pair is holding above 1.0765. Read next: Adani Group Company's Crisis Is Gaining Momentum, Finland Is The Happiest Country| FXMAG.COM GBP/USD The British pound has not enjoyed a good reputation lately. The economic data was not strong enough to support sterling against its rivals, while the ongoing strikes and the threat of more in the coming weeks hit the mood. On Friday, the Office for National Statistics (ONS) will release preliminary GDP data for Q4. Growth in the UK stalled in the fourth quarter of last year and may have reversed, fueling further recession fears. The GBP/USD pair tried to break above 1.2050 on Monday. Currently, the GBP/USD pair is trading above 1.2060. AUD/USD The Australian dollar collapsed on Friday after soaring US non-farm payrolls (NFP) data pushed the US dollar higher. Investors are cautious ahead of this week's decision by the Reserve Bank of Australia, which is expected to raise interest rates by 25 basis points for the ninth consecutive time. Annual inflation in Australia rose 7.8% in December, the largest increase since 1990 and above market forecasts of 7.5%. The Aussie pair in the early hours of trading tried to catch up and climbed above 0.6940 but failed to maintain momentum and the Aussie Pair trades below that level again near 0.6900. Source: wsj.com, finance.yahoo.com
Sterling Slides as Market Anticipates Possible Final BOE Rate Hike Amidst Weakening Consumer and Housing Market Concerns

US Recession Looks More Probable Today Than At Any Time

Franklin Templeton Franklin Templeton 07.02.2023 08:01
Stephen Dover, Head of Franklin Templeton Institute, crunches the data to decipher the odds of a US recession this year and the implications for investor portfolios. Originally published in Stephen Dover’s LinkedIn Newsletter Global Market Perspectives. Follow Stephen Dover on LinkedIn where he posts his thoughts and comments as well as his Global Market Perspectives newsletter. In 1663 a strange skeleton was found in a gypsum quarry near the mountain town of Quedlinburg, in present day Germany. The discovery caught the attention of Otto von Geuricke, a Prussian scientist, who concluded that the incomplete skeleton was a unicorn. The skeleton, dubbed the Magdeburg Unicorn, was obviously not actually a mythical beast. It was a composition of bones from several different prehistoric animals.1 The Magdeburg Unicorn is a reminder of the problems that can occur with an incomplete picture. At Franklin Templeton, we invest heavily in gathering data, crunching numbers, building models, and trying to make sense of the deluge of information that bombards us daily. In the modern world, data capture and systematic data analysis are an important part of making informed judgements that help us meet our fiduciary responsibilities.  The topic at the top of everyone’s minds as we start 2023: Is the United States headed into recession, and how will my investment portfolio be impacted? One tool the Franklin Templeton Institute employs to better assess how to answer these questions is a Nowcast model.2 What indicators are we watching While there are several Nowcast-style models, developing our own brings us closer to the data. Our Nowcast index is constructed based on 153 economic and financial indicators from the following categories: manufacturing, labor, consumer, housing and construction, liquidity, and financial conditions. Looking at the most recent readings of many economic indicators, nowcasting gives a more up-to-date reading of the economy than gross domestic product (GDP). Currently, all categories are contributing to the ongoing US economic slowdown, which is also becoming more pronounced. Several indicators are particularly worrisome. Consumer sentiment is near five-decade lows. The gap between current and future sentiment readings, which is typically a good recession indicator, is elevated. More recently, manufacturing sentiment has deteriorated. The global manufacturing purchasing managers’ index (PMI) dropped below the expansion/contraction line of 50 (to 48.6) in December, while ISM manufacturing index also dipped to a “stall-speed” of 48.4 in December. The weakest US sector is housing. Building permits have been on a downward trend for much of 2022 and dropped again in December, as did existing home sales. Sentiment among builders of US single-family homes has been deteriorating for 12 consecutive months. Home prices have recently begun to decline in many US regions. The US labor market has been an outlier of resilience. The prime-age unemployment rate is 3% and job growth remains solid, as shown by a net 199,000 nonfarm payroll jobs added in December. To be sure, labor market indicators typically lag overall activity. But the jobs market is also holding up given supply shortages—as of November, job vacancies outstripped jobseekers by a ratio of 1.8.  However, we are starting to see cracks here as well as the labor component turned negative for the first time in December. US recession looks more probable today than at any time since 1970 Armed with information that shows the US economy slowed significantly in 2022, what lies ahead? What are the odds that a slowdown turns into a full-blown recession? Perhaps the most used and statistically significant recession probability variable is the shape of the US yield curve. The US Treasury curve is now inverted, in the sense that two-year note yields of 4.22% are higher than 10-year yields of 3.49%.3 That’s unusual—typically investors require higher yields at longer maturities. An inverted yield curve typically precedes recessions. But as our work shows, the probability of a recession increases the more different maturities along the yield curve are inverted. Based on a deeper historical statistical analysis, the probability of a recession nears 100% if more than 50% of the maturity spreads along the yield curve are inverted, as is the case today. History also provides plenty of data about how other variables typically behave before recessions. Our work also points to a leading relationship of broad stock market returns and recessions, with large and sustained negative equity market returns often (if not always) preceding recessions. By gathering and analyzing a lot of data we can employ elementary statistics to estimate probabilities of future outcomes. We can also neatly compile a plethora of different data sources with recession-forecasting significance into a single index, which we present in the chart below. Currently, our recession probability index is beyond ”amber”—it is flashing ”red.” In our analysis, a US recession looks more probable today than at any time since 1970. US Recession Model: Probability of Recession Within 12 Months January 1971–January 2023   Sources: Franklin Templeton Institute, S&P Global, NBER (National Bureau of Economic Research), Federal Reserve Bank of Philadelphia, Conference Board, University of Michigan, Institute for Supply Management (ISM), US Department of Treasury, US Bureau of Labor Statistics (BLS), Macrobond.Grey areas represent NBER recessionary periods. Equal-Weighted Composite Of: CEO Confidence, Consumer Confidence Spread, ISM Manufacturing, Treasury Spread, Unemployment Rate, National Financial Conditions Leverage.There is no assurance that any estimate, forecast or projection will be realized.   How should investors position? These quantitative methods provide a basis for how portfolios might be optimally positioned depending on the current environment. Utilizing this framework plus the collective wisdom and experience of 1,300 investment professionals at Franklin Templeton across asset classes, gives us additional intelligence on what this might mean for investors. It is important to distinguish between investor types. Very long-term (endowment style) and risk-tolerant investors will face different decisions than those who are either risk averse or anticipate the need for liquidity in the near term. The former may use any market dislocations that occur when recession looms to opportunistically look for value. The latter may want to consider a near-term reallocation to safer instruments. A third type of investor, one looking to add extra return from tactical asset allocation, will focus on opportunities to switch between asset classes. In short, there is no ”one size fits all” answer for investors. Nevertheless, a few observations can be made that may serve most investors, irrespective of their risk tolerance, return objectives, liquidity needs or other considerations: Government bonds provide a safer haven. If the US economy is moving toward recession, government bonds (i.e., US Treasuries) are likely to produce positive returns. Weak growth (or recession) reduces private sector borrowing demand and hence tends to push down real interest rates. Inflation is more likely to fall than rise, further lowering bond yields. Risk aversion also tends to drive many investors out of corporate assets and into Treasuries as recessions unfold. Corporate profits will almost certainly fall in absolute terms if the economy dips into recession. There has never been a US recession in US postwar history when the S&P 500 Index or National Income and Products Accounts (NIPA) measures of corporate profits did not shrink. That should concern investors, insofar as the consensus of company analysts (as collected by FactSet) expects US corporate profits to rise in 2023. If analysts are forced to significantly downgrade earnings forecast, stocks are likely to struggle. Corporate bond default rates are likely to rise in 2023. After more than a decade of cheap finance, the combination of higher interest rates in 2022 (due to aggressive Federal Reserve rate hikes) and weak economic activity will lead to a deterioration of credit quality. If the past is a good indicator, the spread between corporate bonds and Treasuries is likely to widen. Careful selection of credit risks will be increasingly important. In summary, for long-term, risk-tolerant investors, the abovementioned outcomes should present opportunities in equities and corporate credit. But for more risk-averse investors, those anticipating liquidity needs and those looking to opportunistically exploit cyclical market moves, it is probably best to consider safer government bonds. Stay tuned as we bring you more insights from our quantitative studies and independent investment teams in the coming year. We want to acknowledge the efforts of Lukasz Kalwak, CFA, and Karolina Kosinska, the architects of Franklin Templeton Institute’s Nowcast model.
US Inflation Eases, but Fed's Influence Remains Crucial

US jobs: Should we change our view? - 07.02.2023

ING Economics ING Economics 07.02.2023 08:50
January's jobs report was far stronger than expected, so have we been too pessimistic on the US economy? On the face of it the data makes the 'soft landing' story look more plausible, but as we dig through the data there remains major areas of concern. While interest rates will rise further, we still think the Federal Reserve will switch to rate cuts by year end A warmer-than-usual January has led to less disruptions in the construction sector Hot jobs data suggests interest rates could stay higher for longer Friday’s US January jobs report was far stronger than what both the market and we had expected and has prompted a major debate on whether this means the economy is more resilient than thought. In turn does this mean interest rates need to stay higher for longer? It showed a 517,000 increase in non-farm payrolls with substantial upward revisions, including 71,000 to the previous two months while the unemployment rate dropped to a 53-year low at 3.4%. Given the softer activity data and weakening sentiment, economists had expected a mere 188,000 jobs would be added with even the most optimistic forecast of 320,000 being well short. The unemployment rate had been expected to tick higher to 3.6%. We have been in the camp that thought we would get one more rate rise in March with a slowing economy, weakening jobs market and falling inflation prompting a sharp reversal in the Fed’s policy stance from late third quarter onwards. So does this report mean we need to rip up our forecasts and start again? Yet inflation pressures continue to subside It does make the soft landing scenario look more plausible – the idea that inflation will slow to 2% over the next 12 or so months without a recession and significant job losses. After all, inflation will continue to fall given shelter is such a major influence and house prices are dropping everywhere and rents are topping out in all major cities. There is also evidence that corporate pricing power is weakening while labour costs are moderating as indicated by average hourly earnings numbers within Friday’s reports and the Bureau for Economic Analysis’ data on personal incomes from wages and salaries. The latest employment cost index was softer than expected with slowing quarterly gains set to push the year-on-year rate of growth lower through 2023. YoY change in worker compensation Source: Macrobond, ING   This all points to a lack of need for major rate hikes from here. But it also raises a very important question. If the labour market is so hot, why are the costs of employing people decelerating and converging back to pre-Covid trends? Why was the jobs report so strong? To try to explain it our starting point is to look at one-off factors that could have boosted the numbers. The most obvious case is the 74,000 jump in government workers led by state and local government education workers. This was due to the ending of strike action by University of California Academics. This merely reverses job losses seen in November and December and means February will experience a return to much lower growth. Nonetheless, there was no single event that could explain the strength in private payrolls, which rose 443,000. There was no single event that could explain the strength in private payrolls So we now look at the employment surveys that give us a general indication of demand for private sector workers. Job vacancies, which rose to 11mn in December, equivalent to 1.9 job vacancies for every unemployed American, do just that. However, it has been incredibly strong throughout the past two years and that hasn’t prevented a slowdown in payrolls growth. Moreover, the ISM employment indices for the manufacturing and services sector are 50.6 and 50.0, respectively, which indicate stagnant employment growth given 50 is the break-even level. They are also at the same level they have averaged over the past six months, so again, no reason for a bounce in hiring. Then there is the NFIB small business hiring intentions. A net 19% of small businesses were looking to hire workers in January versus 20% for the six-month average so nothing much there. Next we look at the ADP private payrolls, which listed private payrolls as growing by just 106,000. So there is nothing really from the demand side indicators to point to such a strong rise in January payrolls.   No hiring, fewer firings Next we look at the difference between the seasonally adjusted payrolls growth, which is used to observe the cyclical trends – the 517k number that shocked everyone – and the underlying data. The chart below shows the non-seasonally adjusted changes in employment in each month over recent years and it is obvious that January is when a lot of workers lose their jobs due to seasonal factors. Typically 2.7-3.1mn jobs are shed in January. I’ve taken out 2020 given the wild swings caused by the pandemic through that year, but even January 2020 saw a 2.8mn drop in employment. This year there were only 2.5mn jobs lost in January – we have to go all the way back to 1995 to find a January that lost fewer jobs. Non-seasonally adjust payrolls changes (mn) Source: Macrobond, ING   These seasonal job losses are partly down to the end of the holiday season with people spending less on retail, leisure and hospitality in January with businesses typically laying off staff at this time. Then there is the weather impacting with winter temperatures and snow limiting the ability of people to work outside – so the like of construction gets hit along with mining and oil and gas drilling. This January was warmer and had less snow than the average over the past 20 years so construction, mining and drilling has been less disrupted and people have been out and about more, spending money. This suggests that we should also anticipate strong retail sales and industrial production for January. February has been much colder so far. The story behind the strength in the payrolls number is fewer people being laid off rather than any meaningful increase in hiring So essentially the story behind the strength in the payrolls number is fewer people being laid off rather than any meaningful increase in hiring. This view is backed up in the Homebase employment data. Homebase is a labour scheduling and time tracking tool used by tens of thousands of local businesses that are often individually owned and primarily consist of restaurant, retail and personal services – so reflect the experiences of businesses that won’t be tracked by the larger survey organisations. Homebase number of workers versus median for the period Jan 4- Jan 31 2020 (% difference) Source: Macrobond, ING  Read next: USD/JPY Pair Is Trading Above 132.00, The Aussie Pair Is Near 0.6900| FXMAG.COM These small businesses have been struggling to hire so there may also be a degree of labour hoarding, fearing that if they lay workers off they may not be able to recruit them when business is better. This is consistent with the decline seen in initial jobless claims yet continuing claims are flat lining – no hiring, fewer firings. The chart above shows that the January decline in employment was not as significant as in 2021 or 2022. If it isn’t hoarding then we should be braced for colder weather in February to mean seasonal lay-offs have simply been delayed from January into February. Lay-offs are on the rise From a job lay-offs announcement perspective the outlook for coming months doesn’t look good. Outplacement firm Challenger, Gray & Christmas provides long-term data on lay-offs and hiring announcements by industry and it reported in January that lay-offs rose 440% YoY. The data is volatile, but if we take a 3M average of the annual rate we see that such big increases in lay-offs do typically result in employment growth eventually turning negative – the chart has employment on the right-hand scale inverted so a movement higher implies weakening. Rising lay-offs point to a deteriorating outlook for employment Source: Macrobond, ING   They also track data on hiring announcements so we can get a net figure. In January there were only three sectors out of 30 hiring in net terms; entertainment/leisure, energy and the non-profit sector. The caveat that this reflects larger employers needs to be added, but it doesn’t offer much encouragement for continued strength in payrolls. Challenger lay-offs, hiring and net position in January, by sector (000s) Source: Macrobond, ING   Neither do business surveys in general. Confidence in America’s board rooms and the small business sector (Conference board survey of CEOs and the NFIB small business optimism index in the chart below) are below the levels seen at the worst point in the pandemic and are on a par with where we were during the Global Financial Crisis. This would hint at a more defensive mindset that focuses more on cost reduction rather than business expansion. This certainly tallies with the increase in lay-off announcements. Business optimism is weak Source: Macrobond, ING The jobs market is not as strong as January payrolls suggest As such we appear to have a story where bigger businesses are becoming more cautious and are signaling that demand for workers is flat to falling. Smaller businesses, that struggle to offer the pay and benefits on offer at larger employers are still doing ok and are keen to retain (hoard labour) and hire selectively, but we are a long way from a booming jobs market. This brings me to my final chart and it paints a remarkable story that full-time employment in America has flatlined since March 2022. All of the jobs created since then have been part-time. This does not paint the picture of a vibrant jobs market. US full-time and part-time workers (millions) Source: Macrobond, ING   The data suggest we are starting to lose higher paid full-time workers while gaining lower paid part-time workers, which suggests that aggregate household incomes will fall and the economy will continue to gradually soften. While Friday’s jobs report makes a Fed funds peak of 5-5.25% look more plausible in May, it is not guaranteed. Furthermore, while our 100bp of rate cuts from the third quarter onwards may be too aggressive, we continue to believe that the Fed will be in a position to cut interest rates before the end of the year on the back of decelerating inflation, slower growth and a weaker jobs market. Read this article on THINK TagsUS Jobs Interest rates Federal Reserve Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  
Rates Spark: Bracing for more

Rates Spark: Kicking a bond when it's down

ING Economics ING Economics 07.02.2023 09:14
Expect hawkish rhetoric from central bankers today but euro and dollar rate markets are already pricing in that outcome. Supply resumes this week, with a detrimental effect on duration, front-loaded to the start of the week Hawkish central banks well anticipated by markets Rates markets will be looking to public appearances from European Central Bank board member Isabel Schnabel and Fed Chair Jerome Powell. Despite some notable differences in communication style and in economic fundamentals, markets have taken a uniform view that domestic inflation will soon be back under control, and that their respective tightening cycles will soon come to an end.  What both central banks have in common is that the drop in rates, tightening in credit spreads, and rally in other risk assets make their task of bringing inflation back to target more difficult. Schnabel and Powell face an uphill struggle to move yields up much further Many would object that in the current disinflationary trend, central bankers will not care if the yield curve prices rate cuts before the end of the year. We think this is more true of the Fed than of the ECB but, when it comes to it, we expect both officials to strike a hawkish tone. The main difference is that there is much less confidence about the downward trajectory of European inflation. This will make Schnabel’s push back against market pricing more potent than Powell’s. Read next: Adani Group Company's Crisis Is Gaining Momentum, Finland Is The Happiest Country| FXMAG.COM Helped by a bumper jobs report in the US, and hawkish post-meeting ECB comments, we would argue that both Schnabel and Powell face an uphill struggle to move yields up much further. 10Y Bund yields for instance are 25bp off their post-ECB meeting trough already, to a level we would call low but not strikingly so. The same goes for 10Y Treasury yields, around 3.6%, they are much lower than Fed funds but already 30bp above last week’s lows. Bond yields have bounced convincingly off last week's lows Source: Refinitiv, ING Primary market activity picks up this week Bond issuance resumes in earnest after a week-long hiatus. Euro syndicated deals last week fell to €13bn from €47bn the week before. In the best of times, it is difficult to distinguish the impact of supply on rates direction. The effect tends to be transient, and localised. In addition, it was nearly impossible to make out its effect last week given the cascade of events and economic releases. Euro deals have probably already seen most of their market impact on rates direction This week should prove easier. First of all, we expect some degree of catch up after a quiet week in primary markets. Secondly, some of the deals already announced reinforce that view, and speak to a skew towards longer-dated deals, at least today (see events section below). Thirdly, the fact that many European financials are still reporting this week should reduce the number of swapped deals, making the rest of issuance more market-moving, and also reducing its swap spread tightening impact. As usual, the main challenge is timing. Looking to the US, long-dated 10Y/30Y auctions later this week are well flagged, and the long-dated France and Poland euro deals have probably already seen most of their market impact on rates direction. We would stop short of ascribing the bond sell-off on Friday and Monday to supply pressure, but we think it helped. Bond issuance needs to catch up after a quiet week Source: Refinitiv, ING Today's events and market view The main event today is an opportunity for central bankers to set the record straight after dramatic market reaction to last week’s policy meetings, and rightly so. The focus is on Powell’s interview, but don’t underestimate the potential for Schnabel to move euro markets. The Netherlands (new 10Y), Austria (10Y/17Y), and Germany (inflation linkers) will carry out euro-denominated sovereign bond auctions, adding to France’s newly mandated 30Y syndicated deal which should also occur today. Poland should also come to primary markets with a dual tranche 10Y/20Y deal. The US Treasury will kick off this week’s auction slate with a $40bn 3Y T-note sale. The only economic release to note in this session is US trade. Read this article on THINK
Asia Morning Bites - 04.05.2023

The RBA Meeting Ahead, Crude Oil Prices Are Choppy

Saxo Bank Saxo Bank 07.02.2023 09:35
Summary:  US equities extended their losses while the USD continued to run higher on Monday as markets repriced the Fed’s path higher following Friday’s hot jobs report and Fed member Bostic’s hawkish comments bringing 50bps of rate hikes over the next two meetings back on the table. Eyes turn to Fed Chair Powell up later today if similar hawkish rhetoric will be maintained. RBA meeting ahead and key to watch if the door for further rate hikes is kept open. Oil prices are choppy but Gold strength is seen holding up despite a recent correction.   What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) extended losses, waiting for Powell’s interview and corporate earnings After the retreat triggered by a staggering employment report last Friday, US equities extended losses in a relatively uneventful day on data and news. Bond yields soared further on Monday and put pressure on stocks. Investors are also cautious about what Fed Chair Powell will say in an interview on Tuesday after the strong job data. Disney, PepsiCo, Uber, and DuPont are reporting this week. Nasdaq 100 dropped 0.9% and S&P 500 slipped 0.6%. Nine of the 11 S&P 500 sectors retreated, led by communication service, information technology, and materials. Tesla (TLSA:xnas) outperformed with a 2.5% gain after the EV giant raised the prices of its Model Y SUV. Dell (DELL:xnys) fell 3% following the computer maker shedding 5% of its workforce citing eroding market conditions. Newmont (NEM:xnys) plunged 4.5% after the gold mining giant make a USD17 billion offer for Australia’s Newcrest Mining (NCM:xasx). Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) jumped further to reprice the Fed’s rate path Treasuries extended the post-job report sell-off, seeing yields on the 2-year soaring 18bps to 4.47% and those on the 10-year rising 12bps to 3.64%. Hawkish comments from the Fed’s Bostic, ECB officials, and Bank of England officials added additional pressure to the market which was already in motion to decline in price and rise in yields. Atlanta Fed President Bostic said the strong job report would probably mean that the Fed have to raise rates more than he had projected. Earlier in the day, the weakness in Treasuries started from spill over selling pressure on U.K gilts on hawkish comments from Catherine Mann, external member of the BOE’s Monetary Policy Committee and Huw Phill, chief economist of the BOE, suggest more rate hikes. ECB Governing Council member Robert Holzmann added to the hawkish pushback from central banks, saying “the risk of over-tightening seems dwarfed by the risk of doing too little”. Treasury and corporate supply are weighing on markets as well. About USD 13 billion corporate new issues came to the market on Monday and the Treasury is auctioning USD40 billion 3-years on Tuesday, followed by USD35 billion 10 years and USD21 billion 30 years on subsequent days. For today, all eyes are on Powell’s scheduled interview. The market is pricing in a 25-bp hike in March, followed by an about 80% chance for another 25bp hike in May, bring the terminal Fed Fund rate to above 5%. The rate cut expectation was shed further to 38.5bps as implied by the SOFR June-Dec spread. Australia’s share market earnings are beating US earnings growth, supporting the ASX200  Amid Australia’s reporting season kicking off, so far average earnings growth from the ASX200 companies are outperforming those in the S&P500. But also, stronger than expected earnings from the ASX200 companies so far have moved the market closer to its record all-time high. The market is under 1% away from trading at its highest level in history, and this is despite commodity prices falling this week amid a higher US dollar.  Hong Kong’s Hang Seng (HIG3) and China’s CSI300 (03188:xhkg) deeper into consolidation The Hang Seng Index declined 2% on Monday, extending the benchmark’s retreat from the January 27 high to over 6%. Digital health platforms, mega-cap internet, tech hardware, EV, and Chinese developer names were among the biggest laggards. Alibaba Health (00241:xhkg), plunging 7.2%, was the biggest losers among blue chips, followed by Sunny Optical’s (02382:xhkg) 6.9%. Another i-Phones supplier, AAC (02018) also slipped 4% on signs of weakening demand for iPhones in China. Aluminum product maker China Hongqiao (01278:xhkg) dropped 4.5% after preannouncing a 40% decline in profits in 2022. EV names headed south, falling 2%-5%. HKEX (00388:xhkg) plunged 4.2% despite the Special Administrative Region’s Chief Executive in Saudi Arabia pitching Saudi Aramco to have a second listing in Hong Kong. Renewed geopolitical tension over the Chinese surveillance balloon incident, overall risk-off sentiment spilled over from pricing out some of the rate cut expectations in the U.S., and profit-taking after the sharp rises in the Hong Kong and mainland Chinese stocks weighed on the market. In A-shares, CSI300 dropped 1.3%, with Chinese white liquor one of the worst-performing industries, following reports of PICC Property and Casualty (02328:xhkg) limiting staff liquor consumption at business events. Mainland media speculated it as a sign that the Chinese authorities might do likewise at other large state-owned enterprises. Food and beverage, household appliance, construction materials, and non-bank financials were also laggards. Northbound flows registered a small net selling. FX: Dollar’s post-NFP strength extends further with focus turning to Powell After a hotter-than-expected US jobs report on Friday, Fed member Bostic’s comments on a potentially higher peak in the Fed Funds rate supported the US dollar overnight. Market pricing has seen an upward revision to terminal rate to 5-5.25% and Treasury yields continued to surge higher. The Japanese yen, being the most yield sensitive, suffered a double-whammy of higher US yields and chatter of a dovish new Governor at the Bank of Japan. USDJPY stayed close to 132.50 after jumping higher from sub-129 levels on Friday. AUDUSD pushed below 0.69 ahead of the RBA meeting (read preview below) while NZDUSD is still testing the 0.6300 handle. EURUSD plunged further to sub-1.0750 but GBP supported at 1.2000 as BOE’s Mann noted that the next step in the Bank Rate is still more likely to be another hike than a cut or hold. Crude oil (CLG3 & LCOH3) prices whipsawed A risk-off tone in the market following Friday’s US jobs report and hawkish comments from Fed’s Bostic saw oil prices slump lower earlier in the US session. Prices turned around later however as risks of supply disruptions rose after a catastrophic earthquake in Turkey has halted oil flow to the Ceyhan export terminal, which ships more than 1mb/d. Meanwhile, Saudi Aramco increased most prices for its flagship Arab Light grade against expectations of a cut, suggesting confidence in the demand outlook. WTI prices dipped towards $72 before a recovery to $74.50/barrel while Brent was up to $81/barrel, still far from resistance at $84.30. Gold (XAUUSD) strength continues to hold up despite a stronger dollar Gold prices saw a correction to drop back below $1900 after the hot US jobs report on Friday after the speedy run higher in the last several weeks. Stronger dollar and higher yields overnight again with hawkish comments from Fed’s Bostic continue to suggest there could be more downside for Gold in the near-term, but the $1870 support has continued to hold. This morning again, Gold is still testing that level, and if it continues to hold, it would send a signal about a weak correction within a strong uptrend. Next level of support at $1845 followed by $1828. Fed Chair Powell’s comments in the day ahead will be on watch. Copper awaiting Chinese demand recovery Copper led the base metals sector lower as the impact of the strong US jobs report last week lingered. However supply disruptions in Peru have helped to hold the key $4 support for now, and all eyes are on the pickup in activity in China. Aluminium briefly spiked after the reports suggesting the US was preparing to slap a 200% tariff on Russian aluminium. Russia is the world’s second largest producer of the metal and traditionally has accounted for 10% of US imports. However, imports fell to virtually zero in October last year. As a result, the tariff is expected to have limited impact on supply.  Read next: Adani Group Company's Crisis Is Gaining Momentum, Finland Is The Happiest Country| FXMAG.COM What to consider? Hawkish remarks from Fed’s Bostic; Chair Powell due to speak today Atlanta Fed president Bostic (non-voter) spoke on Bloomberg, noting that jobs data from Friday raises the possibility of a higher peak rate, and his base case is still for two more hikes. Bostic also said the Fed could consider moving back to a 50bps hike if it needed to. Chair Powell will be speaking in Washington on Tuesday (1am SGT on Wednesday for Asia), followed by Barr, Williams, Cook, Kashkari, Waller and Harker over the course of the week. Japan’s nominal wage growth records highest growth in 26 years Japan reported a stronger-than-expected wage growth for December, with labor cash earnings of 4.8% YoY coming in above 2.5% YoY expected and prior revised higher to 1.9% YoY as well. This was the highest since 1997, and could potentially fuel speculation again that the Bank of Japan could consider shifting policy after the new Governor is appointed in April. Real cash earnings growth also turned positive, coming in at 0.1% YoY from -2.5% YoY previously and -1.5% YoY expected. RBA meeting ahead; a 25bps hike is likely to 3.35%, while some economists predict a 40bps hike The latest RBA indicators have been hot; surging Australian inflation, hotter than expected retail sales numbers, slowing employment (although unemployment is near five decade lows, at 3.5%), yet other metrics such as building approvals are soaring - seeing one of their biggest jumps in a decade. Meanwhile the RBA is contending with signs of a slowing economy; with the services sector in contractionary phase and retail spending falling. Still the RBA is likely to continue to hike rates to the highest in over a decade. A 25-bp hike is expected by most today. However guidance is key, as the market is now pricing the RBA for another ~37 bps of tightening, into a peak in either June or July, and then cutting in September. We’re watching AUDUSD and EURAUD with the AUD having nose-dived as commodity prices fell from their highs, while the USD gathers strength, with the dollar index breaking above 103 for the first time since early January. If the RBA hikes more than expected, a knee-jerk rally up the Aussie dollar is likely. US plans a 200% tariff on Russian Aluminium; yet prices continue to fall on a higher US dollar President Biden has yet to give the go-ahead, however it’s being reported the White House was mulling an outright ban. The 200% tariff is expected to have a limited impact on prices given Russia accounts for 6% of global aluminium. Aluminum prices held losses, largely pressured by a higher US dollar. In the US, Alcoa and Century Aluminum shares fell. In Australia keep an eye on Rio Tinto and Alumina. Investors may like to consider prices are paring back from their highs amid a higher US dollar, yet concerns linger that supply cannot keep up with demand for high purity aluminium. The same applies to most metals. There are risks of a further pull back in commodity pricing should the US dollar continue to run up, however, the market will likely once again focus back on fundamentals. So keep an eye on the US dollar. Outlook from European industrial giant Siemens to watch Siemens, one of Europe’s largest industrial companies, is expected to show revenue growth of 11% y/y and unchanged operating income compared to a year ago as cost pressures remain a key challenge for Siemens. Last quarter the order book and net new orders looked healthy, so the question is whether this will flow through into the outlook for 2023. Gold companies are in focus. World’s two largest gold miners are in talks to combine In case you missed it, the US-listed gold miner Newmont is attempting to acquire Australia’s gold mining giant, Newcrest in a bid that values the gold miner at $17bn. If the deal goes through it will reunite the two gold miners after being separated for over quarter of a century. It will also be the world’s biggest takeover of 2023. Overnight the Canadian listed Newcrest jumped 14%, ASX listed Newcrest shares jumped 9% yesterday. Importantly, the takeover offer reflects the world’s increasing appetitive for gold, given gold generally outperforms equites when the Fed pauses rate hikes. Among retail investors, many have been increasing their exposure to gold companies ahead of central banks easing. Nationwide strike in France today After a successful demonstration all over France on 19 January, trade unions are calling for new nationwide strike today against the government’s plan to push back the minimum retirement age to 64 and to accelerate a previous reform, called the Touraine reform, which provides for the extension of the required contribution period to 43 years by 2035. Before Covid, the government also tried to implement a pension reform which caused a massive wave of demonstrations across the countries – there was basically almost no public transport in main cities for weeks. This is still uncertain how long the strike will last. But the trade unions are planning to keep fighting as long as needed. Expect a blockage in several sectors (refineries, metro, rail transport, education). At the moment, we don’t think the strike will have a noticeable negative impact on GDP growth this quarter. We are confident France will avoid a recession this year – with a GDP growth forecast around 0.6-0.7%. This is not high but it is better than in many other eurozone countries.   For what is ahead at markets this week – Read/listen to our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: Market Insights Today: Hawkish Bostic puts the focus on Powell – 7 February 2023 | Saxo Group (home.saxo)
Asia week ahead: RBA policy meeting plus regional trade data

China will be fiscally expanding longer and deeper than normal

Saxo Bank Saxo Bank 07.02.2023 09:38
Summary:  The market is trying to get back to the pre-Covid and pre-war times, but that model is broken. A new dawn is here and the financial world needs to adapt. A famous quote says: “If it is not broken, don’t fix it” which seems to be the operative model of all central banks and politicians since the 1980s, with each market cycle bringing a rinse and repeat of the prior cycle policy response of extend and pretend and releveraging of our already debt-saturated economies. What it should read is: “Why does it keep breaking, and breaking worse after every time we try to fix it?” This is exactly what this quarterly outlook is about. We start the year with the market busy trying to get back to pre-Covid, pre-war in Ukraine standards for the global economy and a new massive leveraging up as interest rates ease and not least, as inflation hopefully fades.  We think this is an entirely misguided premise for what the world needs. We simply think the models are broken. The same models that didn’t see rising inflation are now predicting a peak in inflation, a peak in Fed rates and a general return to higher asset returns without dealing with the underlying crisis from energy shortages (in both baseload and lack of investment), and the move to diversify and deglobalise supply chains. From a mostly OECD country perspective, there’s also the rise of dangerous new potential trade and financial alliances (Russia, China, India and Saudi Arabia) and not least too low productivity to bring real growth or reduce inequality.  The same model also was busy through H2-2022 to talk about the 100 percent likelihood of a US recession! As 2023 gets under way, it’s even money between a ‘soft landing’ and a shallow recession scenario. Models simply don’t work. What has transpired in 2022 was that the excess demand came down but didn’t collapse, the supply function remains below the demand and hence there is real risk of medium- and long-term inflation failing to reach the magic 2 percent, or even 3 percent, but instead ending up at more like 4 percent. This means a need to focus on the real economy, the tangible things we can touch and see as opposed to the intangible digital economy. Today in the S&P 500, 90 percent of market value is in intangibles. Ninety percent! This means the real economy is too small for the ambitions of fiscal and monetary policy, the green transformation and even the power-hungry digitalisation ongoing globally. We simply need to build more infrastructure, create cheaper and more environmentally friendly energy and not least become more productive. Many pundits consider the present supply scarcity and the overall constraints as a hindrance for growth potential in the economy and return on assets. The reality, however, is that we have the highest propensity to innovate and change when we are under the most pressure. We believe that the higher marginal cost of capital, the constraints on available energy, and the inability of central banks and political systems to allow markets to have true price discovery will lead to a complete break with the old models, but a positive one for moving forward. The negative break came in 2022 when both bonds and equity fell. In 2023 we have new fundamentals. The peak in policy rates is close – not here yet but closer. The consumer continues to spend money as they draw down the stimulus money from the pandemic and savings, and sometime in 2023 they will move into credit financing. We have full employment. Financial conditions are easier than when the Fed starting hiking in 75 bps increments in June of last year. And importantly, China has pivoted away from its zero-Covid policies and some of its crackdown on the private sector. We consider President XI’s reversal on zero-Covid policies, tech companies and not least housing critical for the rest of 2023. Last year China imported less energy, had low demand in commodities and ran the economy at maximum 70 percent of capacity. Now China leadership realises that the last decade of slowly decreasing private initiatives has left the economy weak and exposed. This will mean renewed, massive support for fiscal spending, much of it in infrastructure, support for housing credit, expansion of state-owned banks’ balance sheets and a reopening of the economy.  This may be the single biggest event in 2023 having happened before this publication goes to print. Pull out a chart and observe what China’s scaled-up expansion did to the global economy in 2003 (post-WTO entry), 2009 (post-GFC crisis) and 2016 (currency devaluation). We expect the magnitude of China’s credit impulse to match 2007-2009 as the three-year lockdown will mean China will be fiscally expanding longer and deeper than normal. Q1 is likely to be dominated by the fight between a soft landing and recession.  For now, the soft landing probability is rising fast, and the recession probability is falling. We see this and trade this as long risk assets in Q1, but at all times we remind ourselves that nothing has changed fundamentally. We are long energy, long deglobalisation as the economy is running on very easy financial conditions. This means by H2-2023 inflation will resurface, growth will surprise to the upside globally, but mainly in Europe and the US, and the Fed will be forced to begin hiking again after only a short pause (not set for a long series of cuts starting later this year). This will echo the path of Fed Chair Volker in 1979 to 1982. The models are broken, but before we change, we will likely see the market pricing a new round of extend and pretend in Q1. Safe travels,Steen Source: The models are broken | Saxo Group (home.saxo)
Saxo Bank Quarterly Outlook: Bullish View On Industrial Metals

Copper Together With Aluminium Has Already Led A Strong Start To 2023 For Industrial Metals

Saxo Bank Saxo Bank 07.02.2023 09:49
Summary:  Following a dramatic and volatile 2022 with good returns, a lot of this year's commodity performance may be driven by Chinese politics. Cautious and defensive trading – with a few exceptions – best describes the early 2023 price action across the commodity sector, a year that hopefully will provide less drama and volatility than last year, when the Bloomberg Commodity Total Return index surged higher to record a first quarter gain of 38 percent before spending the rest of the year drifting lower before closing with a 16 percent gain. This was a very respectable return considering the stronger dollar and market participants spending the second half increasingly worrying about a recession.  This focus helped drive financial deleveraging across the commodity sector and physical destocking to the point that some markets have ended up being ill prepared for a strong recovery in China and even less so should the most widely anticipated recession in history turn out to be a shallow one. Tight market conditions across most commodities in 2022 saw forward curves swing into backwardation, a structure that rewards long positions through the positive carry from rolling (selling) an expiring contract at a higher price than where the next is bought. Backwardation helped drive the mentioned 16 percent return on a passive long investment in the Bloomberg Commodity Total Return index, almost 9 percent above the return signalled through changes in spot prices.  Source: Bloomberg and Saxo The key macroeconomic event that will drive developments in 2023 has, in our opinion, already occurred. The abrupt change in direction from the Chinese government away from its failed zero-Covid tolerance towards reopening and kick-starting its economy will have a major impact on commodity demand at a time where supply of several key commodities from energy to metals and agriculture remains tight. In addition, risk sentiment will likely also be supported by a continued and broad drop in the dollar as US inflation continues to ease, thereby supporting a further downshift in the Fed’s rate hike trajectory. Furthermore, an increased likelihood of an incoming recession either not materialising or becoming weaker than anticipated may also trigger a response from financial and physical traders as positions and stock levels are being rebuilt in anticipation of stronger demand. In such a scenario, the structural underinvestment thesis, mostly impacting energy and mining, will likely attract fresh attention and support prices. The strong gains seen at the start of the year – especially in gold and copper – have in our opinion showed the correct direction for 2023. However, while the direction is correct, we believe the timing could be slightly off, thereby raising the risk of correction before eventually moving higher. With activity in China and parts of Asia unlikely to pick up in earnest until after the Lunar New Year holiday, the prospect of a lull in activity could be the trigger for a pause in the current rally, before gathering fresh momentum and strength from the second quarter and onwards.  Adding these together we conclude the commodity sector remains on a journey towards higher prices, and while the speed of the ascent will slow we project several years ahead where supply of key commodities may struggle to meet demand. With that in mind, we forecast another positive year for commodities resulting in a +10 percent rise in the Bloomberg Total Return Index. Copper Inside our positive view on commodities we are significantly bullish on industrial metals, led by copper, aluminium and lithium due to the green transformation and the enormous political capital being invested in achieving this transition. In addition, the new geopolitical environment will mean a massive boost for the European defence industry which should see double-digit growth rates close to 20 percent per year over the next economic cycle as the European continent doubles its military spending in percentage of GDP. Copper, together with aluminium, has already led a strong start to 2023 for industrial metals on speculation China, the world’s top consumer, will step up its economic support similar to what it did in 2003 (post-WTO entry), 2009 (post-GFC crisis) and 2016 (currency devaluation). This is in order to fuel an economic recovery to offset the economic fallout from President Xi’s failed and now abruptly abandoned zero-Covid policies. This optimism has been mixing with a weaker dollar on speculation that the Federal Reserve is slowing down the pace of future rate hikes as the inflation outlook continues to moderate.  Source: Bloomberg and Saxo The initial and strong rally in copper, however, has primarily been driven by technical and speculative traders frontrunning an expected pickup in demand from China in the coming months. Once the initial rally is over, the hard work begins to support those gains, with an underlying rise in physical demand needed to sustain the rally, not least considering the prospect of increased supply in 2023 as several projects go live. Overall we see copper settle into a USD3.75 to USD4.75 range during the coming months before eventually breaking higher to reach a new record sometime during the second half.  Gold and silver Gold jumped out of the gate to kick off 2023 with strong gains as the positive momentum, supported by a weaker dollar, carried over into the new year. Silver initially struggled to keep up but given our bullish view on copper we see the potential for silver outperforming gold during a year that will signal a turnaround from 2022 as previous headwinds, the stronger dollar and rising yields reverse to add support.  In addition, we see continued strong demand from central banks providing a soft floor in the market. While last year’s record buying of 673 tons during the first three quarters alone (Source: World Gold Council) is unlikely to be repeated, the activity nevertheless is likely to create a soft floor under the market, similar to the one OPEC+ through actively managing supply has established under the crude oil market. Part of that demand is being driven by a handful of central banks wanting to reduce their dollar exposure. This de-dollarisation and general appetite for gold should ensure another strong year of official sector gold buying. Source: Bloomberg and Saxo Adding to this, we expect a friendlier investment environment for gold to reverse last year’s 120 tons reduction via ETFs to a renewed increase. However so far, and despite the strong gains since November, we have yet to see demand for ETFs – often used by long-term focused investors – spring back to life, with total holdings still hovering near a two-year low. ETF demand struggles when investors trust central banks will deliver what they promise, and with inflation coming down that that trust is currently not being challenged.  However, it is our belief that inflation, following a slump during the next six months, will start to revert higher, primarily driven by rising wage pressures and China stimulus raising demand and prices for key commodities, including energy and metals. Until such time we will likely see gold spend most of the first quarter consolidating within a USD1,800 to USD1,950 range, before eventually moving higher to reach a fresh record above USD2,100. If achieved we could see silver return to USD30 per ounce, a level that was briefly challenged in early 2021.  Crude oil Crude oil demand will, according to the International Energy Agency, rise by 1.9 million barrels per day in 2023, bringing the total to the highest ever. The main engine behind that price supportive call is a strong recovery in China as the country moves away from lockdowns towards a growth-focused recovery, driven not only by increased mobility on the ground but also supported by a post-pandemic recovery in jet fuel consumption as pent-up travelling demand is unleashed.  What it will do to prices very much depends on producers’ ability and willingness to bump up supply to meet that increase in demand. We expect multiple challenges will emerge on that front to support higher crude oil prices later in the year once demand in China increases, sanctions on Russian crude and fuel products continue to bite, and OPEC shows limited willingness to increase production.   The theme for our quarterly outlook, ie the model is broken, has very much been felt and seen across the energy sector this past year. Russia’s attempt to stifle a sovereign nation and the Western world's push back against Putin’s aggressions in Ukraine remains a sad and unresolved situation that continues to upset the normal flow and prices of key commodities from industrial metals and key crops to gas, fuel products and not least crude oil. EU and G7 sanctions against Russian oil from December last year has created several new price tiers of oil where quality differences and distance to the end user no longer are the only drivers of price differentials between different crude grades. Seaborne crude oil flows from Russia has held up but will increasingly be challenged in the coming months as EU’s product embargo is introduced in February.  These developments have forced Russia to accept a deep discount on its crude sales to customers not involved in sanctions, especially China and India. The second-wave reaction to these developments has been strong refinery margins in China, a country with capacity beyond what is required for the domestic market. Depending on the strength of the economic rebound in China, we are likely to see an increase in product flows from China to the rest of the world. Together with the US, the Middle East, an emerging refining powerhouse, these flows will likely make up the shortfall in Europe from the removal of supply from Russia.  Crude oil’s trajectory during the first quarter primarily depends on the speed with which demand looks set to recover in China. We believe the recovery will be felt stronger later in the year, and not during the first quarter which seasonally tends to be a weak period for demand. With that in mind we see Brent continue to trade near the lower end of the established range this quarter, mostly in the USD80s before recovering later in the year once recession risks begin to fade, China picks up speed and Russian sanctions bite even harder.  OPEC meanwhile has increasingly managed to rein back some price control, not least considering the level of market share it controls together with members of the OPEC+ group. Through their actions they have been able to create a soft floor under the market and the question remains how they will respond to a renewed pickup in demand. Not least considering their frustrations with Western energy companies and what they see as political interference in global oil flows and not least last year’s decision by the White House to release crude oil from its Strategic Reserves.  Overall we see another year where multiple developments will continue to impact both supply and demand, thereby raising the risk of another volatile year which at times may lead to reduced liquidity and with that fundamentally unwarranted peaks and troughs in the market. Following a relatively weak first quarter where Brent should trade predominately in the USD80s, a demand recovery thereafter combined with supply uncertainties should see Brent recover to trade in the USD90s with the risk of temporary spikes taking it above USD100.   Source: China reopening will drive another strong year for commodities | Saxo Group (home.saxo)
Crypto: according to Craig Erlam, there seems to be a gap between reality and prices

If Retailers Continue To Withdraw Capital From Brokers The Cryptocurrency Market May Suffer The Most

Saxo Bank Saxo Bank 07.02.2023 10:25
Summary:  From a near-perfect environment for speculative assets before 2022 to the opposite, crypto faces fundamental challenges. The genesis of crypto: a post-GFC liquidity bonanza On December 16, 2008, the United States Federal Reserve (Fed) slashed with a stroke of the pen the interest rate to near zero amid the Great Recession. This was the first time in history that the Fed imposed an interest rate below one. To get the economy back on its feet, the Fed followed up with hefty quantitative easing in March 2009 to flood the economy with fresh money and liquidity. Throughout the 2010s, the Fed retained a low interest rate, aside from a few minor interest rate hikes and cuts, while other central banks even enforced a negative rate. To put it frankly, this formed a near-perfect environment for speculative assets to thrive for years to come. As a peculiar circumstance, hardly two weeks after the Fed slashed interest rates to zero for the first time, the most speculative asset of this epoch – namely Bitcoin – emerged, following its genesis block on January 3, 2009. It was largely a coincidence that Bitcoin mined its first block that close to the Fed imposing zero rates and quantitative easing. However, this environment has been of great significance to make Bitcoin and later crypto as a whole the darling of retail investors it slowly but surely became. Retail supremacy In its first decade, crypto derived little if any recognition from the lion’s share of institutional investors and financial intermediaries, other than a few strong advocates. Although the financial establishment would simply not touch crypto with a bargepole, retail participation grew exponentially, making crypto a key playing field for retail investors along with meme stocks and other r/wallstreetbets favourites. The near zero or even negative interest rates in some countries have drawn in retail investors to investable assets, including greatly speculative markets such as crypto to perchance achieve some return on their capital, during times at which interest rates have not given any yield. The absence of institutions and frequent fear-of-missing-out retail investors have fuelled excessive volatility and various bubbles such as in 2017 and 2021, causing countless cryptocurrencies to unsustainably pump to sky-high prices before dropping like a stone. This volatility has arguably reinforced the desire of institutions to stay away from crypto. A great business to serve retail Serving the trading needs of retail in crypto has been an extremely lucrative business for the exchanges that were early movers in the space. In fact, the majority of Coinbase’s revenue is a product of retail trading, although the company has various other revenue streams such as staking, interest rate earnings, commerce gateway, developer tools, and institutional trading and custody. Retail trading of crypto may not pay as many bills at zero-commission broker Robinhood relative to Coinbase, yet, it is still a sizeable part of the firm’s revenue, particularly considering that it offers trading in other assets such as equities and options. This stresses that retail rather than institutions keeps crypto-trading enablers afloat. Source: Coinbase Global, Inc. & Saxo Group Source: Robinhood Markets, Inc. & Saxo Group Will retail stick around just as interest rates rise and liquidity dries up? In what felt like a flash in 2022, the macro environment transformed from a near-perfect environment for speculative assets on pandemic-induced liquidity to an ugly reversal. To tame soaring inflation, the Fed raised interest rates from near zero to above 4 percent in the span of less than a year, causing other central banks around the world to follow suit. To make matters worse, the Fed initiated quantitative tightening to decrease the liquidity in markets by shrinking its balance sheet. The rate hikes in 2022 reduced liquidity and further deflated the frothiest speculative markets of 2021. In hindsight, in early 2021, retail hands had started running dry of fresh ‘free’ pandemic stimulus money to plough into crypto. Note, for example, the first huge peak in Bitcoin and other crypto assets was within several weeks of the last and largest US stimulus check, after which the subsequent volatility saw many crypto traders burning out. From this point forward, if retail continues to withdraw capital from brokers, the crypto market is likely to be hit the hardest, as crypto has never existed in such a macro environment and because of weak participation from professional and institutional investors. In our view, retail will not likely pull out of the market immediately, as the almost 15-year perception that money is cheap must be erased from the dominant, younger generation of retail crypto traders. If liquidity stays tight as central banks fight inflation, the model of retail supremacy to not only keep the crypto market afloat but also the model of crypto brokers selling shovels in a gold rush will break down. From retail to institutions In the past few years, crypto market advocates have touted the impending arrival of serious institutional participation. Relative to the ‘don’t-touch’ attitude that institutions largely held towards crypto until 2020, some respected institutions have dipped their toes into the space, trading the market themselves, offering it to clients, and in some cases executing various transactions directly on-chain. While this is a step in the right direction, the institutional interest in crypto has been relatively modest, as it is still dominated by relatively few institutions. As a consequence, institutions are not likely set to arrive in sufficient force in the near-term to offset retail’s crypto exit, particularly for the smaller and less liquid cryptocurrencies. Nonetheless, less retail activity may lead the market to a less speculative but more robust and sustainable model long-term, although most cryptocurrencies may not survive the wash-out of speculative activity. To bring about a sustainable model for the market to thrive in the future, crypto must return to its roots by offering unique decentralised use cases and mature into more economically sustainable assets. On the latter, last year was encouraging in demonstrating that cryptocurrencies can be economically sustainable assets by generating dividend-like returns, following Ethereum’s transition from proof-of-work to proof-of-stake last year. During the transition, Ethereum drastically decreased its issuance of new Ether, so it nowadays offers holders a reward of up to 7 percent yearly by verifying transactions but without increasing its supply, as the reward is fundamentally funded by transaction fees. Hopefully, other cryptocurrencies and tokens follow in Ethereum’s footsteps in turning into more economically sustainable assets, altogether leading the space to become less speculative.   Source: Can institutions save crypto before retail vanishes? | Saxo Group (home.saxo)  
Asia Morning Bites - 23.05.2023

The RBA Sees GDP Slowing To Around 1.5% This And Next Year

Saxo Bank Saxo Bank 07.02.2023 11:05
Summary:  The S&P 500 index toyed with pivotal support yesterday around 4,100 without breaking down through it as the market absorbs the fresh surge in treasury yields in the wake of Friday’s strong US jobs report. The US dollar remains well bid, although the JPY came in stronger overnight on hotter than expected wage growth data, while a far more hawkish than expected RBA boosted the Aussie. Fed Chair Powell will sit for an interview late today. Copper and gold meanwhile have seen no follow-through selling following Friday's breakdown. What is our trading focus? Equities (US500.I and USNAS100.I): Short-term strength is still intact S&P 500 futures continued to roll over from their weak Friday performance with the 4,100 level almost coming into play, but instead of extending downside momentum the index futures turned around from the lows. This morning S&P 500 futures are trading around the 4,130 level, and if they can close above yesterday’s close it will signal the short-term strength in equities, and if not the 4,100 level is in play again opening the range from the 4,000 level. The VIX Index is well behaved these days and the US 10-year yield is already retreating a bit from the recent surge suggesting a quiet day ahead. FX: USD firm, but Japan’s wage data boosts JPY, RBA hawkishness powers AUD overnight The US dollar remained firm on Fed member Bostic’s comments on a potentially higher peak in the Fed Funds rate supported the US dollar overnight. Market pricing has seen an upward revision to terminal rate to 5-5.25% and Treasury yields continued to surge higher. The Japanese yen, being the most yield sensitive, was weak yesterday on the double-whammy of higher US yields and chatter of a dovish new Governor at the Bank of Japan, but the JPY rose overnight on December wage data showing the strongest rise in wage growth in 25 years.  AUDUSD pushed well below 0.6900 but then bounced hard on a far more “hawkish” (less dovish) RBA than expected – see below. EURUSD is stil mired below 1.0750 this morning and GBPUSD avoided a move below 1.2000 as BOE’s Mann noted that the next step in the Bank Rate is still more likely to be another hike than a cut or hold. Crude oil (CLH3 & LCOJ3) supported by supply concerns and Saudi price hike Crude oil trades higher for a second day following last week's long-liquidation-driven slump. The turnaround was given further support after Turkey halted around 1m b/d of flows from Northern Iraq to the Ceyhan export terminal following a major earthquake in the region. In addition, Saudi Aramco instead of a cut increased its official selling price for its flagship Arab Light grade to Asia in March, suggesting confidence in the demand outlook. Focus turning to the US where the EIA will publish its monthly Short-term Energy Outlook and later the API its weekly inventory report. Weeks of bigger-than-expected inventory rises in the US has been one of the reasons, together with a slow pickup in demand from China, have been the main reasons why speculators were forced to exit recently established longs. The Brent prompt spread meanwhile has risen to 33 cents, signalling increased tightness. Brent support at $79 and resistance at $84.30. Gold (XAUUSD) sees no follow-through selling ahead of Powell comments Gold’s long overdue correction which accelerated on Friday below support-turned-resistance at $1900, did not see any follow-through selling on Monday despite continued dollar and yield strength. The yellow metal remains up 16% from the November low and even a further drop to $1829 would still be categorised as a weak correction within a strong uptrend. So far, it has managed to find support around $1860 as the market awaits comments from Fed chair Powell today at the Economic Club of Washington. Atlanta Fed’s Bostic - a non-voting member this year - meanwhile said the FOMC may have to raise rates by more than expected, thereby supporting the hawkish narrative the bank is trying to convey. Copper awaiting Chinese demand recovery Copper led the base metals sector lower as the impact of the strong US jobs report last week lingered. Spot copper currently trades at a discount in China as stockpiles have continued to rise while a price measuring demand for imports has dropped to a nine-month low. However, while the market awaits the expected pickup in China, supply disruptions in Peru have so far prevented the price from challenging key support in the $3.95 to $4 area. Aluminum briefly spiked after the reports suggesting the US was preparing to slap a 200% tariff on Russian aluminum imports. Russia is the world’s second largest producer of the metal and traditionally has accounted for 10% of US imports. However, imports fell to virtually zero in October last year. As a result, the tariff is expected to have limited impact on supply. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) jumped further to reprice the Fed’s rate path Treasuries extended the post-job report sell-off, seeing yields on the 2-year soaring 18bps to 4.47% and those on the 10-year rising 12bps to 3.64% before easing back slightly. Peak Fed rate expectations for this summer reached as high as 5.15% yesterday, a new high. Hawkish comments from the Fed’s Bostic, ECB officials, and Bank of England officials added additional pressure to the market which was already in motion to decline in price and rise in yields. Atlanta Fed President Bostic (voter 2024) said the strong job report would probably mean that the Fed have to raise rates more than he had projected. Earlier in the day, the weakness in Treasuries started from spill over selling pressure on U.K gilts on hawkish comments from Catherine Mann, external member of the BOE’s Monetary Policy Committee and Huw Phill, chief economist of the BOE, suggest more rate hikes. ECB Governing Council member Robert Holzmann added to the hawkish pushback from central banks, saying “the risk of over-tightening seems dwarfed by the risk of doing too little”. For today, all eyes are on Powell’s scheduled interview. Read next: Adani Group Company's Crisis Is Gaining Momentum, Finland Is The Happiest Country| FXMAG.COM What is going on? Japan’s wage growth strongest in 25 years The December wage growth data released overnight blew past estimates, posting a 4.8% gain versus expectations of a rise of 2.5%. This was the strongest rise in wages since 1997 and could allow the Bank of Japan to move more rapidly toward some semblance of normalization after soon outgoing Governor Kuroda long touted wage growth as the key to reviving sustained inflation in the Japanese economy. Nationwide strike in France today After a successful demonstration all over France on 19 January, trade unions are calling for new nationwide strike today against the government’s plan to push back the minimum retirement age to 64 and to accelerate a previous reform, called the Touraine reform, which provides for the extension of the required contribution period to 43 years by 2035. Before Covid, the government also tried to implement a pension reform which caused a massive wave of demonstrations across the countries – there was basically almost no public transport in main cities for weeks. This is still uncertain how long the strike will last. But the trade unions are planning to keep fighting as long as needed. Expect a blockage in several sectors (refineries, metro, rail transport, education). Now, we don’t think the strike will have a noticeable negative impact on GDP growth this quarter. We are confident France will avoid a recession this year – with a GDP growth forecast around 0.6-0.7%. This is not high, but it is better than in many other eurozone countries. RBA hikes by 25 bps to 3.35% as expected, guiding for further hikes in the “months ahead” The RBA forecasts slowing spending and economic growth, with unemployment set to rise even as it acknowledged inflation picking up more than expected. Australian 2-year yields jumped 13 basis points from the prior day’s close as the decision was read as hawkish and the peak policy rate this year was revised sharply higher to 3.90% by mid-summer. Still, the RBA sees price rises falling from 6.9% in underlying terms, to 4.75% this year, before ending near the top of its 2-3% target by mid-2025. It sees the jobless rate rising from 3.5% to 3.75% by year-end, and rising to 4.5% by mid-2025, reflecting the lag effect of tightening on corporations. All in all, with the services sector already in contraction, the RBA sees GDP slowing to around 1.5% this and next year as it sees household spending pulling back amid tightening financial conditions, with the post-pandemic spending rush easing. BP misses on Q4 earnings; increases CAPEX in FY23 The European oil and gas major missed on Q4 earnings but remains confident about the near-term future increasing dividends by 10% and planning a further share buyback of $2.75bn. BP is also saying it will grow investments into the energy transition. BP is targeting $16-18bn in capital expenditures for FY23 which is a significant increase from the $12bn in FY22. Nintendo outlook misses Switch estimates The Japanese game console developer announced total Switch unit outlook of 18mn missing estimates of 19mn, but the outlook still reflects a strong underlying growth in the game console. The FY net income outlook is JPY 480bn vs est. JPY 500bn. Hawkish remarks from Fed’s Bostic; Chair Powell due to speak today Atlanta Fed president Bostic (non-voter) spoke on Bloomberg, noting that jobs data from Friday raises the possibility of a higher peak rate, and his base case is still for two more hikes. Bostic also said the Fed could consider moving back to a 50bps hike if it needed to. Chair Powell will be speaking in Washington on Tuesday (1am SGT on Wednesday for Asia), followed by Barr, Williams, Cook, Kashkari, Waller and Harker over the course of the week. What are we watching next? Swedish Riksbank the next G10 in the spotlight Thursday after krona’s recent weakness The Riksbank will meet this Thursday and is expected to hike 50 basis points to bring its policy rate to 3.00%, but is then expected to guide for a more cautious approach of smaller hikes or even a pause on further tightening after the new Riksbank governor Erik Thedeen recently spoke on high inflation and rising interest rates testing the resilience of the Swedish financial system. Yesterday, EURSEK posted its highest level since the heart of the financial crisis back in 2009, making the Riksbank’s task of bringing down inflation a difficult one due to krona weakness, but 2-year EU-Sweden yield spreads have risen to their highest in years on the anticipation that the Riksbank is set to take a relatively more cautious path from here. The Riksbank may add active quantitative tightening (selling holdings rather than merely allowing maturing assets to roll off) to its policy arsenal on Thursday. It looks to be key test for the new Governor and the Swedish krona. Earnings to watch Today’s US earnings focus is Fortinet which is expected to continue its high growth in the cyber security industry with revenue growth expected at 34% y/y and EBITDA margin expected to expand. With higher interest rates there is also a lot of focus on the private equity industry and thus KKR’s outlook is a must watch for understanding the dynamics in risk capital. Tuesday: Carlsberg, BNP Paribas, Siemens Energy, SoftBank Group, Nintendo, BP, Linde, Vertex Pharmaceuticals, KKR & Co, Fortinet, DuPont, Illumina, Enphase Energy Wednesday: A.P. Moller – Maersk, Vestas Wind Systems, TotalEnergies, Societe Generale, Deutsche Boerse, Adyen, Equinor, Yara International, Walt Disney, CVS Health, Uber Technologies Thursday: KBC Group, Brookfield, Thomson Reuters, L’Oreal, Vinci, Credit Agricole, Siemens, Toyota Motor, NTT, Honda Motor, AstraZeneca, Unilever, British American Tobacco, ArcelorMittal, DNB Bank, Volvo Car, Zurich Insurance Group, Credit Suisse, AbbVie, PepsiCo, Philip Morris, PayPal, Cloudflare Friday: Enbridge, Constellation Software Economic calendar highlights for today (times GMT) 0810 – ECB's Klaas Knot to speak0900 – UK Bank of England’s Ramsden to speak1000 – ECB's Villeroy to speak1015 – UK Bank of England’s Pill to speak1330 – Canada Dec. International Merchandise Trade1330 – US Dec. Trade Balance1700 – ECB’s Schnabel to Speak1700 – US Fed Chair Powell interview1700 – EIA's Short-term Energy Outlook (STEO)1730 – Canada Bank of Canada Governor Macklem to speak2000 – US Dec. Consumer Credit2130 – API's Weekly Crude and Fuel Stock Report     Source: Financial Markets Today: Quick Take – February 7, 2023 | Saxo Group (home.saxo)
ECB cheat sheet: Difficult to pull away from the Fed

EUR/USD Drop Below 1.0700$ And GBP/USD Drop To 1.967$, The Aussie Pair Holds Above 0.69

Kamila Szypuła Kamila Szypuła 07.02.2023 14:48
The US dollar was mixed against its major trading partners early Tuesday - up against the euro and pound, down against the yen and the Canadian dollar. Today, Fed head Powell will speak. Powell will have to reconcile last week's decision by the Federal Open Market Committee to slow the pace of interest rate hikes with the exceptionally strong employment data for January released on Friday. In addition to Powell, Fed Vice Chairman for Supervision, Michael Barr, is set to speak at 14:00 ET. For the rest of the week there will be Fed officials. USD/JPY USD/JPY is rising after the US Fed raised interest rates by 25 basis points last week, and Chairman Powell said the central bank could deliver a few more rate hikes to bring inflation down to target. Additionally, reports that Bank of Japan Vice Governor Masayoshi Amamiya could replace the current Haruhiko Kuroda as central bank governor provided some support for USD/JPY as the BoJ's ultra-easy policy is expected to continue. USD/JPY is under some selling pressure on Tuesday and pulls some of the previous day's gains down to around 133.00, a monthly high. After the pair fell below 132.00, it is currently holding just above 132.0190. EUR/USD The EUR/USD pair extended its decline to a new three-week low below 1.0700 as demand for the US dollar prevails ahead of US Federal Reserve (Fed) President Jerome Powell's speech. Investors await speeches from ECB officials and FOMC chairman Jerome Powell. During the European morning, Germany published data on industrial production in December, which fell by 3.1% over the month and by 3.9% a year earlier, much worse than expected. The United States will publish a balance of trade in goods and services in December, which is expected to show a deficit of USD 68.5 billion. Continuing its decline, EUR/USD dropped below 1.0700 to 1.0694 and looks set to drop further. Read next: The Court In Munich Decided In Favor Of BMW| FXMAG.COM GBP/USD Sterling hit a new monthly low against the US dollar on Tuesday as investors expect the Bank of England (BoE) to end and possibly reverse its monetary tightening cycle soon, while the US Federal Reserve may hold interest rates higher for longer. Investors await further comments from the Bank of England and preliminary UK Gross Domestic Product (GDP) data. GBP/USD came under bearish pressure again and hit a month-low below 1.2000 on Tuesday. Despite a slight improvement in risk sentiment, the US dollar holds its ground and weighs heavily on the GBP/USD pair. AUD/USD The Australian dollar rose high after the RBA raised its cash rate target to 3.35% from 3.10%. Since the first increase in May 2022, a total of 325 basis points have been added. The Australian dollar gained above $0.69, bouncing back from monthly lows following the RBA decision. The RBA said in an accompanying statement: "The board expects further rate hikes will be needed in the coming months to ensure inflation returns to target and that this period of high inflation is only temporary." Following the RBA decision, the Aussie Pair holds above 0.69 but the pair has lost momentum and is closer to 0.6900 than close to 0.6930. Source: finance.yahoo.com, investing.com
Saxo Bank Podcast: A Massive Collapse In Yields, Fed's Tightening Cycle And More

Fed Policymakers Expect To Deliver A Couple More Interest Rate Increases

Jakub Novak Jakub Novak 07.02.2023 15:20
Market participants are waiting for another speech by Fed Chair Jerome Powell, especially his comments on the recent labor market report. Federal Reserve Bank of Atlanta President Raphael Bostic said yesterday that a strong January jobs report raised the possibility that the central bank would have to lift interest rates higher than previously anticipated. Economy If the economy keeps growing, "It'll probably mean we have to do a little more work," Bostic said. "And I would expect that that would translate into us raising interest rates more than I have projected right now." According to Bostic, his base case remains for rates to reach 5.1%, in line with the median of policymakers' December forecasts, and stay there throughout 2024. A higher peak could be reached through an additional quarter-point hike beyond the two currently envisioned. GDP Notably, the latest GDP data for the 4th quarter turned out to be well above economists' forecasts and was revised upwards. This allows policymakers to believe that the US economy is relatively strong. Thus, it will be able to survive much higher interest rates than the current ones. This is necessary in order to quickly bring inflation back to the Fed's target of 2.0%. After that, it will be possible to start cutting rates and pumping up the economy with cheap money, developing business, investments, and companies. In January, the economy added 517,000 new jobs, and the unemployment rate dropped to 3.4%, the lowest level since May 1969. Last week, the Federal Open Market Committee raised the short-term federal funds rate by 25 basis points, or 0.25%, to a target range of 4.50% to 4.75%. This move was taken immediately following the December meeting, when the rate was raised by only 0.5%, after four aggressive hikes by 75 basis points before. Raphael Bostic  Raphael Bostic also said that officials needed to understand whether the jobs report was "anomalous" or not. The committee could consider returning to the 50 basis-point increase if necessary. The president of the Federal Reserve Bank of Atlanta did not rule out that economic figures for the next quarter could be stronger than expected, adding that the focus was on an imbalance of supply and demand. Fed Chairman Jerome Powell According to Fed Chairman Jerome Powell, policymakers expect to deliver a couple more interest rate increases before putting their aggressive tightening campaign on hold. He also warned that in order to further ease price pressures, the labor market would have to suffer a bit.  EUR/USD  From a technical point of view, the EUR/USD pair is trading under strong downward pressure. Nobody believes that the European Central Bank will keep its monetary policy tight. To halt the slide, the price needs to consolidate above 1.0720. In this case, the pair will most likely rise to the 1.0770 area. A breakout of this level will make it possible to climb to 1.0800 and then 1.0830. If the price breaks through the support level of 1.0720, the volume of short positions will increase further. Thus, the EUR/USD pair will dip to 1.0680 and probably the low of 1.0650. GBP/USD  As for the GBP/USD pair, after two days of losses, it entered a sideways range. To regain control of the market, buyers need to push the price above 1.2070. If the price breaks through this resistance level, the pair will be able to recover to the 1.2140 area. In this case, the British pound may extend gains, heading for the 1.2200 area. Alternatively, the trading instrument will come under pressure again if bears take control of 1.2010. This will bring the GBP/USD pair back to the levels of 1.1950 and 1.1880. Relevance up to 12:00 2023-02-08 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/334397
Expect the ECB to keep increasing rates at the short-term, at least until the summer

German Industrial Production Decreased, Which Is Bad News For The Rest Of The Eurozone

Kenny Fisher Kenny Fisher 07.02.2023 15:28
The euro has fallen for three straight sessions and has extended its losses on Tuesday. Earlier in the day, EUR/USD fell below the 1.07 line for the first time since Jan. 23. Eurozone data disappoints German and eurozone numbers have been soft this week, adding to the euro’s woes. Eurozone retail sales fell 2.7% in December, worse than the estimate of -2.5% and well off the November read of 1.2%. German Industrial Production came in at -3.2% in December, down from 0.4% in November and below the expectation of -0.6%. Germany is the locomotive of the bloc but the engine is stuttering, which is bad news for the rest of the eurozone. GDP in Q4 contracted by 0.2%, retail sales for December slumped by 5.3% and Manufacturing PMI remains mired in contraction territory. The US dollar received a much-needed boost from the January nonfarm payroll report, as the 517,000 gain crushed expectations. There are no major releases out of the US today, but Fed Chair Powell will participate in a panel discussion. If Powell strikes a hawkish tone, the US dollar could extend its gains. There are a host of Fed members speaking this week, and if they reiterate the “higher for longer” stance that the Fed continues to embrace, the US dollar could continue to move north. How will the Fed react to the stellar employment report?  Fed member Mary Daly called the employment release a “wow number” and said that the Fed’s December forecast of a peak rate of 5.1% was a “good indicator” of Fed policy. With the benchmark rate currently at 4.5%-4.75%, we’re likely looking at two more rate hikes, exactly what Jerome Powell said at the FOMC meeting last week. The spike in job creation has raised hopes that the Fed can pull off a “soft landing” and there is even talk on Wall Street of a “no landing” which would mean that a recession could be avoided. Read next: EUR/USD Drop Below 1.0700$ And GBP/USD Drop To 1.967$, The Aussie Pair Holds Above 0.69| FXMAG.COM EUR/USD Technical 1.0758 is a weak support line, followed by 1.0633 There is resistance at 1.0873 and 1.0954 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
The Fear of Strong Jobs: How US Labor Market Resilience Sparks Global Financial Panic

The American Airline Company Is Preparing To Cut Jobs In The Financial Department

InstaForex Analysis InstaForex Analysis 08.02.2023 08:17
Atlanta Federal Reserve Bank (FRB) President Rafael Bostic (he does not have a vote on the Federal Open Market Committee this year) believes the Fed may have to raise its benchmark interest rate higher than previously expected as strong data on the US labor market showed that economic activity in the US is slowing down slightly. Bostic said they would have to do a bit more work, and the Fed would have to raise rates higher than forecasts indicate. The US trade deficit in December 2022 increased by 10.5% to $67.4 billion, the country's Department of Commerce said. According to the revised data, in November, the negative trade balance amounted to $61 billion, and not $61.5 billion, as previously reported. The rate was the lowest since September 2020. Experts, on average, expected growth to $68.5 billion from the previously announced November level. By 17:57 GMT+3, the Dow Jones Industrial Average fell by 101.03 points (0.3%) to 33,789.99 points. The Standard & Poor's 500 fell 8.33 points (0.2%) to 4102.75 points. The Nasdaq Composite lost 7.09 points (0.06%) to 11,880.36 points. Aramark shares are down 11.3%. The U.S. company, which supplies food and special clothing to employees of hotels, universities, hospitals and stadiums, increased its net profit and revenue in the first quarter of fiscal year 2023, with revenue growth exceeding market expectations. Shares of Pinterest Inc. are down 5.8%. Internet service visual bookmarks in the fourth quarter received a net profit and revenue worse than expected. Comcast Corp. shares are down 0.2%. The largest U.S. Internet and cable TV provider continued to cut its stake in Internet news company BuzzFeed Inc. Comcast sold 5.1 million BuzzFeed securities between Feb. 2 and Feb. 6, the media company said in a report. It previously reported that it sold more than 5.7 million shares of BuzzFeed in several transactions between Jan. 30 and Feb. 1. Shares of Bed Bath & Beyond Inc. fall by 41.6% after taking off by 92% in previous trading. The American retailer managed to enlist the support of investors, which allowed it to avoid declaring bankruptcy, Bloomberg reports citing informed sources. Papers Centene Corp. down 1.8%. The health insurance and maintenance company ended the fourth quarter with a net loss, but improved its full-year revenue guidance. Share price of DuPont de Nemours Inc. grows by 6.7%. The American chemical company reported a decline in net profit and revenue in the fourth quarter of 2022, although adjusted profit and revenue beat market expectations. Papers Boeing Co. rise in price by 1%. The American airline company is preparing to cut jobs in the financial department and the personnel management service in 2023. It is expected that the cuts will amount to about 2 thousand jobs, mainly in the field of finance and HR.   Relevance up to 04:00 2023-02-09 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/311785
All Eyes On Capitol Hill, Jerome Powell Will Appear Before The Senate Banking Committee

The Fed Chief Made It Clear That Friday's Jobs Report Would Not Change The Central Bank's Approach To Future Interest Rate Hikes

InstaForex Analysis InstaForex Analysis 08.02.2023 08:29
The EUR/USD pair suddenly fell, having tested the 6th figure. Although traders failed to hold steady in this price area, market participants are showing growing interest in the U.S. currency. The greenback was not only supported by Friday's strong Nonfarm Payrolls report, but also by Federal Reserve Chairman Jerome Powell, who sounded some rather hawkish signals on Tuesday. The Fed chief spoke at the Economic Club in Washington, D.C., where he commented on the latest economic data and also spoke on inflation. Powell's ambivalent message The pair initially surged by nearly 100 points amid the general weakening of the U.S. dollar. It reacted this way because Powell mentioned that the disinflationary process has begun in America. He did however clarify that the process, in particular, is observed in goods but hasn't kicked in the service sector yet. The market interpreted these words against the greenback, as Powell's rhetoric was "final" in the context of a possible hawkish rate hike. Such assumptions were reinforced after the Fed chief reacted rather calmly to January's Nonfarm payrolls, making it clear that Friday's jobs report would not change the central bank's approach to future interest rate hikes. In the backdrop of such conclusions, the EUR/USD jumped from 1.0690 to the target of 1.0770 within an hour. But Powell's follow-up rhetoric allowed the bears to test the 6th figure again. Long, long way to go After acknowledging the fact that the U.S. began the disinflationary process, Powell noted that it may take a long time for the consumer price growth rate to slow down. As part of his speech, he highlighted that getting inflation down to 2% will take a "significant period of time." In this context, he used phrases that were different in form (but identical in meaning) - that the Fed would take "a considerable period of time" and that it was "still early in the process" in general. But in the end, Powell was very specific about the timing, which is uncharacteristic of him, stating that inflation in the U.S. won't slow down until 2024. He said the following verbatim: "My guess is it will take certainly into not just this year, but next year to get down close to 2%." Powell expanded on this point by making two other important points. First, he said that interest rates will continue to rise. Since rates have not yet reached an acceptable level for fighting inflation (without specifying what level of the rate is "acceptable"). Secondly, he reassured the markets that the Fed would have to hold policy at a restrictive level for "some time". Again, Powell also did not specify how long the Fed intends to keep the rate at the peak level. However, despite the wording (except for the reference to 2024), Powell made it clear that the U.S. central bank is not going to curtail its hawkish strategy in the foreseeable future. In practice, that means the Fed will increase the rate by 25 points not only in March, but probably at the next two meetings as well. Investors now place a 71% probability of a 25-point rate hike at the Fed's May meeting, according to the CME's FedWatch tool. The likelihood of another round of hikes at the June meeting is estimated at 35% (which is not insignificant given the slowdown in U.S. inflation). Conclusions Despite the fact that bears failed to settle in the area of the 6th figure, bearish sentiment still dominates the pair. As a matter of fact, Powell ruled out the end of the current tightening cycle (thereby, denying the rumors) and announced further steps in the direction of the range of 5.25-5.50%. At the same time, the European Central Bank did not ally itself with the euro at the end of its February meeting. ECB President Christine Lagarde, while announcing the realization of the 50-point scenario in March, simultaneously cast doubt on further rate hikes. According to her, after the March decision "we will then evaluate the subsequent path of our monetary policy,". Euro-area headline inflation has decelerated for the third straight month, and at a fairly brisk pace (it came in at 8.5% in January against a forecast of 9.0%). If the core CPI in February-March repeats the trajectory of the headline inflation, a "post-March" rate hike will be highly questionable. From a technical point of view, the pair is between the middle and bottom lines of the Bollinger Bands indicator, as well as under the Tenkan-sen lines. According to Tuesday's results, the bears were unable to push through the support level of 1.0700 (bottom line of the Bollinger Bands on the D1). If the bears overcome this barrier, the next target will be 1.0600, which corresponds to the upper limit of the Kumo cloud on the same chart.   Relevance up to 00:00 2023-02-09 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/334448
Listen: Higher for longer

Rates Spark: The range is your friend

ING Economics ING Economics 08.02.2023 09:11
Through the recent gyrations, markets seem to lack the conviction needed to push new lows in rates. The resulting range-trading environment brings lower rates volatility and better risk appetite. We think rates differentials should narrow when rates finally converge lower Not enough conviction to call time on inflation, and still divergent policies The China reopening hype seems to have faded, judging by commodity prices running out of steam already. This is at least one less source of inflation for markets to fear but it is fair to say that coordinated central bank tightening, as was the case in 2022, doesn't rank very high on the market's list of worries. Instead we may well be witnessing a market where better-than-expected growth is causing investors to shun long-dated bonds when yields fall too fast. This theory is only valid up to a point. Recent hard German data, for instance industrial production, is showing an economy unlikely to reach escape velocity any time soon. And yet, European bonds have pulled back just as hard as their US counterparts. Better-than-expected growth is causing investors to shun long-dated bonds when yields fall too fast The net result is a curve is no hurry to print new lows in yields due to better opportunities in other markets, and with not enough information to push rate cuts expectations lower. Similarly, revisiting the 2022 highs seems out of the question, even accounting for the fact that yield curves, especially in the US, are deeply inverted. Combine this with still divergent policies with the Fed near the end of its hiking cycle, and the European Central Bank unsure where its own cycle will end, and we have a powerful force pulling yields away from the extremes of the recent range. Lower inflation expectations and the resulting decline in volatility are boosting risk appetite Source: Refinitiv, ING Lower rates volatility is good for risk, and rates differentials should narrow There are two themes emerging from this state of play. Firstly, rate implied volatility in the option market is right to decline from last year's highs – even taking into account last and this week's gyrations. This is an environment, as we've seen, conducive of greater risk appetite, and also a reason why investors would shun the safety of government bonds, except perhaps for the shorter ones. This is an environment, as we've seen, conducive of greater risk appetite  The other theme is that this market is less likely to see large directional moves, even though we think the trend in rates is still lower. Instead, the most remarkable moves are likely to be in cross country spreads. Notwithstanding a solid US job market, we continue to think US rates have further to fall than their European counterparts. Last week has shown that this sort of view is not immune to setbacks, but we think it is the one most consistent with rates taking their time to converge lower, and happy to pause for a while, within existing ranges. Short-end swap spreads should tighten further on reduced collateral scarcity fears Source: Refinitiv, ING The ECB has chosen to nip any re-emergence of collateral scarcity fears in the bud The ECB has announced the post-April remuneration arrangements for government deposits held at the ECB last evening. These deposits will no longer be remunerated at ESTR, but at 20bp below – very generous compared to the prospect of a 0% cap kicking in again. Fears of €350bn in government cash suddenly pushing into the tight collateral market now give way to an outlook of a more gradual adjustment, which will be easier to absorb for the market. The move shows the ECB’s sensitivity to market concerns in this area and removes a major obstacle to the further structural tightening of Bund asset swap spreads. Today's events and market view What we lack in data today is compensated by a busy slate of central banks speakers and brisk supply action. From the Fed we will hear from a wide range of officials including Williams, Cook and Kashkari, though it should appear that with Fed Chair Powell's comments yesterday the central bank's main take on the data should be clear – no need to ratchet up the hawkishness on one data print. Over in Europe ECB’s Isabel Schnabel stated yesterday that the ECB’s unprecedented tightening had little impact so far on inflation, signalling that rates would have to remain in restrictive territory until there is robust evidence that underlying inflation is coming down. Klaas Knot, another outspoken hawk, is scheduled to speak on the economic outlook today. Recall that in January he had called for rate hikes also in May and June. After Powell failed to dial up the Fed's hawkish message, we expect risk sentiment to continue improving in the short term. As we discussed above, we're increasingly in a market where this means bond markets fall out of favour with investors, and yields drift higher. 10Y Treasuries are within touching distance of 3.75% but this may take a little while longer to get there if volatility dies down as we expect. The hawkish ECB push should help at the margin although we think the message has already been clearly delivered in recent days, despite a few doves' dissent. In supply the focus will shift to the US longer end with the US$35bn sale of a new 10Y note, followed by the 30Y tomorrow. In EUR goverment bond markets Germany reopens a 7Y bond and Portugal a 10Y. The UK sells a 17y Gilt.  Read this article on THINK TagsRates Daily   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Navigating Inflation and Central Bank Meetings: Assessing Rate Hike Odds

Disney Is Expected To Report Revenue Growth Of 7%, Crude Oil Pirces Was Up

Saxo Bank Saxo Bank 08.02.2023 09:25
Summary:  Bumpy ride for the markets as Fed Chair Powell repeated his disinflationary remark but later added that the Fed will need to do more rate increases. NASDAQ led the gains, supported by Microsoft and Alphabet, despite another day higher in US 10-year yields. USD was broadly softer with JPY leading the gains, while EUR lagged. RBA’s hawkish guidance supported AUDUSD as China demand upturn is still awaited. Gold steady and oil prices jumped higher on improving demand outlook.   What’s happening in markets? US equities (US500.I and USNAS100.I): Short-term strength is still intact On Tuesday the S&P 500 rallied 1.3% in a choppy session to close at 4,164, regaining some short-term strength. Traders absorbed Powell's remarks (for details of his comments, please read below) and took stocks to rebound and close near the day high. So, we’re seeing the technical indicators (the MACD and RSI) behaving - supporting short-term strength, as the VIX Index is too. The advance in the S&P500 was led by energy, communication services, and information technology. Nasdaq rose 2.1% to 12,728, driven by strong gains in mega-cap names such as Microsoft (MSFT:xnas) up 4.2% and Alphabet (GOOGL:xnas) up 4.6%. Take-Twe Interactive (TTWO:xnas) jumped 7.9% after the game software company announced cost-cutting. Du Pont (DD:xnys) surged 7.5% following earnings and margins beat analyst estimates. Royal Caribbean Cruises (RCL:xnys) rose 7.2% on upbeat guidance, citing “a record-breaking Wave season”. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) edged up on Powell’s comments and a weak auction Fed Chair Powell’s comments made at the much anticipated moderated discussion before the Economic Club of Washington, D.C. were less hawkish than feared. He started by repeating that the disinflation process had begun and his remarks saw yields on the front end tumbling 10bps with the 2-year down to as low as 4.38 and the curve bull steepened. The fall in yields quickly reversed after Powell said that last Friday’s payroll report was “certainly strong-stronger than anyone I know expected” and that inflation “will go away quickly and painlessly” is not the Fed’s base case and the Fed has to “do more rate increases”.  More selling came after a weak 3-year action that was awarded 4bps cheaper than the market at the time of the auction, and the bid-to-cover ratio dropped to 2.33 from 2.84 last time. The corporate supply of around USD15 billion of new issues, including USD11 billion from Intel also weighed on the market. The 2-year pared almost all its early gains to settle 1bp richer at 4.46% while yields on the 10-year rose 3bps to 3.67%. Australian equites (ASXSP200.I); short term pressure as RBA hikes by 25bps to 3.35% guiding for more hikes in “months ahead”   ASX200 futures suggest the market will rally 0.46%, and likely erase yesterday’s 0.5% fall. But short-term pressure has built up by the RBA indicating more hikes are needed. Coal prices are down 36% and picked up this week almost 7% after the Australia Energy Market Operator said coal supply and gas supply in Australia is short and will stay short till 2026, so we think the RBA could make upward revisions to underlying inflation forecasts on Friday, despite the Bank keeping its headline CPI, unemployment and activity forecasts broadly unchanged. For investors, this means volatility in the ASX200 could pick up on Friday - financials and insurers could be supported with the RBA seeing more hikes ahead. The services sector is already in contraction, yet the RBA sees GDP slowing to around 1.5% this and next year, expecting household spending to pull back amid tightening financial conditions, as the post-pandemic spending rush has eased. This means, consumer discretionary stocks likely face headwinds. On the flip side, the energy sector is being supported. Hong Kong’s Hang Seng (HIG3) and China’s CSI300 (03188:xhkg) in thin trading; ChatGPT names soared After climbing as much as 1.4% in the morning, Hang Seng Index retraced to close near the day low, inching up 0.4% from Monday. The trading volume was light. The Hang Seng TECH index outperformed and closed 1.2% higher, led by a 15.3% jump in Baidu (09888”xhkg) on confirmation from the company that it is working on a ChatGPT-like product. The three Chinese state-owned oil giants advanced, led by CNOOC (00883:xhkg) up 2.2%. In A-shares, ChatGPT names continued to outperform. Household appliances, media, environmental, and real estate names gained. CSI300 registered a modest 0.2% gain in a choppy and low-volume session. Northbound flows were net selling of RMB3 billion, being outflow for the third day in a row. FX: Yen strength returned as Powell adds little new information Dollar was choppy as Powell initially reiterated his remarks from last week but later made a comment that the Fed could more if the data stays hot. Still, market pricing of the Fed’s path was little changed, and dollar ended the day broadly lower against all G10 currencies. The Japanese yen recouped come strength despite somewhat higher Treasury yields, with USDJPY falling as low as 130.49 before bouncing back higher to 131.50. AUDUSD, although still waiting for the upturn is Chinese demand, was supported by the RBA’s guidance to hike more. AUDUSD above 0.6960 in early Asian hours, with AUDNZD moving above 1.1000 to near 3-month highs. EURUSD was a laggard as it took a look below 1.07 before bouncing back to 1.0720+ levels subsequently. Crude oil (CLH3 & LCOJ3) prices rise on demand outlook and supply concerns WTI prices jumped 4% and Brent was up 3% after Powell stayed away from turning significantly more hawkish after the bumper jobs report last Friday. Meanwhile, demand outlook continues to improve as signaled by Saudi Aramco’s price increases, and API also suggested a draw in US crude stocks. API reported US crude stockpiles declined by 2.2mm barrels last week, compared to expectations of a 2.5mm barrels increase. Both OPEC and EIA have been upbeat on China’s demand recovery as well. The market shrugged off reports that flows through the 1mb/d Ceyhan oil terminal in Turkey will resume shortly, and supply side issues remained in focus as well. The Energy Information Administration lowered its forecast for US crude oil production in 2024. Gold (XAUUSD) strength continues to hold up despite a stronger dollar Gold continues to remain supported around the $1860 level despite another increase in US yields overnight. Buying by central banks remains buoyant, with China raising its gold reserves for a third straight month in January, up 6.9% MoM. The momentum below $1900 appears to be lacking, suggesting the move remains a correction in the larger bullish trend. Eyes on next supports at $1845 and $1828.  Read next: The Court In Munich Decided In Favor Of BMW| FXMAG.COM What to consider? Powell’s balanced narrative unable to spur market caution; Kashkari sees terminal rate at 5.4% Fed Chair Powell’s message last night was only marginally more hawkish compared to last week’s Fed meeting, giving markets enough reasons to continue to give more emphasis to data. Powell qualified his ‘disinflationary’ remark from last week’s Fed meeting by saying it is at a very early stage, and only in the goods sector. He was surprised by the strength of the jobs report, and said that the Fed probably needs to hike rates further and they have still not reached a sufficiently restrictive level. Powell expects 2023 to be a year of a significant decline in inflation, but it will certainly take into next year to get down close to 2% - in fitting with the December SEP's. Market’s pricing of the Fed rate path saw no material change following Powell’s comments. Meanwhile, Fed member Kashkari (voter) was more hawkish saying if he had to pick a rate forecast, would not lower it from his Dec SEP forecast of 5.4% but rates may have to be held at a higher level for longer. He added that markets are more confident than he is about inflation falling. Weak German industrial production, CPI due today Germany’s industrial production for December saw a steeper fall than expected, coming in at -3.1% MoM (vs. est -0.8%) while the November print was revised higher to +0.4%. After a technical delay last week, Germany’s inflation prints for January will be released today. Spain and France printed higher-than-expected CPI for the month, while the region-wide printed was softer last week. This suggests Germany’s inflation likely eased due to energy price increases being more subdued than previously expected. Meanwhile, adjustments in the CPI basket could also likely result in a softer print. Bloomberg consensus expects 10.0% YoY from 9.6% YoY in December, with the MoM print also turning positive at 1.3% from -1.2% previously. Walt Disney to report earnings The entertainment giant Disney is expected to report revenue growth of 7% Y/Y and EPS of $0.76 up 21% Y/Y and a lot of focus will be on Nelson Peltz, the activist investor that has gone into the company, and his quest for higher streaming profitability and potentially changing the asset portfolio of Disney.  Saxo launches in Q1 2023 quarterly outlook: The Models are Broken Saxo’s quarterly outlook released argues that the economic models and assumptions of how market cycles are supposed to work are broken. We explore how this may affect both equities and commodities, as well inflation being higher-for-longer and how could it impact forex and crypto. Read the outlook here.   For what is ahead at markets this week – Read/listen to our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: Market Insights Today: Powell adds little new information – 8 February 2023 | Saxo Group (home.saxo)
Hawkish Fed Minutes Spark US Market Decline to One-Month Lows on August 17, 2023

Powell’s Interview Yesterday Was Interpreted By The Equity Market As A Positive Thing

Saxo Bank Saxo Bank 08.02.2023 09:35
Summary:  Equity markets rushed back higher despite treasury yields maintaining altitude, with much of the activity on the day around Fed Chair Powell’s interview, which sparked considerable two-way volatility before the market decided that he wasn’t sending too hawkish a message. With strong risk sentiment, the USD was mixed and commodity currencies are trying to stage a comeback from their recent sell-off. Oil posted its strongest rally in weeks yesterday. What is our trading focus? US equities (US500.I and USNAS100.I): growth vs policy rate Powell’s interview yesterday saying the US jobs market is so strong that more rate hikes are needed was interpreted by the equity market as a positive thing. Investors are clearly weighing growth above the discount rate for now, but that is only until rates hit a level in which it slows down the economy. The downside risk to Powell’s comments is that while inflationary pressures are easing in the goods economy, the services sector, which has more sticky inflation components, could underpin high inflation for much longer than anticipated. If S&P 500 futures can break above the 4,200 level again and close above then the cyclical top around 4,300 from back in August is the next major level to watch out for. Chinese equities: Hang Seng (HIG3) and CSI300: (03188:xhkg) tread water Hang Seng Index and CSI300 tread water and are nearly flat as investors wait for signs of recovery in China after the initial month-long rally that has repriced equities higher to reflect the change in policy directions in China. The benchmark Hang Seng Index was dragged by Meituan (03690:xhkg) which tumbled 6.5% on news that Douyin is launching food delivery service in March. In A-shares, northbound flows returned to net buying after three days of net selling. Real estate names outperformed and solid-state battery concept stocks were among the top gainers. FX: Yen steadies, USD choppy to lower as Powell adds little new information The US dollar was choppy as Powell initially reiterated his remarks from last week but later made a comment that the Fed could do more if the data stays hot (see more blow on Powell’s interview). Still, market pricing of the Fed’s path was little changed, and dollar ended the day broadly lower against all G10 currencies. The Japanese yen recouped come strength despite somewhat higher Treasury yields, with USDJPY falling as low as 130.49 before bouncing back higher to as high as 131.50 overnight. AUDUSD, although still waiting for the upturn is Chinese demand, was supported by RBA’s Tuesday guidance to hike more. AUDUSD above 0.6960 in early Asian hours, with AUDNZD moving above 1.1000 to near 3-month highs. EURUSD was a laggard as it took a look below 1.07 before bouncing back to 1.0720+ levels subsequently. GBPUSD tested its 200-day moving average near 1.1950 but managed a rebound back well above 1.2000 yesterday. Crude oil (CLH3 & LCOJ3) prices rise on demand outlook and supply concerns WTI prices jumped 4% and Brent was up 3% after Powell stayed away from turning significantly more hawkish after the bumper jobs report last Friday. Meanwhile, demand outlook continues to improve as signalled by Saudi Aramco’s price increases, and API also suggested a draw in US crude stocks. API reported US crude stockpiles declined by 2.2mm barrels last week, compared to expectations of a 2.5mm barrels increase. Both OPEC and EIA have been upbeat on China’s demand recovery as well. The market shrugged off reports that flows through the 1mb/d Ceyhan oil terminal in Turkey will resume shortly, and supply side issues remained in focus as well. The Energy Information Administration lowered its forecast for US crude oil production in 2024. Gold (XAUUSD) strength sustains Gold remains supported around the $1860 level despite another increase in US yields overnight. Buying by central banks remains buoyant, with China raising its gold reserves for a third straight month in January, up 6.9% MoM. The downside momentum below $1900 has failed to follow through, so far suggesting the move remains a correction in the larger bullish trend. Eyes on next supports at $1845 and $1828 if selling resumes. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) edged up on Powell’s comments and a weak 3-year auction Fed Chair Powell’s comments made at the much-anticipated moderated discussion before the Economic Club of Washington, D.C. were less hawkish than feared as noted below. Yields and markets swung wildly after he started by repeating that the disinflation process had begun, which saw yields on the front end tumbling 10bps before quickly reversing after Powell said that last Friday’s payroll report was “certainly strong-stronger than anyone I know expected” and that inflation going away “quickly and painlessly” is not the Fed’s base case and the Fed has to “do more rate increases”.  More treasury selling came after a weak 3-year action that was awarded 4bps cheaper than the market at the time of the auction, and the bid-to-cover ratio dropped to 2.33 from 2.84 last time. The corporate supply of around USD15 billion of new issues, including USD11 billion from Intel (discussed below) also weighed on the market. The 2-year pared almost all its early gains to settle 1bp richer at 4.46% while yields on the 10-year rose 3bps to 3.67%. Read next: The Court In Munich Decided In Favor Of BMW| FXMAG.COM What is going on? Powell’s balanced narrative unable to spur market caution; Kashkari sees terminal rate at 5.4% Fed Chair Powell’s message last night was only marginally more hawkish compared to last week’s Fed meeting, giving markets enough reasons to continue to give more emphasis to data on the sense that Powell was not pushing back against the market reaction last Wednesday. Powell qualified his ‘disinflationary’ remark from last week’s Fed meeting by saying it is at a very early stage, and only in the goods sector. He was surprised by the strength of the jobs report, and said that the Fed probably needs to hike rates further and they have still not reached a sufficiently restrictive level. Powell expects 2023 to be a year of a significant decline in inflation, but it will certainly take into next year to get down close to 2% - in fitting with the December SEP's. Market’s pricing of the Fed rate path saw no material change following Powell’s comments. Meanwhile, Fed member Kashkari (voter) was more hawkish saying if he had to pick a rate forecast, would not lower it from his Dec SEP forecast of 5.4% but rates may have to be held at a higher level for longer. He added that markets are more confident than he is about inflation falling. Earnings: Fortinet, Maersk, and Vestas Fortinet, one of the largest cyber security companies on revenue, reported Q4 revenue and EPS that beat estimates and the FY23 outlook on operating margins and revenue were in line with analyst estimates. It was clear that investors had lowered their expectations below that of analysts as the FY23 outlook hitting estimates led to a 16% rally in extended trading. Maersk is reporting lower than estimates Q4 revenue and EBITDA in line, but the FY23 outlook on EBITDA of $8-11bn vs est. $13.5bn is a big miss and maybe a bit too conservative if the cyclical upturn gathers steam. Vestas is reporting a FY23 outlook that signals further challenges and weakness in the wind turbine business with FY23 revenue outlook at €14-15.5bn vs est. €14.8bn and adjusted EBIT margin of –2% to +3%. Shares are indicated down 5% in pre-market trading. Weak German industrial production, delayed Jan. preliminary CPI due today Germany’s industrial production for December saw a steeper fall than expected, coming in at -3.1% MoM (vs. estimated -0.8%) while the November print was revised higher to +0.4%. After a technical delay last week, Germany’s inflation prints for January will be released today. Spain and France printed higher-than-expected CPI for the month, while the region-wide printed was softer last week. This suggests Germany’s inflation likely eased due to energy price increases being more subdued than previously expected. Meanwhile, adjustments in the CPI basket could also likely result in a softer print. Bloomberg consensus expects 10.0% YoY from 9.6% YoY in December, with the MoM print also turning positive at 1.3% from -1.2% previously. Biden State of the Union address includes tough rhetoric on China In Biden’s State of the Union address last night, the US President claimed autocratic regimes were growing weaker and suggested that China and its leadership are in a challenged position, shouting at one point “Name me a world leader who’d change places with Xi Jinping. Name me one, name me one.” and later saying that “I am committed to work with China where it can advance American interest and benefit the world....but make no mistake: as we made clear last week [in shooting down purported Chinese spy balloon] if China threatens our sovereignty, we will act to protect our country, and we did.” Intel places $11bn in bonds in a seven-part deal. To fund its expansion of production facilities, funding working capital and refinancing existing debt, Intel has placed some $11 billion in funds via corporate bond issuance yesterday, a series of 7 bonds with maturities of 3-, 5-, 7-, 10-,20-,30- and 40 years. The last of these features a yield that is 2.15% higher than US 30-year T-bonds, some 20 basis points tighter than anticipated (The US 30-year T-bond yield is currently near 3.70%). By comparison, the current dividend yield on Intel stock is near 5.00%. What are we watching next? String of Fed speakers today, 10-year Treasury auction Incoming data may have more primacy for moving US treasury yields than Fed speakers, but we do have a rather heavy schedule of FOMC voters on tap for today, including the NY Fed’s Williams, who will be interviewed at a live WSJ event. Board of Govern’s members Lisa Cook and Michael Barr are also out speaking as noted in the calendar highlights below. The hawkish Minneapolis Fed president Kashkari and Board of Governors member Waller are out speaking later in the day, the latter of these discussing the economic outlook. After the recent resurgence in treasury yields and yesterday’s weak 3-year treasury auction, plenty of attention as well on today’s 10-year treasury auction. Earnings to watch Today’s US earnings focus is Uber Technologies and Walt Disney. The on-demand ride hailing service Uber will report before the market opens with analysts expecting revenue growth of 47% y/y in Q4 with the EBITDA margin expending further into positive territory as the company prepares to become fully profitable in FY23. Disney reporting after the market close is expected to see revenue growth of 7% y/y in Q4 and EBITDA margin bouncing back from the low point in Q3. Wednesday: A.P. Moller – Maersk, Vestas Wind Systems, TotalEnergies, Societe Generale, Deutsche Boerse, Adyen, Equinor, Yara International, Walt Disney, CVS Health, Uber Technologies Thursday: KBC Group, Brookfield, Thomson Reuters, L’Oreal, Vinci, Credit Agricole, Siemens, Toyota Motor, NTT, Honda Motor, AstraZeneca, Unilever, British American Tobacco, ArcelorMittal, DNB Bank, Volvo Car, Zurich Insurance Group, Credit Suisse, AbbVie, PepsiCo, Philip Morris, PayPal, Cloudflare Friday: Enbridge, Constellation Software Economic calendar highlights for today (times GMT) Poland Base Rate Announcement 1415 – US Fed’s Williams (voter) to speak 1500 – US Fed’s Barr (Voter) and Bostic to speak 1530 – US EIA Weekly Crude Oil and Product Inventories 1730 – US Fed’s Kashkari (Voter 2023) to speak 1800 – US 10-year Treasury auction 1830 – Canada Bank of Canada publishes summary of deliberations 1845 – US Fed’s Waller (Voter) to speak 0001 – UK Jan. RICS House Price Balance Source: Financial Markets Today: Quick Take – February 8, 2023 | Saxo Group (home.saxo)
Is Gold Ready to Shine Again? US CPI and Fed Policy Insights

Gold’s Upside Is Likely Limited, Yesterday’s Speech From The Fed Chair Powell Was Hawkish

Swissquote Bank Swissquote Bank 08.02.2023 11:09
Another hawkish speech from the Federal Reserve (Fed) Chair Jerome Powell turned into a risk rally yesterday. Equities gained, and the bond yields fell. Fed Yet, yesterday’s speech from the Fed Chair Powell was hawkish. He said that the Fed may hike the rates more than what’s priced in if the jobs market remains unexpectedly strong. Stocks market The S&P500 still eased when Powell said they need ‘substantial evidence’ that inflation slowed, but finally, the index erased gains and ended the session by 1.30% higher. Nasdaq jumped more than 2%. The US 2-year yield eased and the US dollar first jumped, then eased. Zoom and Microsoft In individual stock news, Zoom jumped 10% on news that it will lay off 15% of its workforce, while Microsoft jumped 4% after the company unveiled its new ChatGPT-powered Bing! Forex The EURUSD tipped a toe below its latest bullish trend base, and below its 50-DMA yesterday, and the pair is just at the edge of bullish trend again this morning, with no guarantee that it won’t slide further. Cable rebounded before hitting its 200-DMA, at 1.1950, and is back above the 1.20 mark this morning. Read next: The Decline In Tech Valuations Continues To Hit SoftBank| FXMAG.COM Curde Oil BP shares price jumped nearly 8% to above our mid-term 500p target, after reporting report profit, dividend raise and share buyback, while crude oil jumped more than 4% as API revealed a 2-mio-barrel decline in US stockpiles. Watch the full episode to find out more! 0:00 Intro 0:28 Jerome says one thing, investors hear another thing 1:36 Market update 3:30 One bad, two good news 5:02 Zoom jumps 10% 5:37 Why Microsoft’s AI could be longer-lived than metaverse craze? 7.27 FX update 8:28 BP rallies on profits, oil jumps on US inventories 9:37 Gold’s upside is likely limited Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Powell #speech #inflation #jobs #USD #EUR #GBP #XAU #crude #oil #earnings #Dell #Zoom #layoffs #Microsoft #ChatGPT #Bing #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
ECB's Tenth Consecutive Rate Hike: The Final Move in the Current Cycle

Fed Officials Signaled That The Central Bank Still Has A Lot Of Work To Do

Jakub Novak Jakub Novak 08.02.2023 11:26
Euro continues to slump as risk appetite declined after Fed officials made another hawkish comment on Tuesday. Minneapolis Fed President Neel Kashkari said the explosive growth in jobs this January indicates that the central bank still has a lot of work to do as it is becoming increasingly difficult to get inflation back to 2.0%. Economy In short, interest rates will continue to rise and it is likely that it will peak at 5.4% instead of the previously expected 4.75%. Kashkari said they have a target and they know that raising rates can curb inflation, but it is not enough yet so they need to aggressively raise rates and cool the labor market to see a serious impact on the overheated economy. The labor market On Friday, the US Department of Labor reported that non-farm payrolls rose by 517,000 in January, almost triple the economists' expectations. It is the largest growth in the first month since 1946, not to mention it came despite the attempts of the Fed to use higher interest rates to correct the situation. Officials have repeatedly noted that there is an imbalance in the labor market with supply and demand. Average hourly pay also rose 4.4% in January. Kashkari's statement  Kashkari's statement that rates should be raised to 5.4% puts him in a more aggressive position compared to his fellow policymakers, who indicated in December that they see the peak at around 5.1%. The Fed has raised the benchmark federal funds rate eight times after inflation reached its highest level in more than 40 years. The most recent increase took place last week, which was by a quarter of a percentage point, the smallest since the policy tightening cycle began. However, inflation, although falling, is still well ahead of the Fed's target. Thus, policymakers continue to signal further increases at upcoming committee meetings. An example of this is Atlanta Fed President Raphael Bostic, who made a similar suggestion a day earlier. Read next: The Decline In Tech Valuations Continues To Hit SoftBank| FXMAG.COM EUR/USD Talking about the forex market, there is quite a lot of pressure on EUR/USD as no one believes that the ECB will be able to maintain its hawkish policy. To stop the bear market, traders must keep the quote above 1.0720. That will spur a rise to 1.0770 and possibly, to 1.0800 and 1.0830. In case of a decline below 1.0720, pressure will increase, which will lead to a further fall to 1.0680 and 1.0650. GBP/USD In GBP/USD, the sideways trend remains, so buyers need to push the quote above 1.2070 to regain their advantage. Only the breakdown of this resistance will push the pair to 1.2140, after which it will be possible to head towards 1.2200. But in the event that pressure returns and bears take control of 1.2010, the pair will plunge to 1.1950 and 1.1880.   Relevance up to 08:00 2023-02-09 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade Read more: https://www.instaforex.eu/forex_analysis/334492
Rates Spark: Riding the hawkish wave while it lasts

Traders Had Become A Little More Defensive On The Expectation Of A Hawkish Shift

Craig Erlam Craig Erlam 08.02.2023 12:35
European equity markets are expected to open a little higher on Wednesday following a positive shift on Wall Street on Tuesday, while Asia overnight was a very mixed bag. Investors appear a little relieved at Fed Chair Jerome Powell sticking to last week’s script despite Friday’s jobs report indicating that the labour market remains red hot. It would appear traders had become a little more defensive on the expectation of a hawkish shift but Powell refrained from taking the leap. And credit to him for doing so. The central bank, like others, has long talked about one data point not making a trend and while there are causes for concern in last week’s jobs report, it’s not a game changer. Wages are still heading in the right direction, and participation also improved. That said, we are getting a consistent message from policymakers across various central banks. While headline inflation is falling and will likely fall much further, core services inflation remains a big concern, and tight labour markets make achieving lower wage growth consistent with 2% inflation targets very difficult. It’s been clear for a while that the journey back to 2% was likely to be more treacherous than the path to peak inflation, and the data in the first quarter in particular, perhaps the second also, was going to highlight that. Recent jobs reports alone have epitomized that and sentiment in the markets is likely to continue mirroring it in the coming months. ​ The year of the crypto revival Bitcoin also enjoyed some light relief from Powell’s risk rebound overnight and it came at a good moment as the cryptocurrency was beginning to flirt with range lows. It’s now safely back in the middle of a near three-week range and still holding onto the bulk of the new year gains. 2023 may well be the year of the crypto revival. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
The Commodities Feed: Specs continue to cut oil longs

Oil Prices Have Been Trending Higher In Recent Days

Craig Erlam Craig Erlam 08.02.2023 12:39
China to drive stronger demand China may well be the outlier in all of this as there has been no need for excessive monetary tightening and rather, the slowdown in growth is almost certainly behind it. In fact, the transition from zero-Covid to living with it is reportedly going very smoothly which could boost the economy earlier and by more than expected, leading to higher growth forecasts for 2023. While that could support the global economy through a difficult period, it may also worsen the inflation problem due to much higher demand for commodities including crude oil. Oil prices have been trending higher in recent days on these improved forecasts, although they still remain around the middle of the range they’ve traded within since early December. Read next: Douyin Wants To Enter The Food Delivery Industry| FXMAG.COM Gold only mildly buoyed Fed Chair Powell’s soothing words generated some relief in gold as well overnight, although compared to the declines late last week, it was quite mild. The yellow metal has been on a phenomenal run since early December and a correction was growing ever more likely. While traders have welcomed Powell’s consistent stance, it may not be enough to save gold and a deeper correction could well be on the cards. It’s seeing some support now around $1,860 but more substantial support may be found around $1,820-$1,830. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
Bank of England is expected to hike the rate by 25bp. Kelvin Wong talks Euro against British pound

The GBP/USD Pair Climbed To Around 1.2100, The EUR/USD Pair Is Above 1.0700

Kamila Szypuła Kamila Szypuła 08.02.2023 13:18
The dollar fell as Powell spoke. The dollar fell Wednesday after Federal Reserve Chairman Jerome Powell refused to significantly tighten his tone on inflation in a closely watched speech, despite last week's strong employment data. USD/JPY The yen tumbled earlier this week as robust US jobs data suggested the Fed had more room for interest rate hikes. Recently, Japan's central bank countered speculation about another policy adjustment by keeping interest rates very low and leaving its yield control policy unchanged. As things stand, it seems that the market is having a hard time assessing the way forward as strong US data brings constant warnings of more hikes, which usually support USD valuations. At the same time, Japan is considering nominations for the top BoJ position for April, as the likelihood of policy normalization at the ultra-dovish Bank of Japan by the new incumbent cannot be ruled out. In the morning, the USD/JPY pair started rising towards 131.30. USD/JPY traded above 131.00 for the following hours of trading but fell below in the European session and is now trading at 130.6910. EUR/USD EUR/USD rebounded towards 1.0750 on Wednesday after falling below 1.0700 late Tuesday but struggled to gain further momentum. In the absence of high-impact data releases, investors will pay close attention to comments from Fed officials. Currently, the EUR/USD pair has fallen below this level, but slightly to the level of 1.0740. On Tuesday, mixed comments from European Central Bank (ECB) officials made it difficult for the euro to gain an advantage over its rivals. ECB politician Francois Villeroy de Galhau said they are not very far from the peak of inflation. On a hawkish note, policymaker Joachim Nagel reiterated that further significant interest rate hikes would be needed, adding that ECB rates were not restrictive yet. Finally, Isabel Schnabel, member of the Executive Board of the ECB, took a neutral tone. Federal Reserve Chairman Jerome Powell said US interest rates may need to be raised while the process of "disinflation" appears to be underway. Read next: Douyin Wants To Enter The Food Delivery Industry| FXMAG.COM GBP/USD At the end of Tuesday, FOMC Chairman Jerome Powell also confirmed good labor market data and reiterated that they will probably have to make further rate hikes. On an optimistic note, Powell said he expected 2023 to be "a year of significant decline in inflation." This remark made it harder for the US Dollar Index to maintain its upward momentum and helped GBP/USD recover some of its losses this week. From the UK's perspective, the strike action remains a concern for the government and civil servants are planning to carry out another strike on March 15. Chancellor of the Exchequer Jeremy Hunt will present his fiscal plan on the same day and will be under additional pressure to possibly reassess inquiries about the pay settlement. Overall, it is bearish for the pound as strike action disrupts the UK economy and challenges UK leadership. GBP/USD pair gained momentum and climbed to around 1.2100 on Wednesday. Currently, the GBP/USD pair is trading above 1.2090$. AUD/USD The Aussie pair is defending support at 0.6950 with the US Dollar generally subdued so far. The Aussie pair surged above 0.6990 today but failed to maintain momentum and is currently trading above 0.6980. Yesterday the RBA raised rates by 25 bp. Source: finance.yahoo.com, investing.com
US Flash, that is to say preliminary, PMI for April came in at a better-than-expected 50.4 versus a downwardly revised 49.2 in March and a forecast 49

US Outlook: Household Balance Sheets Are Relatively Healthy, And Household Credit Balances Have Been Increasingly Held

Franklin Templeton Franklin Templeton 08.02.2023 15:04
Our central US outlook scenario is that of recession but a moderate one, so that we expect neither spiraling inflation nor a hard landing. The US economy is likely to be neither hot enough to induce an ultra-aggressive Fed response— what many refer to as a Volcker moment—that might crash the economy into significant recession, nor cold enough to severely impact the rest of the world’s growth. Economic activity is decelerating. Are we headed for a recession? The US economy has shown relative strength compared to other major economies over the past couple of years, but it is now decelerating. Negative GDP growth prints in the first and second quarters of 2022 were related to idiosyncratic factors, with temporary drags from inventories and trade. GDP decreased in the first half of 2022 as a result, but it rose again in the third quarter by enough to offset that decline. Despite that recent gain, the US economy is clearly decelerating as positive effects from the post-COVID reopening dissipate. The lagged effect of interest-rate increases should also have a dampening effect on economic activity. Various Measures of US Domestic Demand are Decelerating Exhibit 4: GDP, Final Sales to Domestic Purchasers, Final Sales to Private Domestic Purchasers, % Quarter-On-Quarter (Q/Q) Seasonally Adjusted Annual Rate (SAAR) February 2010–August 2022 Q/Q SAAR 10 0 2 4 6 8-2-4-6-8-10 Feb-10 Feb-12 GDP Mar-14 Apr-16 Final Sales to Domestic Purchasers Final Sales to Private Domestic Purchasers May-18 Jun-20 Aug22 Sources: U.S. Bureau of Economic Analysts (BEA), National Bureau of Economic Research (NBER). Several measures of domestic demand and activity are showing a clear deceleration (see Exhibit 4). While GDP growth was 1.9% in the third quarter of 2022 compared with the same quarter of the prior year, basically matching the second quarter’s reading, final sales to domestic purchasers eased marginally to 1.2% from 1.3% and final sales to private domestic purchasers slowed to 1.6% from 1.8%. Other key economic indicators are also showing a controlled slowdown. For example, the Institute for Supply Management (ISM) Manufacturing Purchasing Managers’ Index (PMI) decreased to 48.4—below the 50 break-even level—in December from 56.1 in May, while the ISM Services PMI slowed to 49.6 in December from 58.3 in March. Interest rates are starting to have some impact too. An example of this is the housing market, in which the rise in mortgage rates that has been seen during the Fed hiking cycle has resulted in housing construction turning downward (see Exhibit 5). Housing Has Reacted to Higher Interest Rates Exhibit 5: Housing Starts and Permits, SAAR January 2000–November 2022 MN SAAR 2.5 2.0 1.5 1.0 0.5 0 Jan-00 Nov-02 Sep-05 Jul-08 May-11 Mar-14 Jan-17 Nov-19 Nov22 Starts Permits Source: US Census Bureau. Overall, we therefore believe the US is likely entering a recession, though we expect it to be moderate. A moderate recession—and, in this case, one with still relatively high but decelerating inflation—would allow the Fed to first pause and then slowly ease interest rates in due course, gradually removing this driver of USD strength from the picture. Moderate or deep recession—what matters? A key factor mitigating against a deep US recession is the still-robust labor market, which remains at historically tight levels (Exhibit 6). The strength in the labor market has driven an acceleration in nominal wage growth (Exhibit 7). The combination of a resilient job market and rising wages supports labor income and, thus, overall household consumption. Consequently, while we anticipate the labor market to weaken, we expect its resilience to provide a base for stability in consumer spending, rather than the kind of steep contraction that might be associated with a deeper recession, such as that evidenced during the 2008 global financial crisis. We also do not currently see the kind of large macro imbalances that would require corrections of the types traditionally associated with deeper recessions. At present, the biggest risk to economic activity would thus likely come from the Fed needing to overtighten to bring inflation under control, rather than from imbalances in the real sector (such as excessive inventories or over-investment in real assets) or in the financial sector (such as elevated household or corporate leverage). Inventories are low in some sectors and only rebuilding at a slow pace (Exhibit 8). Elevated housing prices have not driven a boom in residential construction (Exhibit 9 on the next page); if anything, there is still an under-supply of housing. Household balance sheets are relatively healthy, and household credit balances have been increasingly held by high FICO score households. One area of risk is the still-elevated level of home prices relative to rents (the housing market analogy of the equity price-to-earnings ratio) (Exhibit 10 on the next page). However, it appears that mortgages are in the hands of those with stronger balance sheets (Exhibit 11), and the importance of housing construction to economic growth is also much lower than what it was before and during the global financial crisis. The shadow banking system is not as large as it used to be (Exhibit 12), and asset prices have already experienced significant corrections. However, we recognize that there are risks in the financial markets from “unknown unknowns,” especially given the rising rate cycle This article is part of the report
US Inflation Eases, but Fed's Influence Remains Crucial

US Outlook: Supply-Chain Issues Are Easing

Franklin Templeton Franklin Templeton 08.02.2023 15:07
Has inflation peaked? US headline inflation appears to have peaked in June 2022 when it reached a multi-decade high of 9.1% year-on-year (Y/Y), boosted by high energy and food prices (Exhibit 14 on the next page). Excluding food and energy, core CPI inflation had recorded an earlier multi-decade high of 6.5% Y/Y in March 2022, and the pace of underlying inflation appears to have been decreasing from its peaks since then. Although core CPI remains elevated relative to the historical record, slowing inflation should keep the Fed from hiking in a Volcker-like fashion. A number of factors support the view that inflation rates will continue declining. Both raw food prices and oil prices peaked in March, and these elements of non-core CPI should continue to drive headline disinflation. Supply-chain issues are easing, lowering firm input prices. Measured input prices (Producer Price Index [PPI] import prices) peaked in March–April. Nonetheless, core inflation is anticipated to remain elevated relative to the Fed’s 2% target for some time, supported by housing costs and other core items, particularly core services, where sticky inflation measures have increased. Thus, while we expect the disinflationary process to continue, we also expect it to be slow. Base effects should help restrain inflation as prices normalize somewhat. 2021 was quite abnormal in that the month-onmonth (m/m) gains in CPI for almost every month of that year were either at or near the top of their 2010–2021 range (Exhibit 15). Monthly gains through 2022 were similarly high. If CPI monthly gains continue to retreat toward the middle of their historical range, as they have recently, inflation should continue to decrease. Energy prices have peaked (at least for now): West Texas Intermediate (WTI) oil prices had fallen about 35% by end-November compared to June (Exhibit 16 on the next page). If energy prices remain stable, the contribution of energy to headline CPI should decrease from a peak of 3.3 percentage points (pp) in October to a negative contribution by March 2023 (Exhibit 17 on the next page), further cementing the disinflationary trend in headline CPI. Food prices should also decelerate. The FAO (Food and Agriculture Organization of the United Nations) Food Price Index4 has decreased 15.5% from its March peak (Exhibit 18 on the next page), and the annual growth rate has fallen sharply from 34% Y/Y in March 2022 to just 0.3% in November. US food prices have not yet slowed as fast as would be suggested by their long-run relationship to international food prices. In October, US food inflation was running at 10.6%, while the long-run relationship to international prices would imply this inflation rate should be below 4%. This current break in the relationship, as seen in Exhibit 19 (where the gray area represents 2022 outcomes), is likely due to food distribution issues. As long-run relationships reestablish themselves, the deceleration in FAO food prices implies that US food CPI should also decelerate. Food and beverage inflation does appear to have peaked at 10.9% in August. Supply constraints are easing significantly in both goods and services sectors, leading to lower input prices (see Exhibits 20 and 21 on the next page). Overall PPI and import price inflation peaked in March–April 2022. A number of consumer price items that saw sharp price increases around the reopening after COVID shutdowns are also coming off their highs now. For example, airfares in August had declined 17% from their June highs. Lodging prices are 4.5% below their May highs (Exhibit 22 on page 12). Rental car inflation, which had seen costs double around mid-2021, is now in deflation (Exhibit 23 on page 12). While we expect headline inflation to abate from current historically elevated levels, the inflation rates of the stickier parts5 of the CPI basket have increased meaningfully (see Exhibit 24 on page 13) and should keep inflation substantially above the Fed’s 2% target for some time. One of these sticky components is the housing component of CPI. Asking rental rates (such as from Zillow and Redfin) tend to lead US CPI rental inflation by roughly 12 months (Exhibit 25 on page 13). Zillow rental rates peaked in February at 17.2% and had decelerated to 11% by November. This suggests that US CPI rental inflation should peak in early 2023, but is likely to decelerate only slowly. This article is part of the report
Saxo Bank Podcast: A Massive Collapse In Yields, Fed's Tightening Cycle And More

The Fed will likely continue to tighten as planned

Franklin Templeton Franklin Templeton 08.02.2023 15:09
The Fed Over much of 2022, the Federal Open Market Committee (FOMC) repeatedly surprised financial markets at its meetings by showing a more aggressive expected policy path than had been predicted by the markets, leading to a continual ratcheting higher of rate expectations that we believe was a significant driver of USD strength. This trend was underlined by fairly constant hawkish commentary by FOMC officials outside of Fed meetings too. Now, we believe that the market-expected policy path is more in line with the actual Fed outlook, and so we expect this influence to dissipate. The Fed will likely continue to tighten as planned, but we do not expect much more tightening from current levels. Once the Fed finally realized the inflation problem was not “transitory,” it tightened financial conditions enough to give it a chance of achieving some disinflation, and the markets now appear to be on board with the policy path. Fed funds futures are now more closely reflecting the Fed’s own projections, as encompassed in its “dot plot” (Exhibit 27 on the next page). Softer economic activity and Dec-22 Dec-22 sentiment suggest that further upside surprises to the fed funds rate are now limited, and downside surprises to rates may even emerge. This would take further steam out of the USD’s progress. Structural issues remain While the above discussion focuses on the current and anticipated evolution of cyclical factors, it is worth bearing in mind that the US continues to face structural challenges that are unlikely to be supportive of the USD on a longer-term basis too. The US remains in a “twin deficit” situation, with both current account and fiscal account balances in longterm deficit (Exhibits 28 and 29 on page 14). As a counterpart, US government debt has been rising relative to GDP for some years now (Exhibit 30 on page 14), with looser fiscal policy in response to both the global financial crisis and the pandemic seeing debt rise sharply over the past decade. The IMF estimates US government debt has reached 122% of GDP in 2022 from 53% of GDP in 2001. These long-term structural concerns underpin the cyclical dynamics described above in terms of leaving the USD vulnerable to adjustment from its current overvalued levels, in our view. This article is part of the report
Markets under Pressure: Rising Yields, Strong Dollar, and Political Headwinds Weigh on Stocks"

On The New York Stock Exchange Indices Recorded Losses

InstaForex Analysis InstaForex Analysis 09.02.2023 08:11
As of 20:05 GMT+3, the Dow Jones Industrial Average was down 58.20 points, or 0.17%, to 34,098.49 points, the S&P 500 lost 21.61 points, or 0.52%, to 4142. 39 points, and the Nasdaq Composite - 109.91 points, or 0.91%, to 12,003.88 points. eBay shares are down 0.6% in trading. The day before, the world's largest online auction announced its intention to reduce the global staff by about 4%, laying off about 500 people. Capri Holdings Ltd., which owns fashion brands Michael Kors, Jimmy Choo and Versace, plunged 24% amid weak quarterly earnings and company guidance. US restaurant chain Chipotle Mexican Grill was down 4%. The company increased net profit in the 4th quarter of 2022 by 1.7 times, however, adjusted profit and revenue fell short of analysts' expectations. Uber Technologies rose 2.5%. The taxi and food delivery service company saw a nearly 1.5x increase in revenue in the 4th quarter of 2022 thanks to an increase in orders. Uber's first-quarter guidance beat market expectations. The price of Coty Inc. papers. fell by 3.5%. The cosmetics and perfumery manufacturer's net profit in the 2nd financial quarter grew by 22%, the company's revenue decreased by 3.5%, but exceeded market expectations. In addition, Coty has improved its FY2023 adjusted earnings guidance. CVS Health Corp. share price increased by 4%. The pharmacy chain operator's fourth-quarter revenue rose 9.5% to $83.85 billion, well above the market's consensus forecast of $76.32 billion. CVS also announced the purchase of Oak Street Health Inc., which operates a network of primary care centers for Medicare users, for $10.6 billion. Oak Street rose 4.1%. Fed chief Jerome Powell, who attended an Economic Club of Washington event the day before, said he expects a significant slowdown in US inflation in 2023. At the same time, he noted that the continued stability of the US labor market may serve as a basis for further rate hikes by the Fed. At the same time, Powell said that it is necessary to continue raising rates, and it will also be necessary to maintain a restrictive policy for some time. Saxo Bank A/S Head of Equity Strategies Peter Garnry noted that due to the slowdown in commodity inflation, the growth in consumer prices in the service sector is more stable. This factor may contribute to a longer-than-expected inflation. Wednesday is scheduled to feature New York Federal Reserve Bank (FRB) Governor John Williams, Fed Board members Lisa Cook and Christopher Waller, Fed Vice Chair Michael Barr, and Atlanta and Minneapolis Fed leaders Rafael Bostic and Neil Kashkari. Traders are also evaluating the statement of US President Joe Biden, who proposed to increase by 4 times - up to 4% tax on the repurchase of shares by companies. This, according to Biden, should push the business to increase investment in further development.      Relevance up to 04:00 2023-02-10 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/311991
Rates Spark: Balancing data and risk factors

Rates Spark: Taking stock of the impact of recent central bank comments

ING Economics ING Economics 09.02.2023 08:50
Following an eventful week and post-meeting communications fine-tuning by officials, the dust has finally settled. Circumstances have clearly made it easier for the Fed to land its message while the European Central Bank has had limited success so far in extending the reach of its hawkish intentions beyond the next few months ECB President Christine Lagarde and Fed Chair Jerome Powell The Fed unlikely to be fussed by the market The past days have given policymakers plenty of opportunity to refine their policy stance after the previous week had seen outsized market gyrations in the wake of the central bank meetings and then the US jobs data. With regards to the Fed, Chair Powell had largely confirmed the message he had previously conveyed at the press conference. The latest speakers have added only a somewhat more hawkish tone stressing that rates could remain higher for longer. And as the Fed’s Waller added, if financial conditions were to loosen, the response could be faster policy tightening than the 25bp currently envisioned. US markets have shifted their rates expectations higher by about 20bp compared to before the Fed meeting Taking into consideration all of the above, US markets have shifted their rates expectations higher by about 20bp compared to before the Fed meeting, placing the terminal rate at about 5.10%. However, the amount of cuts expected through the end of 2024 was little changed at close to 200bp despite the officials’ emphasis that rates may have to stay higher for longer. Indeed, judging by the smaller increase of medium to longer term OIS real rates by 5bp to 8bp versus the beginning of last week, financial conditions have tightened only moderately since the Fed meeting. But importantly they have not dropped and are roughly aligned with their average over the past two months. Broader financial conditions have eased but real USD rates have barely budged Source: Refinitiv, ING ECB: Salvaging the last meeting's hawkish intent was only modestly successful Arguably the ECB’s press conference probably required a bit more fine-tuning to the initial market reaction of dropping rates. The latest bits of communication in this regards have come from an outspoken hawk, Klaas Knot, warning that the current pace of 50bp hikes may have to be maintained into May. Vice President de Guindos, who reflects a more centrist position within the Council, cautioned markets may be too optimistic about the inflation trends and he would not rule out hikes after March. the ECB’s press conference probably required a bit more fine-tuning to the initial market reaction of dropping rates Comparing latest money market curves to where they were at the beginning of last week just ahead of the policy meeting does not suggest that ECB officials have been able to increase the reach of its hawkish message. The 1m ESTR OIS forwards for the next few months have risen by more than 10bp since then, but beyond that forwards are little changed, if not even a tad lower. The terminal rate itself has nudged only 4bp higher to 3.44% whilst the amount of policy easing expected through 2024 thereafter has slightly increased to a cumulative 93bp.   With markets shorter to medium-term inflation expectations as measured by inflation swaps having risen to a greater extent, the OIS real rates out to 10y have actually dropped by 10 to 4 basis points, signalling slight net loosening of financial conditions. Not a desirable outcome for policymakers who consider their job far from being done, but also not catastrophic with real rates still above the recent average. The ECB's hawkish pushback has kept real EUR rates positive Source: Refinitiv, ING One measure to judge them all Of course the one benchmark against which all central banks will eventually be measured is the decline in inflation. With regards to the US we will get the University of Michigan’s survey of consumer inflation expectations tomorrow and of course the next set of CPI data next week. While the former is anticipated to show a slight uptick on the one year measure, the CPI itself is seen continuing on its downward  trend. The ECB can be seen stuck in the catch up phase being confronted with stubbornly high underlying inflation pressures That puts the Fed in a more comfortable position, in the eyes of the market more of a fine-tuning stage of its policy stance, whereas the ECB can be seen stuck in the catch up phase being confronted with stubbornly high underlying inflation pressures. That increases the risk that hawkish rhetoric as well as action will eventually have to ratched up further.  Today's events and market view In the eurozone, Germany’s inflation data was probably the most anticipated release of the week with little else on the data calendar of note. At 9.2% the EU-harmonised measure is lower than the 10% median estimate but much higher than the 8.6% used by Eurostat in their HICP estimate last week.  Main focus now is on the US initial jobless claims as markets will try to get a better grip on the state of the labour market. There are more ECB speakers scheduled today though only after the end of the European trading session. With Bundesbank’s Nagel we will see another more prominent hawk, but also more dovish to moderate members with de Cos and again VP de Guindos. Main highlight on the central bank front today is the BoE, where Governor Bailer and MPC members Pill, Tenreyo and Haskel appear before teh Treasury committee. At the last meeting the Bank shifted its rhetoric and signalled it was near end of its hiking cycle. In supply last night’s US 10y note auction was another display of strong demand with bid cover of 2.66 even topping January auction. Notable was the record-high allocation to indirect bidders, a proxy for foreign investor demand in the auction. Tonight the Treasury will auction its 30y bond.    Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Vestas Wind System FY23 Outlook Signaled Further Challenges And Weakness, The Adani Group Plans To Prepay a $500mn Bridge Loan

Vestas Wind System FY23 Outlook Signaled Further Challenges And Weakness, The Adani Group Plans To Prepay a $500mn Bridge Loan

Saxo Bank Saxo Bank 09.02.2023 09:06
Summary:  U.S. equities pulled back by over 1%, led by a selloff in the tech space. Google’s parent Alphabet tumbled 7.7% after Google's newly introduced Chatbot Bard’s reportedly underwhelming performance. The decline in bond yields following a strong Treasury auction failed to boost the stock market. Investors are excited about the prospect of AI generative content and bid up shares related to ChatGPT-like products and on the other hand, have concerns about the potential disruption to the mega-cap technology companies.   What’s happening in markets? US equities (US500.I and USNAS100.I) lower, dragged by tech selloff US stocks retreated led by a selloff in the technology space on concerns about the disruption caused by the technological advancements in AI-generated content. Alphabet (GOOGL:xnas) tumbled 7.7% after reports of the underwhelming performance and erroneous responses from the company’s newly introduced Chatbot Bard. Meta (META) dropped 4.3%. Lumen Technologies (LUMN), tumbling 20.8% on well-below-expected earnings guidance for 2023, was the biggest lower within the S&P500. S&P 500 drifted down 1.1% and Nasdaq 100 plunged 1.7%. Despite the retracement, the S&P500 and Nasdaq are still in their technical uptrends for now. All 11 sectors of the S&P 500 declined, led by communication services, utilities, and information services. Hawkish comments from several Fed officials also weighed on the market sentiment. Fortinet (FINT:xnas) jumped 10.9% after the cyber security company beat revenue and earnings estimates. Uber (UBER:xnys) gained 5% continuing its uptrend since January, with Uber reporting stronger-than-expected quarterly results. Disney (DIS:xnys) rose 5.5% in extended-hour trading, after reporting earnings beating estimates and planning to cut 7,000 jobs for cost saving. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) pulled back on a strong 10-year auction The reaction in the Treasury market was muted to the chorus of hawkish comments calling for higher for longer from Fed’s Williams, Waller, Kashkari, and Cook.  The action came in after a strong 10-year auction which awarded the notes 3bps richer than the market level at the time of auction and a strong bid-to-offer-cover at 2.66 times, increasing from 2.53 times in the previous auction. Yields on the 10-year fell 6bps to finish Friday at 3.61%. Australian equites (ASXSP200.I): This quarter, focus will be on energy companies and companies benefiting from Chinese students returning ASX200 futures suggest a 0.4% fall on Thursday. However, focus will be on energy companies again with oil markets moving up. In company news, Nine Entertainment (NEC): won the rights to the 2024-2032 Olympic Games so that will excite some. Fortescue Metals (FMG) is hoping its iron project in Gabon will one day rival the giant mines of Australia’s Pilbara, with the West African nation giving the go-ahead for digging to start this year. Also keep an eye on travel businesses and educational firms in the quarter ahead with at least 50,000 students from China expected to return to Australia before the start of semester  - with Beijing’s government ruling that degrees earned online will no longer be accredited. Hong Kong’s Hang Seng (HIG3) and China’s CSI300 (03188:xhkg) lacked of direction Hang Seng Index was nearly flat in directionless trading as investors were waiting for more evidence of recovery in China after the initial month-long rally that had repriced equities higher to reflect the radical change in policy directions in China. The benchmark Hang Seng Index was dragged by Meituan (03690:xhkg) which tumbled 6.5% on reports that Douyin was launching a food delivery service in March. Tech stocks overall were laggards. Hang Seng TECH Index dropped 1.9%. Kuaishou (01024:xhkg) plunged 6.2% following the content-sharing and social platform company banned 500,000 accounts for breaching the company’s policies. SenseTime (00020:xhkg) dropped 6.6% as Softbank trimmed its stake in the AI and vision software maker. Baidu (09888:xhkg) retraced 3.1% to pare some recent strong gains despite southbound flow registering a net buying of HKD 671 million on Wednesday. Online knowledge-sharing platform, Zhihu (02390:xhkg) soared 39.6% on the potential of being benefited by ChatGPT application. NetEase (09999:xhkg) climbed 1.1% as the company is planning to roll out a demo online educational product similar to Chat GPT. Ganfeng Lithium (01772:xhkg) gained 5% following the EV battery maker making breakthrough in manufacturing solid-state power batteries. An EV SUV using Ganfeng’s solid-liquid hybrid lithium-ion batter is expected to come to the market in 2023.  In A-shares, northbound flows registered net selling for the fourth day in a row. CSI300 drifted 0.4%. Media, communication, and defense stocks led the decline. Real estate, transportation, and pharmaceutical names outperformed. FX: Aussie gains stall; sterling outperforms After a strong run higher post-RBA, AUDUSD turned lower overnight on hawkish Fed speak. Pair reversed from 0.6996 highs to 0.6920 and will need either a turn in sentiment or another leg higher in commodity prices to sustain this week’s rally. USDCAD also returned back above 1.3400 despite the surge in oil prices. Sterling bounced off 1.2000 support and bounced back to 1.2100 but still staying below the 38.2% Fibo retracement at 1.2120. UK GDP for Q4 will be released tomorrow. Crude oil (CLH3 & LCOJ3) jumps again despite hawkish Fed and inventory build Oil prices rose 1.7% with WTI to $78.50 and Brent above $85 despite a hawkish rhetoric from Fed members as well as higher inventory levels as demand outlook remains upbeat. The EIA reported US crude stocks building 2.4mln bbls in the latest week, contrasting the private data that indicated a draw of a similar magnitude. On the demand side, TotalEnergies sees oil demand will rise to a record this year, in line with the IEA’s messaging. The International Energy Agency expects oil processing will rise to a record 14.4mb/d over the course of the year. That compares with 13.6mb/d in 2022.  Read next: The GBP/USD Pair Climbed To Around 1.2100, The EUR/USD Pair Is Above 1.0700| FXMAG.COM What to consider? Fed speakers call for higher rates A slew of Fed speakers were on the wires yesterday. While a broad chorus on higher rates was maintained, much of which has been the Fed’s message throughout, markets perceived the messages as hawkish primarily as the January jobs report is still keeping investors concerned. Importantly, all the four speakers last night are voting this year. Christopher Waller said rates may have to stay higher for longer. John Williams called the December dot plot a good guide, adding that rates are "barely into restrictive" territory. He also hinted at a slightly higher terminal rate of 5.0-5.5%. Lisa Cook said "we are not done yet." Neel Kashkari expects the peak to rise above 5% this year as services side of the economy is still hot. Market pricing of the Fed path still pretty much unchanged, with terminal rate priced in at just over 5.1%. European companies outperformed in earnings growth Saxo’s Head of Equity, Peter Garnry, mentioned in his latest notes that European companies are the big winner in the Q4 earnings season with 4.8% earnings growth Q/Q and the highest growth rate in revenue Q/Q compared to US and Chinese companies. European earnings are actually ahead of S&P 500 earnings since Q3 2019. As Peter writes in Saxo’s Q1 Outlook, the comeback to the physical world is also a comeback to European equities. The Q4 earnings season also show that earnings are holding up better than we expected despite margin pressures are still an ongoing theme and could intensify during the year. Maersk guided a downbeat 2023 outlook A.P. Moller-Maersk (MAERSKb:xcse) reported lower than estimated Q4 revenue and in-line EBITDA, but the FY23 outlook on EBITDA of $8-11bn vs est. $13.5bn is a big miss and maybe a bit too conservative if the cyclical upturn gathers steam. Maersk’s guidance for global container trade in 2023 at -2.5% to +0.5% again is at odds with the market’s cyclical growth bet. Maersk’s CEO says that a significant inventory adjustment is taking place and that the world is generally moving to a more normal world. Vestas signals weakness in the wind turbine business Vestas Wind System (VWS:xcse) reported a FY23 outlook that signaled further challenges and weakness in the wind turbine business with FY23 revenue outlook at €14-15.5bn vs est. €14.8bn and adjusted EBIT margin of –2% to +3%. If the cyclical upturn continues, it will most likely put more pressure on industrial metals making it difficult for Vestas to expand its operating margin in 2023. The outlook is at odds with the narrative that Europe is undergoing a boom in green energy as the revenue in 2023 is expected to be the same as in 2020. Judging from analyst estimates, it seems that growth is expected to pick up in 2024 with revenue growing to €17.9bn. One thing is for sure, the lack of great headlines coming out of wind turbine makers will add steam to the movement and support for nuclear power which seems inevitable as part of the solution toward net zero carbon in 2050. Cybersecurity company Fortinet beat estimates Fortinet (FINT:xnas), one of the largest cyber security companies on revenue, reported Q4 revenue and EPS that beat estimates and the FY23 outlook on operating margins and revenue were in line with analyst estimates. It was clear that investors had lowered their expectations below that of analysts as the FY23 outlook hitting estimates led to a rally in extended trading. The outlook on operating margin also confirms that cyber security companies are experiencing little margin pressure. Auto companies Toyota, Honda and Volvo report earnings A bevy of EV and motor companies report today including Toyota Motor, Honda Motor and Volvo Car. We think there could be a risk they report weaker than expected results, similar to Ford; which sent Ford shares 8% lower on Friday. Ford is struggling to make money on its EV business and blamed supply shortages. Metal commodities are a large contributor to car manufacturers costs. And we’ve seen components of EVs rise significantly in price, amid limited supply vs the expectation China will increase demand.  For example consider the average EV needs about 83 kilos of copper- and its price is up 26%, 250 kilos of aluminium are needed - and its price is up 20% from its low. These are some headwinds EV makers are facing, in a market where consumer demand is restricted amid rising interest rates.   Adani prepays bridge loans, earnings support sentiment The Adani Group plans to prepay a $500mn bridge loan due next month, in order to avoid a refinancing at higher rate after the recent sell-off. The effort to deleverage also appears to be a response to banks that had started to step away from lending against Adani debt or a measure to avoid a potential rating downgrade. Recent earnings from Adani companies have also hinted at slower inorganic growth to avoid the need for fresh borrowing, and this is helping to rebuild investor confidence. Markets will wait to see some more such confidence-boosting measures from Adani before we can comfortably put a floor to the allegation-driven declines. MSCI’s quarterly review today will be key for any risks of exclusion.   For what is ahead at markets this week – Read/listen to our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: Market Insights Today: Alphabet tumbled on underwhelming Chatbot performance – 9 February 2023 | Saxo Group (home.saxo)
The Indian Rupee Pair Takes Clues From The Receding Fears Of Hawkish Fed Rate Moves

The USD/INR Pair May Witness Recovery

TeleTrade Comments TeleTrade Comments 09.02.2023 09:09
USD/INR remains pressured for the second consecutive day amid broad US Dollar weakness. RBI rejects dovish hike concerns even as matching market forecasts of 0.25% rate hike. Cautious optimism in Asia, downbeat US Treasury bond yields favor Indian Rupee buyers. USD/INR fades bounce off intraday low as Indian Rupee buyers cheer cautious optimism in Asia, as well as a softer US Dollar, during early Thursday. In doing so, the pair sellers extend the Reserve Bank of India (RBI) inflicted losses to around 82.60 by the press time. Market sentiment in Asia improves amid the risk-positive headlines surrounding China. That said, the receding fears of the US-China jitters, following the China balloon shooting by the US, join hopes of People’s Bank of China’s (PBOC) rate cuts and the restart of the China-based companies’ listing on the US exchanges to favor risk-on mood in the bloc. Additionally favoring the sentiment could be the receding recession woes surrounding China and the US. On Wednesday, global rating giant Fitch inflated China's growth forecasts while US Treasury Secretary Janet Yellen and President Joe Biden recently cheered hopes of growth in the current year. It should be noted that the RBI’s rejection of the market’s dovish hike expectations, by suggesting high inflation fears, also seems to weigh on the USD/INR prices. Following the RBI’s 0.25% hawkish move, analysts at ING and Citibank expect another 25 bps rate hike. Alternatively, hawkish Fedspeak, including Fed Governor Christopher Waller, New York Federal Reserve President John Williams and Fed Governor Lisa Cook, highlight inflation fears and defended higher rates, while also pushing back the talks of rate cuts in 2023. On the same line were comments from the US diplomats as Treasury Secretary Janet Yellen mentioned, “While inflation remained elevated, there were encouraging signs that supply-demand mismatches were easing in many sectors of the economy.” Elsewhere, US President Joe Biden said during a PBS interview that there will be no US recession in 2023 or 2024. Amid these plays, the US 10-year Treasury bond yields which reversed from a one-month high to snap a three-day uptrend on Wednesday, pressured around 3.61% at the latest. The same helped S&P 500 Futures to ignore Wall Street’s downbeat closing and remain mildly bid as of late. Read next: The GBP/USD Pair Climbed To Around 1.2100, The EUR/USD Pair Is Above 1.0700| FXMAG.COM Given the cautious optimism in the market and the US Dollar’s failure to justify hawkish Fed bias, the USD/INR pair may witness recovery if the US Weekly Jobless Claims keep portraying a strong US labor market. Also, fears of more Sino-American tussles and higher Fed rates may allow the Indian Rupee (INR) to pare RBI-inspired gains. Technical analysis USD/INR bears need validation from a convergence of the 100-DMA and a two-week-old ascending support line, close to the 82.00 round figure by the press time, to retake control.  
Sweden: How the Riksbank has made the krona’s path to recovery even narrower

Unusual Scale Of The Swedish Krona Weakness, Crude Oil Trades Higher

Saxo Bank Saxo Bank 09.02.2023 09:56
Summary:  Choppy markets yesterday as the US market erased the prior day’s sharp rally in the ongoing struggle between bulls and bears after the S&P 500 recently cleared important resistance but has stalled out. Treasury yields also dipped after a very strong US 10-year treasury auction as the US yield curve is near its most severe inversion for the cycle. Elsewhere, oil prices have jumped sharply off recent lows over the last three days. What is our trading focus? US equities (US500.I and USNAS100.I): tight trading range Yesterday’s trading session did not confirm the cyclical growth bets in equities with S&P 500 futures erasing the prior gains on Powell’s tight labour market comments and the need for higher policy rates. It feels like the market is transitioning into a tighter range before getting new information on which to decide whether to continue to uptrend or reverse lower. The signs are leaning towards a cyclical uptrend, but the signal-to-noise level remains low across many macro indicators. Yesterday’s open price in S&P 500 futures at 4,167 is the key level to watch on the upside. Chinese equities: Hang Seng (HIG3) and CSI300 (03188:xhkg) lacked of direction Hang Seng Index and CSI300 bounced over 1% after a week-long consolidation. Xiaomi (01810:xhkg), surging 9.5%, was the biggest winner within the Hang Seng Index. Lei Jun, Chairman and founder of the mobile phone and electronic device maker, announced on Twitter in the form of Q & A with a Chatbot that the company is launching its Xiaomi 13 Series mobile phone on 26 Feb. Mobile phone hardware suppliers Sunny Optical (02382:xhkg) and AAC (02018:xhkg) surged 5.3% and 4.1% respectively. The technology space outperformed overall, with the Hang Seng Tech Index climbing 2.5%. In A-shares, food and beverage, communication, defense, and internet-of-things stocks led the advance. FX: Aussie gains stall; sterling outperforms After a strong run higher post-RBA, AUDUSD turned lower yesterday after taking a stab at 0.7000, but was choppy overnight in the Asian session, perhaps buoyed into early European hours by a bounce in metals prices. The key levels for that pair to the downside are the recent 0.6856 low and the 200-day moving average another 50 pips lower currently. USDCAD also returned back above 1.3400 despite the surge in oil prices, with the line of resistance for that pair near 1.3475. Sterling bounced off 1.2000 support in GBPUSD and managed a poke through 1.2100 but has found resistance in that area. The 38.2% Fibo retracement at 1.2120. UK GDP for Q4 will be released tomorrow. The EURGBP rally, meanwhile, has partially deflated after the pair broke well above the key 0.8900 area, trading near 0.8875 this morning and threatening a full reversal if it closes much lower in coming sessions. Crude oil (CLH3 & LCOJ3) prices rise on demand outlook Crude oil trades higher for a fourth day as last week’s long-liquidation-driven sell-off continues to be reversed as the dollar softens and on renewed optimism about the demand outlook for oil, especially in China and other parts of the world that may narrowly avoid a recession. The EIA reported US crude stocks building 2.4mln bbls in the latest week, contrasting the private data that indicated a draw of a similar magnitude. On the demand side, TotalEnergies sees oil demand will rise to a record this year, in line with the IEA’s messaging. Brent is currently trading above its 21-day moving average, currently at $84.95 - in WTI at $78.25 - with a close above likely to provide additional positive momentum. Gold (XAUUSD) trades steady but risk of further weakness lingers Gold remains supported around the $1860 level but so far the failure to break decisively higher to challenge support-turned-resistance in the $1900 area is raising concerns that a correction floor has yet to be found. The yellow metal erased earlier gains on Wednesday after Fed members reaffirmed the view that interest rates will need to keep rising to contain inflation. Since hitting a $1861 low last Friday, gold has been trading within an 18-dollar rising channel, currently between $1870 and $1888, and a break to the downside carry the risk of an extension towards $1828, the 38.2% retracement of the run up from early November. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) pulled back on a strong 10-year auction The reaction in the Treasury market was muted to the chorus of hawkish comments calling for higher for longer from Fed’s Williams, Waller, Kashkari, and Cook.  The action came in after a strong 10-year auction which awarded the notes 3bps richer than the market level at the time of auction and a strong bid-to-offer-cover at 2.66 times, increasing from 2.53 times in the previous auction. Yields on the 10-year fell 6bps to finish Friday at 3.61%. What is going on? Credit Suisse sees weak 2023 on significant outflows The Swiss bank reports this morning Q4 net income loss of CHF 1.4bn vs est. loss of CHF 1.1bn, but even worse the bank is expecting a substantial loss before taxes in 2023, but also expect to bounce back to profitability in 2024. Outflows in Q4 totalled CHF 111bn but deposits looked positive in January according to Credit Suisse. Walt Disney announces job cuts and $5.5bn cost-cutting plan The Walt Disney Company reported quarterly earnings after hours yesterday, with profits of 99 cents per share well north of consensus estimates of 74 cents and revenue growing 7.8% y/y to $23.5bn, also above estimates. Disney+ streaming service subscribers fell 1% in the quarter, mostly due to their Indian streaming service loosing streaming rights to cricket games. CEO Bob Iger announced a $5.5bn cost saving plan that will include a $3bn reduction in movie-production budgets and the axing of 7,000 jobs. Shares were up over 5% in late trading last night, near $117.80 per share. Uber shares gained 5% yesterday after reporting earnings. The rise in Uber accelerated yesterday, posting a new 10-month high after Uber reporting stronger than expected quarterly results. Uber expects its first ever year of profits, including for its ride and Uber Eats businesses. Uber reported its highest ever number of trips for the quarter at more than 2 billion and nearly 1mn trips per hour. Meanwhile Uber is also receiving more advertising dollars, and on track to achieve its $1bn ad revenue in 2024. A fourth activist investor joins the move to shake up Salesforce Three activist investors, Elliott Investment Management, Starboard Value LP, and ValueAct Capital Partners, have already put pressure on Salesforce’s management to cut costs and improve profitability. Wall Street Journal writes that a new activist investor Third Point LLC has now also taken a stake in the software maker. This group of investors will put enormous pressure on the software maker to improve results over the coming year. UK House Prices continue to drop sharply, according to RICS Survey. The UK RICS Price Balance survey registered a new low for the cycle at –47%, suggesting that nearly 50% more of surveyed estate agents are seeing falling prices than rising prices, the lowest number since 2009, during the financial crisis. This was slightly worse than expected and a drop from –42%, although estate expectations are improving with only 20% believing in a worsening outlook for the next 12 months versus 42% a month ago. European gas settles at 17-month low on mild weather outlook. The Dutch TTF gas futures, Europe’s natural gas benchmark, settled at €53.69 on Wednesday, its lowest close since September 2021, and around 25 euros above the five-year average for this time of year. A cold spell across Europe this past week have had no major impact on prices with ample supplies to meet demand, and forecasters are now looking for milder than expected weather for the rest of the month than previously expected. EU gas in storage remains 69% full and we may enter the injection season in late March near 60% and unprecedented high level, even compared with the recession hit 2020 when the level was 54%. Fed speakers call for higher rates A slew of Fed speakers were on the wires yesterday. While a broad chorus on higher rates was maintained, much of which has been the Fed’s message throughout, markets perceived the messages as hawkish primarily as the January jobs report is still keeping investors concerned. Importantly, all the four speakers last night are voting this year. Christopher Waller said rates may have to stay higher for longer. John Williams called the December dot plot a good guide, adding that rates are "barely into restrictive" territory. He also hinted at a slightly higher terminal rate of 5.0-5.5%. Lisa Cook said "we are not done yet." Neel Kashkari expects the peak to rise above 5% this year as services side of the economy is still hot. Market pricing of the Fed path still pretty much unchanged, with terminal rate priced in at just over 5.1%.  Read next: The GBP/USD Pair Climbed To Around 1.2100, The EUR/USD Pair Is Above 1.0700| FXMAG.COM What are we watching next? Sweden’s Riksbank to hike today – watching guidance after krona’s woeful weakness. EURSEK recently touched its highest level since the global financial crisis back in 2009, a rather unusual scale of SEK weakness, given strong global risk sentiment and an improved outlook for Europe. The new Riksbank governor Erik Thedeen warned on the concerns that rate rises and high inflation (which hit over 12% YoY a the headline and 10.2% for core inflation in December) are risks for Sweden’s financial system, suggesting that the central bank may be reluctant to continue hiking much more beyond today’s 50 basis point rate rise, which would take the policy rate to 3.00%. With 10-year Swedish government bonds trading with a yield south of 2.00%, the Swedish yield curve is even more steeply inverted than Germany’s, suggesting strong concerns for economic growth. RBA inflation forecasts due tomorrow as Chinese students set to return to AU The AUDUSD has had a volatile week, sentiment was lifted a bit overnight in Australia as the iron ore (SCOA) and copper prices moved up over 1% each. China recently docked its first Australian coal import shipment in two years. In what can only prove a boost to the Australian economy, almost 50,000 Chinese students are expected to arrive in Australia this month- ahead of the start of semester. This is due to Beijing’s government ruling that degrees earned online will no longer be recognized. Tomorrow, the RBA will issue its quarterly economic forecasts and policy outlook in Australia on Friday. Earnings to watch Today’s US earnings focus is PepsiCo and PayPal with analysts expecting PepsiCo to report revenue growth of 7% y/y and EPS of $1.64 up 7% y/y as the beverage and snacks business is resilient during inflation. PayPal earnings will an interesting to watch as Adyen in Europe yesterday spooked markets with a significant decline in the EBITDA margin on more hiring and investments in infrastructure. Analysts expect PayPal to report revenue growth of 7% y/y and EPS of $1.20 up 41% y/y. Thursday: KBC Group, Brookfield, Thomson Reuters, L’Oreal, Vinci, Credit Agricole, Siemens, Toyota Motor, NTT, Honda Motor, AstraZeneca, Unilever, British American Tobacco, ArcelorMittal, DNB Bank, Volvo Car, Zurich Insurance Group, Credit Suisse, AbbVie, PepsiCo, Philip Morris, PayPal, Cloudflare Friday: Enbridge, Constellation Software Economic calendar highlights for today (times GMT) 0830 – Sweden Riksbank Policy Rate 0945 – Bank of England Governor Andrew Bailey to testify 1330 – US Weekly Initial Jobless Claims 1400 – Poland National Bank Governor Glapinski press conference 1530 – US Weekly Natural Gas Storage Change 1900 – Mexico Rate Announcement 0030 – Australia RBA Monetary Policy Statement 0130 – China Jan. CPI/PPI   Source: Financial Markets Today: Quick Take – February 9, 2023 | Saxo Group (home.saxo)
Higher Rates And Wider Credit Spreads Make High-Yield Bonds Look More Appealing To Us Over The Long Term

Higher Rates And Wider Credit Spreads Make High-Yield Bonds Look More Appealing To Us Over The Long Term

Franklin Templeton Franklin Templeton 09.02.2023 11:27
Key Points • Valuations reset across most assets in 2022, leading to a rise in expectations for longterm returns for many risky assets, including high-yield bonds and equities. • We view valuations as a better long-term asset allocation signal than a justification for short-term portfolio changes. • Despite improved long-term return expectations, our cautious near-term macro-outlook— with significant recession risk—leads to a less favorable view of risky assets, such as high-yield bonds and equities, over the next several quarters. • Putting it all together, the improvement in valuations currently leaves us moderately bearish on risky assets given our cautious cyclical outlook. Introduction Franklin Templeton Investment Solutions (FTIS) is optimistic about the performance potential for risky assets over the long term, which we consider to be a full business cycle, or about 10 years. However, our short-term preference (over the next 12 months) for risk assets is more cautious, based on our macro outlook. Some might notice these opposing viewpoints and wonder what signals would make an investment manager bearish in the short-term and bullish over the long-term, and how they balance this tension in a portfolio. Here, we attempt to provide the rationale behind these opposing views. While generally applicable to all risky assets, we will focus specifically on high-yield bonds and equities. Long-term return expectations have improved Our long-term return expectations have risen across every asset class, due largely to the market declines in 2022, which have reset valuations (Exhibit 1 on the next page). In equities, lower price-to-earnings (P/E) multiples (and thus higher earnings yield) now mean that valuations are a tailwind over the foreseeable future, rather than a headwind. In fixed income, interest rates have risen across the yield curve. Higher rates and wider credit spreads make high-yield bonds look more appealing to us over the long term. Historically, valuations have been helpful indicators of long-term returns. As an asset class gets cheaper (i.e., yields increase), generally the long-term return expectations increase. However, valuations are much less effective at predicting shorter, one-year returns (Exhibit 2 on the next page). Focusing on the long term We believe it’s hard to argue against the long-term case of high-yield bonds and equities, assuming they fit an investor’s risk parameters and investment horizon. Historically, high-yield bonds have produced a total return somewhere in between US stocks and investment-grade corporate bonds. And they have achieved these returns with less volatility than equities, resulting in what we believe to be strong risk-adjusted returns (see Exhibit 3). High-yield issuers usually have less equity and/or more leverage on their balance sheets, which raises their default risk and leads to a higher credit spread when compared with their investment-grade counterparts. The higher credit spread leads high-yield bond returns to move more in lockstep with the perceived financial strength of their issuers. Thus, they usually respond to the strength of the economy (similar to stocks) more so than changes in interest rates, which tend to impact investment-grade corporate bonds to a greater degree. Put simply, high-yield bonds have more exposure to the economic growth factor, while investment-grade bonds have more exposure to the interest-rate factor. Investors are compensated for this extra credit risk with excess returns—at least when times are good, and the default rates are low. What about when times are bad? Of course, like equities, high-yield bonds are not impervious to downturns. But so far, we have never observed two straight calendar years of negative returns in the high-yield asset class (see Exhibit 4). With a streak like that, should investors consider high yield? Our view (short-term vs. long-term) Our near-term macro outlook for 2023 remains cautious. While inflation may have peaked, we believe it will remain above the US Federal Reserve’s (Fed’s) target levels of 2% for some time. The Fed has repeated that it is unconditional in its fight against inflation, with the hope that it can lower job openings (weaken wage inflation) without materially affecting employment. We think this will be difficult to achieve. We also believe that growth and employment need to weaken to fully normalize inflation. FTIS’ odds for a US recession over the upcoming year remain high at 65%. The implications of this viewpoint for asset allocation are straightforward. Risky assets, such as equities and high yield, have performed poorly heading into recessions (see Exhibit 5). Read next: Disney Plans To Cut Costs And Jobs, Google Is Now Rolling Out AI Chatbot| FXMAG.COM During recessions, the high-yield risk premium, or spread over Treasuries, typically spikes up to compensate for anticipated higher defaults. At its peak, the default rate has reached more than 10% in a recession and spreads often widened past 7%. We do not think high-yield bonds are currently pricing in a recession from a spread valuation perspective (see Exhibit 6). In other words, the market, in our view, is not pricing in the much tighter financial conditions and weaker financial performance for issuers that often comes with a market downturn and can lead to an increase in defaults. A volatile year ahead At the opening of 2022, we believed the Fed was walking a tightrope heading into the year.2 Unfortunately, it is still on the same tightrope, in our view, as the central bank tries to engineer a soft landing in 2023. The Fed will likely try to pause its interest-rate hikes at some point in 2023, fearful of driving the US economy into recession. The market is pricing in Fed rate cuts in 2023 due to growth worries. We find this scenario unlikely, and think the Fed is likely to keep rates restrictive throughout 2023. As always, what ultimately happens will depend on a number of variables, many outside the Fed’s control, including the US economy’s sensitivity to higher interest rates, and how geopolitical developments evolve. The performance of risky assets will depend on these variables, among others. Returns at year end don’t reflect the volatility experienced along the way. Prices will likely be volatile until the market has an unobstructed view of clear skies ahead—and that will likely begin with the Fed’s policy actions. This is why we believe that nimble, active management is important, especially in times like these. Our own viewpoint will change as our cyclical outlook changes. Conclusion Improved valuations have increased the long-term expected return outlook for multi-asset portfolios in general. However, in the near term, we weigh our cyclical outlook more heavily, which leaves us defensively positioned given our view of significant US recession risk. This combination of improved valuations and an uncertain near-term view leaves us moderately bearish toward risky assets, such as high yield and equities. Source: Making sense of different signals | Franklin Templeton
BRICS Summit's Expansion Discussion: Impact on De-dollarisation Speed

Equities Fall On Hawkish Fed Comments, Uber, Disney Jump

Swissquote Bank Swissquote Bank 09.02.2023 12:58
US equities fell yesterday on the back of two important factors: hawkish comments from the Federal Reserve (Fed) members, and the unexpected surge in the American used car prices. Stocks market The S&P500 fell more than 1%, while Nasdaq slid around 1.80%. Inside Nasdaq, Google had a particularly rough day, to say the least. The company posted a Tweet showing Bard in action, and the tweet went wrong, as Bard gave the wrong answer! The stock price slumped by more than 9% at some point. Microsoft Microsoft on the other hand was upbeat on the news, and its valuation shortly surpassed the $2 trillion mark. Uber, Disney Elsewhere, Uber jumped more than 5.5% on stronger than expected results. Disney also jumped by more than 5% in the afterhours, after reporting better than expected results, and the promise to slash $5.5 billion in costs, along with 7000 jobs. The US futures are in the positive at the time I am talking here, but the bears are not far away. Read next: Credit Suisse Reported Its Biggest Annual Loss Since The 2008, Ukrainian President Is Asking For Help And More Weapons In Brussels| FXMAG.COM Forex In the FX, the US dollar remains upbeat, but the 50-DMA offers remain a solid resistance to a bullish breakout. Likewise, the EURUSD remains bid at around the 50-DMA, and the dollar-yen remains offered into the 50-DMA. So that 50-DMA mark is the key resistance that must be cleared to set the dollar bulls free for further appreciation, and de-block the situation in the FX space. Energy In energy, US crude extended gains above its own 50-DMA yesterday. Could it extend gains higher, and by how much? Watch the full episode to find out more! 0:00 Intro 0:50 Equities fall on hawkish Fed comments… 3:45 … and sudden jump in used-car prices 5:54 Bard’s gaffe costs Google more than $100bn in market cap 7:22 Uber, Disney jump after earnings 8:29 USD must clear 50-dma for further appreciation 9:00 Crude’s next challenge Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Google #Bard #AI #gaffe #Microsoft #ChatGPT #Fed #hawkish #comments #inflation #jobs #USD #EUR #JPY #XAU #crude #oil #earnings #Uber #Disney #layoffs #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH      
Long-Term Yields Soar Amidst Hawkish Fed: Will They Reach 5%?

Weak Data From The German Economy Will Make It Difficult For The ECB To Make Excessive Interest Rate Hikes

Kenny Fisher Kenny Fisher 09.02.2023 13:11
The euro has posted strong gains on Thursday. EUR/USD is trading at 1.0749, up 0.57%. German CPI ticks higher German inflation came in at 8.7% y/y in January, up from 8.6% in December. On a monthly basis, CPI rose 1.0%, following a -0.8% reading in December. The report shows that German inflation remains high and it’s still too early to talk of a peak. The good news is that nasty double-digit inflation seems behind us, thanks in large part to lower energy prices due to a warm winter in Europe. The ECB raised rates by 50 basis points last week, bringing the cash rate to 3.0%. The cash rate remains well below that of all other major central banks – the Fed’s rate, for example, is at 4.75%. ECB policy makers have noted that core inflation, which is a more reliable gauge than headline inflation, remains stickier than expected. The central bank meets next on Mar. 16 and the markets have priced in a 50-bp hike. What happens after March is uncertain. The ECB could take a pause in order to assess the impact of its tightening cycle or it could continue hiking, perhaps in modest increments of 25 bp, until there is a clear indication that core inflation is coming down. ECB rate policy is primarily focused on taming inflation, but it must also keep an eye on the strength of the German economy, the largest in the eurozone. Recent data has been weak, which will make it harder for the ECB to deliver oversize rate hikes. German Industrial Production came in at -3.2% in December, GDP in Q4 contracted by 0.2%, retail sales for December slumped by 5.3% and Manufacturing PMI remains mired in contraction territory. The Fed paraded four policy makers on Wednesday, each of whom drummed the message that the fall in inflation was welcome but the fight was not yet over. Fed member Williams said that a restrictive policy stance could last for a few years until inflation dropped to the target of 2%. The markets may be listening more closely to the Fed since the blowout employment report on Friday, but continue to underestimate the Fed’s end game. The markets have priced in a terminal rate of 4.6%, while the Fed has projected a terminal rate of 5.1%. Read next: Credit Suisse Reported Its Biggest Annual Loss Since The 2008, Ukrainian President Is Asking For Help And More Weapons In Brussels| FXMAG.COM EUR/USD Technical EUR/USD is testing resistance at 1.0758. Above, there is resistance at 1.0873 1.0714 and 1.0633 are providing support This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
InstaForex's Ralph Shedler talks Euro against Japanese yen

USD/JPY Is Below 131.00 Again, The Aussie Is Close To 0.70$

Kamila Szypuła Kamila Szypuła 09.02.2023 13:55
The US dollar hovered near the middle of recent ranges compared to majors on Thursday as investors scrutinized comments from many Federal Reserve officials. Overnight, four Fed speakers continue to send their hawkish message to the market. The consistent message is that further interest rate hikes are announced and that the interest rate will have to stay high for a long time. The employment data initially raised expectations that the Fed might return to aggressive monetary policy, but Powell did not lean in that direction in his speech. Investors will be keeping a close eye on the consumer price inflation data that comes out on Tuesday for additional guidance on the policy outlook. USD/JPY During the morning trading hours, USD/JPY held above 131.40 but failed to sustain momentum. USD/JPY has returned to levels below 131.00. EUR/USD EUR/USD maintained its upward momentum and extended its daily gain towards 1.0800 on Thursday. Earlier in the day, data from Germany revealed that the Harmonized Index of Consumer Prices (HICP) fell to 9.2% on an annualized basis in January from 9.6% in December. This reading was much lower than market expectations of 10%, but the negative impact of these data on the euro remained short-lived. With the major European stock indices opening much higher on Thursday, the EUR/USD rate began to rise. At the time of publication, the German DAX 30 and Euro Stoxx 50 indices were up over 1% during the day. Read next: Credit Suisse Reported Its Biggest Annual Loss Since The 2008, Ukrainian President Is Asking For Help And More Weapons In Brussels| FXMAG.COM GBP/USD The Bank of England is concerned that UK inflation will remain stubbornly high. This suggests that the BoE has growing uncertainty about whether further policy tightening is warranted and that the current cycle of rate hikes may be coming to an end. The BoE has hiked interest rates 10 times since December 2021, the last being a week ago, as it battles to bring down sky-high inflation without causing a deep recession. Bank of England Governor Andrew Bailey is joined today by MPC members Huw Pill, Professor Silvana Tenreyro and Professor Jonathan Haskel in the Treasury Committee (TSC). So far, they have been asked whether the central bank is lagging behind in the fight against inflation. So far, the statements of BoE representatives suggest that the MPC is still worried about persistently high inflation and that the British economy may face a prolonged period of weakness. GBP/USD continued to move higher and hit a new six-day high above 1.2150 on Thursday. Cautious comments from BOE policymakers on the outlook for inflation and a risk-prone market environment help the pair keep their balance. On Friday, the UK's Office for National Statistics will publish estimate GDP figures for December 2022. AUD/USD The risk-sensitive Australian dollar gained against gains from US equity futures and the more hawkish Reserve Bank. AUD/USD rebounded strongly from 0.6920 in the Asian session. The New Zealand dollar also appreciated. Australians were rather dissatisfied after the last RBA meeting, which may point to further rate hikes in the future due to inflationary pressure. A slightly weaker dollar this morning is supporting the Australian bulls, including the rise of some key Australian commodities. The Australian pair is currently trading close to the $0.7000 level. Source: finance.yahoo.com, investing.com
Uncertain Waters: Saudi's Oil Production Commitment and Global Economic Jitters

Adidas Released A Shockingly Bad Outlook, The US Dollar Traded Weaker

Saxo Bank Saxo Bank 10.02.2023 08:51
Summary:  A downbeat session in the US yesterday took the S&P 500 Index back below the pivotal levels that provided resistance on the way up recently. Long US treasury yields rose again on one of the weakest a weak 30-year T-bond auctions in a year. This helped boost the US dollar again and take gold prices to nearly 1,850 overnight, representing a more than 100-dollar consolidation of the rally since last November. What is our trading focus? US equities (US500.I and USNAS100.I): Failing to hold the line  S&P 500 futures failed yesterday to push higher above that important 4,200 level and lost instead altitude closing below the 4,100 level erasing the gains for February. The US 10-year yield also bounced but the moves are not dramatic, and it feels like the market is waiting for the bond market to make up its mind about long-term yields and inflation. Earnings after the close from PayPal and Lyft that both disappointed also helped lower risk sentiment in US equity futures overnight. FX: USD rolls back higher on weak sentiment. Historic day for SEK The US dollar traded weaker yesterday before firming late in the session as US equities rolled over and posted a weak session, with EURUSD never making a serious challenge of 1.0800  and trading below 1.0725 this morning, while a USDJPY sell-off yesterday quickly aborted on a weak US T-bond auction that sparked a rise in long US yields. This will have USD traders on watch for a follow through higher, which could suggest a proper trending move rathre than a mere consolidation of prior weakness. Elsewhere, an historic day for the Swedish krona yesterday on a powerful broadside to SEK speculators in yesterday’s guidance, but also technical moves to increase liquidity in Sweden’s banking system as noted below. Crude oil (CLH3 & LCOJ3) slides again on US growth concerns Crude oil trades lower for a second day after sentiment across markets received a fresh set back on worries about the US economy's ability to withstand additional Fed rate hikes. Overall, it highlights a market that remains rangebound (since November) with current soft fundamentals likely to remain until the second quarter when, despite concerns about further US rate hikes, improved activity in China should brighten the macro-outlook. Brent trades back below its 21-day moving average, currently at $84.90 - in WTI at $78.40 - with a close above needed to attract fresh buying momentum. Next week, apart from US CPI on Tuesday, the market will look out for monthly oil market reports from OPEC and the IEA. Gold (XAUUSD) weakness resumes with focus on US rates and next week’s CPI print Gold’s attempt this past week to recover from last Friday’s sell-off below support-turned-resistance in the $1900 area received a setback on Thursday when weakness resumed, driving the price down to a $1853 during the Asian trading session. The market had been left vulnerable to further weakness after only managing a small bounce earlier in the week, and with the attention now fully on the prospect for even higher Fed rates to tame inflation, the dollar and Treasury yields have risen to provide some formidable headwind. Furthe weakness carry the risk of an extension towards $1828, the 38.2% retracement of the run up from early November. The main event next week being the US January CPI report on Tuesday. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) back higher on weak 30-year T-bond auction It has been a confusing week for treasury traders this week, as we saw a very weak 3-year auction on Tuesday followed by a robust 10-year auction Wednesday, only to see one of the weakest 30-year T-bond auctions over the last 12 months yesterday, which saw 30-year benchmark yields reversing back higher and posting a new local high close just shy of 3.75%. The 2-10 portion of the yield curve remains near the extreme of its inversion for the cycle, just below –80 basis points, and near the highest since the early 1980s. What is going on? SEK blasts higher on watershed Riksbank meeting The Riksbank met yesterday and impressed the market with its guidance on further rate hikes and additional plans to accelerate the pace of quantitative tightening from April onwards, with additional offerings of “Riksbank certificates” to encourage a rise in rates and foreign investment in Swedish paper. Two-year Swedish rates jumped 10 basis points on the news, and the QT The new Riksbank Governor, Erik Thedeen, also took aim at currency speculators in the press conference yesterday. Ahead of the meeting, EURSEK had risen above 11.40 at one point, its highest level since 2009, in part on concerns that the Riksbank feared the impact of higher rates on Sweden’s housing market, the bottom dropped out yesterday on the Riksbank developments, taking EURSEK all the way back down to range support near 11.10, one of the most powerful strengthening moves in the krona’s history. This was a watershed moment and likely puts a floor under the krona for now. Natural gas lower despite larger-than-expected US draw US natural gas futures (NGH3) only managed a temporary rise on Thursday after the EIA said inventories had declined by 217 billion cubic feet (bcf) last week. This the first above average weekly storage draw this year left total stocks some 5.2% above the long-term average, and despite trading near a two-year low the upside potential remains limited amid robust production, up 6% y/y, and gas demand down y/y by the same percentage. In addition, forecasts are now pointing to much warmer-than-normal weather through February 18 across Central and Eastern states. Adidas reports a disastrous 2023 outlook The German sports clothing maker released yesterday after the market close a shockingly bad outlook. The decision to not sell Yeezy inventory will have an adverse impact on the underlying operating profit which could hit €700mn loss in 2023 with €500mn impact coming from Yeezy items. Adidas also sees €200mn in one-off costs in 2023. Revenue in constant currency terms is expected to decline up to high-single-digit. The shocking revelation is that the majority of Adidas operating profit came from one partnership and design series. PayPal misses Q4 volume estimates but steady Q1 expected The US-based payment company missed on volume in Q4 against estimates but delivered EPS $1.24 vs est. $1.20 in addition to announcing that the CEO Dan Schulman is stepping down by year-end. The Q1 outlook on EPS was $1.08-1.10 vs est. $1.06 and Q1 revenue growth of 7.5% y/y at current spot rates in the currencies. The RBA raised its underlying inflationary forecasts In the RBA’s quarterly economic forecasts and policy outlook (known as the Statement of Monetary Policy) released today in Australia, the Bank increased its “trimmed mean” CPI forecast from 3.8% to 4.3%. The increase was largely driven by sticky consumer durable goods inflation and services inflation. The RBA also upgraded labour costs projections, forecasting wages to rise 4.25% this year versus 3.9% previously. RBA continues to forecast that longer term inflation will ease to within the Bank’s target. Market pricing now suggests the RBA will hike another 75 basis points through the July meeting before a likely pause. US jobless claims rose but still sub-200k Initial jobless claims rose to 196k from 183k, and above the expected 190k. Continued claims also surpassed expectations and printed 1.688mln (exp. 1.68mln), above the prior 1.650mln. While there is a pick-up in claims, it must be noted that it comes from a low level and continues to signal a tight labour market. Hawkish 50 bp hike from Mexico’s central bank Banxico surprised markets with a 50-bp rate hike once again, taking the policy rate to 11.00% and signalled another, smaller hike at the next meeting. Expectations were for a smaller 25-bp hike, followed by a pause. This appears to be in line with what we have seen from RBA and Reserve Bank of India this month, suggesting broad inflation pressures continue to challenge central banks that were hoping to signal a pause.  Read next: USD/JPY Is Below 131.00 Again, The Aussie Is Close To 0.70$| FXMAG.COM What are we watching next? “New” USD CPI next Tuesday as risk sentiment on watch with the break of US S&P 500 Index support. As noted above, the S&P 500 Index broke below the pivotal 4,100 area that was an important resistance line on the way up, suggesting the risk of further consolidation lower from a technical perspective. A more significant level to the downside could be the 200-day moving average coming in near 3,945 on the cash Index, considerably lower, while the Nasdaq 100 Index eyes the important 12,300-12,100 area. What could turn sentiment lower? The most likely source of immediate concern would be any further rise in Treasury yields, but an interesting test awaits the market with next Tuesday’s CPI release, which will be the first release after an overhaul of the calculation methodology, which some argue could engineer a sharper than expected drop. Breaking: Government nominates Kazuo Ueda as new Bank of Japan Governor The name of Kazuo Ueda, an economist and former member of the Bank of Japan’s deliberation committee, was not among the names considered most likely to replace current governor Kuroda on his exit in early April. The first move in the JPY was higher on the announcement. Earnings to watch The earnings calendar is light today with Enbridge, Canada-based energy distributor, being the most interesting to watch. Analysts expect Enbridge to report revenue growth of 3% y/y and EPS of $0.73 down 5% y/y. Next week, the earnings calendar will provide plenty of interesting releases with the three most important releases being Deere, Schneider Electric, and Airbnb. Friday: Enbridge, Constellation Software Next week’s earnings: Monday: Recruit Holdings, DBS Group, Cadence Design Systems, SolarEdge, Palantir Tuesday: CSL, TC Energy, First Quantum Minerals, Toshiba, Norsk Hydro, Boliden, Coca-Cola, Zoetis, Airbnb, Marriott International, Globalfoundries, NU Holdings, Akamai Technologies Wednesday: Commonwealth Bank of Australia, Fortesque Metals Group, Wesfarmers, Shopify, Suncor Energy, Nutrien, Barrick Gold, Kering, EDF, Tenaris, Glencore, Barclays, Heineken, Nibe Industrier, Cisco Systems, Kraft Heinz, AIG, Biogen, Trade Desk Thursday: Newcrest Mining, South 32, Airbus, Schneider Electric, Air Liquide, Pernod Ricard, Bridgestone, Standard Chartered, Repsol, Nestle, Applied Materials, Datadog, DoorDash Friday: Hermes International, Safran, Allianz, Mercedes-Benz, Uniper, Sika, Deere Economic calendar highlights for today (times GMT) 1300 – Poland National Bank releases meeting minutes 1330 – Canada Jan. Net Change in Employment / Unemployment Rate 1400 – UK Bank of England Chief Economist Huw Pill to speak 1400 – ECB’s Schabel in live Q&A on Twitter 1500 – US Feb. Preliminary University of Michigan Sentiment 1730 – US Fed’s Waller (Voter) to speak at Crypto conference 2100 – US Fed’s Harker (Voter 2023) to speak   Source: Financial Markets Today: Quick Take – February 10, 2023 | Saxo Group (home.saxo)
Mexico’s Central Bank Surprised Markets With A 50bps Rate Hike Once Again

Mexico’s Central Bank Surprised Markets With A 50bps Rate Hike Once Again

Saxo Bank Saxo Bank 10.02.2023 08:43
Summary:  Equities erased early gains with S&P500 falling below 4100 as short-end Treasury yields jumped higher and yield curve inversion deepened to a fresh record. Riksbank’s hawkish surprise, along with Banxico’s, is raising concerns that central banks will have to continue to hike rates. Dollar was off its lows, and Gold pulled back to test the $1860 support again. Crude oil prices slid despite risks of lingering supply disruptions, as demand concerns weighed. China’s inflation data due today ahead of more Fed speakers and University of Michigan survey.   What’s happening in markets? US equities (US500.I and USNAS100.I) slide lower on Thursday; Tesla hits a new cycle high The S&P 500 wiped an earlier 1% jump, ending 0.9% lower on Thursday and 1.3% down on the week. It’s the first time in three weeks the benchmark index is in negative territory. That said, the S&P500 hold a gain of about 16% from its October low. On Thursday, options traders piled into bets the Federal Reserve is targeting a peak rate of 6%, nearly a whole percentage point above consensus. The two-year yield traded near 4.5%, and earlier pushed above the 10-year yield rate, by the widest margin since the early 1980s — This is a sign of fading confidence in the US economy’s ability to withstand additional tightening, and weighed on bank stocks. Alphabet (GOOGL) was also a key laggard as the underwhelming chatbot event continued to drag. Walt Disney (DIS) also reversed its gains after reporting earnings and announcing layoffs. Tesla (TSLA) shares were a top performer rising 3% on Thursday, taking its rally to 100% from its January low, bolstered by signs that demand for its EVs are rebounding - particularly with China out of lockdown. Still, Tesla share are down 50% from their record high. The technical indicators on the weekly and monthly charts look interesting – suggesting buying could potentially pick up over the longer term, as reflected in the MACD and RSI.  Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) jump higher The 2-year note Treasury yield rose 6bps to top 4.5% for the first time since November 30th, which means the bond market is beginning to take the Fed more seriously again. The surprise hawkish announcement from Riksbank likely added to concerns that central banks will continue to hike rates. The 10-year yield was up 5bps taking the Treasury yield curve inversion to 86bps, the widest since the 1980s. Hong Kong’s Hang Seng (HIG3) and China’s CSI300 (03188:xhkg) gained as optimism returned Hang Seng Index rallied 1.6% and CSI300 bounced over 1.3% after a week-long consolidation. Xiaomi (01810:xhkg), surging 8.5%, was the biggest winner within the Hang Seng Index. Lei Jun, Chairman and founder of the mobile phone and electronic device maker, announced on Twitter in the form of Q&A with a Chatbot that the company is launching its Xiaomi 13 Series mobile phone on 26 Feb. Alibaba (09988:xhkg) climbed 4% following its announcement of a plan to develop a ChatGPT-like chatbot. The hype on AI-generated content and chatbot spilled over to chip makers with Hua Hong (01347:xhkg) and SMIC (00981:xhkg) each rising over 3%. Mobile phone hardware suppliers Sunny Optical (02382:xhkg) and AAC (02018:xhkg) surged 5.7% and 5.9% respectively. The technology space outperformed overall, with the Hang Seng Tech Index climbing 3.2%. Macao casino operators advanced with MGM, surging 9.2% and other operators gaining 3% to 5%. In A-shares, semiconductors, food and beverage, communication, defense, and internet-of-things stocks led the advance. Northbound flows registered a net buying of over RMB 12 billon. Australian equites (ASXSP200.I) likely to end the week lower, with rate sensitive stocks down the most, while banks and insurers lift ahead of RBA saying more hikes ahead The Energy sector is up the most this week, followed by Materials – with activity in China picking up after Luna New Year holidays. The best ASX200 returns this week so far are from Gold mining giant, Newcrest, up 11%, followed by insurance group Medibank up 5%, while regional bank Suncorp is up 4%. On the downside, Block, also known as Square (SQ, SQ2) fell over 9% this week, after rising for the last 6 weeks. ASX tech logistics giant WiseTech (WTC) fell about 10% so far this week, knock it off its record all time high and ending its four-week strong rally with the logistics industry improving. WiseTech has contracts with global logistics giants including UPS, DHL etc.  FX: SEK outperforms on hawkish Riksbank; JPY awaits new governor The big drag on the USD came from the outperformance of the Swedish krona after Riksbank surprised hawkish (read below). However, the dollar bounced back as Treasury yields picked up in wake of a dismal 30yr auction. Even as EURSEK plunged below 11.20, EURUSD rushed back above 1.0750 and came in close sight of 1.0800, although reversing most of these gains in the wake of dollar strength subsequently. GBPUSD also pushed higher to test the 50DMA at 1.2187 but reversed towards 1.21 later. USDJPY finding it difficult to go below 130 with PM Kishida saying he doesn’t want to surprise the markets with his Governor choice, which is shifting the consensus towards safer bets. AUDUSD failed another attempt at 0.70, awaiting RBA’s quarterly outlook. Crude oil (CLH3 & LCOJ3) dips as investors clip profits WTI oil traded 0.5% lower at $78.06, ending its best three-day rally since December. Some investors moved into profit taking mode, worried about a sagging US economy and that it could drag on oil demand. As the Fed has turned marginally hawkish recently, a large draw in inventories recently is also sending caution about oil demand. This comes despite supply disruptions with exports of Azeri oil from Turkey unlikely to resume until late next week. This has wiped out about 600kb/d of shipments. Meanwhile, Kazakh crude production has been reduced by about 200kb/d due to unplanned maintenance work. Gold (XAUUSD) back lower to test $1860 Gold turned lower again as the surge higher in 2-year yields and the US dollar strengthened, and was testing the $1860 support in early Asian trading hours. A marginally hawkish stance by the Fed members over the last week, coupled with fears from a very strong job market report, continues to bolster the view that interest rates will need to keep rising to contain inflation. Still, if gold manages to stay above the 38.2% retracement of the run up from early November at $1828, the broader uptrend can remain intact.  Read next: Credit Suisse Reported Its Biggest Annual Loss Since The 2008, Ukrainian President Is Asking For Help And More Weapons In Brussels| FXMAG.COM What to consider? Riksbank’s 50bps rate hike boosts krona The Riksbank hiked the 50 basis points to 3% and guided for “probably” more tightening to come, but importantly also announced an acceleration of bond sales to reduce the balance sheet (QT) in April, which helped boost 10-year Swedish Government bond yields a chunky 20 basis points today, bringing them suddenly close to par against German yields. New Govenror Thedeen’s u-turn on the krona policy helped to bring EURSEK below 11.15, with the 11-handle and 200DMA at 10.81 now in focus. US jobless claims rose but still sub-200k Initial jobless claims rose to 196k from 183k, and above the expected 190k. Continued claims also surpassed expectations and printed 1.688mln (exp. 1.68mln), above the prior 1.650mln. While there is a pick-up in claims, it must be noted that it comes from a low level and still continues to signal a tight labor market. German inflation slows to five-month lows A delayed preliminary inflation print for January was released in Germany yesterday and it retreated to 9.2% YoY from 9.6% in December as government aid to ease the burden on households from soaring energy costs helped ease price pressures. Still, the disinflationary pressure appears to be slower than expected, and the ECB will have to keep its foot on the pedal. Hawkish outcome from Mexico’s central bank Banxico surprised markets with a 50bps rate hike once again and signalled another, smaller hike at the next meeting. Expectations were for a final 25bps rate hike. This appears to be in trend with what we have seen from RBA thins month, as also from the Reserve Bank of India, suggesting broad inflation pressures are still continuing to challenge central banks from considering a pause. China inflation is expected to inch up China’s Inflation may have accelerated as the headline CPI is forecasted to bounce to 2.2% Y/Y in January from 1.8% in December. A surge in in-person service consumption after the reopening may have underpinned some price increases but the upward pressure on the general level of inflation has remained moderate. Rises in vegetable and fruit prices were likely damped by a decline in pork prices. The decline in producer prices is expected to narrow to -0.4% in January from -0.7% in December as industrial metal prices bounced offsetting a decline in coal prices. Australian trade update: Commodity optimism picks up after Lunar New Year, Chinese students to return to AU, RBA inflationary forecasts due today. Could Australian wine tariffs from China be dropped? AUDUSD on watch. Aussie dollar volatility continued this week, with the AUDUSD losing 2% over the last 5 sessions, mirroring commodity prices pulling back. But optimism has started to pick up. The Copper (HG1) price fell 0.6% over the last five sessions, moving up yesterday, while the Iron ore (SCOA) price is 0.6% down on the week, but picked up over the few sessions, with construction kicking off in China - after the Luna New Year break. Plus, a top China economist said interest rates could be cut next quarter. This supports further commodity buying, on top of Fortescue Metals, BHP and Rio Tinto’s quarterly outlooks, hinting China demand will pick up in 2023. China also docked its first Australian coal import shipment in two years yesterday, which supports the Aussie dollar over the medium to long-term, with the market to perhaps see more coal orders. Regardless, the coal export to China will add to quarterly GPD. Supporting Australian GDP this quarter as well - will be the 50,000 influx of Chinese students expected to arrive in Australia this month - ahead of the start of semester. Beijing’s government ruled that degrees earnt online would not be accredited any more. The next catalysts for the AUDUSD might come from the RBA’s quarterly economic forecasts and policy outlook released today. We think the RBA can afford to make upward revisions to its underlying inflation forecasts, given energy prices are expected to pick up later this year - as the AEMO alluded to. Lasty, consider China’s commerce ministry is willing discuss tariffs imposed on Australian wine that began in 2020. Should the tariffs be dropped or reduce, it may encourage China to buy Australian wine again – and add to AU GDP.   For what is ahead at markets this week – Read/listen to our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: Market Insights Today: Yield curve inversion unnerves investors – 10 February 2023 | Saxo Group (home.saxo)
The USD/MXN Pair Could Then Aim To Surpass The February Monthly Swing High

The USD/MXN Pair Remains Directed Towards The Multi-Month Low

TeleTrade Comments TeleTrade Comments 10.02.2023 09:00
USD/MXN pares Banxico-led losses ahead of US consumer-centric data. Banxico surprised markets with 0.50% rate hike versus 25 bps expected. Recession fears seem to underpin US Dollar rebound after Fed talks, US statistics weighed on the greenback. US Michigan Consumer Sentiment Index, inflation expectations eyed ahead of next week’s US CPI. USD/MXN seesaws around 18.80 as it consolidates the weekly loss, as well as the daily fall, while heading into Friday’s European session. In doing so, the Mexican Peso (MXN) pair fades the Banxico-led moves as the US dollar picks up bids amid a cautious mood in the market. The Mexican central bank, namely Banxico, surprised markets by announcing 50 basis points (bps) rate hike on Thursday. With this, Banxico surpassed market forecasts of a 0.25% rate lift while citing an effort to tame inflation fears with the increase of the benchmark rate to 11.0%. On the other hand, the US Dollar suffered from the increase in the weekly initial jobless claims, as well as the downbeat comments from Richmond Federal Reserve (Fed) President Thomas Barkin. That said, the US Weekly Initial Jobless Claims rose to 196K versus 190K expected and 183K prior. “The advance number for seasonally adjusted insured unemployment during the week ending January 28 was 1,688,000, an increase of 38,000 from the previous week's revised level," said the US Department of Labor (DOL) showed on Thursday. Elsewhere, Fed’s Barkin appeared too dovish while suggesting rate cuts as he said that it would make sense for the Fed to steer "more deliberately" from here due to lagged effects of policy. Previously, Fed Chair Jerome Powell hesitated in cheering the upbeat US jobs report and raised fears of no more hawkish moves from the US central bank. Read next: USD/JPY Is Below 131.00 Again, The Aussie Is Close To 0.70$| FXMAG.COM While delving deeper into the recent moves, the widest negative difference between the US 10-year and 2-year Treasury bond yields since 1980 amplified the recession woes the previous day. The yield curve inversion remains around the same level as both these key bond yields stay inactive near 3.67% and 4.49% respectively by the press time. The same favor the market’s rush towards risk safety and underpins the US Dollar rebound. That said, the US Dollar Index (DXY) prints mild gains around 103.38 at the latest. Moving on, the early signals for the next week’s US inflation data, namely preliminary readings of the US Michigan Consumer Sentiment Index and 5-year Consumer Inflation Expectations for February, will be crucial for immediate directions. Considering the upbeat expectations from the scheduled data, as well as the recession woes, the currency pair is likely to witness further recovery. Technical analysis USD/MXN remains directed towards the multi-month low of 18.50, marked earlier in February, unless providing a daily closing beyond the 50-DMA hurdle surrounding $19.20.    
Microsoft Is Replacing The Metaverse With Artificial Intelligence (AI)

AI Divergence Between Microsoft And Google Intensifies

Swissquote Bank Swissquote Bank 10.02.2023 10:34
US stocks failed to keep up with the European optimism on the back of rising bets that the Federal Reserve (Fed) could hike the interest rates to 6%. In fact, option traders are piling into bets that the US rates could peak at 6%. Mexico’s Banxico Plus, the surprise 50bp hike from Mexico’s Banxico, on the back of unexpected – and unwelcomed inflation jump since the end of last year, also raised worries that the US could experience a similar uptick in inflation, and, may have to raise rates higher. Optimism And the strong US jobs market, the latest recovery in energy and commodity prices on the Chinese reopening optimism, and the sudden jump in second-hand car prices are red flags… Stock market The S&P500 fell 0.88% yesterday, and Nasdaq retreated 0.90%. Topsellers will likely remain in charge of the market on the possibility that maybe inflation in the US may have not eased to 6.2% as expected by analysts. But nothing is clear before next Tuesday’s CPI release, in terms of Fed expectations. USD What’s interesting though, is that the hawkish Fed bets don’t translate fully into the US dollar valuation. The US dollar remains under pressure despite the positive pressure on the US yields. And the 50-DMA offers remain particularly solid in the US dollar index. Read next: Twitter Co-Founder Jack Dorsey Comments New Twitter's Owner| FXMAG.COM Bitcoin Finally, Bitcoin fell 5% on news that Kraken stops staking. Negative pressure in tech stocks could further weigh on appetite. Watch the full episode to find out more! 0:00 Intro 0:32 Swiss stocks fell on mixed bag of bad news 2:48 US stocks under pressure as option traders bet for 6% Fed rate 5:25 AI divergence between Microsoft and Google intensifies 5:57 Tesla rallies past $200 but… 6:47 US dollar remains offered at 50-DMA. What are traders waiting for? 7:29 Bitcoin under pressure as Kraken halts staking Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Fed #peak #rate #hawkish #bets #US #inflation #Tesla #Google #Bard #AI #gaffe #Microsoft #ChatGPT #USD #EUR #JPY #Bitcoin #Kraken #CreditSuisse #Trafigura #Swatch #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
Sweden: How the Riksbank has made the krona’s path to recovery even narrower

Saxo Bank Podcast: Riksbank Meeting Blasted The Swedish Krona Higher

Saxo Bank Saxo Bank 10.02.2023 10:57
Summary:  Today we look at the US market turning lower again yesterday and closing down through an important level that was providing resistance on the way, setting up the technical situation of a risk of downside capitulation. Higher US yields weighed and the US dollar rallied yesterday, although the big news in FX was a watershed Swedish Riksbank meeting that blasted the Swedish krona higher. Breaking this morning was the unanticipated news of the nominee for BoJ Governor, which sparked JPY volatility. We also delve into the disastrous news from Adidas this morning, the earnings calendar this week, commodity developments, the latest on natural gas and the week ahead macro calendar. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it. Read next: Twitter Co-Founder Jack Dorsey Comments New Twitter's Owner| FXMAG.COM   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source; Podcast: Risk off, BoJ Governor nominee, Adidas dump, SEK soars | Saxo Group (home.saxo)
The Challenge to the Dollar: De-dollarisation and Geopolitical Shifts

The Recent Economic Data Could Justify A Pause In The Fed Hiking Cycle

Franklin Templeton Franklin Templeton 10.02.2023 11:46
Western Asset: Markets have started to anticipate that the Fed may cut rates in the not too distant future. But, this is in contrast to the Fed’s latest projections reiterated today that rate cuts are unlikely in 2023. Today the US Federal Reserve (Fed) increased its policy rate by 0.25%, as pretty much everybody expected it would. The post-meeting statement contained only small modifications. Fed Chair Jerome Powell reiterated many of the comments that have characterized his recent communications. “Inflation remains too high” and “The Fed is strongly committed to returning inflation to our two percent objective,” Powell said. Last year many feared the Fed was behind the inflation curve, as it responded slowly to above-target inflation. The environment has since shifted. The Fed may once again be behind, but now in the opposite direction. Chair Powell’s comments today did not fully acknowledge the change in economic data, nor did he convincingly explain why the Fed has a divergent view from the market regarding the path for interest rates. The Fed may now be behind the disinflation curve. Economic Data A number of recent data points could have been used to justify the Fed pausing its hiking cycle today, rather than continuing with rate increases at future meetings. First and perhaps most importantly, consumer price inflation is moderating. Core Personal Consumption Expenditures (PCE), the Fed’s preferred inflation measure, showed that prices increased at an annual rate of 2.9% over the final three months of 2022. This is down sharply from the too-hot pace recorded over the preceding 12 months, when core PCE prices were increasing at an annual rate of 5.2%. Second, wage growth is decelerating. A number of series, including yesterday’s Employment Cost Index, suggest wage growth has declined to a 4% annual pace. This is down from a pace of nearly 6% early last year. The current 4% pace is close to one that would be consistent with annual price inflation of 2%, assuming productivity returns to more normal levels in 2023. Further deceleration in wage growth remains likely in coming quarters, as hiring has slowed and the gap between job openings and workers has started to narrow. Finally, economic activity appears to have stalled at the end of last year. Retail sales ended 2022 with two straight months of nominal declines. Manufacturing activity similarly declined in each of the last three months of 2022. And the contraction in housing activity showed no sign of abating. (The gross domestic product (GDP) data for 4Q22 likely overstated the economy’s momentum, as most of the growth came in inventories and net exports. The quarterly data may also mask some of the deceleration in the last two months of the year.) Taken together, these three things—moderating inflation, decelerating wage growth and stalling economic activity—make a case for the Fed pausing its rate hiking cycle. Chair Powell’s statement today that additional hikes remain “appropriate” puts him, and the rest of the Federal Open Market Committee (FOMC), a bit behind the economic data. Market Pricing Markets have started to anticipate the Fed may cut rates in the not too distant future. This is in contrast to the Fed’s latest projections that rate cuts are unlikely in 2023. Today Chair Powell did not indicate any change to those projections. This divergence between the market and the Fed has received a fair amount of attention, including from multiple reporters at today’s press conference. Generally, we are disinclined to think the divergence is all that significant. After all, following a year when the Fed’s interest-rate forecasts missed by 350 basis points (bps), ending this year within 50 bps of the forecast could be viewed as a respectable result. Nonetheless, to the extent there is something to be learned, we think the divergence is suggestive of two points. First, the current level of short-term interest rates is unlikely to be sustained for too long. The most acute phase of the inflation episode appears to have passed. Should inflation continue to decline throughout 2023, the current level of rates will become increasingly restrictive, thereby putting additional downward pressure on inflation and hastening the start of rate cuts. Relatedly, when interest rates are cut, they will likely be reduced by a significant amount. Just as the hikes in 2022 were steeper and larger than in previous cycles, it follows that rate cuts, when they happen, will likely also be much steeper and larger than in previous cycles. Read next: Tesla Will Increase Output For 2023, Deliveroo Are Planning To Cut Jobs| FXMAG.COM The second point suggested by the divergence is that the risks have shifted. Last year, the primary risk was that inflation would continue to surprise higher. This year, in contrast, investors face a two-way risk with regard to inflation (i.e., inflation could surprise either lower or higher), as well as an increasing risk of a more material economic contraction. As a consequence, investors are now considering a number of scenarios in which short-term yields would be falling, and some scenarios in which yields would be falling very rapidly. These scenarios, which are increasingly plausible even if they are not yet most investors’ base case, have in turn pulled market pricing in the direction of lower yields. Conclusion The Fed may now be behind the disinflation curve. The recent economic data could justify a pause in the hiking cycle after today’s meeting; the market currently anticipates that rate cuts are on the horizon. The Fed, in contrast, continues to assert that further rate hikes will be appropriate and it does not anticipate cutting rates this year. There are, of course, a number of ways that this could play out. On the one hand, if inflation were to reaccelerate, the Fed’s slow response could prove prescient. This risk was likely a focus in the Fed’s deliberations today. On the other hand, if inflation continues to moderate, at some point the Fed will catch up with the data and markets. The timing of that remains uncertain. It’s entirely possible that the market pricing for cuts is a bit premature. Nonetheless, we do think the market pricing has correctly anticipated two points. Interest rates are unlikely to remain at these elevated levels for all that long, and the risks are increasingly tilted toward lower rather than higher yields. Source: The Fed may be behind the disinflation curve | Franklin Templeton
Key Economic Events and Earnings Reports to Watch in US, Eurozone, and UK Next Week

The Mortgage Market Looks Different Than During The Global Financial Crisis

Franklin Templeton Franklin Templeton 10.02.2023 12:00
ClearBridge Investments: While the housing market has been on the leading edge of the current downturn, the threat of higher interest rates will likely be somewhat muted as borrowers shift away from adjustable-rate mortgages. Key takeaways A precipitous drop in Housing Permits over the last three quarters led to a signal change from yellow to red this past month, driving the overall signal of the ClearBridge Recession Risk Dashboard deeper into red or recessionary territory.  While the housing market has been on the leading edge of the current downturn, the threat of higher interest rates will likely be somewhat muted relative to history as borrowers have largely shifted away from adjustable-rate mortgages. Both the economy and housing market are in a very different place compared to the outset of the Global Financial Crisis, which should limit the damage from a housing slump. Residential construction plans wane as housing slowdown worsens The housing market has experienced a wild ride over the past several pandemic-influenced years, with home prices rising by double-digit percentages in both 2020 and 2021 before rolling over in the middle of last year. The ClearBridge Recession Risk Dashboard focuses on Housing Permits — authorizations to build a new home — as a leading economic indicator. Permits typically move ahead of actual “shovels in the ground” metrics such as Housing Starts by several months and often fall well ahead of recessions. Permits are down nearly 30% from their peak one year ago and have dropped precipitously over the past three quarters, leading to a signal change from yellow to red. Exhibit 1: Building Permits for New Private Housing   Data as of Dec. 31, 2022, latest available as of Jan. 31, 2023. Source: U.S. Census Bureau, retrieved from FRED. Compiled: econpi.com. Past performance does not guarantee future results.   There are no other changes to the dashboard this month, although both Truck Shipments and Jobless Claims deteriorated beneath the surface and are nearing yellow territory. A worsening dashboard and economic outlook in the face of a rallying market is undoubtedly frustrating, although not entirely unexpected. In November we highlighted how countertrend rallies are not uncommon during extended bear markets, and we continue to believe a durable bottom has not yet formed. Exhibit 2: ClearBridge Recession Risk Dashboard   Source: ClearBridge Investments.  Read next: Tesla Will Increase Output For 2023, Deliveroo Are Planning To Cut Jobs| FXMAG.COM While the Housing Permits indicator has held up until now, the broader housing market has been at the leading edge of the current economic slowdown. This is unsurprising considering housing is typically one of the first dominoes to fall. Housing is one of the most interest-rate-sensitive areas of the economy, given most homeowners borrow to purchase homes; changes in mortgage rates have a meaningful impact on demand. Over the last 10 months through the end of January, the Federal Reserve (Fed) has raised its target rate 425 basis points to cool economic growth and tame inflation, helping push mortgage rates much higher from their late 2021 trough. The rise in mortgage rates, combined with the substantial increase in home prices, has pushed affordability metrics down to multidecade lows.  However, the threat from higher interest rates will likely be muted relative to history. In the wake of the Global Financial Crisis (GFC), borrowers shifted away from adjustable-rate mortgages (ARMs) and have largely stayed away from them since. The share of ARMs as a percentage of all mortgages (by dollar volume) has fallen back to 13.5% after peaking slightly below 25% last fall1, a stark contrast to the run-up to the GFC when around 50% of homebuyers were using this variable type of financing2. Even though higher rates may dissuade new buyers, the impact on mortgage payments for existing owners is blunted by this dynamic relative to the 2004–2006 hiking cycle. The mortgage market also looks different than during the GFC from a quality perspective. While so-called “liar loans” — mortgages where borrowers falsified their incomes or provided no income documentation to qualify for mortgages they couldn’t afford — were common in the mid-2000s, the creditworthiness of borrowers today appears far healthier. Consumer balance sheets are still in great shape after a tough year for markets, with robust wage increases, rising home prices and accumulated savings supporting household net worth. In fact, just over 80% of mortgages originated over the past five years went to super-prime borrowers (>720 credit score), and the share of subprime borrowers (<620 credit score) was in the low single digits, a stark contrast from what the early days of the GFC when super-prime was less than 60% and subprime was over 10%.3 Exhibit 3: Mortgage Origination Quality Improving   Data as of Sept. 30, 2022, latest available as of Jan. 31, 2023. Sources: Federal Reserve Bank of New York Consumer Credit Panel/Equifax, Bloomberg.    A final key difference relative to the GFC that could help limit downside in the housing market is demographics. The bulk of the millennial generation is now hitting its peak earning and child-bearing years, helping support longer-term housing demand. Many millennials have lived at home and delayed forming households longer than previous generations, although this appears to be shifting. Further, the trend toward “aging in place” means fewer retirees are moving into retirement homes, limiting housing supply in a period of increased demand. As a result, demographic trends will likely support the housing market in the coming years, which should limit how far activity and prices fall in a downturn. While housing prices have rolled over and transaction activity has stalled, construction activity has held up. Housing completions in the fall of 2022 were at their highest level since 2007 and 2023 is likely to see the highest number of new multifamily units come to market in several decades.4 This activity is supporting strong gains in construction jobs, which steadily marched higher in the second half of 2022 despite a softening backdrop for home prices. However, as the backlog of building projects clears out this spring, the typical layoff cycle in construction is likely to commence. Although the economic pain in housing has yet to be felt, leading indicators including permits and starts suggest it will become an economic headwind in the coming quarters. Against this challenging backdrop, there are reasons for optimism with the recent bounce in the National Association of Home Builders (NAHB) survey and weekly mortgage applications. While it’s not surprising to see homebuyers take advantage of declining interest rates, a small bounce in housing data isn’t uncommon as the Fed wraps up a tightening cycle. More concerning, however, is how the NAHB survey has historically led changes in the unemployment rate by 12 months. This survey’s massive drop in 2022 suggests more pervasive layoffs are likely in 2023. Exhibit 4: Home Builder Sentiment vs. Unemployment   Data as of Aug. 31, 2022, latest available as of Sept. 30, 2022. Source: FactSet, US Department of Labor, NAHB, NBER. Past performance does not guarantee future results.   Although the economy’s trajectory is relatively clear, the timeframe and severity of a potential downturn are anything but, as we discussed in the most recent Long View. The good news is both the economy and housing market are structurally in a very different place compared to the outset of the GFC. This should limit the damage from a housing slump, creating more of a headwind than a hurricane.  With the U.S. economy slow dancing toward a potential recession, we continue to believe the first half of 2023 will prove choppy for equity markets as incoming data fail to reveal a clear trend for growth and earnings. Endnotes Source: Bloomberg. Ibid. Sources: Federal Reserve Bank of New York Consumer Credit Panel/Equifax, Bloomberg. Source: Reuters, “Multi-family housing boosts U.S. homebuilding”, November 2022. Definitions The ClearBridge Recession Risk Dashboard is a group of 12 indicators that examine the health of the U.S. economy and the likelihood of a downturn. The term adjustable-rate mortgage (ARM) refers to a home loan with a variable interest rate. With an ARM, the initial interest rate is fixed for a period of time. After that, the interest rate applied on the outstanding balance resets periodically, at yearly or even monthly intervals. The Global Financial Crisis (GFC) refers to the economic disruption that followed the collapse of prominent investment banks in 2007-8, marked by a general loss of liquidity in the credit markets and declines in stock prices. WHAT ARE THE RISKS? Past performance is no guarantee of future results.  Please note that an investor cannot invest directly in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges. Equity securities are subject to price fluctuation and possible loss of principal. Fixed-income securities involve interest rate, credit, inflation and reinvestment risks; and possible loss of principal. As interest rates rise, the value of fixed income securities falls. International investments are subject to special risks including currency fluctuations, social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets. Commodities and currencies contain heightened risk that include market, political, regulatory, and natural conditions and may not be suitable for all investors. U.S. Treasuries are direct debt obligations issued and backed by the “full faith and credit” of the U.S. government. The U.S. government guarantees the principal and interest payments on U.S. Treasuries when the securities are held to maturity. Unlike U.S. Treasuries, debt securities issued by the federal agencies and instrumentalities and related investments may or may not be backed by the full faith and credit of the U.S. government. Even when the U.S. government guarantees principal and interest payments on securities, this guarantee does not apply to losses resulting from declines in the market value of these securities. Source: AOR Update: Headwind, not a hurricane | Franklin Templeton  
According to Wall Street Journal, banks are ending partnerships with crypto firms

While Politicians Are Struggling Analysts Expect Increased Market Volatility

InstaForex Analysis InstaForex Analysis 10.02.2023 13:30
The issue about raising the US government debt ceiling is becoming a political drama as the parties fail to reach a bipartisan agreement. The US reportedly reached a borrowing limit of $31.4 trillion at the end of January, so the Treasury began implementing emergency measures, including suspending investments in individual government accounts, to pay all of the country's bills. If the debt ceiling is not raised by June, then the government will truly run out of money. That is why calls from US President Joe Biden, Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell have become increasingly desperate. On Monday, Yellen once again called on Congress to raise the US national debt limit, warning that failure to do so could cause economic and financial disaster. On the following day, Powell said investors should not expect the Fed to protect the US economy if the debt ceiling is not raised in time. He also ruled out the idea of a trillion-dollar coin and stressed that there is only one way to solve the problem - if Congress raises the national debt ceiling in time. Biden also called for unity among Republicans to raise the national debt ceiling. In a first attempt to resolve the issue, Republican House Speaker Kevin McCarthy and President Joe Biden met last week, but the stand-off continued as they agreed to meet again. Republicans have made it clear that they would like cuts in federal spending in return for a cap increase. Analysts warn that the path to a higher debt ceiling could be precarious as the last time the debt ceiling debate significantly affected markets was in August 2011, when Republicans and Democrats failed to agree and ended up raising the ceiling just hours before the deadline. Back then, risky assets caused a negative reaction as dollar fell, equities fell and credit spreads widened. A similar scenario is not ruled out this time as negotiations to raise the government debt ceiling are just beginning. While politicians are struggling, analysts expect increased market volatility, especially closer to the June deadline.   Relevance up to 09:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/334766
The Commodities Digest: US Crude Oil Inventories Decline Amidst Growing Supply Risks

Markets Believe That The War Against Inflation Has Already Been Won

Franklin Templeton Franklin Templeton 10.02.2023 14:13
Markets think the war against inflation has been won—and the Fed seems to believe it too—but has it? Franklin Templeton Fixed Income CIO Sonal Desai analyzes the latest data in light of the Federal Reserve policy meeting and examines whether a “painless landing” is possible. Much like financial conditions have eased back to early 2022 levels (over 400 basis points of rate hikes ago…), the press conference following the Federal Reserve’s (Fed’s) January 31-February 1 policy meeting seems to have turned back the clock to at least pre-Jackson Hole, if not all the way to the Fed’s “inflation is transitory” days. This was a very dovish press conference—surprisingly so—and financial markets have rightly taken it as such. The most surprising and dovish part was Fed Chairman Jerome Powell’s repeated arguments  that financial conditions have tightened significantly over the past year. The truth is that they had temporarily tightened between August and early October, when the Fed had signaled a more determined anti-inflation stance but have loosened significantly thereafter. At the end of January, financial conditions were back at the early-April 2022 levels, and that was before the rally in US Treasuries and equities that this Fed press conference ignited. This has de facto undone all  of the monetary policy tightening to date. In the question-and-answer part of the conference, Powell did not push back against this loosening in financial conditions, and therefore validated it. Financial Conditions Back to Early 2022 Levels National Financial Conditions Index (NFCI)—Federal Reserve Bank of ChicagoDecember 2021–January 2023   Sources: Federal Reserve Bank of Chicago, Macrobond.   Powell went through his stable of hawkish arguments, but he sounded like he was going through the script and did not truly believe it. To me, it all sounded rather perfunctory and half-hearted. He did say that the labor market is still too tight, but he added that gave him hope that disinflation could be achieved with minimum loss of jobs. He noted that there is no evidence yet of disinflation in core non-housing services—which account for about half of the Fed’s core inflation measure—but at times sounded confident that disinflation in this key category will soon come. He did warn that if the Fed’s expectations of a recession-free, steady but slow decline in inflation bear out, there will be no rate cuts this year. However, he followed it with the disclaimer that forecasting inflation is very hard and the Fed has gotten it wrong so far, which might suggest that perhaps financial markets are right in expecting faster disinflation. Even more important was what Powell did not say. He did not push back against the loosening in financial conditions, and in responding to a question, he declined to acknowledge that it would make the Fed’s job harder, raising inflation risks and potentially requiring more monetary tightening. Nor did he say that the exceptional strength of the job market makes it unlikely that we will see wage growth fall to levels consistent with the inflation target. Markets believe that the war against inflation has already been won, and Powell sounded like he wants to believe that, too. To be sure, there are some reasons to be a bit optimistic. Inflation has declined. Some measures of wage growth, notably the Employment Cost Index, have come down from very elevated levels. Housing inflation will eventually slow as well, once new and lower rental contracts start feeding into the index. And some of the delayed impact of the Fed’s rate hikes still needs to be felt. That’s why financial markets think the war against inflation has already been won. And that’s why the Fed can entertain the hope that inflation can be brought to heel with minimal damage to employment and asset prices. After all, as was pointed out in the question- and-answer session of the Fed meeting, we’ve seen a decline in both inflation and wage growth even though the unemployment rate remains at a 50-year record low, and job openings continue to vastly outnumber job seekers. That hope came through very strongly in some of Powell’s comments. And it’s a hope we all share. However, there are important reasons to fear that the path ahead will be a lot more challenging. The loosening in financial conditions has offset all of the Fed’s rate-hiking effort; this will give a respite to the real estate sector, and support an economy that has already proved quite resilient. This is worth emphasizing—financial conditions have loosened so much that it’s as if the Fed’s rate hikes never happened. The labor market remains exceptionally tight. The latest Job Openings and Labor Turnover Survey (JOLTS) numbers show the ratio of vacancies to unemployed is almost back to its high of two openings for every job seeker. While we have not seen a wage-price spiral when inflation was powered to 8%-9% by exogenous shocks, various measures of wage growth are still running in the range of 4%-6%, which might make it a lot harder to push inflation below 4%-5%—considering also that workers have already surrendered a lot of purchasing power. And while Powell claimed that short-term inflation expectations are now also well-anchored, the most recent New York Fed survey has them at 5% (one-year ahead), which seems more consistent with current 4%-6% wage growth than with the Fed’s 2% inflation target. I think markets—and at this stage the Fed as well—are too sanguine on the inflation outlook. Powell claims that the Fed prefers to run the risk of tightening too much than too little, but the opposite appears to be true. The Fed seems now too tempted by the possibility of achieving the Holy Grail, of bringing inflation down from 9% to 2% while retaining full employment all along, and with minimal, short-lived damage to financial asset prices. It will most likely hike one more time, maybe two, in the coming meetings, and then pause to assess the incoming data. That’s a perfectly sensible strategy. But by validating hopes of a “painless landing,” and giving markets license to rally even more, the Fed exacerbated the risk that after a rapid decline driven by vanishing supply shocks, inflation might rebound and get entrenched at a stubbornly elevated level, say somewhere in the 3%-5% range. That’s the scenario the Fed says it wants to avoid; but it’s a scenario that the Fed is making increasingly likely. WHAT ARE THE RISKS? All investments involve risks, including possible loss of principal. The value of investments can go down as well as up, and investors may not get back the full amount invested. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in an investment portfolio adjust to a rise in interest rates, the portfolio’s value may decline. Changes in the credit rating of a bond, or in the credit rating or financial strength of a bond’s issuer, insurer or guarantor, may affect the bond’s value. Source: On My Mind: Fed to markets—keep dancing | Franklin Templeton
Kenny Fisher talks British pound against US dollar. UK economy declined 0.3% in March, Bank of England chose the 25bp variant

Data This Morning Confirmed The UK Avoided A Recession At The End Of 2022

Craig Erlam Craig Erlam 10.02.2023 14:39
Equity markets are ending the week on a flat or slightly downbeat note which has largely reflected the mood all week, really. Central bankers, particularly from the Fed, have been out in force stressing caution over interest rate expectations. And it’s clearly had an impact following that red-hot jobs report last Thursday. Markets are now pricing in two more hikes from the Fed and possibly one cut later in the year. No time for sparkling wine I think it’s safe to say the sparkling wine can remain on ice after data this morning confirmed the UK avoided a recession at the end of 2022 by the narrowest of margins. So much so that there’s every chance that a tiny revision over the next couple of months confirms quite the opposite. Ultimately, this isn’t a story of whether the UK is in recession or not as that’s just a simple technical definition. It’s a story of zero growth – quite literally in the case of the fourth quarter – and the fact that this likely represents the recent past, present, and near-term future prospects for the UK economy. High but falling inflation and basically no growth for some time. It’s all a bit bleak really. Of course, that’s better than where we expected to be at this point so that’s a positive. The data towards the end of the year is actually quite difficult to pick apart due to the impact of one-off or temporary events like the world cup, the loss of premier league football, and most importantly, the many, many public sector strikes that continued into the new year. The negative impact on the pound was brief though as the data doesn’t tell us anything we didn’t already know, nor does it alter the outlook on inflation or interest rates. First big test of the recovery After showing solid resilience over the past few weeks, bitcoin finally appears to have entered into a correction phase after falling almost 5% on Thursday. The community won’t be too dismayed by the move as it was never just going to go from strength to strength and this correction will enable us to see just how quickly money pours back in. It should be an interesting couple of weeks. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
Hawkish Fed Minutes Spark US Market Decline to One-Month Lows on August 17, 2023

The Fed, The European Central Bank (ECB) And Most Other Central Banks Have Been Talking Very Hawkishly

Franklin Templeton Franklin Templeton 11.02.2023 11:45
Are markets correctly pricing inflation? Sonal, it looks like the consensus view is for US inflation at about 3% year-over-year in 2023. Do you agree? What’s your view on inflation and interest rates? Sonal: I think 3% is optimistic. A few points. First, macro policies are still pretty loose, which might sound strange when we’re looking at a US central bank that’s been raising interest rates. But the United States is looking at a fiscal deficit this year, which is probably going to be around 5% of gross domestic product (GDP). Social Security checks have gone up close to 9% this year, and those go out to about 70 million Americans—that’s about a third of the adult population.3 And, keep in mind, the Fed’s balance sheet is still huge. Second, the market has taken a great deal of comfort from the fact that wages are moderating—as it should. Having said that, the Fed Bank of Atlanta’s latest Wage Growth Tracker showed overall wage growth of 6.1% in December, with wages up 7.7% for job switchers, and up 5.5% for people who remained in their jobs.4 And unit labor cost growth was 5.2%5.3%.5 Historically, the Personal Consumption Expenditures Index (PCE) has mapped into unit labor costs, and the December reading was far above the Fed’s 2% inflation target. So, we’re talking about US unemployment at close to 3.5%, a US fiscal deficit of around 5%, and wages still growing. Meanwhile, markets are anticipating a Fed “pivot” in the near term, but I think some people are suffering from what I would consider a recency bias. They regard the current Fed tightening cycle as being transitory, but I would note that after the global financial crisis (GFC), the Fed spent more than 10 years fighting deflation—the dog that never barked. It threw the kitchen sink at the problem in terms of easing, because the GFC was such a terribly large and meaningful event. I think these last few years of substantially above-target inflation will probably lead us to a multiyear period where the Fed keeps rates higher than the market is currently anticipating. To summarize, you think the federal funds rate will rise to 5% or 5.5% and that the so-called pivot toward easing won’t happen quickly. If the equity market is wrong in its current view and then sees a correction as a result, are you saying it’s unlikely the Fed will come to the rescue? Sonal: Correct. The market believes the “Fed put” is there, but it doesn’t exist. That’s my biggest concern. Mark, let’s turn to you and Western Asset’s view. What is your outlook both for inflation and rates? Any concerns? Mark: The forecasters on the team are talking about the possibility of US inflation at around 2% year-over-year by the end of this year. If you look at the fixing—here I am talking the near-term inflation swap6 market—if you look at the pricing on the headline Consumer Price Index (CPI), it’s somewhat surprising to many, in the fourth quarter of 2023 on a yearover-year basis, we’re 2% or below. It’s the first time in a long time the pricing or fixing on CPI is below our forecast. Obviously, oil and energy are very important components of inflation, and oil is currently around US$75–$80 per barrel. Things could change radically. But if we do end up with year-over-year inflation declining from over 6% in 2022 down to 2% toward the end of 2023, as the market seems to be anticipating, that’s consistent with our view. Read next: EUR/USD Pair Is Belowe $1.07, USD/JPY Pair Is Back To 131 And GBP/USD Pair Is Slightly Above $1.21| FXMAG.COM How do we get there? Certainly, the commodity side plays a part as it relates to headline inflation. But whether it’s rents, autos, medical or other services, we are seeing overall downward pressure in inflation on the goods side, on the manufacturing side. It is a bit slower on the services side. When we look at the inflation numbers and our expectations for 2023, we are optimistic that we will see a quick retracement. The worry is that the 2% inflation scenario is now priced into the marketplace; there is a disconnect between the market expectations and the Fed’s expectations. That’s where the debate gets extremely interesting. “ When we look at the inflation numbers and our expectations for 2023, we are optimistic that we will see a quick retrace ment. The worry is that the 2% inflation scenario is now priced into the marketplace; there is a disconnect between the market expectations and the Fed’s expectations. That’s where the debate gets extremely interesting.” Mark Lindbloom Can you elaborate a little on that disconnect and your outlook for monetary policy? Mark: The Fed, the European Central Bank (ECB) and most other central banks have been talking very hawkishly. They are concerned that we are in an environment similar to the late 1970s and early 1980s when inflation was more buoyant and sticky than the post-GFC period, for a variety of reasons. Fed Chair Jerome Powell and other Fed officials have talked about how they’re not going to ease up the current tightening cycle quickly—essentially saying they are going to get to restrictive territory then hold rates there nearly all year. The market doesn’t believe them. The market is seeing the fed funds rate rise to 4.75% or perhaps 5%, while the Fed has been signaling 5.25%. So, the market expected—and got— a 25 bps hike at the February policy meeting, but there is anticipation of a pause—wherein the Fed can stop and assess the data. And, then assuming the economy is on a path of weakness and lower inflation, the thinking is there will be aggressive easing as we get into the latter part of 2023. At Western Asset, we are generally in line with the market for the near-term outlook, but there is an internal debate within our team regarding duration and the yield curve. We aren’t quite as sure about what happens in March. Most importantly, we think the Fed’s focus is on employment data. While a lagging indicator, earnings and wages have been very, very slow to turn. For the Fed to really shift and pause, we need to see that fall into place.
Rates Spark: Escalating into a Rout as Bond Bear Steepening Accelerates

High Yield Has Probably The Most Exposure To Economic Growth Of Any Fixed Income Sector Out There

Franklin Templeton Franklin Templeton 11.02.2023 11:55
So just a quick summary, you would be a little hesitant entering duration in the short term, but it’s a good time to move into fixed income and especially in some of the spread type products? Sonal: I’d say that’s fair, but on the other hand, I’m not saying don’t go into duration at all because certainly if you just want to put something somewhere and forget about it, you’re getting better returns right now than you have in a long time. I would note that short duration Treasuries in some ways are giving you better returns than anything on the long end given the inversion of the yield curve, which I don’t think is justified. Francis, there’s a lot of uncertainty and a lot of competing forces. Given that, where are you seeing opportunities in duration right now? Francis: I think, generally speaking, it’s pretty constructive for adding duration. The problem is that the long end of the yield curve is held in check to some extent by the Fed’s stubbornness at the short end of the curve—especially given how steeply inverted the curve is right now. Fed policy historically is notoriously schizophrenic, it goes from tightening to easing, often without a lot of transition—this Fed in particular has this characteristic. So, I do think there’s going to be another, as I said, “oh my God” moment at the Fed, much like there was last year when they pivoted from maximum stimulus to hitting the brakes. I think that moment will come this year, but it may take a labor market dislocation. And clearly, as that arrives, that will be a big plus for fixed income when it happens. Mark, let’s turn to you and Western Asset’s view of duration. Mark: There are risks to the growth question, just given where we are in the economic cycle and what central banks are trying to engineer. That causes us to believe that duration, which has been a benefit for this bull market over the decades, and which worked miserably in 2022, will work better in 2023. Therefore, we do want some duration. I think to Sonal’s point, you can be tactical about that. Remembering, for example, June into July of 2022, we saw a vicious rally in the market where 10-year Treasury notes came off by 90 bps, moving from around 3.5% on June 14 to around 2.7% on July 29.9 That turned out to be a really good selling opportunity. But we think it is different now from an economic, monetary policy, and most importantly, an inflation point of view. Perhaps the market has moved a little too quick. It’s important to remember that in fixed income, it’s all about yield. We haven’t seen these yields in Treasuries and investment-grade corporate bonds in 20 years. The pie is getting bigger. I think the people are allocating to fixed income away from other sectors just given the expected risk-adjusted returns. So, from a duration point of view, we think it pays to be long. One of the things that we like to look at is the consensus of the market—where the forwards are. Where is the one-year forward, where is the Treasury curve? And if you look at twos through 10s, the answer as of now is about 3.3%. It’s substantially lower on the short end of the yield curve and only a little lower in 10-year Treasury notes. We think that’s about right, and the bigger discussion we have from a macro point of view is more on the yield curve than it is on the overall duration, but we do want to hold duration against some of our favorite spread sectors or our risk sectors in a broadbased portfolio. What risk-spread sectors have opportunity? Mark: Given the uncertainty over growth and the valuations we now see, I think many investors are surprised at where investment-grade corporates, high-yield bank loans, emerging markets structure, munis, etc. are currently trading. They’ve done very well at the start of the year. What we have tended to do is to increase the investment-grade sectors, investment-grade corporates—for example, Treasury plus a spread—but the absolute yield is pretty darn attractive. We feel that that is a good place to be. We don’t dislike high yield and bank loans, but we want to be a little more careful there from a quality point of view. On the structured side, we favor mostly shorter durations going up the capital structure. We find AAA non-residential, commercial real estate asset-backed securities very attractive. Given the uncertainty surrounding what’s happening with residential areas of the housing market, and commercial real estate in particular, we need to differentiate between what’s happening in the office and industrial sectors. And then finally emerging markets, as Michael has pointed out, we see some very, very attractive opportunities there. Read next: EUR/USD Pair Is Belowe $1.07, USD/JPY Pair Is Back To 131 And GBP/USD Pair Is Slightly Above $1.21| FXMAG.COM Gene, what are your thoughts on duration and also for investors looking at moving from equity into fixed income? Gene: In terms of fixed income duration, right now we’re just a touch longer than our benchmarks, but not by much. We are not looking to go long duration today, and we’re also fairly concerned about the shorter side as well given the trajectory of interest rates going forward within fixed income. We are carefully looking at the shape of the yield curve. We are also cautious on floating-rate loans (bank loans), that’s not somewhere that we’re concentrating on right now, or high yield. High yield is interesting because it looks like the longer-term implications are quite favorable, but we’re very concerned with the short-term and volatility over the next six to 12 months. So, we’re relatively negative on high yield over that shorter horizon. Elsewhere, we’ve become less constructive on Japan and China. But the overall story for us is relatively duration-neutral, we’re certainly interested in the higher yields coming off of Treasuries, looking at investment-grade favorably, and skeptical right now of some of the higher-spread sectors. “ In terms of asset allocation, I think it really comes down to one’s time horizon. Right now, crafting a durable portfolio with a five- or 10-year time horizon requires a different mix than if you’re looking to be more tactical, in our view.” Gene Podkaminer In terms of asset allocation, I think it really comes down to one’s time horizon. Right now, crafting a durable portfolio with a five- or 10-year time horizon requires a different mix than if you’re looking to be more tactical, in our view. The former may see a healthy allocation toward risky assets, while the latter may lighten up on equity exposure in order to fund investment-grade fixed income. Let me start with the longer term first—high yield and equity have characteristics that are very similar in the long term. High yield has probably the most exposure to economic growth of any fixed income sector out there. One can argue that high yield is as close as you get to an equity substitute within fixed income. Over the long-term, we see a very robust return for high yield compared to investment-grade bonds and cash. But over the shorter term, if an investor is worried about recession and wants to meaningfully reduce their exposure to the economic growth factor, or avoid volatility, high yield is probably not where they should be looking. Generally, the relative safety of sovereigns and investment-grade bonds would better align with their concerns. So perhaps for right now, bypassing some of those higher-spread segments in the interim, as volatility passes.
Gold's Hedge Appeal Shines Amid Economic Uncertainty and Fed's Soft-Landing Challenge

China Is Coming Back Online, And Inflation Proves To Be Far Stickier

Franklin Templeton Franklin Templeton 11.02.2023 11:56
Mark, what’s your take on the flavor of potential recession? Mark: This has been an unusual three years to say the least. And I always use the word “experiment” from the sense that the economy was down and out, almost in a depression. We saw extraordinary policy responses, monetary as well as fiscal. And because of that, we’ve seen a lot of dislocations. As we come back online and try to compare what’s going on now to before COVID-19, perhaps 2018, 2019, it’s difficult to apply probabilities. However, that’s what we do. One of the reasons we believe in a diversified portfolio in 2023, even though that did not work at all in 2022, is because of some of the uncertainties that Gene and Sonal have highlighted. We would agree more so with Sonal than Gene when looking at the odds of recession. Working with our economists, our base case is for the United States to avoid a recession—let’s call it either side of unchanged. While we have observed inverted yield curves, we have also seen fed funds move up from near zero to 4.5% in a year of volatility. Financial conditions have been tightening, and when you put that all together and you look at the various components of the economy, we see unchanged or around zero in terms of economic growth. There are some stress points to the economy that are more interest-rate sensitive—like housing—but a decline in interest rates should provide some relief. The consumer is behaving very well, and very importantly, incomes, job growth and savings have offered support— at least so far. All in all, our base case is that the United States doesn’t have a deep recession. Our next highest probability is that unbeknownst to the Fed as well as other central banks globally, they are in the process of overdoing it. Real interest rates are as high as they’ve been for a long time. Policy is a big debate that we all have, and it seems that US fiscal policy is not extremely tight by any means, but is less than what we were used to in 2020 and 2021. A lower probability for us would be a deeper US recession. The question we would ask is where is the stress in the economy? Where is the leverage? It’s not always obvious as we go through the cycles, but nonetheless, we think a deep recession is a lower probability. Finally, in terms of our “ ...the question becomes will the Fed react fast enough? Given their history and their anxiety about maintaining their inflation credibility, my personal belief is that they prob ably are not going to react fast enough. There will be another “oh my God” moment, just like there was last year, but in a different direction.” Francis Scotland probabilities, a potential tail risk is that the economy is doing just fine, the consumer is doing very well, China is coming back online, and inflation proves to be far stickier than the market is pricing in. We put a fairly low probability on that outcome as we go through 2023, which would have a whole different set of policy implications, particularly for the Fed. Read next: EUR/USD Pair Is Belowe $1.07, USD/JPY Pair Is Back To 131 And GBP/USD Pair Is Slightly Above $1.21| FXMAG.COM And, finally Francis, your thoughts on recession? Francis: Fed Chair Jerome Powell has gone to great lengths to prepare the market, business and people for the prospect of a recession. He’s drawn on references to the Fed Chair Paul Volcker era (1979–1987) when it took a severe recession to break the inflation psychology that existed in the early 1980s. In my opinion, a comparison of that era with today isn’t appropriate. We’ve seen an 18-month pickup in inflation that has largely reversed and is well on its way back to 2%. There’s just no comparison with what we’ve gone through to what took place in the 1970s and the 1980s. But if the Fed persists in sustaining monetary conditions where they are, we will get a recession. And, you can see the underbelly of the labor market beginning to shift here. Temporary employment is already contracting. Average weekly hours have now fallen back to below pre-pandemic levels. Average weekly earnings grew only 3% over the last year, which is a dramatic retreat from post-pandemic levels. All of that suggests the wage disinflation the Fed is looking for is already in the pipeline. In addition, Harvard University’s high-frequency economic tracking service tracks job postings data—the data show there’s been a dramatic change in the job market in the last two months. Job postings, according to this metric, went from 20% higher than January 2020, as recently as early November, to 22% below January 2020 levels, as of the end of last year.2 So that seems to rhyme with the weakness in average hourly earnings, which was posted in the last jobs report, as well as a lot of the job layoff announcements that we’re seeing in the newspapers from large marquee-type corporations. What’s missing so far has been a pickup in unemployment insurance (UI) claims. But what history shows is that when UI claims start to pick up, it coincides with a rise in the unemployment rate. And all of that happens very, very quickly, and it’s not reversible—by the time that arrives, it’s too late. So, the question becomes will the Fed react fast enough? Given their history and their anxiety about maintaining their inflation credibility, my personal belief is that they probably are not going to react fast enough. There will be another “oh my God” moment, just like there was last year, but in a different direction. So, do I think that the Fed’s going to react fast enough? No.
All Eyes On Capitol Hill, Jerome Powell Will Appear Before The Senate Banking Committee

The Fed’s Inflation Fighting Credibility Is Really On The Line This Year

Franklin Templeton Franklin Templeton 11.02.2023 12:01
Francis, what is your view of inflation right now in the United States? Francis: Well, the short answer for me is: the direction is down. I don’t think there’s a lot of dispute about that anymore. The real question is: are we going to 2% or are we going to hit 3% to 4%, and then level out? My view is we’re going to go to 2%, maybe even lower. As you know from a lot of the conversations we’ve had in the past about the outlook and this particular topic, our view has been shaped by the idea that this isn’t a normal business cycle. We’re living through the normalization of the economy following a disaster brought on by the pandemic, the lockdowns, and the various reactions to both. To recap briefly, we had the biggest bust in history. The authorities reacted to it with historic reflationary stimulus on a scale we’ve never seen before. As a result, we experienced the sequence of inflation rolling through asset markets. We had asset market inflation. Then we got commodity market inflation. We got real estate inflation, and ultimately, we got inflation in goods and services itself. In late 2021, the Fed started to get nervous that inflation might not be transitory after all. They really started to get nervous when they saw this reflationary impulse roll into wage inflation. Then, they pivoted. They shifted the narrative from “it’s transitory” to “it’s structural.” And the shift really felt like they were panicking over the realization that they got it really wrong, and they needed to catch up in order to preserve the inflation credibility. So, what’s happened since they made their pivot? It’s been a bit like watching a movie in reverse. In a word, we’ve seen a lot of deflation. Stock and bond prices have fallen, commodity prices have retreated, and real estate prices have started to decline. Additionally, in the second half of last year, price inflation retreated a lot. The data—looking at both headline and core CPI—is pretty convincing, indicating that the peak in inflation was mid-2022. It’s fallen a lot in the last six months, and likely to keep falling. It should fall all through this year. And my own view is it’s going to be 2% or less by year end. Read next: Tesla Will Increase Output For 2023, Deliveroo Are Planning To Cut Jobs| FXMAG.COM That’s very compelling, Francis, and it seems there are a number of market indicators that also suggest that inflation could be coming down. But the Fed doesn’t really seem to have that view. What’s going on? Francis: It’s hard to tell what the Fed believes at times— especially after underestimating inflation so badly last year. The Fed’s inflation fighting credibility is really on the line this year. At the December Federal Open Market Committee (FOMC) meeting, what was really interesting was every single FOMC member believed that interest rates had to go higher this year, notwithstanding this declining inflation rate that I just mentioned that was playing out all through the second half of 2022. So, the Fed shifted its view on inflation from transitory to structural concerns almost at the peak of the price-inflation cycle in the middle of last year. Now, it’s really focusing on how tightness in the labor market and how sticky wage inflation might prop up service sector price inflation. However, we know from the yield curve that the market believes that in last year’s panicky effort to correct its wrong and get ahead of inflation that they overshot equilibrium. The yield curve’s inverted. It’s been that way for a while now. Even in the Fed’s own summary of economic projections, they have an equilibrium fed funds rate at 2.5%. So, the market’s saying the central bank is overdoing it. Conditions are very restrictive. It’s not just the yield curve. If you look at the money supply, we’ve seen an unprecedented contraction, in nominal terms, in M2;8 and, the contraction in money supply in real terms is as severe as it was in the 1980s. These conditions are what the yield curve is picking up. Inflation’s not going up as long as money growth stays this weak. If you look at risk assets, risk assets have been rallying lately. Risk assets are finding optimism in the inflation developments. But because the Fed sees financial conditions as part of the transmission mechanism on inflation, Fed Chair Powell has kept up his sort of hawkish rhetoric. They reduced the pace with the 25-bps increase in February, but there’s still no discussion about the case for lower rates.
The Commodities Feed: US announces SPR purchase

Crude Oil Prices Surged On Friday After Russia Announced A Production Cut

Saxo Bank Saxo Bank 13.02.2023 08:22
Summary:  U.S. stock markets finished Friday mixed with a small gain in the S&P and weakness in the Nasdaq 100 weighed by higher bond yields. Hang Seng Index and CSI300 Index declined as investors waited for fresh evidence of a recovery in the Chinese economy. Growth in outstanding loans in China picked up to 11.3% YoY in January as banks had been encouraged to lend. The nomination of Kazuo Ueda as the next Bank of Japan governor was a surprise to the market. Crude oil prices surged on Friday after Russia announced a production cut.   What’s happening in markets? US equities (US500.I and USNAS100.I) may be on wobble town this week, with CPI out Tuesday S&P 500 edged up 0.2% in a lackluster session while the tech-heavy Nasdaq 100 slid 0.6% on higher bond yields. Energy was the best-performing sector on Friday, rising nearly 4% as crude oil rose more than 2% on the Russian production cut. Markets seem defensive coming into this week after a 1.1% decline in the S&P last week - worried firstly, the Fed can keep rates higher for longer, triggered by the hot employment report the week before followed by hawkish Fed speaker comments last week. This week, the focus will be on the CPI data on Tuesday. In individual stocks, Lyft (LYFT:xnas) tumbled 36.5% after the ride-hailing company guided Q1 EBITDA at USD5 to USD15 million, far below the consensus of USD83.6 million, noting price cuts to keep customers against completion from Uber (UBER:xnys). Paypal (PYPL:xnas) rose 3% on Q4 results and earnings guidance beating analyst estimates. Spotify (SPOT:xnys) gained 3.5% following activist investment company ValueAct Capital Management took a stake in the music-streaming company. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) bear steepened The long end of the curve led the sell-off in Treasuries, with yields on the 10-year jumping 7bps to 3.73% and those on the 2-year climbed 4bps to 4.52%. The University of Michigan consumer sentiment index came at 66.4, above the 65.0 expected and the highest level in 11 months. One-year inflation expectations edged up to 4.2% from 4.0% while the 5-10-year inflation expectations remained unchanged at 2.9% Y/Y. Traders were cautious ahead of the CPI report on Tuesday and the upcoming supply from a 20-year auction this Wednesday. Hong Kong’s Hang Seng (HIG3) and China’s CSI300 (03188:xhkg) declined for the second week Hang Seng Index dropped 2% on Friday to finish the week with a second weekly loss in a row. Technology stocks, consumer discretionary, and healthcare names led the decline. Hang Seng Tech Index tumbled 4.6%. Baidu (09888:xhkg), plunging 7.4%, was the biggest loser within the Hang Seng Index. JD.Com (09618:xhkg) dropped 6.3% despite the e-commerce giant announcing plans to launch its ChatJD and jump on the ChatGPT-like AI-generated content bandwagon. Sportswear stocks were laggards. Shenzhou ( 02313:xhkg ), Anta ( 02020:xhkg ), and Li Ning (02331:xhkg) slid between 4% and 5.6%. Shares of EV makers tumbled, XPeng (09868:xhkg) down 7.9%, Li Auto (02015:xhkg) down 7.6%, Nio (09866:xhkg) down 6.6%. SMIC declined 4.3% after the chipmaker warned of a gloomy 2023 and guided full-year revenue down 10%-13%. Standard Chartered Bank (02888:xhkg) rose 4.2% in Hong Kong trading but its London-listed shares fell 5% after First Abu Dhabi Bank said it is not evaluating an offer. In A-shares, CSI300 slid 0.6% on Friday and was down 0.8% for the week. Solar, lithium, coal mining, non-ferrous metal, auto, and semiconductors were laggards. Investors are waiting for more evidence of a recovery in the Chinese economy. The stronger-than-expected growth in corporate loans in China was released after the market close. Australian equites (ASXSP200.I) could also wobble street, if employment data is hotter than expected and commodities pair back with a higher US dollar This week investors and traders will be focused firstly – Australian employment data out for January, due on Thursday, expected to show employment rose by 20,000 from the prior drop, with the unemployment rate expected to remain unchanged at 3.5%. Also importantly, consider the Aussie share market, may be potentially vulnerable for a pair back as the Australian 10 year bond yield has moved up aggressive to 3.81%- its highest level since January. The reason for this, is that the market is expecting the RBA to make ~78.6bps of hikes before pausing in August. So this means unprofitable tech companies and those businesses that don’t pay a dividend yield are vulnerable. FX: SEK reverses gains, CAD boosted by strong jobs and oil The US dollar continued to gain amid renewed risk aversion on Friday, but gains were somewhat capped by gains in CAD as oil prices soared after the Russian supply cuts and Canadian jobs report smashed consensus expectations ten times over. USDCAD reversed from 1.3450+ levels to 1.3350. Meanwhile, USDJPY ended the week nearly unchanged and may be looking at further volatility with higher yields, rising oil prices and the new BOJ Governor. Meanwhile, SEK reversed from the highs after a hawkish surprise from the Riksbank last week. EURSEK back above 11.15 and EURUSD down to 1.0670 from 1.087 levels last week. Crude oil (CLH3 & LCOJ3) moves higher on Russian supply falling Oil prices jumped higher on Friday, closing the week with over 8% gains, as Russia said it would lower production in response to western sanctions (read below). The OPEC+ alliance, which Russia is key member, signalled they won’t be increasing output to fill in for the reductions, signalling a tight market may be ahead. WTI rose to $80/barrel and Brent touched close to $87, although some profit taking emerged in early Asian hours on Monday. Oil prices still continue to trade within a range that has prevailed since November. Meanwhile, other supply returned to the market with Tanker loadings of Azeri crude docking at Turkey's Ceyhan terminal. Gold (XAUUSD) has its eyes on US CPI this week Gold continues to consolidate near $1860, despite pressure from rising US yields. This week’s US CPI release continues to be on watch to assess if the disinflationary narrative can continue even with a new methodology of calculating. A rhetoric shift in global central banks has been seen last week with more hawkish surprises, and the CPI will be the latest test if that narrative can continue to build. Gold however still getting support from rising US-China tensions. Further weakness carries the risk of an extension towards $1828, the 38.2% retracement of the run up from early November.  Read next: UK Economy Suggest That Inflation Will Drop| FXMAG.COM What to consider? Bank of Japan picks a dark horse for Governor post Japan PM Kishida in a shocking announcement on Friday nominated a dark horse candidate Kazuo Ueda as the next governor for the Bank of Japan after Kuroda steps down in April. BOJ executive director (in charge of monetary policy) Shinichi Uchida and former Financial Services Agency commissioner Ryozo Himino were also nominated as deputy governors. Ueda is an academic and a former member of the BOJ policy board, and digging his prior speeches has revealed that he has more of a neutral stance, compared to the dovish Amamiya who was reportedly offered the role but rejected it. His appointment suggests we could see some tweaks in BOJ’s ultra-easy monetary policy, but expecting an outright removal of yield curve control policy appears aggressive now. Fed’s Harker highlights higher-for-longer rates Philly Fed President Patrick Harker (voter) said the likelihood of the Fed being able to control inflation without triggering a recession is growing, but stressed that the key rate must get above 5% and stay there to ensure price pressures ease. He also hinted at a “couple” more 25-bps rate hikes being in the pipeline, but said that how far the Fed will need to go above 5% will be determined by the data. He also talked about rate cuts, but dismissed the possibility in 2023. Focus turns to Michelle Bowman who speaks at a banking conference today. Russia’s production cut to further tighten the oil market On Friday, Russia announced a unilateral cut in its March crude oil output by 500,000 barrels a day, apparently without consulting with its OPEC+ partners first. Since the introduction of EU and G7 sanctions on crude oil from December and fuel products from early February, Russia has increasingly been forced to cut its selling price as its client base continued to dwindle. If oil prices continue to charge higher, OPEC may need to fill the gap by ramping up production, especially in light of an expected pickup in Chinese demand this year. China’s CPI rose to 2.1% in January China’s CPI rose to +2.1% Y/Y in January from 1.8% in December, in line with expectations. The increase was largely due to the fact that the Lunar New Year fell into January this year while it was in February last year and a larger than expected 6.2% Y/Y food price inflation in January versus 4.8% in December. Excluding food and energy, core CPI came in at 1.0% Y/Y, edging up from 0.7% in December. In January, services inflation picked up to 0.8% M/M but was still benign on a year-on-year basis, coming at 1.0% Y/Y in January, rising moderately from 0.6% Y/Y. Producer price deflation deepened, with PPI falling 0.8% Y/Y, versus -0.5% Y/Y expected and -0.7% Y/Y in December. The larger decline in CPI was driven by falling crude oil and coal prices. Growth of outstanding RMB loans in China accelerated to 11.3% Y/Y New aggregate financing increased to RMB5,980 billion from RMB1,306 billion (revised down from RMB1,310 billion) in December, above RMB5,400 forecasted in Bloomberg’s survey. However, due to a high base last year, the growth in total outstanding aggregate financing slowed to 9.4% Y/Y in January from 9.6% in December. The strength in credit expansion came from a larger-than-expected increase in new RMB loans to RMB4,900 billion versus RMB4,200 billion expected and RMB1,400 billion in December, as regulators instructed banks to provide more credits to support key industries and the economy. RMB4,680 billion of these new loans were extended to the corporate sector while only RMB257 billion went to households. The RMB257 new loans to households were much below the RMB843 billion a year ago. The growth in M2 accelerated to 12.6% Y/Y in January from 11.8% in December, above the 11.7% expected. Geopolitical tensions rising U.S. officials said an “unidentified object” has been shot down by its military over Lake Huron. This is the third time in as many days, after earlier downings in Alaska and Canada, and it is the fourth this month to be shot down over North America by a US missile. As debris from these is being evaluated, now the Chinese government says it has spotted a mystery object over waters near northern port city Qingdao and it is preparing to shoot it down. Singapore’s DBS Bank announces special dividend Singapore’s largest bank DBS Group (D05:xses) reported Q4 earnings this morning, with net income up 69% at S$ 2.34bn vs. estimate of S$2.17bn. Higher interest rates continued to boost its income and more than offset other declines due to volatility in financial markets. The board has declared a final dividend of 42 cents a share for the fourth quarter, up from 36 cents a year ago, and a special dividend of 50 cents a share. This brings the total payout for the full year to $2 a share. Other banks including Oversea-Chinese Banking Corp (O39:xses) and United Overseas Bank (U11:xses) are due to report results next week.   For a global look at markets – tune into our Podcast.   Source: Market Insights Today: New BOJ chief; Russian crude production cut; Strong loan growth in China – 13 February 2023 | Saxo Group (home.saxo)
Lithium Imports To China And USA Are Surging This Year

Lithium Imports To China And USA Are Surging This Year

Saxo Bank Saxo Bank 13.02.2023 08:28
Summary:  WATCH video or read text. US inflation volatility risk picks up amid uncertain of the new methodology. Fed speakers and retail sales also key. Japanese yen may have trouble finding direction. UK data is key for the next BOE meeting. Oil markets look wobbly with Russia’s cut, monthly oil reports from OPEC and EIA due. Eyes on lithium companies with Ford and CATL to build a mega battery plant, while Albemarle reports results. 60 S&P500 companies report quarterly earnings this week, across most sectors, while some of the ASX200’s biggest companies declare full year results. US inflation volatility risks with uncertain impact of new methodology, Fed speakers and retail sales also key While investors firmly believe inflation is on a downward trajectory, month-on-month variations still remain on watch. More importantly, this month brings a change in methodology, which adds further uncertainty to the release. If we take the last few month’s revisions for core CPI into account based on the new methodology, there is reason to believe that the new weights could mean an upward push to inflation. Average core CPI for the last three months of 2022 has gone up from 3.1% to 4.3% with the new seasonal factors released by the BLS. Moreover, milder weather in January compared to December, as well as an upward swing in jobs, could mean demand pressures picked up further traction. Bloomberg consensus expects headline CPI to soften to 6.2% YoY from 6.5% YoY in December, while the MoM picks up to 0.5% from a revised +0.1% previously. Retail sales is also expected to pick up momentum again in January amid sustained consumer strength. This will be an important input for market watchers that continue to weigh up the recession vs. soft landing scenarios. Several Fed officials are due to make appearances during the week and will be key to watch after central bank rhetoric took a hawkish shift again last week. New York Fed President John Williams, St. Louis Fed head James Bullard, Philadelphia Fed President Patrick Harker and Cleveland Fed head Loretta Mester will be on the wires this week. Japanese yen may have trouble finding direction this week Japan PM Kishida in a shocking announcement on Friday nominated a dark horse candidate Kazuo Ueda as the next governor for the Bank of Japan after Kuroda steps down in April. BOJ executive director (in charge of monetary policy) Shinichi Uchida and former Financial Services Agency commissioner Ryozo Himino were also nominated as deputy governors. Ueda is an academic and a former member of the BOJ policy board, and digging his prior speeches has revealed that he has more of a neutral stance, compared to the dovish Amamiya who was reportedly offered the role but rejected it. In July 2022, Ueda wrote an article for the Nikkei entitled "Japan, Avoid Hasty Tightening", but in August 2022, he also questioned if the Fed was too late to raise rates. His appointment suggests we could see some tweaks in BOJ’s ultra-easy monetary policy, but expecting an outright removal of yield curve control policy appears aggressive now. Other reasons to expect potential volatility in the Japanese yen include the surge in global yields again and US CPI due in the week, along with a sharp increase in oil prices after Russia’s decision to announce a cut in production by a half million barrels per day. Read next: Campbell Bought A $100,000 Plane To Live In It| FXMAG.COM UK data key for next Bank of England meeting The Bank of England hinted at the February meeting that the 50bps rate hike may have been their last. This week’s inflation, jobs and retail sales data will however be key to determine if another hike may be seen in March. Labor data is out on Tuesday, and expected to continue to show a tight labor market. January CPI comes out on Wednesday, and it is expected to remain in double digits. Bloomberg consensus expects headline CPI to only cool marginally to 10.3% YoY from 10.5% YoY in December. Finally, retail sales data on Friday is expected to show that consumer spending remains under pressure. But with the GDP data out last week showing a likely delay in the start of recession, the BOE may have room to look past the weakening economic momentum for now and keep its focus on price pressures. However, market pricing already suggests a near certain case for another 25bps rate hike in March, so scope for GBP appreciation remains minimal. Oil market wobbly with Russia’s cut, monthly oil reports from OPEC and EIA due In its latest move to use energy as a weapon in the war, Russia announced a unilateral cut in its March crude oil output by 500,000 barrels a day on Friday, apparently without consulting with its OPEC+ partners first. Since the introduction of EU and G7 sanctions on crude oil from December and fuel products from early February, Russia has increasingly been forced to cut its selling price, given its client base continues to dwindle. And now Russia plans to limit its discount on Urals oil to Brent at $34 a barrel in April, $31 in May, $28 in June and $25 in July. That said, some oil supply returned to the market with Tanker loadings of Azeri crude docking at Turkey's Ceyhan terminal. All in all, if oil prices continue to move higher, OPEC may need to fill the gap by ramping up production, especially in light of the expected pickup in Chinese demand this year. So far, OPEC+ are signalling that they won’t boost production to offset Russia’s supply shortages. Monthly reports from EIA and OPEC are due in the week ahead, and will likely keep the energy markets bumpy. As mentioned in the Quarterly Outlook, we expect Brent Oil to remain around the $80 levels this quarter and move to the $90s in the second quarter, and beyond.   Lithium companies on watch with the battery market heating up. Ford and CATL building a battery plant Lithium imports to China and USA are surging this year, ahead of car makers ramping up production with some of the IEA countries planning to end the sale of fuel engines in seven years. The world's biggest lithium company Albemarle reports earnings this week - and will be a lithium proxy to watch - for what we may expect from lithium companies this year. In other news, Ford and CATL are reportedly planning to build a $3.5 billion mega battery plant in Michigan, across 1,900 acres - and employ 2,500 workers. Meaning, they will need to buy industrial metals to produce batteries. This narrative illustrates demand is likely to continue to grow, while supply remains limited. This supports Saxo’s bullish view on battery metals; copper, aluminium and lithium. Click the link, for a look at stocks to watch this week across these sectors. Alternatively refer to Saxo's Equity baskets under Research, Stocks.  Big stakes this week for earnings with 60 S&P500 companies reporting and ASX reporting season ramping up So far, this quarterly US earnings season, 346 S&P500 (US500.I) companies reported results and average earnings growth for the quarter is down 2.3%. Although quarterly earnings growth is in the red again, it’s slightly better than expected. That’s one of the major themes again this US earnings season - margin/profit squeezes are continuing, while the most earnings growth is continuing to come from the Energy sector  - which is benefiting from rising free cash flow growth. Meanwhile, for the first time since covid, we’ve seen the biggest earnings declines in Materials – with mining companies reporting falling earnings amid production slipping amid weather issues. That said, Australian commodity companies are reporting that production has started to turn around in the industry, with mining employment improving. For companies to watch this week who are reporting quarterly or full year earnings  - see our calendar below. Highlights include results from Glencore (GLEN:xlon) that will provide insights about global commodity markets. Sales trends and management’s comments on the business outlook from Coco-Cola (KO:xnys), Kraft Heinz (KNC:xnas) will inform investors about the state of consumers and margin trends in consumer staples. Australian equites (ASXSP200.I) could wobble, if employment data is hotter than expected and commodities pair back with a higher US dollar This week investors and traders will be focused firstly – on Australian employment data out for January, due on Thursday, expected to show employment improved, with 20,000 jobs gained last month, which will market a recovery from the prior drop - while the unemployment rate is expected to remain unchanged at 3.5%. Also importantly, consider the Aussie share market may be potentially vulnerable of pairing back - as the Australian 10 year bond yield has moved up aggressively to 3.81%- its highest level since January. This is because the market is still playing defensive - following hawkish RBA comments and the RBA increasing its inflationary forecast. Plus the market expects the RBA to make ~78.6bps of hikes before pausing in August. Meaning, unprofitable tech companies and businesses that don’t pay a dividend yield are vulnerable here. From a technical perspective, it also looks like the ASX200 is running out of steam. Click here for our technical analyst's views    Macro data on watch this week   Monday 13 February Singapore Q4 (F) GDP India Jan CPI Fed’s Bowman speaks Tuesday 14 February Singapore Budget Australia Feb Westpac Consumer Confidence Japan Q4 (P) GDP Australia Jan NAB Business Conditions/Confidence NZ Q1 2yr Inflation Expectations UK Dec Labor Market US Jan CPI Fed’s Barkin, Harker, Logan, Williams speak US Jan NFIB Small Business Optimism Index Wednesday 15 February Australia RBA’s Lowe Senate Hearing China 1yr Medium-Term Lending Facility Rate UK Jan CPI India Jan Trade US Feb Empire State Manufacturing US Jan Retail SalesUS Jan Industrial Production Thursday 16 February Japan Jan Trade Australia Jan Employment US Jan Building Permits/Housing Starts US Weekly Initial Claims US Jan PPI Fed’s Mester, Bullard, Cook speak ECB’s Lane, Panetta and Nagel speak UK BOE’s Huw Pill speaks Friday 17 February Australia RBA’s Lowe Testimony Singapore Jan Non-oil Domestic Exports UK Jan Retail Sales ECB’s Villeroy speaks Fed Bowman, Barkin speak US Jan Leading IndicatorCompany earnings to watch Company earnings to watch Tuesday 14 February Consumer: Coca-Cola Blood therapy and vaccines; CSL Travel: AirBNB, Marriott International Wednesday 15 February  Oil: Devon Energy Iron ore: Fortescue Therapeutics: Biogen Banking: Commonwealth Bank of Australia Consumer: Kraft-Heinz, Shopify Travel: Corporate Travel Thursday 16 February Lithium:Albemarle Aluminium: South32 Copper: South Tech: Cisco Fertilizers: CF Industries Coal: Whitehaven Coal Gold: Newcrest Mining, Evolution Mining Healthcare: Sonic Healthcare Stock exchanges: ASX Nuclear: NRG Energy Electricity: Southern Co, Origin Energy Friday  17 February Luxury spending: Hermes International Auto and EV maker: Mercedes-Benz Agriculture: Deere   Source: Saxo Spotlight: What’s on investors & traders radars this week? New CPI method, Oil to wobble, Lithium on watch, FX & earnings | Saxo Group (home.saxo)
USD/JPY Pair Has Rebounded Firmly From The Upward-Sloping Trendline

Fears About The Mystery Objects Flying Over The US And China Propel The USD/JPY Prices

TeleTrade Comments TeleTrade Comments 13.02.2023 08:52
USD/JPY picks up bids to renew intraday high as US Dollar cheers risk-off mood. Hopes of doves to keep the BoJ reins weigh on Yen amid sluggish yields. Upbeat US inflation expectations, hawkish Fed concerns keep buyers hopeful. Japan policymakers verdict on BoJ leader, Japan Q4 GDP and US CPI will be crucial for clear directions. USD/JPY refreshes intraday high around 132.30 during early Monday in Europe. In doing so, the Yen pair reverses the previous week’s losses amid hopes of an easy money policy to prevail for long. Adding strength to the pair’s upside bias is the US Dollar’s demand amid a risk-off mood and also due to the hawkish bias surrounding the Federal Reserve (Fed), not to forget steady yields. Talks surrounding Kazuo Ueda’s appointment as the Bank of Japan (BoJ) Governor backed concerns over the ultra-easy monetary policy and favored the USD/JPY bulls afterward. On the other hand, fears about the mystery objects flying over the US and China underpin the US Dollar’s haven demand and propel the USD/JPY prices. The US shot down nearly four such objects while China prepares to hit one such unidentified object while weighing on the market sentiment and fueling the DXY. That said, the US Dollar Index (DXY), was up 0.20% near 103.80 by the press time. Elsewhere, the mildly hawkish Fed talks join Friday’s strong US Consumer Sentiment and US inflation expectations to offer extra strength to the USD/JPY prices, via US Dollar strength. During the weekend, Philadelphia Federal Reserve President Patrick Harker pushed back the chatters of a Fed rate cut during 2023. However, the policymaker did mention, “Fed not likely to cut this year but may be able to in 2024 if inflation starts ebbing.”  His comments were mostly in line with Fed Chair Jerome Powell’s cautious optimism and hence challenge the US Dollar buyers. Read next: Campbell Bought A $100,000 Plane To Live In It| FXMAG.COM Amid these plays, US stock futures fade the previous day’s corrective bounce while the Treasury bond yields remain sluggish around the multi-day high marked on Friday, which in turn helped the US Dollar Index (DXY) to grind higher after a two-week uptrend. Moving ahead, the preliminary readings of Japan’s fourth quarter (Q4) Gross Domestic Product, up for publishing on Tuesday, will precede the Japanese policymakers’ official selection of the BoJ leaders to direct short-term USD/JPY moves. Following that, the US Consumer Price Index (CPI) for January will be crucial for short-term Yen pair directions. Technical analysis A daily closing beyond the 50-DMA, around 132.20 by the press time, appears necessary for the USD/JPY bulls to keep the reins.
FX Daily: Time for the dollar to pause?

Forex Weekly Summary: EUR/USD Closed Below 1.07, GBP/USD started the week at 1.2050 and ended that way too

Kamila Szypuła Kamila Szypuła 11.02.2023 14:36
The dollar gained on Friday as investors grew concerned about a U.S. inflation report next week that could show a number that is higher than markets forecast amid data showing expectations for a continued rise in prices over the next year. As the data continued to show positive U.S. momentum, the dollar was on pace for its second weekly rise against a basket of six currencies, a run it has not seen since October. Federal Reserve Chair Jerome Powell has cited the Michigan survey's inflation outlook as one of the indicators the U.S. central bank tracks. USD/JPY The USD/JPY pair started the week trading at 132.12 and, despite the correction, was moving towards 132.50. Above this level on the first day of trading (Monday) it reached a weekly high of 132.88. In the following days, the USD/JPY pair fell below 132.00 until reaching the level of 130.50. The pair then traded in a range of 130.00-131.50 until USD/JPY dropped to 129.9550, which is the pair's weekly low. The pair closed between the highest and lowest levels, i.e. above 131.00, 131.38 to be exact. The yen rose on Friday across the board with Kazuo Ueda reportedly set to become the next Bank of Japan (BOJ) governor but pared gains after he said the central bank's monetary policy was appropriate. The Japanese unit was on track for its first weekly gain versus the dollar after posting losses for three straight weeks. Japanese Prime Minister Fumio Kishida said the government is planning to present the BOJ governor nominee to parliament on Tuesday, but did not answer a question on whether Ueda would be put forward. Read next: Tesla Will Increase Output For 2023, Deliveroo Are Planning To Cut Jobs| FXMAG.COM EUR/USD The EUR/USD pair started the week trading close to $1.08 at 1.0792. In the following hours, the EUR/USD pair reached a weekly high of 1.0804 and then began to fall towards 1.07. On Tuesday, EUR/USD fell below 1.07, then rose again on Wednesday, breaking above 1.0750 on Thursday. The pair failed to maintain this momentum and on the final day of trading fell to a weekly low of 1.0670. After that, EUR/USD rose slightly and closed the week just above the low of 1.0681. GBP/USD The Cable pair started trading at 1.2050. And for the next two days she lingered in this area. On Wednesday, GBP/USD started an upward move towards 1.21. On Thursday, GBP/USD traded close to 1.22 at 1.2191 which is the weekly high of GBP/USD, but fell back on Friday to close the week at 1.2058. The week's low was at 1.1963 for the GBP/USD pair. AUD/USD The Aussie Pair started trading at 0.6910 and fell on Monday to a weekly low of 0.6859. In the following days, the pair stayed above 0.69. On Thursday, AUD/USD broke above 0.70 and hit a weekly high of 0.7011, similarly to EUR and GBP, the Australian pair failed to maintain momentum and dropped Friday to end the week at 0.6921. The Australian and New Zealand dollars found support on Friday as markets continued to ramp up expectations for how high local interest rates might rise, sending bond yields to one-month peaks. Having hiked rates by a quarter point to a decade-high of 3.35% on Tuesday, the Reserve Bank of Australia (RBA) said domestic price pressures were building and spreading into services and wages, so it was unclear how high rates might have to go. Source: finance.yahoo.com, investing.com
The Commodities Digest: US Crude Oil Inventories Decline Amidst Growing Supply Risks

The US Economy Is Already Seeing The Effects Of The Interest Rate Hike And Inflation Is Expected To Fall Again

Kamila Szypuła Kamila Szypuła 11.02.2023 15:04
Fed Chairman Jerome Powell gave no policy guidance at Tuesday's panel discussion in Stockholm, and with other Fed officials saying their next moves will depend on the data, investors are very focused on the US CPI data. Forecast The YoY CPI report is expected to fall to 6.2% from 6.5% previously, but the monthly CPI change (M/M) is expected to increase to 0.4%, from 0.1%. Core CPI Y/Y is also expected to drop to 5.5% from 5.7%. Source: investing.com Deflation? US inflation rates rose to their highest levels since the 1980s last year, thanks to a string of geopolitical tensions and pandemic-related economic decisions. Now, we’re watching a delicate dance between the Fed, unemployment and interest rates unfold, aiming to tame the beast. Inflation has decreased in the US six months in a row, a sign that the Fed’s aggressive interest rate-raising approach is working. However, the Fed is expected to stick to rate increases after the lowest levels of unemployment in 50 years were revealed. Last week, the Fed raised interest rates by 25 basis points and said it saw signs of disinflation, but the hit jobs report shook investors as they feared policymakers could stay hawkish for longer. Fed Chairman Powell reiterated his belief that disinflation is underway in his speech this week. Employment An employment report last week showed U.S. job growth accelerated sharply in January while the unemployment rate hit a more than 53-1/2-year low of 3.4%, pointing to a tight labor market that could be a headache for the Fed. The labor market has an interesting role to play. When many people are out of work, employers have plenty of choice in whom to hire and don't have to push workers to pay higher wages. This keeps wage inflation low. Right now, it should be the other way around, but we're getting mixed signals instead. While the labor market is hot, wage growth is declining: average hourly earnings fell from 4.8% in December to 4.4% a month later. It is quite difficult for the Fed to decide whether to continue raising interest rates when unemployment is extremely low and wage growth is not adequate. What's next from the Fed? After a massive effort to rein in inflation in 2022, the Fed has started to take control of the situation. Rate hikes have slowed down recently, with the Fed announcing a quarter-point rate hike last week. Interest rates are currently within the target range of 4.5% to 4.75%. Still, the Fed appears to be cautiously optimistic about inflation. While no one is sure of the exact number of inflation in 2023, most agree that it will continue to fall. Moreover, we have yet to see the full effect of the staggering increase in interest rates. As this affects the cost of credit, consumer spending and exchange rates, we will only see the impact of interest rate increases in 2022 only this year. This can mean a slower economy, fewer jobs and less spending. The Fed is still sticking to its target of bringing inflation down to 2%. How fast that happens depends on a lot of moving parts we haven't seen yet. Source: investing.com
Crude Prices Are Rallying After A Mixed Jobs Report Sent The Dollar Lower

Russia Has Announced To Cut Its Production By 500 000 Barrels Per Day, Equities Are Under Selling Presure

Swissquote Bank Swissquote Bank 13.02.2023 10:45
US equities recorded their worst week since the year started. Hawkish comments from many Federal Reserve (Fed) members hammers sentiment, as stress mounts before the much-important US CPI data due Tuesday. US CPI If US inflation hasn’t eased, or eased enough, or God forbid, ticked unexpectedly higher on yearly basis, we could rapidly see the post-NFP optimism, and the pricing on the goldilocks scenario to leave its place to fear and chaos. Fed At the start of the week, the activity on Fed fund futures hints at around 91% chance for a 25bp in the next FOMC meeting, and around 9% chance for a 50bp hike. Forex In the FX, the US dollar index finally cleared the 50-DMA offers on Friday - which I think could be premature if tomorrow’s US inflation number is sufficiently soft. A a wave of fresh buying in the Japanese yen also marked the latest mood in the currency markets, but didn’t last long. The EURUSD, on the other hand, slipped below its own 50-DMA. What’s next depends on the US dollar, as the US dollar is what leads the dance right now. Read next: Amazon Is Slowly Dismantling Tony Hsieh’s Version Of Zappos, Louisa Vuitton Doubled Sales| FXMAG.COM Energy market In energy, US crude oil jumped past the $80pb on Friday, as Russia announced to cut its production by 500’000 barrels per day, which is roughly 5% of its daily production. But gains remain limited by an overall bearish mood and recession fears, and offers remain strong into the 100-DMA, which currently stands near $81pb level. Watch the full episode to find out more! 0:00 Intro 0:27 Investors are tense before US inflation data due Tue 3:30 S&P500, Nasdaq: key technical levels to watch this week 5:27 FX update: USD up, euro, yen down 7:47 UK avoids recession, FTSE at record, BP tops £100bn valuation 9:09 Crude jumps on Russia, but 100-DMA still intact Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #USD #inflation #data #Fed #expectations #EUR #JPY #GBP #FTSE #BP #crude #oil #Russia #output #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
All Eyes On Capitol Hill, Jerome Powell Will Appear Before The Senate Banking Committee

The Elevated Hawkish Tone Of Fed Has Begun To Affect Current Prices For Precious Metals

InstaForex Analysis InstaForex Analysis 13.02.2023 11:53
In December, the Federal Reserve released its most recent economic forecasts and a "dot plot" that contained its expected rate changes, as 17 members of the Federal Reserve placed their opinion (as a dot). The December 2023 interest rate projections contained the clear realization that the unanimous voting members of the Federal Reserve expected to raise the current base rate to above 5% and maintain those increased rates throughout calendar year of 2023. The elevated hawkish tone, reflecting anticipated actions by the Federal Reserve, has begun to affect current prices for precious metals, U.S. Treasuries and stocks. A faction of market participants still believe that there will be rate cuts this year, contrary to what has been and remains in the Federal Reserve's narrative. However, the Fed's statement the week before last was that they might have to raise rates to a higher target closer to 6%. This was likely the reason for the sale at the end of the week before last. Read next: Poland’s President Andrzej Duda Said The Decision To Send Fighter Jets To Ukraine Was “Not Easy To Take”| FXMAG.COM The strength of the dollar was certainly a strong component at the end of last week, providing headwinds for the markets. The dollar index rose 0.37% in trading. Investors are waiting for the next report on headline inflation against the consumer price index on Tuesday. They hope to better understand the Federal Reserve's possible reversals in terms of rate hikes. The most important takeaway on price action over the past few weeks has less to do with any technical indicators than with event-driven news and the current version of the Federal Reserve.   Relevance up to 09:00 2023-02-15 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/334897
Central Bank Policies: Hawkish Fed vs. Dovish Others"

Market Expectations For The Fed Path And Domination Of US CPI In The Rhetoric This Week

Saxo Bank Saxo Bank 13.02.2023 12:12
Summary:  Market expectations for the Fed path has come back in-line with the December dot plot, with Fed speakers turning hawkish at the margin since the bumper January jobs report. While US CPI is key early in the week, focus will shift back to Fed commentaries later in the week. Market narrative has shifted swiftly from recession at the end of 2022 to soft landing in early 2023, and expectations of a re-acceleration in cyclical growth on the back of a strong labor market are now picking traction. Bond markets are starting to reflect this changing perception, with yields rallying strongly. US 2-year yields reached their highest levels since November, above 4.5%. Market pricing of the Fed’s path has also started to converge with the December dot plot, bringing the terminal rate to 5-5.25% and slowly pushing out the two rate cuts priced in for this year. Read next: Poland’s President Andrzej Duda Said The Decision To Send Fighter Jets To Ukraine Was “Not Easy To Take”| FXMAG.COM A general hawkish tilt has returned in Fed communications, but this week US CPI will dominate the rhetoric in the first half of the week. If inflation is hotter than expected, or even if continues to be sticky, the disinflation narrative started by Chair Powell at the last Fed meeting could continue to come under the scanner. A host of Fed speakers are lined up for the week, and their take on the inflation and jobs data could continue to unnerve the markets.   Source: Fedspeak Monitor: The hawks are lining up again | Saxo Group (home.saxo)
Market Focus: European Data Releases, ECB Survey, US FOMC Minutes, and UK Bond Supply

Situation Of US Dollar Is A Key Factor Lending Some Support To The NZD/USD Pair

TeleTrade Comments TeleTrade Comments 13.02.2023 12:22
NZD/USD rebounds over 50 pips from the daily low amid the emergence of some USD selling. A modest recovery in the risk sentiment weighs the buck and benefits the risk-sensitive Kiwi. Hawkish Fed expectations, recession fears should limit the USD downside and cap the major. The NZD/USD pair attracts some buyers near the 0.6290 area on Monday and climbs to a fresh daily high during the first half of the European session. The pair is currently placed just below mid-0.6300s, though remains well within a familiar trading band held over the past week or so. The US Dollar fails to capitalise on its modest intraday gains and turns out to be a key factor lending some support to the NZD/USD pair. A softer tone surrounding the US Treasury bond yields acts as a headwind for the greenback. Apart from this, an intraday recovery in the US equity markets further undermines the safe-haven buck and benefits the risk-sensitive Kiwi. That said, worries about a deeper global economic downturn should keep a lid on any optimism in the markets. Apart from this, the prospects for further policy tightening by the Fed could help limit any meaningful downside for the USD and cap the upside for the NZD/USD pair. This, in turn, warrants some caution for bulls and before positioning for further gains. Investors now seem convinced that the Fed will stick to its hawkish stance. The bets were reaffirmed by the Labor Department's annual revisions of CPI, which showed that consumer prices rose in December instead of falling as previously estimated. Separately, the University of Michigan survey's one-year inflation expectations climbed to 4.2% in February from the 3.9% previous. Read next: Poland’s President Andrzej Duda Said The Decision To Send Fighter Jets To Ukraine Was “Not Easy To Take”| FXMAG.COM This raises the risk of higher inflation print for January and dashes hopes for an imminent pause in the Fed's rate-hiking cycle. Hence, the market focus will remain glued to the crucial US CPI report on Tuesday. Heading into the key data risk, traders might refrain from placing aggressive bets around the NZD/USD pair in the absence of relevant economic data on Monday. Technical levels to watch remaining time till the new event being published U.S.: Leading Indicators
The Pound Is Now Openly Enjoying A Favorable Moment

GBP/USD Started The New Week In A Calm Way, EUR/USD Is Waiting For US CPI Report

Kamila Szypuła Kamila Szypuła 13.02.2023 13:11
The dollar approached a five-week high against its major peers on Monday, and investors increased their bets on the Federal Reserve staying on tight monetary policy longer. The most important event this week will be US consumer prices data released on Tuesday, which will strengthen expectations regarding Fed policy. Strong CPI data in the US would increase expectations for monetary policy tightening by the Federal Reserve, which would probably push the dollar up. USD/JPY USD/JPY started the new week at the level of 131.3470, and in the following hours it rose and broke through the level of 132.00. At the time of writing, USD/JPY is trading above 132.50. The asset is expected to refresh a four-day high above 132.00 as investors are extremely risk-averse ahead of the United States inflation report. In January, Japanese investors became net buyers of foreign bonds for the first time in five months as US bond yields fell in a sign that slowing inflation would prompt major central banks to slow down the pace of interest rate hikes. Japanese investors bought foreign bonds net worth 1.56 trillion yen ($11.79 billion) in January, according to data from Japan's Ministry of Finance, marking their biggest buying frenzy since September 2021. Read next: Poland’s President Andrzej Duda Said The Decision To Send Fighter Jets To Ukraine Was “Not Easy To Take”| FXMAG.COM EUR/USD On Friday, a preliminary consumer sentiment survey by the University of Michigan in February showed that annual expected inflation rose to 4.2% from 3.9% in February. The reading helped the US dollar stay strong against its rivals ahead of the weekend and forced EUR/USD to end the week in the red. Early Monday, the US Dollar Index holds strong and limits EUR/USD's gains. The EUR/USD pair started trading at 1.0684 this week. In the following hours, EUR/USD fell towards 1.0660 but rebounded above 1.0680. At the time of writing, the EUR/USD pair is trading at 1.0675. The European Commission raised the EU growth forecast for 2023. The European Commission noted that the EU economy entered 2023 in a better position than predicted in the autumn and raised its growth forecasts for this year to 0.9% in the euro area. The Eurozone looks set to avoid a technical recession, thanks in large part to falling gas prices and a solid labor market. The Commission has also lowered its inflation expectations, with headline inflation now expected to fall to 5.6% in 2023. GBP/USD The GBP/USD pair started the week at 1.2050. Similar to the Euro pair, the GBP/USD pair fell towards 1.2035 during the morning trading hours before rising above 1.2060 again. Currently, GBP/USD is trading at 1.2056. The market awaits this week's data, which could show that unemployment in the UK remained flat in December and weekly earnings rose less than in November. The British economy, similarly to the US, will publish inflation reports this week. UK is expecting inflation to fall. UK retail sales figures for January are expected to show that while consumers continue to spend less, the pace of decline in sales may have slowed in the new year. AUD/USD Markets expects RBA Chairman Philip Lowe to reinforce the bank's hawkish stance at parliamentary hearings this week. Reserve Bank of Australia (RBA) Governor Philip Lowe will testify before the Senate this week. Lowe will appear before the Senate Appraisals Committee on Wednesday, and then on Friday will give his semi-annual testimony to the House Economics Committee. In between these public appearances will be squeezed in employment data on Thursday. The central bank surprised markets last week by signaling at least two more rate hikes after raising the cash rate to a decade high of 3.35%. This stifled any talk of a break and led the markets to price in a final rate of 4.2% The AUD/USD Pair started the week close to 0.6900, where it fell below this level in the following hours. The Australian pair managed to break above 0.6915 and is currently trading above 0.6930. Source: investing.com, finance.yahoo.com
Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

Rates Spark: Hawkish markets head into US inflation

ING Economics ING Economics 14.02.2023 08:39
The hawkish repricing on the US curve has resulted in a further inversion, as swaps still price 2024 rate cuts. The mood is understandably nervous but some indicators suggest optimism Hawkish repricing into today's CPI but the market still expects 2024 cuts It’s an understatement to say that a more resilient US economy, and in particular its labour market, have caused some nervousness in global bond markets. This is the dominant mood among participants as we head into the first CPI print for the year. As usual, the focus will be on core inflation, and in particular on core services ex-housing as Fed Chair Jerome Powell and colleagues have stressed its importance for monetary policy. The hawkish shift in market mood has resulted in 2Y Treasuries printing a new high for the year at 4.54% yesterday. The 45bp reversal in February (trough to peak) means front-end yields are now up in 2023. The same cannot be said of longer tenors, still standing below their 2023 starting levels. The resulting flattening of the US yield curve is probably the most striking example of the more hawkish mood in rates.. Another is forwards, which are now pricing a peak in the Fed Funds rate at 5.2% in July. The amount of Fed cuts priced for 2024 is nearly unchanged since January – roughly 150bp Sticking with forwards, the amount of Fed cuts priced for 2024 is nearly unchanged since January – roughly 150bp. Therein lies the rub – higher terminal rates this year, and generally speaking the better growth trajectory, have not translated into a material repricing of long-term policy rates. One reason is that other forward-looking indicators, for instance the New York Fed’s survey of consumer inflation and earning expectations, continue to point to a decline. Higher US swap rates but the curve is still pricing cuts for 2024 Source: Refinitiv, ING Treasury yields: A rise before a fall, and Europe also has some reasons for inflation optimism There is undeniably some upside to rates across maturities today on an upside inflation surprise but the front end remains the most volatile point on the curve, so a change in the slope should be the clearer take-away. We suspect complacent longs could still be shaken out by this report, and 4% in 10Y Treasuries cannot be excluded if hard activity data rebounds this week (retail sales and industrial production) also rebound but this would be setting up for lower rates later this year. 4% in 10Y Treasuries cannot be excluded if hard activity data rebounds this week Of course, the hawkish repricing has not spared euro bond markets. Regular readers know that we find an even stronger case for the repricing higher in European rates as the ECB is still behind the Fed in its fight against inflation. Some good news helped stem the hawkish repricing yesterday, however. A couple of ECB speakers stressed that the bank will turn to a more data-dependent setting after it delivers the 50bp it pre-announced for March. The European Commission’s own winter forecast updated yesterday also indicated some downside to the ECB’s own projections, which will also be revised in March. Read next: Poland’s President Andrzej Duda Said The Decision To Send Fighter Jets To Ukraine Was “Not Easy To Take”| FXMAG.COM European Commission inflation forecast point to downside revisions in the ECB's projections Source: Refinitiv, ING Today's events and market view The main release of note out of Europe today is the second reading to the eurozone’s fourth-quarter GDP growth. The previous estimate was 0.1% quarter-on-quarter. Bond supply consists in Italian (3Y/7Y/15Y) and UK (10Y) auctions. This will add to the European Union reopening two bonds with 6Y and 19Y of residual maturity. Today’s US CPI report is easily the most important release this week, and maybe this month, although the sell-off that followed the January non-farm payrolls means there is fierce competition for this title. The median Bloomberg estimate for core is 0.4% month-on-month. An annual change in components weighting make this number more difficult to call than ususual. Note also that 2022 inflation prints were revised higher last week, adding to the market’s nervousness. Other US-centric events today include small business optimism and a flurry of Fed speakers who will no doubt give their spin on the CPI print. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Albemarle Will Be A Proxy For What We Can Expect From Lithium Companies' Earnings, Tesla Maintains Its Lofty Production Targets

Albemarle Will Be A Proxy For What We Can Expect From Lithium Companies' Earnings, Tesla Maintains Its Lofty Production Targets

Saxo Bank Saxo Bank 14.02.2023 08:55
Summary:  Watch our video in under four minutes or read the text for what’s happening with Tesla shares, and Albemarle, the lithium proxy, plus what to consider if you are investing or trading. Tesla flashes red signals after a record rally; meaning some of its gains could be unwound  Tesla was one of the weakest in mega caps on Monday, while suffering its biggest two-day fall since January, losing 6.1%. Tesla shares have been bouncing off their lows and are up 93% with investors hopeful the Fed will pause rate hikes. However, some investors have been trimming gains, with the Fed hinting it could keep rates higher for longer. However, Tesla’s bulls may argue a potential Fed pause could support higher earnings, while Tesla maintains its lofty production targets. Consensus believes Tesla’s 2023 revenue will grow 28% to a new record, with EBITDA expected to swell 20% to a new high, with 12.5% EPS growth. However, from a technical perspective, Tesla’s relative strength index (RSI) is showing the stock rally is slowing, with Tesla trading in so called overbought territory - a technical level that could signal a potential reversal. The last time Tesla was this overbought was in November 2021. Lithium giant Albemarle reports earnings. Its results will be telling for the lithium sector's outlook   This week, the world's biggest lithium company, Albemarle reports earnings. Given its size and scale - with it selling to most EV makers including - Toyota, Ford, Mercedes, GM, Hyundai, Kia, Nissan, Tesla and Renault – we think Albemarle will be a proxy for what we can expect from lithium companies' earnings. And its outlook could also guide us for what to expect this year from the lithium sector. Consensus expects operating profits to have improved and rise to $1.05 billion in the quarter. EBITDA is expected to grow to $1.22 billion, while net debt is expected to drop, with adjusted EPS forecast to grow to 8.19. Click here to look at more stocks to watch across the metals sector this week. For a list of lithium stocks and EV metal stocks, refer to Saxo's Equity baskets under Research, Stocks.   Read next: GBP/USD Started The New Week In A Calm Way, EUR/USD Is Waiting For US CPI Report| FXMAG.COM For our team's weekly look at markets, click here.  To listen to our global team's take on markets - tune into our Podcast.   Source: Video: Tesla shares flash red and could pull back. Albemarle, the lithium proxy is expected to report higher earnings | Saxo Group (home.saxo)
Swiss Inflation Falls Below Expectations; US Markets Closed, Fed Minutes Awaited

The New Zealand Dollar (NZD) Is Continuously Facing Pressure

TeleTrade Comments TeleTrade Comments 14.02.2023 09:07
NZD/USD is looking to stretch its recovery move above 0.6350 amid the risk-on mood. Federal Reserve might remain favored for policy tightening continuation despite inflation softening ahead. Reserve Bank of New Zealand inflation expectations has dropped to 3.30% from the prior release of 3.62% for two years from now. NZD/USD is oscillating in an Inverted Flag that favors the downside on a broader basis. NZD/USD has rebounded firmly after a corrective move to near 0.6330 in the Asian session. The Kiwi asset is looking to stretch its recovery move above the immediate resistance of 0.6350 as the US Dollar Index (DXY) has extended its downside to near 102.77. Considering the downside pressure in the USD Index ahead of the release of the January inflation report, it is likely that investors are highly confident that the annual Consumer Price Index (CPI) will continue its declining trend consecutively for the seventh time. S&P500 futures are demonstrating a subdued performance, portraying a minor caution for fresh buying. However, the upside strength shown by the 500-US stocks basket on Monday indicates that the risk appetite theme is extremely solid. The demand for US government bonds is escalating vigorously, which has trimmed the return generated on the 10-year US Treasury yields to 3.70%. Annual US Inflation looks to trim consecutively for the seventh time From the whooping figure of 9.1%, the headline inflation in the United States has already come down to 6.5% in January and investors are expecting further decline as higher interest rates have forced the firms to scale down their production activities. Analysts at RBC Economics expect CPI growth to edge down to 6.2% in January from 6.5% in December (YoY). Food price growth likely also continued to slow, albeit from very high levels. By contrast, we expect energy price growth to tick up for the first time in 7 months – though to an 8% rate that is still well below a June peak of 42%. We look for core inflation to slow further in January, coming in at 5.4% YoY, down from 5.7% in December. All told, recent inflation reports have pointed to a relatively broadly-based easing in price pressures.” Another school of thought believes that the Consumer Price Index (CPI) could deliver a surprise move as the labor market has remained upbeat in January month. Higher demand for labor is contained by offering them higher wages, which carries the potential of propelling the overall consumer spending as households will be equipped with more funds for disposal. Meanwhile, the Federal Reserve Bank of New York's monthly Survey of Consumer Expectations showed on Monday that the US consumers' one-year inflation expectation stayed unchanged at 5% in January. Federal Reserve to continue sound hawkish despite softer CPI release The street is laser-focused on the release of the price index data as it will provide meaningful cues for further monetary policy action by the Federal Reserve. Fed chair Jerome Powell has already cleared that inflation is stubborn in nature and a premature consideration of pausing rates or cutting them could paddle up the inflationary pressures again. No doubt, December’s economic indicators were in favor of a policy tightening pause, however, the stronger-than-anticipated US Nonfarm Payrolls (NFP) stole the spotlight. For interest-rate guidance, Fed Governor Michelle Bowman said on Monday the Fed will continue to raise interest rates, pointing out there will be a lot of data releases between now and the next policy meeting. Read next: Poland’s President Andrzej Duda Said The Decision To Send Fighter Jets To Ukraine Was “Not Easy To Take”| FXMAG.COM RBNZ to consider mega rate hike despite slowing inflation projections The Reserve Bank of New Zealand (RBNZ) has been hiking its Official Cash Rate (OCR) significantly to decelerate the pace of price pressures. After recording a multi-decade high of 7.3%, New Zealand’s inflation dropped marginally to 7.2% in the fourth quarter of CY2022. Led by higher interest rates from Reserve Bank of New Zealand Governor Adrian Orr, employment opportunities have slowed down and the Unemployment Rate has increased to 3.4%. Also, inflation expectations reported by the Reserve Bank of New Zealand have dropped to 3.3% on a quarterly basis from the former release of 3.62% for two years from now. In spite of the indicators favoring further exhaustion in the inflationary pressures, the Reserve Bank of New Zealand might continue to hike interest rates with a big number. The inflation rate is extremely skewed upside from the desired rate of 2%. Therefore, a decision of bumper interest rate hike cannot be ruled out. NZD/USD technical outlook NZD/USD is oscillating in an Inverted Flag chart pattern on a four-hourly scale. The chart pattern indicates a sheer consolidation that is followed by a breakdown. Usually, the consolidation phase of the chart pattern serves as an inventory adjustment in which those participants initiate shorts, which prefer to enter an auction after the establishment of a bearish bias. The New Zealand Dollar is continuously facing pressure from the 50-period Exponential Moving Average (EMA) at 0.6355, which indicates more weakness ahead. Meanwhile, the Relative Strength Index (RSI) (14) is oscillating in the 40.00-60.00, which indicates that investors await a potential trigger for a decisive move.     search   g_translate    
The USD/JPY Price Reversed From The Lower Limit

Fears Of The US-China Tension Over The Balloon Shooting Put A Floor Under The USD/JPY Price

TeleTrade Comments TeleTrade Comments 14.02.2023 09:11
USD/JPY prints mild losses while reversing from monthly high. Treasury bond yields remain pressured amid market’s indecision ahead of the key US CPI. Mixed Japan GDP gained little attention as Ueda’s nomination as BoJ leader appears hawkish. USD/JPY bounces off intraday low but remains stuck with mild losses near 132.00 amid early Tuesday morning in Europe. The Yen pair initially cheered the pullback in the Treasury bond yields before the Japanese government’s announcements of Bank of Japan (BoJ) officials triggered hawkish concerns and weighed on the prices. Also favoring the USD/JPY bears is the broad US Dollar pullback as traders brace for a positive surprise from the US Consumer Price Index (CPI) for January. Earlier in the day, Japan’s preliminary readings of the fourth quarter (Q4) Gross Domestic Product (GDP) data printed mixed readings. Following that, the official nomination of Kazuo Ueda as the BoJ leader weighed on the USD/JPY prices. That said, Bloomberg came out with an analysis suggesting further challenges to the Bank of Japan’s (BoJ) easy money policy during the incoming Kazuo Ueda’s reign. It’s worth noting that Ueda previously defended the current monetary policy in his latest public speech. On other hand, the US Federal Reserve (Fed) hawks kept defending the rate hike concerns but the market’s pricing of slower rate lifts and a nearer peak seemed to have weighed on the US Treasury bond yields. As a result, the US 10-year Treasury bond yields drop nearly two basis points to 3.69% at the latest, after reversing from a one-month high the previous day. Read next: GBP/USD Started The New Week In A Calm Way, EUR/USD Is Waiting For US CPI Report| FXMAG.COM Elsewhere, fresh fears of the US-China tension over the balloon shooting also challenge the sentiment and put a floor under the USD/JPY price. US Congress will take a bipartisan look at unidentified aerial objects that have made their way into U.S. and Canadian airspace, and why they were not found sooner,” said US Senate Majority Leader Chuck Schumer. It’s worth noting that a US Military General previously ruled out odds favoring the likely hand of China in the “unidentified objects” which were shot down during the weekend. Against this backdrop, S&P 500 Futures print mild losses whereas Japan’s Nikkei 225 rises 0.65% intraday to near 27,600 by the press time. Moving on, the market consensus anticipates 6.2% YoY print of the US CPI for January but the odds of the positive surprise during the year-start are high, which in turn keeps USD/JPY bears on the dicey floor. Technical analysis USD/JPY extends the early-day pullback from the previous weekly top surrounding 132.90 and forms “Double tops”, a bearish chart pattern. Also justifying the Yen pair’s latest weakness is the RSI (14) line that took a U-turn from the overbought conditions, not to forget the bearish MACD signals.
Central Bank Policies: Hawkish Fed vs. Dovish Others"

All Eyes Are On The US CPI Today, Kazuo Ueda Has Been Nominated As The Next Bank Of Japan Governor

Swissquote Bank Swissquote Bank 14.02.2023 09:41
Market bulls have endless optimism this year, it is amazing. Whether it is funded or not, is yet to be seen. US CPI Inflation could help answer that question today. A few indicators point at a certain uptick in inflation in January figures, and the expectation is that the US headline CPI may have slowed to 6.2% in January, from 6.5% printed a month earlier, on a yearly basis. A sufficiently soft, or ideally a softer-than-expected CPI read today should give an additional boost to the equity bulls while a stronger inflation read could easily bring the Fed hawks back to the marketplace and send equities tumbling. Forex In the FX, the US dollar has seen a crowd of sellers above the 50-DMA. A strong inflation data could finally send the dollar index sustainably above its 50-DMA, while a soft reading will be a good reason to sell the rebound. The EURUSD continues its own struggle around the 50-DMA. In Japan, Kazuo Ueda has been nominated as the next Bank of Japan (BoJ) governor. There are rumours that the new BoJ leader could scrap the YCC policy. The yen was better bid in Tokyo, but the US CPI data is probably what will determine the short-term direction both in EURUSD and the USDJPY. CPI What everyone wants to see is a soft US CPI figure, a softer US dollar, strong equities, improved bonds, and stronger other currencies. What everyone fears however is a figure that’s not convincingly softer. The only sure thing is, the CPI days are known for their high intraday volatility. Watch the full episode to find out more! 0:00 Intro 0:24 Mixed feelings about the market 3:51 All eyes are on the US CPI today! 7:13 FX update 8:39 Balloon update Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #USD #inflation #data #Fed #expectations #EUR #JPY #XAU #US #China #spy #balloon #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH      
The Commodities Digest: US Crude Oil Inventories Decline Amidst Growing Supply Risks

Saxo Bank Podcast: US CPI Report Ahead, Tightening Financial Conditions In The Corporate Bond Market And More

Saxo Bank Saxo Bank 14.02.2023 12:14
Summary:  Today we look at the odd session yesterday in the US, with no readily apparent proximate cause to the rally outside, perhaps of traders hedging today's US January CPI release, which could trigger considerable volatility, especially on the impact of heavy 0DTE options trading if the release is a big surprise in either direction. We also note tightening financial conditions in the corporate bond market, talk market reaction to incoming earnings data, including from ThyssenKrupp, SolarEdge and Palantir, and look at today's crop of earnings reports, as well as stories impacting FX & more. Today's pod features Peter Garnry on equities, with John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Read next: Brazil’s Bank Allows To Pay Taxes Using Cryopto, Ford Will Cut Jobs In Europe| FXMAG.COM   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com. Source: Podcast: Another CPI circus today. Tightening financial conditions? | Saxo Group (home.saxo)
The GBP/USD Pair Is Expected The Consolidation To Continue

GBP/USD Pair Rose Sharply Above $1.22, EUR/USD Pair Also Rose

Kamila Szypuła Kamila Szypuła 14.02.2023 12:49
The dollar fell on Tuesday in anticipation of the eagerly awaited inflation report. Markets are looking at US consumer inflation data for further clues to the Federal Reserve's policy outlook. Investors expect the headline annual CPI to fall to 6.2% from 6.5% in December and the core CPI, which excludes volatile food and energy prices, to fall to 5.5% from 5.7%. USD/JPY The Yen pair initially cheered the pullback in the Treasury bond yields before the Japanese government’s announcements of Bank of Japan (BoJ) officials triggered hawkish concerns and weighed on the prices. Also favoring the USD/JPY bears is the broad US Dollar pullback as traders brace for a positive surprise from the US Consumer Price Index (CPI) for January. Japan’s preliminary readings of the fourth quarter (Q4) Gross Domestic Product (GDP) data printed mixed readings. Following that, the official nomination of Kazuo Ueda as the BoJ leader weighed on the USD/JPY prices. Fresh fears of the US-China tension over the balloon shooting also challenge the sentiment and put a floor under the USD/JPY price. The USD/JPY pair started trading above 132.30 today, but then fell towards 131.90. The yen pair managed to bounce back and traded close to 132.30 again. USD/JPY is currently trading above 132.20. EUR/USD The European Commission's winter economic forecast published yesterday says that the EU economy is geared to avoid recession. The EUR/USD pair held a narrow range of 1.0730-1.0745 in morning trading, but surged up in the European session. The euro maintained its earlier gains against the slightly weaker US dollar, with EUR/USD changing hands around 1.0760. The latest US inflation report due to be released will be another driver of action. Read next: Brazil’s Bank Allows To Pay Taxes Using Cryopto, Ford Will Cut Jobs In Europe| FXMAG.COM GBP/USD The UK unemployment rate remained unchanged for the 3 months to December 2022, as expected. The number of people out of work for up to 6 months has increased, mainly among people aged 16 to 24. The number of people working in the UK increased by 74,000. in the three months to December, well above market forecasts for an increase of 40,000. and after an increase of 27,000 in last month. Meanwhile, from November 2022 to January 2023, the number of vacancies fell by 76,000. up to 1,134,000 UK wages rose 5.9% in December 2022 compared to the same month last year, beating estimates and down 6.4% from the previous print. What will be of concern, however, is the increase in average earnings without bonuses, which rose to 6.7%, beating the 6.5% forecast. The data compares with market forecasts of growth of 6.2% and 6.5%, respectively. In real terms, adjusted for inflation, the increase in total and regular wages fell by 3.1% in the year from October to December 2022 for total wages and by 2.5% for regular salaries. GBP/USD has gathered bullish momentum and climbed toward 1.2200 in the European trading hours. AUD/USD The Australian and New Zealand dollars tried to hold their gains on Tuesday after a rebound on Wall Street boosted global risk sentiment and Australian data underlined the case for further domestic interest rate hikes. Currently, the price of the Australian pair is around 0.6970. Source: investing.com, finance.yahoo.com
Listen: Higher for longer

Rates Spark: Higher for longer hits selectively, for now

ING Economics ING Economics 15.02.2023 08:32
Core bonds are on the back foot as the lower-for-longer narrative takes hold. Today’s US data should reinforce that trend, courtesy of unseasonably warm weather. The hawkish repricing has spared riskier assets, but the Fed and political risks are waiting in the wings Higher-for-longer narrative hurts bond longs Monthly US inflation came in line with expectations in January. After hesitating, rates went resolutely higher. Given the lack of a clear signal in the CPI report, we take this as a sign that there are still complacent longs vulnerable to the higher-for-longer narrative. 10Y Treasuries decisively crossed the 3.75% threshold, and the 2Y is quickly converging to 5%. Today’s stronger industrial production and retail sales should reinforce this trend, although the 2Y reaching 5% would either presuppose a much higher terminal rate than currently priced (5.25%) or hardly any rate cut within that horizon. It’s a tall order, but momentum is on the side of bears. 2s10s have reached the flattest level since the 1980s In comparison, the curve flattening at longer tenors seems like a relatively slow burning trend, but 2s10s have reached the flattest level since the 1980s. A more hawkish path for Fed funds rates is the main culprit but it is easy to forget how long-end rates are anchored, making the current inversion possible. At its core, low long-term rates simply illustrate that markets aren’t easily changing their view on the equilibrium levels of real rates and inflation. In practice, we think the remnants of past Federal Reserve intervention in the bond market continue to suppress term premium, and keep the curve flatter than it would otherwise be. The good news is that our economics team sees core inflation declining to 2% by year-end. Even if we were to miss that forecast by a full percentage point, we think this will be significant relief for financial markets. This is not the way investors think at the moment, however, and today’s data should further delay the move lower in rates that we’re expecting for later this year. Past Fed bond market intervention is preventing longer rates from rising as fast as the short end Source: Refinitiv, ING Risk sentiment stronger than ever, but sovereign risk is unattractive Unlike their high-rated peers, high beta fixed-income markets are still enjoying their moment in the sun. This is in sharp contrast to 2022 when anticipation of tighter monetary policy sent stocks down and credit spreads wider. On paper, the current repricing higher in core rates in response to better growth prospects is the right kind of tightening. But, in the words of Lorie Logan of the Dallas Fed, rates may have to be raised “to respond to changes in the economic outlook or to offset any undesired easing of financing conditions”. Understand, the Fed would hike to cool growth and/or financial markets. This, to us, sounds like a direct shot at Goldilocks carrying market sentiment on her shoulders since January. The Fed would hike to cool growth and/or financial markets European sovereign spreads are one area where better risk appetite is most visible. On paper, all is going well – higher beta bonds benefit both from central bank easing expectations, and from better growth prospects. The first assumption is being questioned, and near-term data shouldn’t distract from weakening economic fundamentals, albeit deteriorating slower than expected. Even if risk sentiment holds up, there are plenty of political catalysts for risk appetite to soften going forward. The Italian government is locking horns with the European Commission over the suspension of the Stability and Growth Pact, and over the pre-agreed national recovery plans. Farther afield, Greece and Spain both have elections due this year. All this should compound greater supply pressure this year. There are plenty of risks for sovereign spreads, not least supply Source: Refinitiv, Debt Management Offices, ING Today's events and market view Eurozone industrial production and trade are the main releases in the European session today. Germany is due to sell bonds in the 30Y sector. Belgium mandated a new 30Y bond via syndication which should also be today's business. Unseasonably warm weather probably skews today’s US industrial production and retail sales higher. This is not necessarily the beginning of a trend but could reinforce the dominant higher-for-longer narrative in financial markets (see above). Other data of note include the NAHB housing market index and the empire manufacturing survey. This should continue to push yields higher and the yield curve flatter, with markets nervously looking to tomorrow's US PPI. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Challenge to the Dollar: De-dollarisation and Geopolitical Shifts

A Chorus Of Fed Speakers Have Suggested The Fed Isn't Yet Taking Comfort In The Inflation Trends

Saxo Bank Saxo Bank 15.02.2023 09:09
Summary:  US equities ended mixed but bonds were lower after a hot US CPI raised concerns on the pace of disinflation and the Fed comments that followed pushed the market pricing of terminal Fed funds rate higher. Dollar ended the day mostly flat but higher yields saw the yen plummeting. A bumper UK jobs report for January sent the GBP higher but the wait is now on for the January inflation print. US retail sales will also be on tap today.   What’s happening in markets? US equities supported by strong price performance in Tesla and Nvidia U.S. equities had a choppy session as stocks oscillated between gains and losses following a slower-than-expected deceleration in the CPI prints and hawkish-leaning Fedspeak before the broad benchmark S&P500 settled at nearly flat and the tech-heavy Nasdaq 100 gained 0.7%. Most of the strength in the Nasdaq came from Tesla’s (TSLA:xnas) 7.5% jump and NVIDIA’s (NVDA:xnas) 5.4% rise in share price. Tesla gained following rival Ford (F:xnys), down 0.9%, halted production and shipments of its F-150 Lightning electric pickup trucks due to an unidentified problem with the battery. Tesla also raised the price of its Model Y by USD1,000 to USD58,990. Consumer discretionary, up 1.2%, was the best-performing sector in the S&P500 and Tesla was the top winner. Palantir Technologies (PLTR:xnys) soared 21.3% after the data analysis software company reported better-than-expected Q4 earnings and expects to turn profitable for the whole year in 2023. Airbnb (ABNB:xnas) surged 9.2% in extended-hour trading following reported adjusted EPS at USD0.475, beating the USD0.31 consensus estimate and an upbeat outlook on strong travel demand. Coca-cola (KO:xnys) slid 1.7% despite reporting stronger-than-expected revenue growth and inline earnings. The management gave upbeat guidance for revenue growth of 7-8% and EPS growth of 7-9% in spite of continued cost pressure. US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) bear-flattened as yields on the 2-year jumped 10bps Growth in the U.S. CPI came at a slower pace but slowed less than what the consensus forecast expected. After choppy initial reactions, selling emerged in the front end, seeing the 2-year yield finish 10bps cheaper at 4.61%. The SOFR June-Dec 2023 spread narrowed by 10bps to -24bps from -33bps, signaling a further reduction in the bet of rate cuts in the second half of 2023. Hawkish-leaning comments from Fed’s Logan and Barkin, plus the departure of Fed Vice-chair Lael Brainard to join the Biden Administration as head of the National Economic Council added fuel to the higher-for-longer narrative. Brainard is perceived to be the “most persuasive policy dove” at the Fed, as the Wall Street Journal’s Nick Timiraos puts it. Yields on the 10-year rose 4bps to 3.74%, paring some of the rises in yield after a large block buying of nearly 20,000 contracts in the 10-year futures. Across the pond, yields on 2-year Gilts jumped 19bps on a hot employment report. Hong Kong’s Hang Seng (HIG3) and China’s CSI300 (03188:xhkg) traded sideways In a choppy but uneventful session, Hang Seng Index slipped 0.2%. Hong Kong developers recovered from yesterday’s sell-off and bounced by 1%-2%. Sun Hung Kai Properties (00016:xhkg) gained 2.4%; Wharf Real Estate (01997:xhkg) climbed 1.8%. Healthcare names were laggards, with Wuxi Biologics (02269:xhkg) plunging 4% after forecasting 2022 revenues rising 48.4% and profits growing 30%, which failed to meet the high bar of analyst estimates. Alibaba Health Information (00241:xhkg) dropped 2.8%. Tencent (00700:xhkg), down 2.1%, led the internet space lower. Oriental Overseas (00316:xhkg) slipped 2.6% on analyst downgrades citing falling container freight rates. In A-shares, CSI300 was little changed. Non-ferrous metal stocks outperformed, with North Copper (000737:xsec) up 8.7%, Yunnan Copper (000878:xsec) up 5%, and CMOC (603993:xssc) up 3.3%, leading the charge higher. Household appliances names were among the winners with Zhejiang Meida (002677:xsec) advancing by 10%, hitting the upper price limit. Australia equities (ASXSP200.I) fall back to January 16 levels, dragged down by Commonwealth Bank’s cautious outlook Shares in the biggest bank in Australia, the Commonwealth Bank (CBA) sank 5.2% pulling away from record high territory, after reporting half-year results today that paint a cautious tone for banks for the year ahead. CBA’s share price drop pulled back the broad market. CBA's profit results mostly disappointed, although its net interest margin- the main metric analysts look at for banking profitability - came in at 2.1% - on par with expectations. CBA’s cash profit missed expectations with profit up 8.6% YoY to $5.15 billion (vs $5.17 billion Bloomberg consensus), while CBA’s return on equity improved – but also missed market targets. That spooked the market, along with CBA putting aside more capital for bad debts, as higher price pressures continue to hurt consumers, along with falling home prices.  Even though CBA’s results missed, it announced a $1 billion share buy-back as its headline profit after tax moved to a record, which was supported by a surge in business banking profits. The share buy back should theatrically support CBA's shares over the medium to longer term, coupled with the market expecting 2023 profits to hit another record, with margins to improve.  CBA shares gapped down, wiping out a month of gains - with CBA shares moving into oversold territory.  FX: Wobbly dollar as yen slips but AUD, GBP gain A hot inflation data along with Fed officials starting to float the idea of a higher terminal rate saw the dollar being volatile on the day but ended unchanged. Higher yields underpinned as market pricing of the Fed path shifted higher, and that made the yen as the underperformer for the day. USDJPY surged above 133, after Kazuo Ueda being formally nominated as the BOJ chief yesterday and expectations that he won’t be quick with any policy normalization. Meanwhile, AUDUSD was choppy but could not sustain a move above 0.70. GBPUSD also gave up 1.22 despite the strong labor market data questioning the Bank of England’s pause signal, eyes on inflation due today. EURUSD still above 1.0700 with the preliminary readings of the Eurozone Q4 GDP matching 0.1% QoQ and 1.9% YoY forecasts. Lagarde will be on the wires today, and also keep a watch on US retail sales data. Aussie dollar's 50-day moving average continues to limit downside ahead of AU employment The Aussie dollar has continued to track sideways for the last 7 trading sessions, with the Aussie dollar against the US - the AUDUSD pair - being supported by its 50-day moving average ahead of Australian employment on Thursday. Despite hotter than expected US CPI, the pair is steady - also supported by the fundaments - metal prices have moved higher, with Copper and Iron Ore prices back at June 2022 levels. The next catalyst will be Thursday’s Australian employment data, if we see more than 20,000 jobs added, then we will be watching the resistance levels, at perhaps 0.7114 for the Aussie. On the downside, if Australian employment is weaker than expected, we will be watching for a potential pullback. Support for the AUDUSD is perhaps at 0.6879. But, over the medium-to-long term, should the USD continue to track lower, commodity prices stay higher and AU exports continue to grow to China, we see the Aussie dollar doing well. Crude oil (CLH3 & LCOJ3) prices remain pressured While reports of the US release of crude oil from its strategic reserves continued to nudge oil prices lower, a large stockpile built and inflation concerns also added to a weak demand outlook. WTI dropped below $79/barrel while Brent got close to $85. US private inventories, as reported by API, were up by 10.5 million barrels last week. A hot US CPI printed also raised concerns on the disinflation narrative taking hold, suggesting Fed may have to go for a higher terminal rate and pause there for sometime, which raises concerns on the demand outlook. The slide in oil prices however got some support from the OPEC report, which hinted at a tigher oil market as it nudged up the demand estimate and trimmed its supply outlook. IEA monthly report will be on tap today. Read next: Walmart Plans To Close Offices, Ford Invests In Battery Factories | FXMAG.COM What to consider? US CPI sent confusing signals to the markets, but the cooling isn’t enough The US January CPI came in at 0.5% MoM, in-line with estimates, while the core CPI was at 0.4% MoM also as expected. December prints were however revised higher with headline up to +0.1% MoM from -0.1% previously, and core up to 0.4% MoM from 0.3% previously. Markets were wobbly on the release, as the YoY prints came in higher-than-expected at 6.4% for the headline (vs. 6.2% exp) and 5.6% for the core (vs. 5.5% exp). However, a key measure that Powell has highlighted earlier – core services ex shelter – cooled to 0.3% in the month from 0.4% previously. Housing contributed the most to the monthly increase in the CPI, but it is a lagged measure. Meanwhile, disinflation in goods slowed as core goods prices rose +0.1% MoM vs. -0.1% MoM prior. Overall, there wasn’t enough evidence that core inflationary pressures are cooling enough to support calls for the Fed to pivot. Fed speakers send market pricing for Fed path higher A chorus of Fed speakers last night talked about the slow pace of disinflation, suggesting the Fed isn’t yet taking comfort in the inflation trends. NY Fed President Williams repeated there is "still a ways to go" to control inflation and the current levels of inflation are far too high. His views on the terminal rate also differed slightly, in December he suggested rates between 5.00-5.50% is reasonable before last week changing the view to 5.00-5.25%. However, he has now seemingly switched back his views of the higher upper bound for the FFR to 5.50% in wake of the January inflation data. Philly Fed’s Patrick Harker noted that how far above 5% the Fed needs to go depends on incoming data, and Tuesday's inflation report shows inflation is not moving down quickly. Dallas President Logan stressed that tightening policy too little is the top risk. All three are voters this year. Thomas Barkin, a non-voter said it was about as expected and there's going to be a lot more inertia and persistence to inflation than the Fed thought. However he was slightly more dovish saying that if inflation settles, they may not go as far on the terminal but he stressed data dependence. Markets are now pricing in a higher terminal rate of 5.26% in July, and one rate cut has also been driven out of this year’s pricing. Takeaways and quick reflections from hotter-than-expected CPI  Shelter costs were a large contributor to US monthly prices moving up - with rent prices up 8.6%, while large price jumps were seen in airfares costs, up 26%. Airlines are not only seeing more passengers, but also increasing their fares - and this is translating to higher earnings expectations and thus stronger share price performance in airline industry stocks. American Airlines shares are up 40% from their lows, while aircraft maker Boeing is up 80% off its lows. Across other inflation categories, other significant price moves were seen in eggs, butter, fuel, gas, lettuce, cereals, and pet food. This reinforces Saxo’s bullish and overweight view on Commodities as we see higher prices for longer. Companies such as Shell trade 32% up from their lows, while agricultural company Deere is up 40% from its lows. UK employment data points to much firmer than expected labour market The UK saw a strong surge in Monthly Payrolled Employees of +102k, well north of the +15k expected, while the January Jobless Claims dropped -12.9k and the December claims were revised down to -3.2k vs. +19.7k originally reported. The December employment change registered a gain of 74k vs. 43k expected and the Unemployment rate in December was steady at 3.7%. Weekly earnings ex Bonus were +6.7% YoY in December Vs. 6.5% expected and 6.5% in November. Focus shifts to CPI report due today and another double digit print is expected. Hong Kong Monetary Authority bought HKD to defend the peg The Hong Kong Monetary Authority bought HKD14.87 billion (USD1.9 billion) to cap the USDHKD at 7.85, in defence of the SAR’s link-exchange-rate regime for the first time since last November. For what is ahead at markets this week – Read/listen to our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: Markets Today: Choppy markets with a hot US CPI and Fed speak – 15 February 2023 | Saxo Group (home.saxo)
The RBA’s aggressive rate tightening cycle will be continued

CBA’s Stock Drop Pulled The Broad Aussie Shar Market Back To January 16 Levels

Saxo Bank Saxo Bank 15.02.2023 09:14
Summary:  Watch our video or read below on what’s happening in markets with potential trading and investing considerations. The Aussie dollar's 50-day moving average continues to limit downside ahead of AU employment data. The sectors that win from hotter than expected US CPI. CBA shares moved into oversold territory after its results missed expectations, but CBA's pull back from its record highs may encourage investors to buy in. US equities supported by technical levels, despite hotter-than-expected CPI. Fed speakers suggest more rates hikes could be ahead The S&P500(US500.I) closed flat, while the Nasdaq 100 (USNAS100.I) gained 0 6% - with the tech index propped up by a 7.5% jump in Tesla shares, which erased Tesla’s two-day fall. That said, Tesla still remains in overbought territory. The major US indices seem to be supported by their 50, 100, and 200-day simple moving averages (SMAs), suggesting a slow rebound in equities may continue, as the market is still pricing in rate cuts later this year. This is despite the headwinds of hotter-than-expected January CPI, which suggests the Fed can keep rates higher for longer, which would pressure aggregate S&P500 company margins/profits, especially those high PE names, such as non-profitable tech companies. Headline consumer prices rose 0.5% in January - the biggest jump in three months, and 6.4% YoY – while the market expected CPI to slide from 6.5% to 6.2%. Core CPI (ex-food and energy) was also higher than forecast at 5.6% YoY – resulting in two Fed speakers saying the central bank may need to raise rates, more than envisioned. While another Fed speaker says the rate-hike path could be near its end.  Investor reflections from hotter-than-expected US CPI; with airlines costs and commodities up   Shelter costs were a large contributor to US monthly prices moving up -  with rent prices up 8.6%, while large price jumps were seen in airfares costs, up 26%. Airlines are not only seeing more passengers, but also increasing their fares  - and this is translating to higher earnings expectations and thus stronger share price performance in airline industry stocks. American Airlines shares are up 40% from their lows, while aircraft maker Boeing is up 80% off its lows. Across other inflation categories, other significant price moves were seen in eggs, butter, fuel, gas, lettuce, cereals, and pet food. This reinforces Saxo’s bullish and overweight view on Commodities as we see higher prices for longer. Companies such as Shell trade 32% up from their lows, while agricultural company Deere is up 40% from its lows. For more commodity companies, refer to Saxo's Commodity equity basket theme.  Read next: Walmart Plans To Close Offices, Ford Invests In Battery Factories | FXMAG.COM Australia equities (ASXSP200.I) fall back to January 16 levels, dragged down by Commonwealth Bank’s cautious outlook Shares in the biggest bank in Australia, the Commonwealth Bank (CBA) sank 5.2% pulling away from their record high territory, after reporting half-year results today that paint a cautious tone for banks for the year ahead. And CBA’s stock drop pulled the broad Aussie shar market back to January 16 levels. CBA’s profit results mostly disappointed, although its net interest margin- the main metric analysts look at for banking profitability - came in at 2.1% - on par with expectations. CBA’s cash profit missed expectations with profit up 8.6% YoY to $5.15 billion (vs $5.17 billion Bloomberg consensus), while CBA’s return on equity improved – but also missed market targets. That spooked the market, along with CBA putting aside more capital for bad debts, as higher price pressures continue to hurt consumers, along with falling home prices.  Even though CBA’s results missed, it announced a $1 billion share buy-back as its headline profit after tax moved to a record, which was supported by a surge in business banking profits. The share buy back should theatrically support CBA's shares over the medium to longer term, coupled with the market expecting 2023 profits to hit another record, with margins to improve.  CBA shares gapped down, wiping out a month of gains - with CBA shares moving into oversold territory.  Aussie dollar's 50-day moving average continues to limit downside ahead of AU employment  The Aussie dollar has continued to track sideways for the last 7 trading sessions, with the Aussie dollar against the US - the AUDUSD pair being supported by its 50-day moving average-  ahead of Australian employment on Thursday. Despite hotter than expected US CPI, the pair is steady - also supported by the fundaments - metal prices have moved higher, with Copper and Iron Ore prices back at June 2022 levels. The next catalyst will be Thursday’s Australian employment data, if we see more than 20,000 jobs added, then we will be watching the resistance levels, at perhaps 0.7114 for the Aussie. On the downside, if Australian employment is weaker than expected, we will be watching for a potential pullback. Support for the AUDUSD is perhaps at 0.6879. But, over the medium-to-long term, should the USD continue to track lower, commodity prices stay higher and AU exports continue to grow to China, we see the Aussie dollar doing well.   -Click here to look at more stocks to watch across the metals sector this week. For our team's weekly look at markets, click here.  To listen to our global team's take on markets - tune into our Podcast. Source: Commonwealth Bank shares fall further from record highs on results miss, Tesla rip up despite hot CPI | Saxo Group (home.saxo)
Airbnb's Revenue Exceeded Estimates, Growing 24% y/y

Airbnb's Revenue Exceeded Estimates, Growing 24% y/y

Saxo Bank Saxo Bank 15.02.2023 09:29
Summary:  Markets gyrated wildly on yesterday’s US January CPI release, which showed higher than expected inflation on a year-on-year basis, which kept US treasury yields firm as a number of Fed members chimed in with hawkish comments. Elsewhere, has the consumption led Chinese recovery been oversold as many new consumer credit loans are being funnelled to pay down mortgages and on stock speculation rather than on consumption. What is our trading focus? US equities (US500.I and USNAS100.I): the dilemma in equities As we wrote in yesterday’s equity note in a response to the US January CPI report, the initial positive reaction in S&P 500 futures seemed weird and most likely reflected clearing of hedges and other derivatives positions. The market eventually settled on the interpretation that inflation remains stubbornly high, and the trajectory lower might take longer than expected. The dilemma for investors is that if the economy does not slip into a recession hen high inflation will remain and eventually push on bond yields and likely increase the equity risk premium leading to lower equity valuations. In the case the economy slips into a recession, equity valuations will come down to reflect lower growth and hit to margins. In any case, equities could have seen the best for now and investors might consider reducing equity exposure at these levels. S&P 500 futures bounced back during the session from the lows after the inflation report, but this morning the index futures trade lower again around the 4,127 level with the 4,100 level naturally being the key level to watch on the downside. Hong Kong’s Hang Seng (HIG3) slid and pared its 2023 gain to only 5% Hang Seng dropped 1.6% on Wednesday to levels last seen on 4 January and pared its 2023 gain to only 5%. The Hong Kong Monetary Authority intervened in the forex market for the first time since last November to sell USD1.9 billion against buying the Hong Kong dollar to cap the USDHKD from going about 7.85 the upper limit of the special administrative region’s link-exchange-rate regime. Selling was across the board. Baidu (09888) bucked the market decline and rallied over 5% supported by the somewhat return of the hype on the AI-generated content concept. In A-shares, CSI300 fell 0.6%. AI-generated content concept stocks advanced while domestic consumption, financial, healthcare, and non-ferrous metal names retreated. FX: Choppy dollar on CPI release, eventually settles higher as yen slips on yields rising The USD ended largely unchanged after gyrating wildly in the wake of the January CPI release and Fed comments (more below). After US treasury yields ended the day firmer all along the curve, the JPY was the weakest of USDJPY rallied and took out local resistance, trading above 133.00 into this morning. ay but ended unchanged. Elsewhere, AUDUSD was choppy but could not sustain a move above 0.70 yesterday and stumbled badly in late Asian trading. GBPUSD also gave up 1.22 despite the strong labour market data questioning the Bank of England’s pause signal, eyes on inflation due this morning (breaking news below on that). EURUSD has edged lower toward 1. 0700 overnight with the preliminary readings of the Eurozone Q4 GDP matching 0.1% QoQ and 1.9% YoY forecasts. Lagarde will be on the wires today. Crude oil (CLH3 & LCOJ3) prices remain pressured While reports of the US release of crude oil from its strategic reserves continued to nudge oil prices lower, a large stockpile build and inflation concerns also added to a weak demand outlook. WTI dropped below $79/barrel while Brent slid below $85. US private inventories, as reported by API, were up by 10.5 million barrels last week. A hot US CPI printed also raised concerns on the disinflation narrative taking hold, suggesting Fed may have to go for a higher terminal rate and pause there for some time, which raises concerns on the demand outlook. The slide in oil prices however got some support from the OPEC report, which hinted at a tighter oil market as it nudged up the demand estimate and trimmed its supply outlook. IEA monthly report will be on tap today. Gold (XAUUSD) pummelled further by yield rise post-US CPI release Gold dropped further yesterday, taking out the 1,850 level as US treasury yields closed the day firmer after wild gyrations across markets in the wake of the US CPI release and hawkish talk from Fed speakers (more below). The next important levels include the 1,829 level, which is the 38.2% retracement of the rally off the November lows, the 1,809 area which was broken on the way up, and then the 200-day moving average, currently coming in just above 1,775. Treasuries bear-flattened as yields on the 2-year jumped 10bps Growth in the U.S. CPI came at a slower pace but slowed less than what the consensus forecast expected. After choppy initial reactions, selling emerged in the front end, seeing the 2-year yield finish 10bps cheaper at 4.61%. The SOFR June-Dec 2023 spread narrowed by 9bps to -24bps from -33bps, signalling a further reduction in the bet of rate cuts in the second half of 2023. Hawkish-leaning comments from Fed’s Logan and Barkin, plus the departure of Fed Vice-chair Lael Brainard to join the Biden Administration as head of the National Economic Council added fuel to the higher-for-longer narrative. Brainard is perceived to be the “most persuasive policy dove” at the Fed, as the Wall Street Journal’s Nick Timiraos puts it. Yields on the 10-year rose 4bps to 3.74%, paring some of the rises in yield after a large block buying of nearly 20,000 contracts in the 10-year futures. Across the pond, yields on 2-year Gilts jumped 19bps on a hot employment report. What is going on? Worries that China’s consumer rebound will underwhelm as consumers not spending Bloomberg reports that China’s attempt to engineer a consumer-led recovery may be hindered as funds issued by banks for consumer credit are in many cases funnelled to unintended destinations, especially for mortgage prepayments, but also for speculation in stocks. The rates on the new bank lending are often lower than those for mortgages. UK Jan. CPI out this morning undershoots expectations UK headline CPI out this morning at –0.6% MoM and +10.1% YoY vs. -0.4%/+10.3% expected and 10.5% YoY in December. The core figure was 5.8% YoY vs. 6.2% expected and 6.3% in Dec. US CPI sent confusing signals to the markets The US January CPI came in at 0.5% MoM, in-line with estimates, while the core CPI was at 0.4% MoM also as expected. December prints were however revised higher with headline up to +0.1% MoM from -0.1% previously, and core up to 0.4% MoM from 0.3% previously. Markets were wobbly on the release, as the YoY prints came in higher-than-expected at 6.4% for the headline (vs. 6.2% exp) and 5.6% for the core (vs. 5.5% exp). However, a key measure that Powell has highlighted earlier – core services ex shelter – cooled to 0.3% in the month from 0.4% previously. Housing contributed the most to the monthly increase in the CPI, but it is a lagged measure. Meanwhile, disinflation in goods slowed as core goods prices rose +0.1% MoM vs. -0.1% MoM prior. Overall, there wasn’t enough evidence that core inflationary pressures are cooling enough to support calls for the Fed to pivot. Fed speakers send market pricing for Fed path higher A chorus of Fed speakers last night talked about the slow pace of disinflation, suggesting the Fed isn’t yet taking comfort in the inflation trends. NY Fed President Williams repeated there is "still a ways to go" to control inflation and the current levels of inflation are far too high. His views on the terminal rate also differed slightly, in December he suggested rates between 5.00-5.50% is reasonable before last week changing the view to 5.00-5.25%. However, he has now seemingly switched back his views of the higher upper bound for the FFR to 5.50% in wake of the January inflation data. Philly Fed’s Patrick Harker noted that how far above 5% the Fed needs to go depends on incoming data, and Tuesday's inflation report shows inflation is not moving down quickly. Dallas President Logan stressed that tightening policy too little is the top risk. All three are voters this year. Thomas Barkin, a non-voter said it was about as expected and there's going to be a lot more inertia and persistence to inflation than the Fed thought. However he was slightly more dovish saying that if inflation settles, they may not go as far on the terminal but he stressed data dependence. Markets are now pricing in a higher terminal rate of 5.26% in July, and one rate cut has also been driven out of this year’s pricing. Berkshire Hathaway cuts stake at TSMC Warren Buffett’s investment company cut 86% of its stake in TSMC in the previous quarter in a quick reversal that is unusual for the investor. As the rivalry in chips is heating up between the US and China, Berkshire Hathaway is likely finding it uncomfortable to hold exposure to physical manufacturing in a conflict area. Earnings recap: Airbnb, GlobalFoundries, NU Holdings Airbnb delivered Q4 revenue that beat estimates growing 24% y/y and Q4 adj. EBITDA was $506mn vs est. $435mn, but the Q1 outlook took the market by surprise with Q1 revenue guidance at $1.75-1.82bn vs est. $1.68bn as travel demand remains strong. GlobalFoundries beat slightly on revenue and earnings with Q1 revenue guidance also coming out higher than estimated suggesting strong demand for computer chips. NU Holdings, the parent company behind Nubank, reports Q4 total revenue of $1.45bn vs est. $1.28bn and the second straight quarter of positive net income as the Brazilian bank continues to navigate the credit turmoil in Latin America due to the recent interest rate shock. Commonwealth Bank, Australia’s largest lender, issues cautious outlook as its customers feel ‘significant strain’ CBA’s shares sank almost 6%, falling from their record highs to $103, while also dragging down the broader Australian share market (ASXSP200.I). Australia’s biggest bank and lender reported disappointing profit results and guided for a challenging year ahead - putting aside more capital for bad debts, as higher price pressures continue to hurt consumers, along with falling home prices. Its net interest margin came in at 2.1%, which was on par with expectations, but its cash profit missed expectations, despite rising 8.6% YoY to $5.15 billion (vs $5.17 billion Bloomberg consensus). The big Bank announced a $1 billion share buy-back and consensus also expects 2023 profits to hit another record, and for margins to improve. CBA shares gapped down, wiping out a month of gains. Read next: Walmart Plans To Close Offices, Ford Invests In Battery Factories | FXMAG.COM What are we watching next? US January Retail Sales, Housing Survey set for release today -With the January CPI data leaving observers none the wiser on the future course of inflation, the market may remain sensitive to incoming data that offers signs of whether economic activity remains robust. Today’s focus is the January US Retail Sales data, which is expected to rebound sharply from the weak December numbers, possibly in part on out-of-date seasonal weightings. Consensus expectations are for headline Retail Sales to have risen a chunky +2.2% month-on-month, with the core, ex Auto and Gas figure to show +0.9%. Elsewhere, the February NAHB Housing Market Index, one of the more leading indicators on the US housing market, is also up today, expected to show further marginal improvement after bottoming in December at 31 and surprisingly rebounding to 35 in January. Earnings to watch Today’s US earnings focus is Kraft Heinz and Biogen with analysts expecting revenue growth of 8% y/y in Q4 for Kraft Heinz as the consumer staples company’s revenue track inflation. Kraft Heinz is also expected to expand its EBITDA margin in Q4. The biotechnology sector is still under pressure from higher interest rates and slower pipeline of drugs, so the industry is relying on the old guard to delivering results. However, Biogen is expected to report a –11% y/y revenue growth in Q4 and lower EBITDA compared to a year ago. Wednesday: Commonwealth Bank of Australia, Fortesque Metals Group, Wesfarmers, Shopify, Suncor Energy, Nutrien, Barrick Gold, Kering, EDF, Tenaris, Glencore, Barclays, Heineken, Nibe Industrier, Cisco Systems, Kraft Heinz, AIG, Biogen, Trade Desk Thursday: Newcrest Mining, South 32, Airbus, Schneider Electric, Air Liquide, Pernod Ricard, Bridgestone, Standard Chartered, Repsol, Nestle, Applied Materials, Datadog, DoorDash Friday: Hermes International, Safran, Allianz, Mercedes-Benz, Uniper, Sika, Deere Economic calendar highlights for today (times GMT) 0900 – Poland Jan. CPI 1000 – Eurozone Dec. Industrial Production 1330 – US Feb. Empire Manufacturing 1330 – US Jan. Retail Sales 1330 – Canada Dec. Manufacturing Sales 1400 – ECB President Lagarde to speak 1415 – US Jan. Industrial Production & Capacity Utilization 1500 – US Feb. NAHB Housing Market Index 1530 – US DoE Weekly Crude Oil and Product Inventories 0030 – Australia Jan. Employment Change / Unemployment Rate Source: Financial Markets Today: Quick Take – February 14, 2023 | Saxo Group (home.saxo)
Assessing 'Significant Upside Risks to Inflation': Insights from FOMC Minutes

The Market Is Waiting For No Further Increases Of Rates By Fed

InstaForex Analysis InstaForex Analysis 15.02.2023 10:50
Two highly significant economic indicators for the US were released with their values in February. It consists of two components: inflation and the state of the labor market (nonfarm payrolls). In January, payrolls increased by 534 thousand while inflation fell by 0.1%. What do these data indicate, and what can we anticipate the Fed to do at its upcoming meetings? Fed will decline to raise rates? Many analysts were certain that the United States' cycle of interest rate increases was about to come to an end for the whole month of January. Some have even predicted that the Fed will decline to raise rates at its very first meeting in 2023. It became generally known that the market is waiting for no further increases when it was revealed that it had grown by 0.25%. The inflation figures, which showed a drop for six straight months, supported this. But the most recent report (for January), which was just made public, showed a drop of just 0.1% to 6.4% y/y. I think the disinflation process is slowing down, which could impact the FOMC members' outlook. One month is not particularly frightening. However, if, for instance, the February report also reveals a minor slowdown, this will be cause for concern. In this situation, the Fed might opt to tighten monetary policy more than just once or twice. Let me remind you that the Fed is essentially no longer dealing with the economic problem, and it was decided right away to sacrifice the economy in favor of price stability. In this situation, it is clear that the FOMC will keep trying everything in its power to get back to the target level. Labor Market  What about the labor market? The most recent nonfarm payroll data showed that it is in good shape. Additionally, the unemployment rate decreased to 3.4%, which is the lowest it has ever been in the previous 50 years. It appears that the Fed has an infinite range of options. It is not an issue if you need to increase the rate multiple times because of how the labor market and economy are currently functioning. In any case, the most recent GDP data was similarly positive. Additionally, the previous one. The economy is expanding once again, jobs are being created often, and unemployment is at a 50-year low. With such a bundle of introductory materials, you can increase the rate to at least 6%. Read next: Airbnb Posted A Profit Of $1.9. Billion, Air India And Largest Commercial Aircraft Deal In Aviation History| FXMAG.COM Wages and services will increase  Analysts are cautious individuals, though, and the majority currently anticipates two additional interest rate increases this year, according to a Reuters survey. Since wages and services will increase in line with the labor market, which will accelerate inflation once more, economists point out that a strong labor market only works against a decline in inflation. We can therefore conclude that the Fed would even profit if the labor market decreased significantly and the labor shortage decreased. Therefore, if nothing else, the rate may increase more frequently than anticipated. In 2023, lowering the rate is not an option. This factor may sustain the demand for US currency in the long run. I draw the conclusion that the upward trend section's development is finished based on the analysis. As a result, sales with targets close to the predicted level of 1.0350, or 261.8% Fibonacci, can now be taken into consideration. However, almost for the first time in recent weeks, we notice on the chart a picture that can be termed the start of a new downward trend segment. The likelihood of an even bigger complication in the upward trend segment still exists. GBP/USD The development of a downward trend section is implied by the wave pattern of the pound/dollar pair. Currently, sales with targets at the level of 1.1508, or 50.0% Fibonacci, might be taken into account. The peaks of waves e and b could be used to place a Stop Loss order. Wave c may take a shorter form, but I expect it to drop another 200-300 points for the time being.   Relevance up to 15:00 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/335103
Canada Expected to Report 6,400 Job Losses; BoC Contemplates Further Rate Hikes

In The United States The Demand For Warehouse Space Is Still Growing

Kamila Szypuła Kamila Szypuła 15.02.2023 11:26
Online shopping is becoming more and more popular. Sellers, in order to meet the expectations of consumers, look for the best possible solutions. It turns out that online sales require more storage space than brick-and-mortar sales, which is why the demand for warehouse space increases with the growth of online trade. In this article: US CPI and what does it mean for investors? Magazine dominance The largest ever bond issue by India's Housing Development Finance Corp US CPI and what does it mean for investors? After months of good news in the fight against inflation, the January report on the Consumer Price Index showed that progress in bringing down inflation is slower. Although it seems that the trend towards lower inflation is still on track For investors, more sticky inflation means interest rates can stay higher for longer. Increasingly, they expect the Fed to hold off on interest rate hikes until the end of the year, the latest inflation report, coupled with the Good Jobs Report released earlier this month, shows that hopes may be waning. The latest data changed expectations that the Fed will raise interest rates and hold them longer. January's CPI report is potentially difficult news for both bond and equity markets, which have increasingly bet that the Fed will soon stop raising interest rates and start cutting them well before the end of 2023. The January CPI report showed that progress in bringing inflation down is moving more slowly than many in the markets thought.For investors, stickier inflation means interest rates potentially staying higher for longer. Here's what to know. https://t.co/oMMcguky0C — Morningstar, Inc. (@MorningstarInc) February 14, 2023 Read next: Airbnb Posted A Profit Of $1.9. Billion, Air India And Largest Commercial Aircraft Deal In Aviation History| FXMAG.COM Magazine dominance According to CBRE, another nearly 190 million square feet of warehouse space was under construction in North America in 2020, with more than 43% of the buildings pre-leased. This demand is being driven by retailers who are expanding their e-commerce business during the online shopping boom and investing in faster delivery thanks to consumer expectations. Retailers are also securing more US warehouse space to cushion the impact of future supply chain shocks, such as those caused by the coronavirus pandemic. JLL estimates that by 2025, the US may need an additional 1 billion square feet of new industrial space to keep up with demand. This forces industrial developers to get creative and find more unconventional places. The U.S. is facing a warehouse shortage. What does this mean for American consumers and business people from Wall Street to Main Street? Watch the full video here: https://t.co/0frYl0vhY7 pic.twitter.com/lnTxxJroki — CNBC (@CNBC) February 15, 2023 The largest ever bond issue by India's Housing Development Finance Corp India's Housing Development Finance Corp (HDFC) aims to raise at least 50 billion rupees ($603.4 million) through the sale of 10-year bonds on Thursday. If the company raises the full amount, it will also be the largest-ever private debt issuance by an Indian company. Indian lender HDFC's biggest-ever bond issue to see strong demand - bankers https://t.co/3IH1i2XeZR pic.twitter.com/cgZ2ziNKzh — Reuters Business (@ReutersBiz) February 15, 2023
Saxo Bank Podcast: A Massive Collapse In Yields, Fed's Tightening Cycle And More

The Futures Market Is Giving A 94% Probability Of A 25bps Hike In March

Marek Petkovich Marek Petkovich 15.02.2023 11:35
Investors' deep faith in a recession in the U.S. economy and in the Fed's dovish reversal acted as a guiding star for the XAUUSD bulls in November–January. Gold rose over this period by 21%, but as soon as cracks began to appear in the slender theory, it immediately collapsed to monthly lows. Strong statistics on the U.S. labor market in January, and the unwillingness of inflation to slow down as quickly as investors would like, put a spoke in the wheels of the precious metal. Recession? It's hard to speculate about a recession when nonfarm payrolls are up by 517k per month, unemployment is falling to its lowest level since 1969, and average wages are up 4.6%, higher than 3.3% before the COVID-19 pandemic. Those who have been burying the U.S. economy are now struggling to justify themselves. Goldman Sachs has lowered the probability of a recession over the next 12 months to 25%. The market says that instead of a soft or hard landing, the plane of the U.S. economy is starting to gain altitude. Under such conditions, the acceleration of January consumer prices to 0.5% and core inflation to 0.4% MoM looks logical. When domestic demand is high, prices have room to rise. They are not slowing down year-on-year the way investors would like. And the longer the path of inflation to the 2% target, the higher the likelihood of new local highs or bumps that will make the Fed nervous. How could it not, given the experience of the 1970s, when the central bank blinked, believing that the job was done and victory was achieved. The result is a new spike in CPI, a resumption of the cycle of monetary tightening, and another recession. Dynamics of inflation in the United States The Fed does not want to step on the old rake, so it does not take decisiveness now. New York Fed President John Williams does not rule out raising the federal funds rate to 5.5%. The futures market is giving a 94% probability of a 25bps hike in March, 80% in May and 52% in June. If these projections are confirmed, the USD index will continue to rise, and XAUUSD quotes will fall. Read next: In The United States The Demand For Warehouse Space Is Still Growing| FXMAG.COM Fed Vice President Lael Brainard's move to the White House economics team is also seen as bullish for the US dollar. She had a less hawkish view than Fed Chairman Jerome Powell and that could affect the debate inside the FOMC. Thus, the withdrawal of fears about an imminent recession and the shattered illusions about a dovish reversal by the Fed in 2023 deprived gold of its main trump cards. Against the background of the strengthening dollar and rising U.S. Treasury bond yields, the development of a pullback to the upward trend in the precious metal looks very likely. Technical Outlook Technically, on the daily chart of gold, the implementation of the Shark harmonic trading reversal pattern continues. The first of its two targets at 78.6% and 88.6% corresponds to $1775 per ounce. This gives grounds to sell the precious metal on the market as long as its quotes are below the $1,850 pivot point.   Relevance up to 08:00 2023-02-20 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/335165
USD/JPY Pair Has Rebounded Firmly From The Upward-Sloping Trendline

USD/JPY Is Above 133.30, GBP/USD Droped Form $1.21 to $1.20, The Aussie Pair Is Trading Below $0.69

Kamila Szypuła Kamila Szypuła 15.02.2023 12:21
The dollar rose on Wednesday amid stubbornly high US inflation data and sharp interest rate talks from Federal Reserve officials. Year on year prices increased (CPI) by 6.4%. This is down from 6.5% in December, but above economists' expectations of 6.2%. The Core CPI, which excludes volatile food and energy prices, rose 0.4% as expected. More importantly, the underlying details of the report revealed that the core services' inflation, which the Fed pays close attention to, stood at 7.2% on a yearly basis. These figures showed markets that the disinflation has not picked up any steam in January and reminded that the Federal Reserve is unlikely to entertain the idea of a policy pivot. USD/JPY Kazuo Ueda, the Japanese government's nominee to be the next governor of the Bank of Japan (BoJ), will inherit a difficult set of problems when he takes over from incumbent Haruhiko Kuroda on April 8. Japanese inflation y/y reached 4% in December, the highest level since January 1991. The new central banker will have to decide when and by how much the BoJ needs to start reducing its very loose monetary policy in order to keep inflation in check while allowing enough monetary slack to allow for economic growth. As other countries have recently learned, once inflation takes root, it becomes increasingly difficult to bring it down. The yen pair after yesterday closed trading near 133.00 today in the first hours of trading USD/JPY started a decline towards 132.55. The drop in the first hours of trading was not sustained and the pair rose above 133.00. At the time of writing, the yen pair is trading at 133.31. EUR/USD The EUR/USD pair started the day trading above 1.0740 but fell towards 1.0710 in the following hours. EUR/USD gained momentum in the European session and traded near 1.0730 but lost momentum and is now trading around 1.0715. According to ING, remarks by European Central Bank President Christine Lagarde later probably won't move the euro materially. EUR/USD pair should remain driven by dollar moves and faces near-term "downside risks" as the market raised its U.S. interest rate expectations following Tuesday's higher-than-expected inflation data. Read next: In The United States The Demand For Warehouse Space Is Still Growing| FXMAG.COM GBP/USD The British pound fell this morning after the UK CPI. The report showed weaker than expected inflation data, both y/y and m/m, concerning headline and core inflation, respectively. The UK's Office for National Statistics reported on Wednesday that the Consumer Price Index declined 0.6% on a monthly basis in January, causing the annual rate to retreat to 10.1% from 10.5%. The Core CPI also edged lower to 5.8% from 6.3% on a yearly basis, coming in lower than the market expectation of 6.2%. Although it's too early to say how these figures could influence the Bank of England's (BoE) policy outlook, the reaction suggests that markets have scaled back hawkish BoE bets. The Cable pair started trading at a high of 1.2175 on Wednesday, but in the following hours it started to fall initially to 1.2150 and then to 1.2100. Currently, GBP/USD is below 1.2100, at 1.2076. AUD/USD The Aussie pair is just below 0.6900. The AUD/USD pair is under strong selling pressure on Wednesday and is pulling further back from its over-week high. The RBA's latest monetary policy statement showed the central bank revised its inflation forecast for this year higher, saying price pressures were spreading to services and wages. The communiqué suggests two more interest rate hikes in the coming months and possibly a third if inflation remains high. Source: investing.com, finance.yahoo.com
Robert Kiyosaki Keeps Calling For The Collapse Of Fiat Money

Robert Kiyosaki Keeps Calling For The Collapse Of Fiat Money

Paolo Greco Paolo Greco 15.02.2023 10:54
Fed, ECB, and BA continue to tighten monetary policy It is even more encouraging to note on the 4-hour TF that bitcoin came very close to the level of $24,350 but was unable to pass it and did not even make a direct attempt to move higher. Although there was no obvious rebound from this point, the cryptocurrency may continue to put its stability to the test. However, we think that it is much more likely that it will fall below $18,500 (at least). This is supported by several global variables at once. First off, as the Fed, ECB, and BA continue to tighten monetary policy, safe assets become more alluring. Second, the QT (quantitative tightening) policy is causing the US money supply to continue to contract, which lowers the amount of potential investments. Remember that throughout the pandemic, Bitcoin was rapidly increasing, not because of the disease itself, but rather because numerous central banks around the world were actively boosting their economies by releasing hundreds of millions or billions of dollars in new money. Since there was constantly more money in the economy, it was obvious that it needed to be used in some way. Some of them chose the market for cryptocurrencies. The situation is entirely different right now. Robert Kiyosaki At the same time, well-known publicist and businessman Robert Kiyosaki keeps calling for the collapse of fiat money, a major global economic catastrophe, and the collapse of the global financial system. The world's central banks are still printing billions of dollars, and their currencies will keep losing value, according to Kiyosaki. Silver will cost $500, gold will rise to $5,000, and bitcoin will reach $500,000. In addition, Kiyosaki predicted that sooner or later, people will stop believing in the dollar and turn to bitcoin as "a currency for people." Remember that the bestselling author of "Rich Dad, Poor Dad" has already predicted the collapse of the world financial system. Both the previous year and this year, he made the same prediction. He does not recall the QT program for some reason, and he is uninterested in the fact that despite bitcoin's existence for 15 years, it has not yet been used as a form of payment by individuals. We think that this is just another attempt to "pump" Bitcoin to make it grow artificially. Remember that many experts who do not personally own bitcoin still think of it as a very dangerous and volatile investing tool. Cryptocurrency owners themselves will undoubtedly always talk about how much it will be worth in the near future. Read next: Airbnb Posted A Profit Of $1.9. Billion, Air India And Largest Commercial Aircraft Deal In Aviation History| FXMAG.COM Bitcoin The bitcoin cryptocurrency has distanced itself from recent highs on a 4-hour time frame by roughly $3,000 and so far does not appear particularly motivated to start growing again. The inflation report released today may have a significant influence on cryptocurrencies. Given that two inflation reports cannot double the value of bitcoin, we believe it will continue to fall. The most recent growth cycle appears to have been an unsuccessful attempt to accelerate growth. The bulls were unable to surpass the crucial $24,350 mark.   Relevance up to 16:00 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/335109
Hawkish comments and a decline in continuing unemployment claims below 1.8 mln boosted chances of a June rate hike rose rose to 37%

The Fed Chairman's Salary Is Closer To That Of Third-Year Analysts

Jakub Novak Jakub Novak 15.02.2023 13:29
A fairly intriguing report was released yesterday that included details about the earnings of Jerome Powell, the chairman of the Federal Reserve System, as speculators tried to predict the Fed's upcoming moves. Additionally, although he can "move the markets," his earnings on Wall Street are not as high as those of other members of the "party." More recently, in a conversation with the co-founder of Carlyle Group Inc., David Rubenstein, Powell disclosed specifics of his annual compensation. This sparked a flurry of questions on social media platforms about why the head of the US central bank gets paid so little. Despite this, Powell claimed that he thought his annual remuneration of roughly $190,000 was appropriate. However, many people disagreed, claiming that his pay did not adequately represent his position as head of the central bank. Powell's income Everyone is listening intently to what Jerome Powell has to say. Even though what he says has the power to swing the markets in any direction, he makes about as much money as a rookie analyst who has just graduated from college. Powell's income falls within the usual basic salary range of investment bank personnel, who get between $150,000 and $200,000. This is according to Wall Street Oasis, a website that records financial payouts. Also take note that bonuses are not included in the source of income for Wall Street employees' wages. Employees' pocket incentives typically equal roughly 50% of their yearly salaries. This varies considerably by year and by organization, though, as certain bonus payments can equal 100% of wages. Congress does, however, have financial restrictions on the Fed chairman. Salary According to the article, the Fed chairman's salary is closer to that of third-year analysts, who earn around $194,000 on average. Although Powell's decisions are mirrored in global markets, as I mentioned above, Congress determines his pay. Appointees to the federal government are categorized based on the levels that influence their salary. The Fed Chairman and the Finance Minister, two senior political figures with the highest salaries, were limited to earning no more than $226,300 in 2017. Powell's pay has been frozen since 2014, like that of other senior officials. For instance, specialists in this field claim that Powell earns substantially less than government employees. For instance, President Joe Biden is paid a salary of $400,000. EUR/USD Regarding the technical picture for the EUR/USD, pressure on the pair increased again following the US inflation report. Staying over 1.0710 will cause the trading instrument to surge to the 1.0760 level and stop the bear market. Above this point, you can easily reach 1.0800 and update to 1.0840 in the near future. Only the collapse of support at 1.0710 will put more pressure on the pair and drive EUR/USD to 1.0670, with the possibility of dropping to a minimum of 1.0640 if the trading instrument declines. GBP/USD Regarding the technical analysis of the GBP/USD, the bulls have not been able to regain the advantage. They still have to surpass 1.2180. Only if this resistance fails will there be a greater chance of a rebound to the area of 1.2260, following which we will be able to discuss a more abrupt movement of the pound up to the area of 1.2320. After the bears take control of 1.2115, from which point the bulls will likely also act more aggressively, it is possible to discuss the return of pressure on the trading instrument. As a result, it is difficult to pass this level. When 1.2115 is broken, the bulls' positions are hit, and GBP/USD is likely to fall back to 1.2070 with a possible increase to 1.2030.   Relevance up to 10:00 2023-02-16 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/335183
All Eyes On Capitol Hill, Jerome Powell Will Appear Before The Senate Banking Committee

The Fed Should Hike A Couple Of Times More In The First Half Of 2023

Torben Melsted Torben Melsted 16.02.2023 08:07
We have seen the inflation move slightly lower in the US and we know that the FED would like to see the inflation hovering at about 2%. That means the forceful hiking of the interest rates seems to be doing their job, but it's likely not enough yet and we should expect the FED to hike a couple of times more in the first half of 2023. That is at least what the market is telling us as the 10-year US Treasury yield moved above the resistance line near 3.75% and we expect the US 10Y yield to continue higher towards the next target at 4.86% and possibly even closer to 5.81 before peaking in wave 5 and setting the stage for a larger correction. However, for now, we should stay focused towards the upside as wave 5 progresses higher towards 4.86% and maybe even higher.   This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/312951
Rates Spark: Bracing for more

Rates Spark: Crucial levels ahead

ING Economics ING Economics 16.02.2023 08:50
Better data has boosted hawkish Federal Reserve and European Central Bank expectations. But this time, the back end of the curve has been lifted to a greater degree. In Bunds especially, the 10Y yield is now approaching the upper end of its recent range Data steepens the curves from the back end Rates were pressured higher on the back of the much better-than-expected retail sales data. A potential weather-related bounce in the data for January had been flagged though, and there is a decent risk that we will see some reversal again next month. For now, as noted in the chart below, money markets are seeing the SOFR rate above 5% through the end of this year for the first time. The notion of higher rates being maintained for longer is gaining traction. The notion of higher rates being maintained for longer is gaining traction More notably this time round, it's the back end of the curve leading rates higher which also helped the Treasury curve pull back from its record inversion. The 10Y UST yield is now back above 3.8% and thus not far below the local high it had ended 2022 on. That itself is still a decent stretch from the October high at over 4.30%, giving yields some room for further upside. Of course, the size of the surprise in the data helps to explain the larger market reaction, but we think it speaks more to overall positioning in rates going into the past week(s) and also the stretched valuations in terms of the curve, which we have also highlighted over the past days. Note for instance that equity markets ended the day higher, dismissing the hawkish implications that the resilience shown in the data may have for the Fed.  Hawkish repricing pushes Fed and ECB expectations to new highs Source: Refinitiv, ING The ECB's hawkish message has finally sunk in When ECB President Christine Lagarde addressed EU lawmakers yesterday she reiterated the call for another 50bp hike in March with underlying inflation still too high and price pressures remaining strong. But again she has left it to other ECB officials to flesh out any guidance beyond the next meeting. Following the last press conference, the central bank's hawks have been more vocal, and also quite successful at realigning markets more to their views. The terminal rate has risen ... and expectations of subsequent policy easing have become less pronounced The terminal rate has risen to 3.56% from a pre-meeting level of 3.44%, and the market’s expectations of subsequent policy easing have become less pronounced, down to below 90bp from the interest rate peak through the end of 2024. Financial conditions as measured by real rates are at the upper end of their recent range since December. Our economists do see a possible scenario where, after March, the ECB continues to hike meeting-by-meeting by 25bp through June - this would bring the deposit facility rate to 3.5%. The market has moved even beyond that, but of course developments in the US have come to help the hawks and we doubt they would have achieved this feat on their own. Today’s slate of public appearances of ECB officials has a more dovish lean with Fabio Panetta and the ECB’s chief economist Philip Lane scheduled to speak. With the Bundesbank’s Joachim Nagel and Ireland’s Gabriel Makhlouf, there are also hawkish voices again, but we have heard from both already more recently. In any case, we have the feeling that markets are more inclined to listen to data these days. Read next: USD/JPY Is Above 133.30, GBP/USD Droped Form $1.21 to $1.20, The Aussie Pair Is Trading Below $0.69| FXMAG.COM 10Y Bunds are approaching a crucial level Source: Refinitiv, ING Today's events and market view Market sentiment and positioning have favoured yield increases. But data remains crucial to carry the sell-off further, especially as we are approaching the upper end of recent ranges. Note that last night's 20Y UST auction saw good demand with the 20Y yield having briefly topped 4% just before. And in Europe, the 10Y Bund yield is now at 2.47%, not far from the (intra-day) highs of last October (2.53%) and December (2.57%) which stake out the upper end for Bund yields this cycle so far.  Today's data releases remain US-focused. Producer prices are seen decelerating further on an annualised basis, not standing in the way of the disinflation narrative. But in the wake of the strong payrolls data the focus will likely fall on the initial jobless claims to gauge the state of the jobs market. A heightened sensitivity to potentially changing narratives in other sectors of the economy may give more weight to housing data including today's housing starts after the larger bounce in the NAHB homebuilders index yesterday Rounding off the data is a busy slate of central bank speakers. From the Fed, only Loretta Mester speaks during the European session, leaving the main focus on ECB officials, including the prominent doves Fabio Panetta and Philip Lane.   In terms of supply, we will see medium-term bond auctions from France out to the 7Y maturity for up to €11.5bn plus linkers and Spain auctions up to €6.5bn in bonds out to the 10Y. The highlight will be the sale of a new 30Y bond from Italy via syndication.  Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Riksbank's Potential Rate Hike Amid Economic Challenges: Analysis and Outlook

The Aussie Unemployment Rate Rose, China Is Warning Of Retaliation Against US Entities Involved In The Shooting Of The Balloon

Saxo Bank Saxo Bank 16.02.2023 09:18
Summary:  The US equity market put in a solid advance yesterday even as treasury yields remain near recent highs. Sentiment in Asia recovered smartly overnight after a stumble yesterday. In FX, yesterday's sharp USD advance paused, while in commodities, oil is pushing back higher near important resistance levels and gold is nearing major support after a drop of more than a hundred dollars per ounce in just two weeks. What is our trading focus? US equities (US500.I and USNAS100.I): animal spirits remain strong Strong US retail sales figures for January and the NAHB Housing Market Index both showed yesterday that the US economy is humming along despite the interest rate shock. Equities shrugged off the implications for further rate hikes and potentially higher long-term interest rates and rallied with S&P 500 futures closed the session at the highest close price in six sessions above the 4,150 level. The uptrend remains intact at this point with the 4,200 level still in play. The US 10-year yield hit 3.8% on the close yesterday. Hong Kong’s Hang Seng (HIG3) and China’s CSI300 (03188:xhkg) in choppy session Early in China’s equity session, the Hang Seng Index and CSI300 gained sharply after a strong US session, but sentiment rolled over badly into late trading, with the Hange Seng approximately flat and CSI 300 down about 1% as of this writing. Qiushi Magazine, a mouthpiece of the Chinese Communist Party, published an excerpt of President Xi’s speech delivered in December, in which the Chinese leader highlighted insufficient aggregate demand as the paramount challenge so expanding consumption is a top policy priority. FX: GBP weakest after soft CPI, JPY sharply lower on yield rise yesterday, DXY on backfoot overnight AUDUSD fell sharply yesterday and stumbled again overnight on the release of weak Australian jobs numbers, but bounced on a recovery in sentiment in China and bounce in metals prices, also keeping away from the pivot low of 0.6856 of earlier this month. Elsewhere, sterling weakness from yesterday’s soft UK CPI release lingered. EURGBP jumped back higher yesterday and GBPUSD even tested below 1.2000 briefly before recovering very slightly. The focus there is on the 1.1941 low and 200-day moving average just above that level. USDJPY surged further yesterday on a fresh rise in global yields and as the Bank of Japan’s rear-guard actions to defend its yield curve control policy mean the bank is effectively doing aggressive QE even as markets anticipated a coming shift away from this policy. Focus today on US housing-related data after the Feb. Crude oil (CLH3 & LCOJ3) rebounds amid China optimism and IEA’s bullish demand outlook A series of signals from US CPI reported on Tuesday to retail sales print yesterday suggest more ammunition for the Fed to raise rates. This has boosted the market pricing of the Fed terminal rate, and dollar strength is back in focus, weighing on commodity prices. Crude oil prices extended their losses after US oil inventories rose 16.3mn barrels to 471mn barrels against expectations of 1.17mn suggesting demand concerns. But reports of passenger loads picking up at China’s top three airlines added optimism overnight. WTI prices rose back above $79/barrel while Brent was above $85. The International Energy Agency (IEA) also raised its demand growth estimates by 0.1mb/d to 2mb/d for 2023. Gold (XAUUSD) close to testing key support Gold prices fell further to $1830/oz as US yields surged higher after the January CPI print, and a hawkish tilt was also seen in Fed commentaries. Last night, US retail sales was also hot suggesting more room for the Fed to hike rates, which boosted the USD. The next important levels include the 1,829 level, which is the 38.2% retracement of the rally off the November lows, the 1,809 area which was broken on the way up, and then the 200-day moving average, currently coming in just above 1,775. Pressure on gold miners to do more deals is rising, despite Newcrest’s rejection of the takeover bid from the world’s biggest gold miner Newmont. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) rose further on solid retail sales Yields on the 10-year Treasury notes jumped 6bps to 3.8% following stronger-than-expected 3% headline retail sales and 1.7% control group (ex-autos, gasoline, and building materials) prints and a rebound in the Empire State Manufacturing Index to -5.8 from -32.9. While the 20-year Treasury bond auction received decent demand with a bid/cover ratio at 2.54, new issuance of around USD 30 billion from corporate, including USD 24 billion from Amgen weighed on the market. Yields on the 2-year climbed 2bps to 4.63%, bringing the 2-10 curve 5bps less inverted to -83bps. Read next: USD/JPY Is Above 133.30, GBP/USD Droped Form $1.21 to $1.20, The Aussie Pair Is Trading Below $0.69| FXMAG.COM What is going on? US retail sales jump far more than expected January retail sales in the US jumped higher by the most in almost two years, in another signal that the US consumer demand is holding up strongly despite high inflation and interest rate pressures. Retail sales expanded 3.0% month-on-month after a decline of 1.1% in December and above the 1.8% expected. Strength was broad-based, with ex-gas/autos rising 2.6% from the prior -0.7%. The control group, which is a useful gauge of consumer spending data, rose 1.7%, also beating expectations of 0.8% and above the prior -0.7%. Factory output also beat estimates, rising 1.0%, although industrial production was flat vs. +0.5% gains expected, mostly weighed by reduced heating demand in January. European earnings: Airbus and Schneider Electric Airbus has had a relatively good year as aviation demand is coming back after the pandemic with fiscal year free cash flow beating estimates and dividends per share set to €1.80 vs est. €1.73. Q4 revenue is €20.6bn vs est. €20bn. Airbus is disappointing a but on its FY23 adjusted EBIT outlook relative to estimates and delays its A320 output target of 75/month to 2026. Schneider Electric reports Q4 revenue that beats estimates driven by strong organic revenue growth and it reports FY23 revenue growth of 9-11% y/y and adjusted EBITA margin up 50-80 basis points. Shopify outlook misses estimates The e-commerce platform reported Q4 revenue of €1.73bn vs est. €1.65bn with gross merchandise volume also beating estimates. The company expects the gross margin to expand in Q1 but the Q1 revenue outlook of high-teen growth rate compared to 20% expected by analysts sent shares lower in extended trading. Geopolitics keeps Saxo’s Defense basket in focus Russia said its troops had broken through two fortified lines of Ukrainian defenses on the eastern front, as the one-year mark of the invasion approaches. The advances come as Western allies announced more military aid for Kyiv including artillery rounds. Meanwhile, China is warning of retaliation against US entities involved in the shooting of the balloon. Biden is considering a public address on the downing of an alleged Chinese spy balloon and other unidentified objects. With geopolitical tensions on the rise, Saxo’s equity theme basket on Defense remains worth a consideration. There were also reports that Germany is poised to increase its defense budget by as much as €10 billion next years. Weak Australian jobs report The Aussie unemployment rate rose to 3.7% in January (vs the market expecting a steady rate of 3.6%), while Australian jobs surprisingly fell 11,5k versus market expectations for +20k, and full-time employment actually fell –43k. Yesterday Australia’s biggest bank Commonwealth Bank also warned that its customers are experiencing ‘significant strain’, amid higher price pressures. What are we watching next? US data, including US Housing Related Data after strong NAHB Housing Market Survey. Yesterday, the US February NAHB Housing Market survey surged 7 points from its January reading, suggesting a fading impact from the mortgage interest rate shock last year. The reading was a 5-month high. Today we get further US housing-related data, including the January Housing Starts and Building Permits figures. We’ll also see the latest weekly jobless claims after a string of four readings below 200k. Earnings to watch Today’s US earnings focus is Applied Materials and DoorDash with analysts expecting Applied Materials to deliver revenue growth of 7% y/y and EPS of $1.94 down 1% y/y. DoorDash, which has been part of our bubble basket, is expected to revenue Q4 revenue growth of 36% and EBITDA of $109mn which seems quite unrealistic given EBITDA was $-147mn a quarter ago. Thursday: Newcrest Mining, South 32, Airbus, Schneider Electric, Air Liquide, Pernod Ricard, Bridgestone, Standard Chartered, Repsol, Nestle, Applied Materials, Datadog, DoorDash Friday: Hermes International, Safran, Allianz, Mercedes-Benz, Uniper, Sika, Deere Economic calendar highlights for today (times GMT) 1300 – ECB's Nagel to speak 1330 – US Jan. PPI 1330 – US Housing Starts and Building Permits 1330 – US Weekly Initial Jobless Claims 1330 – US Philadelphia Fed Business Outlook 1330 – US New York Fed Services Business Activity 1345 – US Fed’s Mester (non-voter) to speak 1500 – ECB Chief Economist Lane to speak 1530 – US Weekly Natural Gas Storage Change 1600 – Canada Bank of Canada Governor Macklem before Parliament 1700 – UK Bank of England Chief Economist Huw Pill to speak 1700 – Norway Norges Bank Governor Wolden Bach to deliver annual address 1830 – US Fed’s Bullard (non-voter) to speak 2230 – Australia RBA Governor Lowe to testify before House   Source: Financial Markets Today: Quick Take – February 16, 2023 | Saxo Group (home.saxo)
US Inflation Eases, but Fed's Influence Remains Crucial

The US Jobs Data Remains Strong, All Eyes On US PPI Report

Swissquote Bank Swissquote Bank 16.02.2023 10:22
Do you remember we were predicting a recession, that was supposed to hit the US and the global economy at the start of the year? A recession that would hit equities and boost bonds? Well, forget about all that, it’s not happening. US data The US jobs data remains strong, inflation continues coming lower but the downtrend gives signs of slowing. And yesterday’s US retail sales data came as a cherry on top, with an eye-popping 3% rise in retail sales last month; it was the biggest jump in the past two years. Stocks Market The S&P500 ended the session 0.28% higher, while Nasdaq 100 stocks added almost 0.80%. Treasury yields pushed higher, however, on expectation that the Federal Reserve (Fed) will continue its rate hike policy – and quite aggressively, given that the rate hikes don’t seem to do any harm to the economy. Deutsche Bank revised its terminal Fed rate from 5.1% to 5.6%. Citi believes that the Fed will end up pushing the rates all the way up to 6%. Read next: Apple Is Facing Multiple Lawsuits And Enforcement Actions| FXMAG.COM US PPI Today, the US will reveal the latest producer price inflation data. Producer prices are expected to have ticked higher by 0.4% m-o-m in January, versus a 0.4% retreat printed last month. On a yearly basis, the PPI index is expected to have slowed from 6.2% to 5.4%. Normally, I would expect a positive PPI surprise – meaning stronger inflation figures - to impact the market mood negatively, but at this point, I am not even sure that it matters. Watch the full episode to find out more! 0:00 Intro 0:18 What recession?! 2:36 Market update 3:50 US PPI is out today! 4:37 USD up, EUR, JPY and XAU down 7:18 Crude oil rebounds from 50-DMA 8:34 Glencore’s record profit fails to convince but… Ipek Ozkardeskaya  Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #strong #economic #data #equity #risk #rally #USD #EUR #JPY #XAU #Crude #Oil #inflation #data #Fed #expectations #Glencore #energy #stocks #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH  
Any Upside Momentum For AUD/USD Is Likely To Remain Capped At Monday’s High

Analysis Of The Aussie Pair, Lowe Is Insistent That The Number One Priority Is To Curb Inflation

Kenny Fisher Kenny Fisher 16.02.2023 12:34
It has been a busy session for the Australian dollar, which started the day with losses but has recovered. In European trade, AUD/USD is trading at 0.6919, up 0.23%. Mixed Australian data Australia delivered some mixed data earlier today. The headline Employment Change for January surprised on the downside at -11,500 after -14,600 prior, well below the forecast of 20,000. There was better news on the inflation front, as Consumer Inflation Expectations for February fell to 5.1%, down from 5.6% expected and prior. The Australian dollar initially declined after these releases but has recovered and eked out small gains. The Aussie had a miserable outing on Wednesday, falling 1.1%. This was courtesy of hawkish remarks from RBA Governor Lowe, which unnerved investors. Lowe appeared before a parliamentary committee and confirmed that further rate hikes are on the way. The central bank has tightened sharply but this has not brought down inflation. In December, CPI hit 7.8%, the highest level since 1990, which Lowe admitted was “way too high”. The double whammy of rising rates and red-hot inflation is squeezing households and businesses, but Lowe is insistent that the number one priority is to curb inflation and avoid inflation expectations from becoming entrenched. US retail sales surprised with a huge 3% gain in December, the largest gain since January 2022. This rosy reading comes on the heels of an inflation release that was higher than expected. These strong numbers should have been bullish for the US dollar, as the Fed will likely raise rates even higher in order to put a brake on the strong economy. Investors, however, shrugged off the inflation and retail sales data and sent equities higher on Wednesday with a “bad news is good news” view. With risk appetite still intact, the US dollar hasn’t been able to capitalize on the inflation and retail sales releases. Read next: USD/JPY Is Trading Close To 134.00, EUR/USD Is Remaining Above $1.07| FXMAG.COM AUD/USD Technical AUD/USD is testing resistance at 0.6929. Above, there is resistance at 0.7001 0.6846 and 0.6774 and providing support This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
The Commodities Feed: Brent Breaks Above $80, Energy Market Dynamics and Trade Data Analysis

Recent Data Form US Are Putting Pressure On Gold

InstaForex Analysis InstaForex Analysis 16.02.2023 13:23
Gold continues to trade under pressure, declining after the January CPI report released Tuesday showed that year-over-year inflation fell to 6.4%. The CPI report for January was lower by 6.4% than the previous month. However, analysts had expected a larger decline, expecting Tuesday's report to be between 6.2% and 6.3%. When combined with last week's unexpected employment report, the collective information will allow the Federal Reserve to maintain its aggressive stance, which means further interest rate hikes and that rates will remain elevated for much longer. Chairman Powell was determined to maintain higher rates throughout the calendar year. Market participants are beginning to recognize the high likelihood that the Fed will cut rates to 5.1%–5.2% and keep them high without cutting rates in 2023. While gold has been trading under pressure, there is a bullish undertone that could come into play at some point. The dollar is gaining strength against other currencies, but for Americans, the dollar's purchasing power continues to decline, a byproduct of higher inflation. The national debt continues to grow, and the United States has reached its debt ceiling. Consequently, the government will have to raise the debt ceiling, which means that the United States will increase its national debt to a higher level. Another factor putting pressure on gold is recent data that suggests the Federal Reserve may change its current target rate from 5.1% to 6% to accelerate the process of reducing inflation. Essentially, gold benefits from higher inflation, and higher interest rates hurt. This is because gold does not provide the yield that makes U.S. Treasuries and other interest-bearing assets more profitable. Although the current fundamentals have had a strong impact, which led to a decrease in the price of gold, technical factors are also present. Analysts believe that although the price may drop lower, at the moment, gold is oversold   Relevance up to 09:00 2023-02-17 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/335303
Asia Morning Bites 13 March 2023

Asia Morning Bites - 17.02.2023

ING Economics ING Economics 17.02.2023 08:27
The Fed's Bullard floats the idea of a 50bp rate hike in March - markets are not yet convinced, but it is worth watching this space.  In Asia, Singapore's NODX contracted for a 4th month while Thailand reports 4Q GDP today.   Source: shutterstock Macro outlook Global Markets: Strong January US PPI data probably didn’t help market sentiment to recover yesterday, and US stocks had another down day. The S&P 500 dropped 1.38% while the NASDAQ was down 1.78%. Chinese stocks were mixed. The CSI 300 dropped 0.73% but the Hang Seng Index rose 0.84%. US Treasury yields have slowed their rise. 2Y yields were up less than a basis point, though there was another 5.6bp rise in the 10Y yield taking it to 3.86%, within spitting distance of 3.90%, which a number of market commentators have said is a target for re-entering long bond positions. This hasn’t yet become a consensus view, but it was interesting yesterday to see the St Louis Fed’s James Bullard raising the prospect of returning to 50bp hikes at the next Fed meeting. This was also supported by Loretta Mester. Barkin and Bowman speak later today. The USD remains pretty strong not surprisingly. EURUSD has dropped to 1.0664. There was a more moderate view expressed by the ECB’s Lane, who noted that much of the effect of earlier tightening was still in the pipeline. While Stournaras said that the updated economic projections due in March should decide the magnitude of the next rate increase. The AUD was also weak, not helped by yesterday’s poor labour data. Cable also slid back below 1.20 but the JPY was fairly steady at just over 1.34. Yesterday was quite mixed for other Asian FX. There were small gains from the PHP, IDR, and INR, but currencies were flat or registered small losses elsewhere. G-7 Macro:  US PPI data came in stronger than expected in January. Final demand PPI rose 0.7% MoM, against expectations for a 0.4% MoM rise. There were above-consensus rises for core measures too. Somewhat curiously, the number of housing starts declined in January, which does put some strain on the weather explanation for some of the other data flow recently, and so we have to be alert to the possibility that there is more to the recent strong data than we have been thinking up until now. This is quite a worry. There isn’t a lot on the G-7 calendar today. Singapore: Singapore reported January non-oil domestic exports (NODX) today.  NODX slid for a 4th straight month, declining 25%YoY as demand faded sharply.  Shipments of electronics fell 26.8%YoY while petrochemical exports dropped 26.6%.  Exports to major trading partners like China (-41.1%YoY) and the US (-31.5%YoY) contracted although exports to the European Union managed to jump 21.4%.   The reopening of China from strict lockdown measures could help revive demand in the coming months but for now, we see a couple more months of contraction for NODX.      Read next: USD/JPY Is Trading Close To 134.00, EUR/USD Is Remaining Above $1.07| FXMAG.COM What to look out for: Fed speakers on deck Singapore NODX (17 February) Thailand GDP (17 February) US import prices (17 February) Fed’s Barkin and Bowman speak (17 February) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Rates Spark: Riding the hawkish wave while it lasts

Rates Spark: Riding the hawkish wave while it lasts

ING Economics ING Economics 17.02.2023 08:29
Momentum may wane now that key levels are being approached and supply as a compounding factor is slowing. But fundamentally there is little in the upcoming week standing against further hawkish repricing aside from potentially dovish vibes out of the Federal Open Market Committee minutes     Data remains key, but central bank comments help Markets do appear a tad selective, jumping on data that fits ongoing hawkish repricing in rates markets such as yesterday’s higher-than-expected PPI, largely dismissing initial jobless claims creeping higher and regional surveys disappointing. It does provide fertile ground for hawkish Fed comments such as those by James Bullard, who said that he would not rule out supporting a 50bp hike next month with the aim of eventually bringing the Fed (mid)rate to 5.375% from 4.625% currently. Pricing a peak SOFR rate of 5.24%, markets already see the Fed getting close to there, if not as fast. But it was the back-end getting a lift again with the curve steepening and the 10Y UST yield testing above 3.85%. Markets do appear a tad selective, jumping on data that fits ongoing hawkish repricing Bund yields saw a more uniform shift higher across the curve yesterday alongside US rates. The 10Y Bund yield is testing the air above 2.5% and there was little yesterday’s European Central Bank doves could set against it. If anything, ECB arch-dove Fabio Panetta was, in our view, not as dovish as he could have been. Arguing for a slower pace after the quasi-preannounced 50bp hike in March doesn’t have him standing in the way of 25bp hikes in May and possibly June – the market has these already firmly priced in discounting 104bp of tightening March to June, and rates downside from here seems limited given the dove's nod of acceptance. What we witnessed yesterday to a greater degree again was the market pricing out the subsequent easing. From (now a higher) peak in 2023 through the end of 2024, that has been whittled down towards 80bp from around 100bp prior to the ECB meeting. Real Treasury yields didn't really decline in 2023, and are now back at their cycle highs Source: Refinitiv, ING Market pattern more likely to extend, subject to data It is a market pattern that may well extend for now, but it remains crucially dependent on the data. Looking ahead we have warned that data surprises for January can to a large degree be traced back to seasonal adjustments and weather quirks, leaving them exposed to a reversal in February. Next week already holds the first data points for February, though with the PMIs it's sentiment data rather than hard data. As such, they may still support the bearish undertone in rates markets. The consensus seems to build around a more upbeat release again. To round the bearish picture off we will also get the release of the final inflation data, more closely watched this time around since the German data had not been available in time for the first estimate – revisions are possible, if not likely. The first release was also light on details, and investors will pore over components such as service inflation. The FOMC minutes can produce some relatively more dovish headlines The main test to the hawkish repricing narrative this week may come from the Fed itself, though. The FOMC minutes will be released on Wednesday, giving a broader representation of the views presented in the discussions ahead of the policy decision. We know that Fed Chair Jerome Powell tends to be more hawkish than the broader FOMC, which implies the minutes can produce some relatively more dovish headlines. Of course, the market may dismiss such comments as being overtaken by the recent surprisingly strong data, even if there are some serious question marks behind the sustainability of that strength. The end of hiking cycles should bring a convergence in rates, eg between GBP and EUR forwards Source: Refinitiv, ING Today's events and market view The hawkish repricing maintains its momentum, 10Y UST yields are just a smidgen away from their local year-end high, 10Y Bund yields have tested the air above 2.50%, which they previously only have done briefly in October and around year-end. While we maintain our outlook for lower yields by the end of the year, the current repricing has little standing in its way for now. Supply in Europe taking a break from the duration-heavy syndication we have seen of late may remove a technical factor, but we think the upcoming test will be next week's FOMC minutes.   There is very little of note on the data calendars for today besides perhaps US import prices. From the Fed, we will see appearances from Tom Barkin and Michelle Bowman. The only ECB speaker scheduled for today is France's Francois Villeroy. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Earnings season: Tesla stock price slipped after yesterday's news. The best selling car in Q1 was Model Y

Tesla Declined 5.7% Following An Announcement To Recall Over 300,000 Cars

Saxo Bank Saxo Bank 17.02.2023 09:08
Summary:  Equities headed lower after the hot US PPI report and hawkish Fed speakers Mester and Bullard bringing the market’s terminal rate projections up to 5.27%. US 10-year yields surged to a YTD high of 3.9% and the US dollar was broadly higher against all other currencies but the yen recovered some of its losses as the session ended. RBA’s Lowe touted more rate hikes as inflation reigns. Metals saw a rebound with Copper leading, while Gold was still close to $1830.   What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) retreated on a hot PPI and 50bps hike back on the table U.S. stocks opened sharply lower on a much hotter-than-expected PPI print. The benchmark S&P 500 and Nasdaq 100 managed to claw back all the losses until they reversed following Fed’s Bullard hit the tape at 3 pm New York time with hawkish comments signaling the door to return to a 50bp hike at the March FOMC is open. The Fedspeak hammered stocks across the board with all 11 sectors in the S&P500 declining. At close, the S&P500 was 1.4% lower and the Nasdaq 100 lost 1.9%. Tesla (TSLA:xnas) declined 5.7% following an announcement to recall over 300,000 cars due to a crash risk associated with its Full Self-driving Beta software. Shopify (SHOP:xnys) plunged 15.8% on revenue outlook missing estimates. Toast (TOST:xnys) dropped 22.8% after missing revenue miss. Twilio (TWLO:XNYS) jumped 14.3% on an earnings beat. Cisco (CSCO:xnas) climbed 5.2%. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) climbed on hawkish Fed and producer price inflation Yields on the 10-year surged 6bps to 3.86% on a large jump on the PPI print in January and hawkish comments from Fed’s Mester and Bullard who brought a 50bp hike back to the table at the March FOMC. The selling during the session concentrated in the longer-end of the curve in particular in the 10-year futures contract and 5-year futures vs ultra-long bond contracts steepening trades. The USD9 billion TIPS auction had a bid/cover ratio of 2.38, below 2.69 last time. Traders are cautious ahead of next week’s USD120 billion supply from the 2, 5, and 7-year Treasury note auction. Hong Kong’s Hang Seng (HIG3) and China’s CSI300 (03188:xhkg) failed to sustain an attempt to rally Hang Seng Index rallied as much as 2.4% in the morning before spending the afternoon paring gains and finishing the Thursday session only 0.8% higher from the previous day. Qiushi Magazine, a mouth-piece of the Chinese Communist Party, published an excerpt of President Xi’s speech delivered in December, in which the Chinese leader highlighted insufficient aggregate demand as the paramount challenge so expanding consumption is a top policy priority. Media reports of foreign hedge fund building long positions in Chinese equities added fuel to the positive sentiment. The news that President Xi will be visiting Iran, a foe country with the United States, and China’s Ministry of Commerce imposed fines and sanctions on U.S. defence companies, Lockheed Martin (LMI:xnys) and Raytheon Technologies (RTX:xnys) dented sentiment. Tech stocks outperformed with Hang Seng Tech Index gaining 1.8%. Online pharm platform shares surged on the news that the Chinese healthcare regulator is stepping up insurance coverage for drugs. JD Health surged 5.3%; Alibaba Health climbed 3.5%. Lenovo (00992:xhkg) jumped 6.7% ahead of reporting quarterly results. Chinese developers and property management services names gained. China Resources Mixc Lifestyle (01298:xhkg) rose 4.7%; China Overseas Land & Investment (00688:xhkg) gained 3.1%; Longfor (00960:xhkg) climbed 2.8%. In A-shares, CSI300 advanced as much as 1% in the morning but pared all the gains to close 0.7% lower. Semiconductor, non-ferrous metal, machinery, and defense names led the charge lower. The food and beverage and cloud-computing gaming space bucked the decline and outperformed. Albemarle –the lithium giant beat earnings expectations & gave a sparky outlook – paving a positive course for the lithium sector... ...as per our Quarterly Outlook. Albemarle, the world's biggest lithium company – in size, and scale (selling lithium to most EV makers) rose 4.7% after it delivered a stronger than expected sales outlook – with China’s reopening to provide extra momentum as demand for EVs picks up. It sees net sales growing to $11.3-$12.9 billion, and EBITDA getting as high as $5.1 billion. It expects to maintain positive cashflow even despite increasing capital expenditure. In Q4 - its earnings (EBITDA) swelled to $1.24 billion, beating expectations and marking a mega jump from $229 million (same time last year), as lithium earnings rose more than expected. Adjusted EPS also grew more than consensus expected with EPS, at $8.62. This paves a positive path for what we might expect from Allkem and Pilbara when they report results next week. Click here for Saxo’s lithium equity basket for stock inspiration. Tesla recalls over 362,000 cars for self-driving crash risks; Its shares remain ‘overbought’ Tesla shares fell 5.7% to $202.04, staying around seven-month highs. Although Tesla’s uptrend seems intact  - buying is slowing  - with the relative strength index (RSI) indicating we could see some consolidation here as the stock is in overbought territory. Tesla’s recall affects 362,758 vehicles, including certain Model 3, Model X, Model Y and Model S units manufactured between 2016 and 2023. Although Musk said it’s not a recall, even though Tesla’s full-self driving beta system “may allow the vehicle to act unsafe around intersections”, and increase collision risk if the driver does not intervene, Musk affirmed the issue will be remedies with a software update, by April 15. RBA Governor faces parliamentary grilling after Australian unemployment surprising rose RBA Governor Lowe today hinted that despite Australian unemployment rising to 3.7% in January up from 3.5% - it does not change its hiking guidance. Yesterday, he faced a Senate estimates hearing – saying the cash rate was unlikely at its peak. And today he is back on the podium, saying banks need to do better jobs of passing on rate hikes. Meanwhile Bullock said refinances of mortgages are really high, with consumers shopping around to get better deals. Amid diminishing corporate operational expenditure power  - the unemployment rate will likely pick up this year, in the face of rising inflation and unemployment, meaning Australia faces a staglationary environment. We will continue to watch the AUDUSD and the GBPAUD – as we think the UK BOE could sit on its hands with rate hikes, while the RBA will likley push ahead with hikes in the coming months. FX: Firm king dollar as yields rise; JPY recovers from lows   With US yields maintaining their upward trajectory, the dollar was firmer again on to reach fresh highs since 6 January. Hot PPI, still low jobless claims and Fed speakers opening the door to another potential 50bps rate hike underpinned. Quiet day ahead with no tier 1 data due and only Fed’s Barkin and Bowman speaking. USDCAD rose to 1.3480 amid weakness in oil prices while AUDUSD was flattish as metals prices recovered, despite a weak jobs data yesterday and RBA’s Lowe affirming more rate hikes. USDJPY rose to 134.50 overnight but was back closer to 134 in Asia. EURUSD continues to find support at 1.0650 as ECB speakers continued to highlight another 50bps rate hike at the March meeting. Crude oil (CLH3 & LCOJ3) heads for a weekly loss amid Fed concerns and inventory build Even as some signs of improving Chinese demand started to appear, the broader inflation and interest rate rhetoric nudging higher again this week weighed on crude oil and the commodity complex more broadly this week. A hot PPI overnight, along with Fed members now starting to open the door for another potential 50bps rate hike has further brought the Fed’s terminal rate pricing higher and US yields continue to rise. WTI prices dipped below $78 in Asia, with Brent around $85. Even as OPEC and IEA reports suggested possible uptick in demand as China reopens, US stockpile reports continued to dampen the demand outlook. Saudi Energy Minister Prince Abdulaziz bin Salman also said the current OPEC+ deal on output levels will remain in place until year-end and that he is wary of forecasts of much higher demand from China. Copper prices jump to two-week highs Copper prices rose higher on Thursday as the dollar rally took a bit of a breather before resuming again. Copper stockpiles on the Shanghai Futures Exchange fell for the first time in two months, suggesting that the Chinese demand is picking up. Growth in aluminium inventories also slowed, according to data from Shanghai Metals Market. This comes amid ongoing risks of further supply disruptions. Earlier this week, Freeport-McMoRan Inc suspended operations at its Grasberg copper mine in Indonesia due to landslides. This is adding to disruption to Peru’s output caused by social unrest. Copper prices rose to $4.15 before a retreat to $4.11 in Asia. The key $4 handle support continues to hold up. Read next: USD/JPY Is Trading Close To 134.00, EUR/USD Is Remaining Above $1.07| FXMAG.COM What to consider? Fed speakers boost the market pricing of Fed’s terminal rate Hawkish Fed speak prompted an upward shift in the Fed funds futures pricing for the terminal rate, but there is still more than one full 25bps rate cut priced in for this year. Loretta Mester said she saw a compelling case for a 50bp hike at the January FOMC meeting. A similar message was sent out by James Bullard too. However, both are non-voters although Mester may become a voting member this year if Austin Goolsby is appointed as Fed Vice Chair. Mester also added that she is not ready to say if the Fed requires a bigger rate rise at the March FOMC; said more upside inflation surprises could make Fed policy more aggressive and can accelerate the pace if conditions warrant it. Bullard also reaffirmed his terminal rate projection of 5.25-5.50%. With members still sounding the hawkish alarm despite the market pricing catching up with the December dot plot, it appears to be a signal that the March dot plot may see an upward revision. Hot US PPI further casts doubts on the goods disinflation narrative After the CPI report this week brought back concerns on the pace at which inflation is cooling, January PPI also saw a hotter than expected print. Headline rose 0.7% MoM or 6.0% YoY (vs. 0.4% MoM and 5.4% YoY exp) jumping from the prior month's -0.2% MoM print (revised up from -0.5%) but cooling from 6.5% YoY last month. Both goods and services prices increased, with goods rising 1.2% and services rising 0.4%. This has started to question the goods disinflation narrative and continues to support the thesis that services inflation is sticky. Price pressures were broad with ex food and energy measure also up 0.5% MoM from 0.3% last month and expected. Jobless claims still below 200k Initial jobless claims data was beneath expectations, and still beneath the watched 200k level, printing 194k against an expected 200k – still supporting the case for a tight labor market persisting. Continued claims were in line with expectations at 1.696mln, picking up from the prior 1.68mln. RBA Governor Lowe’s testimony focused on the need for more rate hikes The Reserve Bank of Australia chief Philip Lowe appeared for the second session of his testimony to the economic committee today, and the message emphasized that the RBA still needs to do more to bring inflation under control, despite acknowledging the impact on community. He said that business conditions remain above average and labor market is still strong. He was scrutinized not just on policy but also on transparency, especially after his closed door meetings with private bankers but lack of public address.   For what is ahead at markets this week – Read/listen to our Saxo Spotlight. For a global look at markets – tune into our Podcast.     Source: Markets Today: Hot US PPI and Mester/Bullard boost Fed terminal rate expectations – 17 February 2023 | Saxo Group (home.saxo)
Mercedes Is Planning A €4bn Buyback Programme, Copper Prices Rose

Mercedes Is Planning A €4bn Buyback Programme, Copper Prices Rose

Saxo Bank Saxo Bank 17.02.2023 09:14
Summary:  The US equity market stumbled badly yesterday as US treasury yields continue to rise, with another strong weekly claims number and hotter than expected producer prices print weighting. The US dollar is breaking out higher in most USD pairs. A heavy load of options expiry today could aggravate US equity market volatility as weekly futures and single stock options are set to expire. What is our trading focus? US equities (US500.I and USNAS100.I): an echo from a distant past In yesterday’s equity note we wrote about the key risks in equities arguing that the interest rate sensitivity is no longer the dominant risk factor as equity valuations have fallen and interest rates have already got closer to long-term averages. With the US 10-year yield advancing yesterday after comments from Cleveland Fed President Loretta Mester that more rate hikes are needed to tame inflation S&P 500 futures reacted negatively. Higher long-term bond yields do still impact equities through the discount rate on future cash flows, but initial reaction in S&P 500 futures was muted and they fought back during the session before selling off into the close. Higher than expected US PPI figures reported yesterday are also negative for equities as it could indicate margin pressures will continue for companies. S&P 500 futures are continuing selling off this morning trading around the 4,080 level which is at the lower end of the trading range for February. Hong Kong’s Hang Seng (HIG3) and China’s CSI300 (03188:xhkg) pulled back Hang Seng Index slipped 0.6% as investors lowered expectations for a rapid recovery in Chinese consumer spending. Leading Hong Kong jewellers which have large exposure to Chinese tourists as well as stores all over the mainland declined 2-4%. The Chinese traditional medicine names bucked the decline and rose 3-7%. President Xi’s plan to visit Iran and China’s Ministry of Commerce imposing sanctions on Lockheed Martin (LMT:xnys) and Raytheon Technologies (RTX:xnys) also dented the market sentiment. In A-shares, CSI300 dropped 0.7%, with stocks in the tech space retreating while Chinese traditional medicines and childcare products names advancing. FX: Firm king dollar as yields rise; JPY threatens new lows With US yields grinding higher still, the dollar was firmer again and hit fresh highs since 6 January. A hot PPI, still low jobless claims and Fed speakers, together with weakening risk sentiment all supportive for the greenback. It may be a quiet day ahead for macro data, but market volatility elsewhere after yesterday’s unsettling sell-off in risky assets could yet drive significant moves (note options expiry in the US below). USDCAD is pushing on 1.3500 for the first time since mid-January amid weakness in oil prices while AUDUSD rolled over to new lows since the first days of the year, touching below the recent 0.6856 pivot low and threatening the 200-day moving average just above 0.6800. GBPUSD likewise broke below its prior pivot low of 1.1961 and is trading at its 200-day moving average at 1.1940. USDJPY rose above 134.50 overnight, with the 200-day moving average still some distance higher at 136.93. EURUSD broke down through it’s range low of 1.0656 in late Asian trading as well. Crude oil (CLH3 & LCOJ3) heads for a weekly loss amid Fed concerns and inventory build Even as some signs of improving Chinese demand started to appear, the broader inflation and interest rate rhetoric nudging higher again this week weighed on crude oil and the commodity complex more broadly this week. A hot PPI overnight, along with Fed members now starting to open the door for another potential 50bps rate hike has further brought the Fed’s terminal rate pricing higher and US yields continue to rise. WTI prices dipped below $78 in Asia, with Brent around $85. Even as OPEC and IEA reports suggested possible uptick in demand as China reopens, US stockpile reports continued to dampen the demand outlook. Saudi Energy Minister Prince Abdulaziz bin Salman also said the current OPEC+ deal on output levels will remain in place until year-end and that he is wary of forecasts of much higher demand from China. Copper prices fading after posting two-week highs yesterday Copper prices rose higher on Thursday as the dollar rally took a bit of a breather before resuming later, so the new two-week high was only briefly held before prices rolled back down into the range overnight. Copper stockpiles on the Shanghai Futures Exchange fell for the first time in two months, suggesting that the Chinese demand is picking up. Growth in aluminium inventories also slowed, according to data from Shanghai Metals Market. This comes amid ongoing risks of further supply disruptions. Earlier this week, Freeport-McMoRan Inc suspended operations at its Grasberg copper mine in Indonesia due to landslides. This is adding to disruption to Peru’s output caused by social unrest. Copper prices rose to $4.15 before a retreat to $4.09 in Asia. The key $4 handle support continues to be key. Gold (XAUUSD) testing below first key support Gold prices were only corralled briefly by the 1,828 level this week, which is the major 38.2% retracement of the entire rally off the 1614 lows. Overnight, the stronger US dollar and higher US yields are driving new selling below 1,825, with the next levels looming the 1,809 area that was a critical range break level on the way up, and then perhaps the 200-day moving average coming in at 1,776. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) climbed on hawkish Fedspeak and producer price inflation The US 10-year treasury yield surged 6bps yesterday and followed through higher still to the highest level of the year at 3.89% overnight after a large jump in the US PPI in January and hawkish comments from Fed’s Mester and Bullard (see below). The selling during the session concentrated on the longer end of the curve, with the 2-10 yield curve inversion moderating sharply to –78 bps after as low as –90 bps on Wednesday. The $9 billion 30-year TIPS auction had a bid/cover ratio of 2.38, below 2.69 last time. Traders are cautious ahead of next week’s $120 billion supply from the 2, 5, and 7-year Treasury note auction. What is going on? Albemarle –the lithium giant beat earnings expectations and gave an upbeat outlook. Albemarle, the world's largest lithium company – in size, and scale (selling lithium to most EV makers) rose 4.7% after it delivered a stronger than expected sales outlook. It sees net sales growing to $11.3-$12.9 billion, and EBITDA getting as high as $5.1 billion. It expects to maintain positive cashflow even despite increasing capital expenditure. In Q4 - its earnings (EBITDA) swelled to $1.24 billion, beating expectations and marking a massive jump from $229 million last year, as lithium earnings rose more than expected. Adjusted EPS also grew more than consensus expected with EPS, at $8.62. Other lithium producers such as Allkem and Pilbara Minerals report results next week. Tesla shares dive as company to recall 362,000 cars for self-driving crash risks Tesla’s recall affects 362,758 vehicles, including certain Model 3, Model X, Model Y and Model S units manufactured between 2016 and 2023. Although Musk said it’s not a recall, even though Tesla’s full-self driving beta system “may allow the vehicle to act unsafe around intersections”, and increase collision risk if the driver does not intervene, Musk affirmed the issue will be remedied with a software update, by April 15. Tesla shares fell 5.7% to $202.04 on Thursday after trading 15 dollars higher earlier in the session. European earnings: Allianz, Mercedes, Hermes Allianz reports fiscal year operating profit of €14.2bn vs est. €13.7bn and sets the dividend per share to €11.40 vs est. €11.38. On the conference call this morning the CFO of Allianz said that the company does not expect rates to go significantly higher. Mercedes reports this morning Q4 revenue of €41bn vs est. €37.7bn and adjusted EBIT of €5.1bn vs est. €4.5bn as pricing remains strong in the car industry but the German carmaker sees FY23 operating income below the 2022 level. Mercedes is also planning a €4bn buyback programme. Hermes reports this morning Q4 revenue of €3bn vs est. €2.8bn up 23% in constant currency reflecting strong demand for luxury goods. Hermes raised their global prices in January by 7% compared to a year ago. Fed speakers mention idea of 50-basis point hikes Two hawkish Fed members, the St. Louis Fed’s Bullard and the Cleveland Fed’s Mester, neither of whom are voters this year, argued they were in favour of a 50-basis point hike at the Feb 1 FOMC meeting (only 25-bp hike delivered). The market is pricing 28 basis points for the March 22 meeting and a peak Fed Funds rate this year of 5.29%. China’s US Treasury holdings hit a 12-year low in December Data published this week by the US Treasury show that China’s holdings of US treasuries fell for the fifth month in a row and to a 12-year low – to $867 billion and marking a total fall of $173 billion for the 2022 calendar year. What are we watching next? Significant options expiry today, 0DTE options a risk for driving volatility. The options market in recent months has driven significant intraday volatility as options on US S&P 500 futures are available with expiry on all weekdays. It has become increasingly popular to trade the contracts that expire on the same day as they are traded, so called 0DTE, or Zero Days to Expiry options. Such trading in 0DTE options represents nearly half of all traded S&P options, with some noting that this trading represents a significant risk to accelerating market volatility on any given day. With yesterday’s ugly session in the US and other options also up for expiry, including weekly options on single stocks and ETF’s, it is worth noting the background risk that market volatility can drive a reflexive risk of further volatility as options holders rush to hedge their market exposure, which can swell as options move closer to- or deeper into the money. Earnings to watch Today’s US earnings focus is Deere which is expected to report FY23 Q1 (ending 31 Jan) revenue growth of 17% y/y and EPS of $5.53 up 76% y/y as demand remains robust and margins have room to expand. Friday: Hermes International, Safran, Allianz, Mercedes-Benz, Uniper, Sika, Deere Next week’s earnings releases: Monday: BHP Group, Williams Cos Tuesday: Teck Resources, Gapgemini, Engie, HSBC, Walmart, Home Depot, Medtronic, Palo Alto Networks Wednesday: Rio Tinto, Genmab, Danone, Lloyds Banking Group, Iberdrola, Nvidia, TJX, Stellantis, Baidu, eBay Thursday: EssilorLuxottica, Deutsche Telekom, Munich Re, Kuaishou Technology, Eni, Anglo American, BAE Systems Friday: BASF, Monster Beverage Economic calendar highlights for today (times GMT) 1130 – ECB's Villeroy to speak 1330 – Canada Jan. Teranet/Nationa Bank Home Price Index 1330 – US Fed’s Barkin (Non-voter) to speak 1330 – US Jan. Import/Export Price Indices 1345 – US Fed’s Bowman (Voter) to speak 1500 – US Jan. Leading Index   Source: Financial Markets Today: Quick Take – February 17, 2023 | Saxo Group (home.saxo)
Gold Trading Analysis: Technical Signals and Price Movements

FX Daily: Hawks in the ascendancy

ING Economics ING Economics 17.02.2023 09:43
It is a familiar story in FX, but the strong run of US price and activity data has provided a tailwind to Fed hawks. Yesterday it was the turn of Fed's Mester and Bullard to put the idea of more aggressive 50bp rate hikes back on the table. We have another couple of Fed hawks speaking today, Barkin and Bowman, suggesting the dollar can hold gains The Fed's James Bullard said he would not rule out supporting a half-percentage-point hike at the March meeting USD: First quarter of 2023 is proving to be the push-back quarter The dollar continues to quietly reclaim some of the heavy losses seen since last October. DXY has now reclaimed about a quarter of that sell-off. The move has clearly been driven by the re-assessment of the Fed cycle, where the 'higher for longer' camp is in the ascendancy. Yesterday, it was the turn of Loretta Mester and James Bullard to outline how they had favoured a 50bp hike earlier this month instead of the 25bp which was delivered. Equally, they both implied they could support a 50bp hike at the 22 March meeting.  Their comments coincided with an above-consensus US January PPI release and pushed 10-year US Treasury yields a further 6-7bp higher. At 3.89%, the US 10-year yield is now the highest since November. The higher rates for longer thesis has also seen some substantial re-pricing of the Fed curve this month where market pricing for the December 2023 Fed Funds rate has risen to 5.10% from 4.35%. Financial markets are making these substantial adjustments to the Fed cycle – i.e. markets are listening to the Fed hawks – because US activity and price data are coming in stronger than expected. We think the better activity data is partly weather-related and had always thought that the next leg of the US disinflation story would be in the second rather than the first quarter. In short, we think the current dollar rally is probably a correction to an underlying bear trend in 2023. This 1Q23 dollar correction may have a little further to run, however. Today we will also hear from Fed hawks Thomas Barkin and Elizabeth Bowman, plus receive an update on January import prices. We see a scenario where DXY continues to edge up to 105.00, with outside risk this quarter to strong resistance at 106.50 (about 1.8% above current levels), which may then prove the best dollar levels of the year. The next big input to the story will be the FOMC minutes released next Wednesday. Chris Turner EUR: Temporary downside to EUR/USD The hawkish re-pricing of the Fed curve dominates markets and even though eurozone money market rates have risen too, the two-year EUR/USD swap differential has widened back out to levels last seen in mid-December. This now stands at -150bp having narrowed to -110bp at the start of this month. Arguably this spread should not narrow in too much more (unless the market thinks that Fed Funds will end the year near 5.50%), meaning that EUR/USD may not have to fall too much more. We would, however, say the direction of travel is to the 1.0450/1.0500 area, which may be the strongest dollar level of the year for eurozone corporates. There is not too much on the eurozone calendar today apart from the December current account figure and the market seems to be ignoring yesterday's comments from ECB dove, Fabio Panetta, favouring the ECB to move in 25bp rather than 50bp increments. Today we hear from ECB's Francois Villeroy (1230CET), seen more as a centrist these days. Chris Turner GBP: BoE slowdown softens the pound In contrast to the hawkish Fed rhetoric yesterday, comments from Bank of England chief economist Huw Pill pointed towards the BoE shifting towards a slower pace of tightening. As mentioned yesterday, we look for one final 25bp BoE hike to 4.25% next month. The comments have seen sterling very marginally underperform – consistent with our preferred view of EUR/GBP drifting into a 0.89/90 range this year. Away from central banking, the UK press is focusing on a surprise trip by Prime Minister Rishi Sunak to Northern Ireland today. The presumption is that he is trying to win over the DUP nationalist party in support of changes to the Northern Ireland protocol, which could see improved trading relations with the EU. We suspect sterling does not get much of a bounce were a new EU deal announced, with investors quite fatigued on this subject. Chris Turner  PLN: The FX mortgage saga remains on the table Yesterday, the European Court of Justice (ECJ) gave its opinion on the FX mortgage issue in Poland. According to the statement, European Union law does not prevent local law from allowing consumers to claim compensation over and above the compensation already common today. On the other hand, banks cannot charge capital costs if the contract with the client is terminated. However, it seems that a clear interpretation of the ECJ's opinion is yet to be found before assessing whether yesterday's statement is negative or not. From the market reaction, it seems that the first direction was negative, however, during the day the Polish market was rather hit by the global story, and in fact, banking stocks in Poland reversed their direction and erased their initial losses. Of course, this story did not end yesterday, and we will probably see more headlines from local banks and the government in the coming days as to what the expected impact on the banking sector is. As for the market, we are unlikely to see a clear sell-off and a jump-up in the Polish zloty, but the issue remains on the table, and we are more likely to see constant pressure on the zloty to continue to underperform the CEE region. For now, we expect EUR/PLN to stabilise around 4.77. Also today after the end of trading we will see a rating review of Poland by S&P. We expect the rating to remain unchanged and yesterday's decision should not affect the review. However, the August review assumed a smooth drawdown of EU money, which has emerged as a problem for the Polish government in recent weeks. Moreover, the macro picture is also mixed and after the experience with the recent downgrade in the case of Hungary, the market cannot ignore this review. Frantisek Taborsky Read this article on THINK TagsFX Federal Reserve Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more    
Rates Spark: Escalating into a Rout as Bond Bear Steepening Accelerates

A Mix Of Economic Data Caused Confusion In The Markets

Swissquote Bank Swissquote Bank 17.02.2023 10:18
The equity marathon that kept going on for questionable reasons since Tuesday ended in tears yesterday, with the arrival of a new set of economic data that crushed the optimistic rhetoric of soft landing.  The latest data Released yesterday, the latest data showed that US producer price inflation rose more than expected on a monthly basis, both for headline and core data, and the core PPI eased less than expected – similar to what we saw in the CPI data, BUT the Philli Fed manufacturing index was a disaster with an unexpected drop from -8.9 to -24.3 – the expectation was a -7.4 print. Fed So that crushed the idea that the economy is strong, without however fueling the Federal Reserve (Fed) cut expectations, as the slowdown in inflation needs to be addressed for some more time. And of course, comments from two Fed members were the last nails in the coffin yesterday. Loretta Mester said that she would go for a 50bp hike if she had the right to vote in the latest FOMC meeting. And James Bullard said that he would back a 50bp hike in March, if he could vote this year. The US 2-year yield consolidates a touch below 4.70%, while the 10-year yield hit 3.90% for the first time this year. US Stocks The S&P500 gave back nearly 1.40% yesterday, while the more rate-sensitive Nasdaq fell nearly 2%. European stock US futures hint at further selloff before the weekly closing bell, as in the absence of important data, investors will have to digest the week’s mixed data. And the bad news is, the European stock traders will also have to think whether a further rally in European stocks makes sense, when the EURUSD is trending lower. Watch the full episode to find out more! 0:00 Intro 0:44 Equity investors are victim of mixed economic data 2:33 Rate expectations and yields update 4:35 Equity update 5:16 FX update 6:23 Gold down, Bitcoin up 8:40 There is no such thing as ‘no landing’ Ipek Ozkardeskaya  Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #mixed #economic #data #Fed #rate #expectations #USD #EUR #JPY #XAU #Crude #Oil #bitcoin #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
Impact of Declining Confidence: Italian Business Sentiment in August

EUR/USD And AUD/USD Are In Downward Trend, USD/JPY Hit 135.00, GBP/USD Is Below $1.20

Kamila Szypuła Kamila Szypuła 17.02.2023 13:12
The dollar rose to a six-week high on Friday as strong US economic data and comments from Federal Reserve officials prompted investors to bet on another rate hike. The Fed's target range is currently between 4.5% and 4.75%. Economists at Goldman Sachs on Thursday raised their expectations for Fed rate hikes this year. After previously expecting two more hikes, they said they now expect three more hikes of 25 bp in March, May and June. That would push interest rates to 5.25% to 5.5%. The US Economic Report will not include any macroeconomic data releases that could significantly affect the behavior of the US dollar. As such, market participants will pay close attention to risk perception. USD/JPY The yen pair hit its highest level in almost two months. USD/JPY has been trending up since the start of the day. USD/JPY started the day trading just above 134.07 and has now crossed the 135.00 mark. EUR/USD EUR/USD extended its decline during the Asian trading hours and hit its lowest level since early January below 1.0650. The technical outlook for the short-term pair shows that the bearish bias remains intact. Meanwhile, comments from Federal Reserve (Fed) and European Central Bank (ECB) officials add to the burden on the EUR/USD pair. The euro could weaken further as the market's interest-rate rise expectations for the European Central Bank may be overdone given comments from ECB members about the risks of excessive policy tightening. ECB board member Fabio Panetta said on Thursday that the ECB should consider the risk of unduly tightening policy and argued that the bank should not commit unconditionally in advance to future policy moves. From a more neutral point of view, the ECB's chief economist Philip Lane said he was open-minded about the exact amount of monetary tightening that would be needed to meet the inflation target. On the other hand, Cleveland Fed President Loretta Mester reiterated that the interest rate will have to rise above 5% and stay there for some time for the Fed to control inflation. Read next: Wyoming Prohibits Forced Disclosure Of Private Cryptographic Keys By US State Courts, JP Morgan Projections Of FX Market| FXMAG.COM GBP/USD GBP/USD extends losses towards 1.1900 in the early European morning. The strength of the US dollar (USD) had a big impact on the GBP/USD exchange rate in the second half of the week. Hawkish comments from Fed policymakers and the latest released macroeconomic data have revived expectations that the Fed may decide to make additional interest rate hikes even after May. Data from the UK showed that retail sales rose by 0.5% in January, as compared to market expectations for a fall of 0.3%. While this reading was better than the market's 0.3% decline, December's -1% reading was revised lower to -1.2%, preventing Sterling from taking advantage of the data. AUD/USD Reserve Bank of Australia (RBA) Chairman Lowe's comments did not stop the AUDUSD rate from falling. Governor Lowe warned that the RBA was keeping an open mind and their view was that further rate hikes were needed. Lowe also stated that interest rates are not on a predetermined path as it takes 18-24 months for rate hikes to make an impact in the economy. The pair of the Australian is in a downtrend on Friday. AUD/USD has fallen well below 0.69 and is trading below the 0.6820 level. Source: finance.yahoo.com, investing.com
USD/JPY Pair Has Rebounded Firmly From The Upward-Sloping Trendline

The US Dollar Is Broadly Higher And Has Pummelled The Yen, USD/JPY Broke Above 135.00 Today

Kenny Fisher Kenny Fisher 17.02.2023 13:52
The Japanese yen is down sharply on Friday. In the European session, USD/JPY is trading at 134.93, up 0.73%. The yen fell below 135 earlier today for the first time since December 23. Solid US data sends dollar higher The US dollar is broadly higher and has pummelled the yen, climbing 2.6% this week. Strong US numbers have boosted the dollar, as the Fed is likely to remain hawkish with the economy remaining strong. Retail sales impressed with a 3% gain earlier this week, and PPI and unemployment claims were both better than expected. Consumer inflation ticked lower but was stronger than expected. Is the disinflation process stalled? The economy has proven to be surprisingly resilient to rising interest rates, leading to hopes for a soft landing or even a ‘no landing’. The Fed has been consistent in its message of ‘higher for longer’ with regard to rates, but the markets haven’t really been listening, assuming that the Fed would have to pivot and even cut rates later in the year. The stronger-than-expected releases, from nonfarm payrolls to inflation to retail sales have forced the markets to revise their stance and move closer to the Fed position that the terminal rate will be above 5%. Fed speak remains hawkish Fed member Mester said she saw a strong case for raising rates by 50 basis points at the last Fed meeting, a sign that the Fed could move away from the moderate 25-bp hikes if inflation isn’t falling quickly enough. Mester said that she didn’t see inflation falling to 2% until 2025, which points to a long disinflation process. The depreciation of the yen will be raising eyebrows in Tokyo. The Bank of Japan and the Ministry of Finance have often voiced unease when the yen has plunged and this has led to currency interventions in order to prop up the yen. It’s a delicate time for the Bank of Japan, as Kozo Ueda is set to take over as Governor in April. If the yen continues to lose ground, we’re sure to hear warnings from the BoJ and the Ministry of Finance, possibly with threats of intervention. Read next: Wyoming Prohibits Forced Disclosure Of Private Cryptographic Keys By US State Courts, JP Morgan Projections Of FX Market| FXMAG.COM USD/JPY Technical USD/JPY is testing resistance at 134.47. Above, there is resistance at 136.05 There is support at 1.3355 and 1.3296 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
Long-Term Yields Soar Amidst Hawkish Fed: Will They Reach 5%?

Key events in developed markets next week - 18.02.2023

ING Economics ING Economics 18.02.2023 09:07
With milder weather, we expect further improvements in activity data in the US. Consumer spending will have jumped 2% in real terms, however we remain sceptical as to whether this indicates true strength. The Fed's favoured measure of inflation looks set to rise 0.4% month-on-month, more than twice what's required to produce 2% year-on-year inflation In this article US: Nothing stopping the Fed from hiking rates in March Eurozone: Recoveries in sentiment data   Shutterstock US: Nothing stopping the Fed from hiking rates in March The warm weather in January, which contrasted starkly with the cold, wintery conditions of December, will continue to boost US activity data over the coming week. Home sales are likely going to get a lift with more people out and about early in the year home hunting, while we have got a very strong idea that consumer spending will have jumped by 2% in real terms given the 3% month-on-month increase in retail sales over the same period. However, we remain a little sceptical as to whether this indicates true strength given the big shifts in weather may have simply meant that spending that would have been done in February and March may have been brought forward, leaving open the possibility of a correction over the next couple of months. This won’t stop the Federal Reserve from hiking interest rates in March and in all probability May too. Indeed, the Fed’s favoured measure of inflation, the core personal consumer expenditure deflator, looks set to rise by 0.4%MoM, more than twice the 0.17%MoM required over time to produce year-on-year inflation of 2%. Indeed, there will be several more Fed speakers over the coming week with the minutes of the February Federal Open Market Committee meeting also likely to reveal that they were not terribly far away from hiking rates by 50bp. Having done 25bp in February, we think this will be the standard incremental move from now on. Eurozone: Recoveries in sentiment data Lots of sentiment data out of the eurozone next week, which will shed light on how the economy is performing in February. Both consumer confidence and PMIs have been showing slight recovery in recent months and are expected to continue recovery at low levels. This should be in line with economic activity broadly stalling as it did in the fourth quarter. Key events in developed markets next week Refinitiv, ING TagsUS Eurozone Read the article on ING Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Equity Markets Rise, VIX at 12 Handle After ECB Rate Hike and US Economic Resilience

Week Ahead: US Q4 GDP, EU CPI, Rolls-Royce And HSBC FY22

Michael Hewson Michael Hewson 18.02.2023 09:16
Fed minutes – 22/02 – if the market reaction to the recent Fed rate hike is any guide, there appears to be a type of cognitive dissonance when it comes to what the market wants to hear from the Federal Reserve and what the US central bank is trying to say. To borrow a line from the film Cool Hand Luke, "what we've got here is a failure to communicate". Long story short, the market thinks the inflation job is done, or at least close to it, even though the recent non-farm payrolls report appears to have muddied the waters in that regard. For all of Fed chair Jay Powell's insistence that more rate hikes were coming at his post meeting press conference, and that the Fed was not looking at cutting rates this year, his failure to push back emphatically on direct questions about market expectations of rate cuts this year, created an even greater divergence between market pricing on rates, and the Fed's expectations of how the economy is likely to evolve. Since that meeting, we've had a succession of Fed officials push back on the dovish narrative insisting that rates are likely to stay higher for longer, however the release of the latest minutes also needs to be set in the context of the fact that they came before the recent jobs, and ISM services data. That said, the recent intervention by non-voting member, Cleveland Fed President Loretta Mester that she saw a compelling case for a 50bps move at the last meeting was an unexpected intervention to the cosy consensus that had developed around the 25bps narrative. This was compounded by another non-voting member, James Bullard of the St. Louis Fed who suggested 50bps in March could be a consideration. This raises two questions, one is to how many other Fed members saw a compelling case for a 50bps move at the last meeting, and two, how much could that have shifted over the last few weeks in light of the recent strength of US data. The minutes should answer the first question, the second question will need to see more data. Another key question will be how long Fed officials see rates staying at current levels, and whether they still see the December dots as an accurate representation of future rate hike expectations. US Core PCE Deflator (Jan) – 24/02 – in the last 2 months the US Core PCE Deflator has fallen back sharply from 5.2% in September, falling to its lowest level since October 2021 in December at 4.4%. The sharp fall from those peaks has certainly helped drive the disinflation narrative that has got the markets speculating that we might start to see some of the recent rate hikes start to get reversed before the end of this year. As the Fed's preferred inflation measure, sharp falls in this indicator could help reinforce the narrative surrounding weaker prices growth. Unfortunately, this week's January numbers may not support this conclusion if the recent payrolls and services data is any indication. We could see a big rebound in prices driven by higher personal spending as a result of the strong jobs data. EU CPI (Jan) – 23/02 – inflation in Europe has been falling sharply in recent months, although the recent Germany CPI numbers would appear to suggest that it is a little stickier than perhaps the ECB would like. The most recent flash numbers for January saw headline CPI fall from 9.2% to 8.5% a bigger fall than expected with the month on month decline of -0.4%. Core prices however increased, rising to 5.2% on an annualised basis from 5.1% in a sign that while headline pressures were easing sharply, there is little sign that core prices are going the same way. This week's January final numbers could see an uptick given that Germany CPI came in higher than expected, in spite of continued weakness in natural gas prices which have slipped to their lowest levels in 18 months. US Q4 GDP – 23/02 – despite the rise in interest rates we've seen over the past few months, the US economy has held up reasonably well, with strong growth in Q3 as well as Q4, after a weak H1. The first iteration of US Q4 GDP saw the economy expand by 2.9%, which was above expectations of 2.5%. Personal consumption was a little disappointing, slipping back to 2.1%, which wasn't that surprising given that November and December retail sales contracted. This trend will probably rebound in the January personal spending and income numbers. HSBC FY 22 – 21/02 – the rebound since the lows in October has seen HSBC shares rally to their best levels since September 2019, on a combination of rising interest rates as well as optimism over a rebound in China's economy in 2023. When HSBC reported in Q3 the shares fell back after reporting Q3 revenue of $11.6bn, while profits after tax came in at $2.56bn. This was significantly lower than the numbers in Q2, with profit attributable to shareholders, dropping to $1.9bn, down from $5.77bn in Q2. Part of the reason for the lower profits was an increase of provisions for non-performing loans of $1.1bn, doubling the amount set aside year to date to $2.2bn. On the plus side the banks NIM rose in Q3 to 1.57% from 1.35%, helping to push net interest income to beat expectations, reflecting the higher interest rate environment. A month later the bank announced it had agreed to sell its Canadian operation to Royal Bank of Canada for $10bn in cash. This appears to be the latest example of Asia's largest bank looking to gravitate away towards its core markets in Asia, and in so doing helping to keep its shareholders onside as it looks to boost the resilience of its core operations, as well as improving pay-outs. This week's full year numbers should point to a better outlook with the Chinese economy reopening even if Q4 disappoints due to the covid disruption which only started to ease in the middle of December. Lloyds Banking Group FY 22 – 22/02 – despite the recovery off its lows in October, the Lloyds share price remains below its highs last year as well as its pre-pandemic peaks set back in December 2019. The shares have underperformed primarily due to concerns over the economic outlook and its heavy reliance on the UK domestic market, particularly mortgages and consumer credit. Despite these concerns the bank has consistently outperformed while increasing profits to the point its more profitable now that it was back in 2019 when the shares were much higher. In Q3 statutory pre-tax profits fell back, coming in at £1.51bn, a 26% decline from the same quarter last year, and down a similar percentage from Q2. A large part of the reason for this was due to a large increase in provisions for non-performing loans, which increased by £668m in a sign that the recent squeeze on customer finances was increasing concern about possible loan losses, pushing impairment provision year to date to over £1bn. In its Q3 numbers the bank also reported that unsecured loan demand remained strong with a 4% increase to £8.8bn, while the open mortgage book saw an increase of 1%. This is expected to see a slowdown in Q4 and into the new fiscal year, even as net interest margins have improved to 2.98% for the quarter, up from 2.55% in Q2, pushing average NIM year to date up to 2.84%. Inevitably this improved profitability has led to calls from certain parts of the political spectrum for a windfall tax on the banks, despite the facts that profits are lower this year than they were last year. Lending to small business also saw a modest decline of 3% to £39.8bn, not altogether surprising given the economic backdrop, and the increases in taxes that are due to come into effect in April. Rolls-Royce FY22 – 23/02 – when new CEO Tufan Erginbilgic took over earlier this year he didn't hold back in the challenges facing the current business. Likening the company to a "burning platform" his words sent the shares off their recent highs, after a rally from the September lows of 70p, which saw the shares hit their highest levels since February last year. There is no question the company has its problems, with its heavy reliance on its civil aerospace division a notable weak spot, although even here there are grounds for optimism as airlines slowly return to their normal pre-Covid flying patterns. In Q3 the company that various problems in its supply chains meant that inventory levels were higher than they should be, due to high demand in its power systems business which was seeing record orders. These problems have caused a higher-than-expected build-up of inventory. Large engine flying hours were also at the lower end of expectations, at 65% of 2019 levels despite the return of long-haul flights last year. The company blamed China's zero-covid policy for impacting the business particularly in Asia, a trend which should improve in the coming months. The ITP Aero proceeds have been used to pay down a £2bn floating rate loan. As we look ahead to the new fiscal year let's hope the new CEO paints a more upbeat and more optimistic outlook than the one, he laid out last month. After all, if he can't paint a positive outlook for the business, why should shareholders. BAE Systems FY 22 – 23/02 – over the last 12 months the UK biggest defence contractor has been one of the best performers with the shares hitting record highs earlier this year. The Russian invasion of Ukraine has pushed BAE to the forefront of investors radars given its position as a manufacturer of artillery shells and howitzer rounds, as well as other defence systems and hardware. In Q3 the company announced it had an order book backlog of £52.7bn, with the company seeing £10bn of orders in Q3 alone, on top of the £17.9bn in H1. The company kept its full year guidance of underlying EPS growth of 4% to 6% unchanged. IAG FY 22 – 24/02 – airlines have got off to flyer this year, amongst the best performing sector over optimism that as we head into 2023 consumers will start splashing what available cash they have on holiday getaways in what looks set to be the first year since covid that won't be subject to widespread disruption. The smaller budget airlines have recently reported a huge surge in bookings numbers, which bodes well for the likes of the big carriers as well. In Q3 IAG reported adjusted operating profits of €1.1bn, while revenues beat expectations coming in at €7.33bn, pushing above 2019 levels, despite operating at lower capacity. The higher revenue level, while welcome, simply reflects higher ticket prices, with business travel back at 75% of 2019 levels. Profits after tax for Q3 rose to €853m. For the year-to-date IAG has managed to edge back into the black to the tune of €170m. For Q4 capacity is expected to be at 87% of 2019 levels, with Q1 expected to rise to 95%, which seems a little on the optimistic side given the economic outlook, and how only Ryanair has managed to return to those sorts of levels of load capacity. Walmart Q4 23 – 21/02 – since falling sharply to 2-year lows in May last year after reducing their sales growth targets and missing on profits due to higher costs, Walmart shares have slowly recovered most of that lost ground. In Q3 the retailer reported Q3 revenues of $152.8bn, and profits of $1.50c a share, which were both well above expectations. The profit number for the quarter was wiped out by a one-off $3.1bn opioid settlement, meaning that the profit turned into a net quarterly loss of $1.8bn. Despite that Walmart upgraded its full year guidance and posted gross margins of 23.8% also slightly ahead of forecasts, as well as announcing a $20bn share buyback. Walmart has also managed to reduce its inventory level down to 13%, haling it from Q2's 26%, helped by sales growth of 8.2%. The big question is whether Walmart will be able to meet this target given the slowdown in US retail sales seen at the end of last year. In previous quarters Walmart warned that rising prices were prompting a shift away from higher margin goods to lower margin everyday staples. Profits are expected to come in at $1.51c a share. Nvidia Q4 23 – 23/02 – having hit two-year lows back in October last year, Nvidia shares have undergone a decent rally since then, retracing 50% of the decline from the record highs from November 2021. The rebound from those lows appears to have run into a bit of trouble in recent days as concerns over the economic outlook increase. In August Nvidia warned on its margins as well as cutting its revenue outlook. Its Q2 numbers confirmed that downgrade to guidance, with profits coming in at $0.52c a share and revenues coming in at $6.7bn, with the company citing a slowdown in gaming revenue to $2bn. In Q3 revenues came in at a lower $5.93bn, although demand for its data centre chips was better, which offset slowing demand for gaming chips. Profits came in at $680m, slightly below expectations, with the company offering Q4 revenue guidance of $6bn, +/- 2%. Since the start of this year Microsoft indicated that demand for gaming had remained lower, which is likely to be reflected in Nvidia's revenue on the gaming side. Demand for higher specification AI chips could well offer some hope here with Nvidia a key supplier in this area. Profits are expected to come in at $0.81c a share. For further comment from Michael Hewson, please call 0203 003 8905 or 07824 660632Email: marketcomment@cmcmarkets.comFollow CMC Markets on Twitter: @cmcmarketsFollow Michael Hewson (Chief Market Analyst) on Twitter: @mhewson_CMC
Week Ahead: Russia is expected to show the deflation trend remains intact

Week Ahead: Russia is expected to show the deflation trend remains intact

Craig Erlam Craig Erlam 18.02.2023 09:20
US The latest round of economic data (retail sales, CPI, PPI, jobless claims) are all signaling more Fed rate hikes are coming.  Wall Street will pay close attention to the flash PMIs, which could show manufacturing and service sector activity is stabilizing, existing home sales, jobless claims, and personal income & spending data.  The second look at Q4 GDP and core PCE are also expected as is the final sentiment reading from the University of Michigan. The debate between quarter-point and 50 basis point rate rises by the Fed has returned.  The FOMC minutes will closely be watched, especially after Fed’s Bullard and Mester noted they were thinking about half-point rises.  Fed speak includes appearances by Bostic and Daly on Thursday, while Jefferson, Collins, and Waller speak on Friday.   Earnings seasons continues with key updates from Alibaba, Baidu, BASF, BHP, Block, Booking, CIBC, Cheniere Energy, Deutsche Telekom, eBay, Engie, Eni, Home Depot, HSBC, Iberdrola, Intuit, Keurig Dr Pepper, Moderna, Munich Re, Nvidia, Rio Tinto, Walmart, and Warner Bros Discovery.  Eurozone It’s unlikely to be a game-changing week but there are some very interesting economic data releases that traders will pay close attention to. The one that stands out is the HICP inflation data, although being a revised number we may not get much from it. The PMI surveys could be of greater consequence, being flash readings that will continue to paint a picture of how well the bloc is holding up.  UK  A quiet week for the UK with the early part bringing PMIs from the services and manufacturing sectors and the latter BoE appearances. The outlook for the UK remains confusing despite all of the optimism and just as we’re seeing setbacks elsewhere, there will likely be plenty here too. Investors appear convinced the end of the tightening cycle is nigh, buoyed by the MPC’s confidence on the path of inflation this year. The PMIs will offer further insight into the state of the economy while the speeches may shed a little more light on what this all means ahead of next month’s meeting. Russia The monetary policy report may be of interest next week, although rates have now been on hold for the last five months. PPI data is expected to show the deflation trend remains intact, something that may trigger a change in thought on rates should it filter through to the CPI numbers.  South Africa Unemployment and PPI data are released next week, the latter of which may catch the eye a little more given the potential implications for CPI inflation and interest rates. We’re still a way off from the next SARB meeting which takes place at the end of March but with inflation now only a little above the 3-6% target range and core well within, the case for further rate hikes is weakening.  On Wednesday, Finance Minister Enoch Godongwana will deliver the National Budget speech to Parliament. The government has numerous priorities that it must address and finding that balance will be no easy feat. Markets, as ever, will be watching. Turkey There’s no doubt what the main event is next week. The CBRT is expected to resume its easing program with another 1% cut, taking the key rate to 8%. The central bank hasn’t been shy about going further than markets expect before, or particularly concerned about the consequences. So we shouldn’t be surprised if it does so again. Switzerland Very little of note on the agenda next week, the most notable possibly being the ZEW survey. A 0.5% rate hike is still expected at the next scheduled meeting on 23 March but with inflation still running uncomfortably above target; the only risk is the SNB won’t wait that long.  China The amount of support that will get pumped into China’s economy might depend on how well their reopening goes.  This week’s main event for China is the decision on loan prime rates.  Given the PBOC kept the key rate steady earlier this month, both the 1-year and 5-year loan prime rates are expected to remain unchanged from a month ago at 3.65% and 4.30% respectively.  China is still widely expected to ease sometime soon and that should keep the outlook strong for Asia.      India No major economic releases or events are expected.  Australia & New Zealand The RBNZ is widely expected to deliver its 10th-straight rate hike, with the majority of analysts expecting a half-point rate rise to 4.75%. The consensus range is anywhere from a quarter-point rate rise to as high as a 75 bp rate increase.  Extreme weather may keep inflation pressures going, so the RBNZ should remain somewhat hawkish.  New Zealand’s second-tier data releases also include PPI, trade balance, and credit card spending.    The main economic release for Australia is Q4 wage data that is expected to show pay growth remained, but struggled to keep up with inflation.  The release of Q4 private capital expenditure should show an improvement from -0.6% to +0.9%.   Japan The focus in Japan will be on two big events.  Kazuo Ueda, the government’s nominee to become the next BOJ  governor, is expected to speak at a confirmation hearing at the lower house of parliament on February 24th. Japan’s inflation report is also expected to show core prices rose to the fastest levels since 1981.  Singapore The January inflation report is expected to be hot as the labor market remains tight and foreign travelers return.  Industrial production is also expected to improve, with the year-over-year reading increasing from -3.1% to -1.9%.  Economic Calendar Saturday, Feb. 18 Economic Events Major leaders attend the 59th Munich Security Conference Hungary PM Orban gives his annual state-of-the-nation speech Sunday, Feb. 19 Economic Event US Secretary of State Blinken’s European trip includes visits to Turkey, Germany, and Greece   Monday, Feb. 20 Economic Data/Events US markets closed for President’s Day China loan prime rates Eurozone consumer confidence Finland CPI Malaysia trade Philippines balance of payments Sweden CPI Taiwan export orders Thailand GDP US President Joe Biden is scheduled to visit Poland   EU foreign ministers meet in Brussels Sweden’s Riksbank releases minutes from its February monetary policy meeting BOE’s Woods speaks at the Association of British Insurers annual dinner Tuesday, Feb. 21 Economic Data/Events US existing home sales, PMI Canada retail sales, CPI Eurozone PMI, new car registrations Finland unemployment France PMI Germany PMI, ZEW survey expectations Japan PMI Mexico retail sales, international reserves UK PMI Russian President Putin to deliver his first state-of-the-nation address RBA releases minutes from its February policy meeting Riksbank’s Floden speaks   Riksbank’s Ohlsson participates in a roundtable about the current economic situation Wednesday, Feb. 22 Economic Data/Events Fed releases minutes from its Jan. 31-Feb. 1 policy meeting Germany CPI, IFO business climate Italy CPI New Zealand trade Russia industrial production US MBA mortgage applications Reserve Bank of New Zealand rate decision: Expected to raise rates by 50bp to 4.75% ECB Governing Council meets in Lapland, for a non-monetary-policy meeting BOJ board member Naoki Tamura speaks in Gunma, Japan Riksbank’s Governor Thedeen speaks about the economy and monetary policy South African Finance Minister Godongwana presents the national budget Hong Kong annual budget presentation Thursday, Feb. 23 Economic Data/Events US 2nd look at Q4 GDP, initial jobless claims Eurozone CPI Singapore CPI Taiwan industrial production G-20 finance ministers and central bank governors meet in India Turkey interest-rate decision: Expected to cut rates by 100bps to 8.00% Mexico’s central bank releases minutes from its February policy meeting Fed’s Bostic speaks at the bank’s 2023 banking outlook conference BOE’s Mann speaks at the Resolution Foundation on “The Results of Rising Rates: Expectations, Lags and the Transmission of Monetary Policy” BOE’s Cunliffe delivers a keynote address at a G-20 financial and central bank deputies meeting on “Leveraging National Payment Systems to Enhance Cross-Border Payment Arrangements” Riksbank’s Floden speaks on the economy and monetary policy Japan Emperor’s Day holiday Friday, Feb. 24 Economic Data/Events US PCE deflator, personal spending, new home sales, University of Michigan consumer sentiment Germany GDP Japan CPI Mexico GDP Singapore industrial production One-year mark of Russia’s invasion of Ukraine German Chancellor Scholz leaves for a three-day trip to India BOE’s  Tenreyro participates in a panel discussion titled, “Back to 2% inflation?” BOJ governor-nominee Kazuo Ueda appears before Japan’s lower house Sovereign Rating Updates Netherlands (Fitch)  Austria (S&P) Austria (Moody’s) Sweden (Moody’s) This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

Fed and ECB seem poised to take interest rates even further into restrictive territory

Ed Moya Ed Moya 18.02.2023 09:25
Wall Street appears to be closing out the week on a down note as investors become rattled over the prospect of more tightening by the Fed. It isn’t just Fed expectations that are rising, traders are also expecting the ECB to send rates much higher. It looks like global growth will definitely take a harder hit as monetary policy gets even more restrictive over the next few months. More from the Fed Fed’s Bowman reiterated inflation is still too high and that they need to continue hikes until we see more progress. She did note the Fed is seeing a lot of inconsistent data in economic conditions. It doesn’t look there is a chance that the Fed will be holding anytime soon, which should keep sending yields higher at the short-end of the curve. Fed’s Barkin however wants to remain flexible and favors a 25 basis point increase. He acknowledges that he is not ready to declare victory on inflation. FX Friday’s sell everything trade initially sent the dollar higher as risk aversion appears to be running wild as Fed tightening jitters make it more likely the US economy is recession bound. The latest round of hawkish Fed speak from Bullard, Mester, and Bowman have swaps pricing rate hikes at the March and May meetings. The dollar pared earlier gains as yields came in around the European close and after Fed Barkin’s comment that he favors 25bp rate hikes for flexibility. Oil Crude prices are falling as supplies are plentiful and as global growth concerns return as the Fed and ECB seem poised to take interest rates even further into restrictive territory. The belief that OPEC+ can keep prices supported wherever they want is waning as global growth outlooks take a turn for the worse. As long as supplies seem ample, OPEC+ will be playing catchup to keep the market tight. Oil is seeing steady selling pressure and the true test will be if prices can break below the $72.00 a barrel level. Gold Gold prices got crushed this week as the bond bears are fully in control now that the market is pricing in more Fed rate hikes. Gold’s vulnerability to further downside however should be limited as central banks appear poised to increase their bullion holdings. Global recession risks are returning and that should lead to some safe-haven flows for gold. Gold should have major support ahead of the $1800 level, which means we might be stuck in a range until we have clearer signs if inflation is going to continue to accelerate here. Crypto Bitcoin is lower on the day as every risky asset sold off on fears of more aggressive Fed tightening and rising recession risks. After Bitcoin tested the $25,000 level and failed to extend higher, many active traders locked in profits. Appetite for risky assets might struggle over the short-term, which could support a Bitcoin consolidation as long as a regulatory crackdown does not take down a key stablecoin or crypto company. Many crypto traders are paying close attention to the reports that Binance might exit relationships with US companies as pressure from regulators intensifies. Binance CEO Changpeng Zhao (CZ) tweeted, “Given the ongoing regulatory uncertainty in certain markets, we will be reviewing other projects in those jurisdictions to ensure our users are insulated from any undue harm.” Binance is the world’s largest exchange and if it abandons key US relationships, that is a major setback for the cryptoverse. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
US GDP Ahead, Energy Prices Push Lower, EUR/USD Pair Struggles

The US Economy Expects Neither Decline Nor Growth Of GDP

Kamila Szypuła Kamila Szypuła 19.02.2023 09:30
This week attention was focused on the US inflation report. In the coming week, the markets and the Americans expect the publication of gross domestic production data and thus whether fears of recession are high. Previous data The US economy ended 2022 in solid form, although there are still questions as to whether growth will turn negative in the coming year. Gross domestic product grew by 2.9% yoy in the fourth quarter, slightly better than expected. An increase in private investment in inventories, government spending, and investment in non-residential fixed assets helped raise the value of GDP. The sharp decline in housing helped reduce GDP, while increases in government spending and private investment contributed to growth. The rate of growth was slightly slower than the 3.2% rate in the third quarter. Consumption expenditure, which accounts for around 68% of GDP, increased by 2.1% over the period, down slightly from 2.3% in the previous period, but is still positive. Forecast Gross domestic product is expected to remain unchanged at 2.9%. Fed New government figures released on Tuesday show that above-average inflation continues to challenge the US economy. Largely positive economic data from the US and hawkish stance of several FOMC representatives opened the possibility of further rate hikes by the Federal Reserve. The Federal Reserve is expected to continue raising interest rates. The difficulty the central bank faces is whether it is able to carry out a soft landing. Economists said they still expect a recession after the new January inflation figures. The question is how severe the downturn could be. Soft landing? A recession is when an economy gets smaller, i.e. produces less stuff: fewer laptops, trucks, lattes and hairdressers. Normally when it happens you feel it, people get fired, businesses close down and it all starts with a super sale. But now nothing really goes according to plan. Last year, as inflation spiked, the Federal Reserve took action to drive prices down by raising interest rates. The increase in interest rates is intended to slow spending. Higher interest rates make it more expensive for people and businesses to borrow money, so they borrow less, spend less, and ultimately buy less. When spending goes down, companies lower prices to encourage people to buy. And just like that, prices go down. Inflation problem solved! The problem is that a slowdown in spending slows down the entire economy. A promising sign that the US economy may hit a soft landing comes from the most important consumer. Consumer spending (or what we buy) accounts for nearly 70% of the entire US economy. When consumers spend less, the entire economy slows down. And the latest figures show that consumers spent at a very fast pace in January. Through the eyes of citizens Despite high inflation, rising interest rates and consistent recession predictions from Wall Street, Americans have continued to spend at record rates over the past year. A recent Morning Consult poll found that nearly half of adults - 46% - believe the US is already in recession. Such a slowdown – traditionally defined as two consecutive quarters of falling economic growth – has not really happened yet. However, economists say a recession may be imminent. Source: investing.com
Sterling Slides as Market Anticipates Possible Final BOE Rate Hike Amidst Weakening Consumer and Housing Market Concerns

Analysis Remains More Certain In The View That Headwinds Persist; Whether This Results In A Recession Is Probably Less Important

Franklin Templeton Franklin Templeton 19.02.2023 10:53
The mood music changes The first month of 2023 was quite the contrast to the dismal financial market returns posted last year. We have seen a growing belief form in markets that inflation—the prime driver of last year’s pain—has not just peaked but is finally moderating. This has been complemented by optimism relating to China’s reopening and economic data in Europe that suggest near-term recession risks have been averted. You might say the “mood music has changed.” As we discussed in last month’s Allocation Views, this is perhaps a case of markets having already discounted the likely pause in developed market growth. In addition, the relatively mild winter in Europe, which has led to unusually full reserves of natural gas (and sharply lower prices), can be viewed through an economic lens as one of the more extreme tail risks having been dodged. But has the outlook actually improved noticeably? Or is it just a matter of the phasing of periods of slightly more, or slightly less, sluggish growth. We continue to anticipate that the cumulative effect of monetary policy tightening will have a dampening effect on economic activity. We also believe the consequences of the cost-of-living crisis have not been evaded and that corporate profit margins may have further to fall if wages attempt to catch up with prices. This is likely to see growth slow—not just to below trend levels, but toward a standstill. However, with a more optimistic background, and listening to a happy tune being played by market participants, it would be easy to get carried away and believe that all was well. One area where this optimism perhaps sits on more solid foundations is in Asia. The reopening of China’s economy and rising demand for regional travel may help to support China’s neighbors. The health consequences of a slightly chaotic relaxation in China’s COVID restrictions have not been as bad as some might have feared, and the domestic service sector should continue to benefit from the follow through into sustained acceleration in growth. However, the Chinese authorities continue to balance a desire to promote growth with a need to maintain stability. Neither housing market risks nor fears of further regulatory action have gone away. We have seen that the change in tune regarding China’s zero-COVID policy has improved the mood of equity investors, especially locally, but we would be less certain that China will drive any appreciable improvement in gross domestic product (GDP) for the rest of the world or lessen the risk of recession in the western developed economies to a meaningful extent. The trough in economic activity is likely still ahead of us, as leading indicators suggest a period of weak growth (see Exhibit 1), even where current activity has held up reasonably well thus far. If the full impact of ongoing monetary policy tightening remains to be felt, then it is unlikely financial markets can post a sustained rebound at this time. Our analysis remains more certain in the view that headwinds persist; whether this results in a recession is probably less important than the direction of travel. This is reflected in our primary theme that is revised to note that “Growth Is Below Trend” and recession risks are high globally, but increasingly bifurcated between East and West. Inflation has peaked Part of the improving sentiment in markets, as we noted above, is due to inflation appearing to have peaked. This is true globally at the headline level, including the direct effects of energy prices. One of the areas that has received particular attention is European natural gas prices (see Exhibit 2), but broader measures of commodities have also reversed substantially all of their gains since the invasion of Ukraine in February 2022. As this round trip in prices recedes into the past, it will provide easy comparisons against which current Consumer Price Index (CPI) levels will be judged. This will result in expectations of an ongoing drop in headline CPI inflation being realized, unless other components rise to offset it. However, with labor markets tight — especially in the United States, but also in the United Kingdom — wage pressures remain the dominant concern of policymakers. So long as job openings remain elevated and employers struggle to fill vacancies with appropriately skilled applicants, core measures of inflation will be slow to normalize. These pressures are particularly acute in the service sector, where productivity gains can be harder to come by and automation is more problematic. As a result, many central bankers continue to have a laser focus on developments in employment and the labor force. Even as we become more certain that headline inflation has peaked, it is too early to sound the “all clear” from a policymaker’s perspective. Although supply push inflation is reversing, we believe demand destruction will increasingly be the dominant force as the economic cycle slows. These developments reinforce our view that companies will face softer demand, just as the lagged impacts of wage gains and interestrate rises are felt. A continued drag on profit margins is likely to drive weaker employment trends and a deceleration in core inflation. This will be a catalyst for central bank policy to change, but it is not in place yet. We believe the current focus on inflation and the debate around the rate of policy normalization will be the key determinants of monetary policy actions as the year progresses. However, we do see movement in a more constructive direction and have revised our second theme to reflect “Inflation Risks Are Now More Balanced.” Source: Allocation views | Franklin Templeton
Key Economic Events and Earnings Reports to Watch in US, Eurozone, and UK Next Week

Oanda Podcast: Ed Moya reviews the latest market news with Jonny Hart and the week ahead

Ed Moya Ed Moya 19.02.2023 16:35
OANDA Senior Market Analyst Ed Moya reviews the latest market news with Jonny Hart. They discussed the return of the bond bears following a wave of hawkish Fed speak, oil’s weekly loss, crypto markets, and the week ahead. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
US-China Tensions Continue To Ramp Up, Dollar Off Its Highs

US-China Tensions Continue To Ramp Up, Dollar Off Its Highs

Saxo Bank Saxo Bank 20.02.2023 09:14
Summary:  Data was light on Friday and US equity indices ended mixed after markets catching up with the Fed’s December dot plot over the week. Fed speakers Barkin and Bowman were however somewhat less hawkish than Bullard and Mester earlier in the week. Dollar off its highs as US yields retreated lower amid short covering, helping metals regain some footing. US markets remain closed today, and key focus this week on geopolitics as US-China tensions continue to ramp up and one-year anniversary of Russia’s invasion of Ukraine approaches.   What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) mixed, European indices outperformed in the week The S&P500 was down for the second consecutive week as hot inflation data and steady retail sales supported the case for more rate hikes from the Fed, shifting the market expectations for the Fed path higher. The S&P500 was down 0.3% on Friday, with NASDAQ100 down 0.7%, even though the Dow Jones index recovered later to close 0.4% higher. NASDAQ however closed the week higher, with Tesla notching up gains of ~6% in the week. European indices outperformed in the week, led by France’s CAC 40 (FRA40.I) which was up over 3% and EuroStoxx 50 (STOXX50.I) was up 1.8%. Importantly, US markets are shut on Monday for Presidents Day, however yields remain a key focus this week after the US 2-year yield rose to 4.7%+ levels on Friday and 10-year is getting close to the 4% mark again. Key stock movers On Friday, US farm equipment maker Deere (DE:xnys) led market gains being up 7.5%, Moderna Inc (MRNA:xnas) fell 3.3% after its experimental messenger RNA-based influenza vaccine delivered mixed results in a study. Lithium miners Livent Corp (LTHM:xnys), Albemarle Corp (ALB:xnys) and Piedmont Lithium (PLL:xnas) slumped between 9% and 12% due to concerns about weakness in Chinese prices for the EV battery metal. Agricultural spending bellwether - Deere - drives up, putting the spotlight on the tangible world outperforming and food security Deere was the star performer in the S&P500 on Friday, rising 7.5% after raising its forecasts for the year, and reporting better than expected Q4 results. It reported $6.55 earnings per share from sales of $12.7 billion, beating estimates (of $5.56 per share on sales of $11.28 billion). The bottom line is demand from farmers is strong, and producers are prepared to buy more equipment and upgrade their fleets. Its production and precision ag division which includes autonomous crop planting and harvesting – saw the most sales growth – with quarterly sales up 55% in the quarter, from a year prior. The company has not only evolved from selling ag equipment to automation equipment and farm management systems, which helps farmers optimize their operations using crop data analytics. For the year ahead, Deere sees net income rising to $8.75 billion to $9.25 billion, which is higher than its prior estimate ($8 billion to $8.5 billion). This reinforces Saxo’s bullish view of investments in the physical world outperforming the intangibles. Hong Kong’s Hang Seng (HIG3) and China’s CSI300 (03188:xhkg) suffered a third consecutive week of losses amid regulatory concerns Hong Kong's stocks suffered a third consecutive week of losses, with the Hang Seng Index dropping by 1.3%, weighed down by China's tech and internet shares. The Hang Seng Tech Index fell by 2.5%, and turnover was the lowest in 2023 at HK$89.7 billion. Fears of regulatory crackdowns in China were fueled by the disappearance of high-profile investment banker Bao Fan and speculation that Wu Qing, who was known in the securities industry for iron-fisted handling of market irregularity cases, would be the new chief of the China Securities Regulatory Commission. Fan’s majority-owned China Renaissance took a 28.2% hit while internet giants Alibaba (09988:xhkg), Tencent (00700:xhkg), and Meituan (03690:xhkg), registered loses over 2%. Baidu (09888:xhkg) fell 4.6% as ChatGPT concept stocks retraced in both the Hong Kong bourse and mainland exchanges. Lenovo (00992) slid 3.1% following reporting net income, revenue declines, and job cuts. Hong Kong jewellers with large exposure to Chinese tourists declined 2-4%, while Chinese traditional medicines and childcare products gained. The A-share market in China also closed lower, with CSI300 Index down by 1.4%. Computing, electronics, communication, ChatGPT concept, and electric equipment stocks led the charge lower. Digital China (000034:xsec) and Montnets Rongxin Technology (002123:xsec) plunged over 8%. Meanwhile, Chinese traditional medicine names and COVID-19 drug pharmaceutical stocks bucked the decline. Shangdong Xinhua Pharmaceutical (000756:xsec) went limit up by 10% and its H-shares (00719:xhkg) traded in Hong Kong surged 26.4% following positive comments on a generic drug manufactured by the company. FX: Dollar off its highs, NZD in focus as RBNZ meets this week After a run higher this week with the hawkish tilt in Fed expectations, the US dollar was off its highs on Friday with US 10-year yields turning lower after getting close to the key 4% mark. This helped USDJPY retreat from 2-month highs of 135 but Japan’s CPI due this week along with BOJ governor nominee Ueda’s parliamentary hearings will likely keep the yen volatile. NZD was one of the underperformers last week on slowing 2yr NZ inflation expectations, and remains in focus this week as RBNZ is likely to downshift to a 50bps rate hike with some even considering a 25bps hike amid risks from the recent cyclone. GBPUSD touched lows of 1.1915 but was back above 1.2000 handle on Friday. ECB commentary remains mixed (read below) and EURUSD still close to 1.07. Crude oil (CLH3 & LCOJ3) end last week lower on Fed worries Crude oil prices tumbled over 2% last week amid a hawkish tilt returning in the US data and Fed commentaries, which brought up the prospects of more rate hikes in the current cycle. Moreover, data confirming a pickup in real economic activity in China has been meagre so far, and near-term oversupply fears have pushed WTI prices lower to touch $75/barrel on Friday, while Brent took a look below $82. OPEC and IEA however raised the medium-term demand outlook, but this week’s focus will also be on geopolitics (read below) with US-China tensions ramping up and the one-year anniversary of Russia’s invasion of Ukraine. Copper focusing on supply-side issues Despite the hawkish tilt in Fed expectations, copper ended the week only down 0.4% as the key $4 area continued to provide support. Supply issues also remained in focus. Freeport-McMoRan Inc suspended operations at its Grasberg copper mine in Indonesia due to landslides. This is on the heels of disruptions to output in Peru amid social unrest. Zambia also reported that its copper output fell to a seven-year low in 2022. US yield and dollar trends this week will be key for metals and commodities in general. Gold (XAUUSD) approaching key supports Gold fell to a six-week low last week amid hawkish comments from Fed officials after the CPI report last week and Fed commentaries shifting market expectations for the Fed path higher. Gold took a look below the key support at $1828 on Friday but a subsequent recovery to 1840 was seen as dollar was off its highs. Next key support at $1800 level remains a key focus, followed by the 200DMA at 1776.   What to consider? Fed speakers note inflation and jobs data surprises Fed member Bowman (voter) said she wants to see a consistent decline in inflation and she thought the moderation of inflation before the prior meeting meant we could be seeing the beginning of disinflation, but notes the most recent data however has been surprising. Barkin (non-voter) also said that he does feel the US is making slow progress on inflation. Both also emphasized labor shortages, with Barkin stating clearly that he prefers the 25bps rate hike path. ECB’s mixed messages ECB speakers had mixed messages on Friday with the hawkish Isabel Schnabel saying that investors risk underestimating the persistence of inflation. That bolstered rate-hike bets, with money markets pricing a 3.75% peak in the deposit rate. However, later dovish member Francois Villeroy said that rate are now in restrictive territory and that they may raise above 3% but it’s not automatic. Rainy season in Brazil-putting iron ore supply in question Rainfall at Brazil's largest iron ore mines increased in the second week of February, but remained below historical levels since the start of the year. Despite a dry start to 2023, iron ore supply risks are high ahead of seasonal rainy season peaking in month end. Brazilian Iron ore shipments are down this year, while Australian iron ore shipments are up YTD. We need to see Chinese property stimulus pick up to propel further demand in iron ore which could also act as a catalyst for the next move up in iron ore prices. Vale is the biggest iron ore producer in Brazil. Australia’s largest iron ore producers are BHP and Rio Tinto, who report results over the next two days.  Luxury stocks are the key contributors to the French CAC 40 index’s 2023 performance The French CAC 40 index is recording a strong YTD performance with an increase of +14 %. This is quite astonishing. This is partially explained by the weight of luxury stocks in the index. Kering, L’Oréal, LVMH and Hermès represent about a third of the jump. Other major contributors are Schneider Electric (which directly benefits from China’s economic reopening), BNP Paribas, Vinci (a construction company and operator of toll roads), STMicroelectronics (semiconductors) and Air Liquide (which can be considered as a market maker in his business segment). The French index is now valued at less than 13 times the estimated profits. This is below its 10-year average of 14. This could imply the market can go much higher in the short- and medium-term. The French stock market is the largest one in Europe followed by the UK’s. China’s loan prime rate fixing due today China's loan prime rates will likely stay steady at the fixing today, considering the People's Bank of China's decision to keep its medium-term lending facility rate unchanged earlier this month. The one-year and five-year LPR rates are likely to remain unchanged at 3.65% and 4.3%, respectively. Still, the uncertainty around the rate path is increasing given the increasing focus in China to drive up consumption and growth, and rate cuts remain likely in H1. Geopolitics keeps Saxo’s Defense basket in focus In Saxo’s equity theme baskets, the Defense basket was one of the top performers last week despite the news of China sanctions on US defense companies like Lockheed Martin and Raytheon due to balloon shooting incident. Geopolitical tensions, and therefore the Defense stocks, will remain in focus again this week as we approach the one-year anniversary of Russian invasion of Ukraine on 24 February. Biden will be visiting NATO ally Poland to talk about the importance of the international community’s resolve, and unity in supporting Ukraine, adding that the next weeks and months are going to be difficult for Ukraine’s forces, and the US is going to continue to stand by them. Meanwhile, China’s top diplomat Wang Yi kicked off his week-long tour through Europe in Paris on Wednesday. The diplomat is expected to travel to Italy, Germany, and Hungary – with a final stop in Russia. There were also some reports suggesting that the US has information that China may be considering supplying arms to Russia. Putin will also be giving a state of the nation address, and focus will be on any risks of further escalation noting that 500k Russian troops have been mobilised.   For a global look at markets – tune into our Podcast.   Source: Markets Today: US yields at critical levels – 20 February 2023 | Saxo Group (home.saxo)
Assessing 'Significant Upside Risks to Inflation': Insights from FOMC Minutes

The Federal Reserve's Monetary Policy Is About To Undergo A Hawkish Revision

InstaForex Analysis InstaForex Analysis 20.02.2023 10:04
Recent statements by the more hawkish faction of the Federal Reserve have raised genuine fears that the current monetary policy to reduce inflation is about to undergo an undesirable change. Several Federal Reserve officials have hinted at a resumption of stronger rate hikes at their upcoming FOMC meetings. After seven consecutive rate hikes in 2022, the Fed raised rates by only a quarter percentage point at the first FOMC meeting this year. Until recently, there was a 90% chance that the Federal Reserve would make another quarter percentage rate hike at its next meeting in March. According to the CME FedWatch tool, the probability of raising the interest rate by half a percentage point has now risen to 18.1%. Exactly one week ago, the CME FedWatch tool showed a 4.2% chance of a half percentage point rate hike in March. Market sentiment has changed dramatically, believing that the Federal Reserve's monetary policy is about to undergo a hawkish revision. Last week, Cleveland Federal Reserve President Loretta Mester voiced her unfulfilled wish for the U.S. central bank to be more aggressive at its latest interest rate committee meeting in January to bring inflation back to 2%. She is not the only Federal Reserve official who shares this belief. Both regional Fed presidents James Bullard and Loretta Mester, speaking to reporters after speaking to a business group in Jackson, Tennessee, voiced their desire for a 50 basis point rate hike next month. Supporters of tighter monetary policy at the Federal Reserve are citing recent inflation reports that show inflation is much more resilient than they thought and is not declining as fast as their forecasts. This dramatic reversal by members of the Federal Reserve led to a decline in the price of precious metals. Traders were unrealistically hoping for a Fed reversal. However, recent economic data has led to extremely hawkish rhetoric from members of the Federal Reserve and new expectations for an upcoming rate hike in 2023   Relevance up to 07:00 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/335533
ECB's Tenth Consecutive Rate Hike: The Final Move in the Current Cycle

Fed Hawkishness Is Spreading Toward Europe, Rising Geopolitical Tensions

Swissquote Bank Swissquote Bank 20.02.2023 11:09
The planet is boiling. US Dollar Escalating geopolitical tensions combined with the hawkish Federal Reserve (Fed) bets boost demand in the US dollar, while gold sees demand below the $1840 mark. US stock market But the US yields are trending higher on an increasingly hawkish Fed talk, and that could well send the precious metal into the bearish consolidation zone, sooner rather than later. Fed and ECB And the Fed hawkishness is spreading toward Europe. The European Central Bank’s (ECB) Isabel Schnabel warned last week that investors may be underestimating the persistence of inflation, and more importantly the response needed to tame it. Read next: Twitter And Elon Musk Faced A Growing List Of Claims| FXMAG.COM EUR/USD The EURUSD rebounded from the 1.0612 dip on Friday. European stock markets The European stock markets, on the other, continue performing well despite the hawkish ECB expectations. Why? Watch the full episode to find out more! 0:00 Intro 0:27 Rising geopolitical tensions… 2:21 … and Fed hawks support USD bulls 3:10 US stock rally in jeopardy? 4:41 What to watch this week? 5:50 ECB hawks become louder… 6:46 But European stocks push higher! 8:09 Energy under pressure 9:24 Is dovish Chinese monetary policy enough to boost appetite? Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #US #China #Russia #North #Korea #Iran #geopolitical #tensions #economic #inflation #data #Fed #ECB #China #rate #expectations #Alibaba #Baidu #earnings #USD #EUR #XAU #Crude #Oil #DAX #CAC #EuroStoxx #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
Euro's Rally Stalls as Focus Turns to Inflation and Data Disappointments

USD/JPY Pair Is Above 134.00, EUR/USD Pair Holds Below 1.07, GBP/USD Pair Managed To Rebound

Kamila Szypuła Kamila Szypuła 20.02.2023 13:22
The dollar fell on Monday but stayed close to Friday's six-week high as a recent wave of positive economic data boosted market expectations for a tightening of the Federal Reserve's monetary policy. USD/JPY The USD/JPY pair started trading at 134.32 and then rose rapidly towards 134.50. The momentum was not extended and the yen fell to 134.00. At the time of writing, USD/JPY is trading slightly above 134.00 at 134.0290. The geopolitical risk intensified over the weekend when North Korea fired ballistic missiles into eastern waters overnight after an intercontinental ballistic missile was launched on Saturday. Saturday's launch landed off Japan's west coast and prompted joint exercises between the US and South Korea as well as the US and Japan. The sister of North Korean leader Kim Jong Un said the use of the Pacific as a "training ground" would depend on the behavior of US forces and warned of the growing presence of US military assets in the region. This comes as rumors swirl of a new Russian offensive in Ukraine and ongoing US-China spy balloon issues. Markets are still awaiting guidance from the new leadership of the Bank of Japan (BoJ), but hopes for a move away from ultra-easy monetary policy may be overly optimistic. EUR/USD European Central Bank (ECB) policymaker Francois Villeroy de Galhau reiterated that inflation in the eurozone is "too fast and probably persistent", while arguing that the ECB needs to be more predictable in its communications and provide a short-term policy outlook. Later in the day the European Commission will release flash consumer confidence index for February, which is expected to slightly improve to -19.0 from -20.9 in January. Poor trading conditions, however, will likely see the pair's shares confined to a narrow channel. The EUR/USD pair started the week at 1.0686 but was falling. After the fall, the EUR/USD pair rose towards 1.07, but failed to maintain momentum and the pair is again around 1.0680. Read next: EY Will Review Darktrace Key Financial And Control Processes| FXMAG.COM GBP/USD After last week's hesitant action, GBP/USD managed to rebound around the mid-1.2000 area early Monday. The cable pair has been falling from above 1.2050 and is currently trading at 1.2025. Sterling could fall if the Bank of England raises interest rates by 25 basis points in March, but signals that this will be the last hike. Some worrisome economic data from the UK dampened additional rate hikes after March, and money markets now appear to favor a break from the May meeting. The widening of the US-UK rate differential has recently weakened sterling, which could get even worse if the BOE formally deems a potential March interest rate hike to be its last, and given the US data still favors a tightening of the rate path interest rates for the Federal Reserve. AUD/USD The AUD/USD pair is based on Friday's good rebound from around 0.6800, the lowest level since January 6, and gaining strong traction on the first day of the new week. The Australian pair was growing towards 0.69. AUD/USD managed to drink through 0.69 and trade above that level. This momentum was interrupted and the pair dropped to 0.6901. Source: investing.com, finance.yahoo.com
Expect the ECB to keep increasing rates at the short-term, at least until the summer

The Disinflation Process Has Not Started In The Eurozone

Kenny Fisher Kenny Fisher 20.02.2023 14:19
The euro showed some volatility at the start of last week but since then it has been in calm waters and has stayed close to the 1.0.7 line.We’ll get a look at eurozone and German PMIs on Tuesday. ECB signals another 50 bp hike The ECB has been criticized for sending mixed messages to the markets, but Christine Lagarde was crystal clear last week when she told EU lawmakers that “in view of the underlying inflation pressures we intend to raise interest rates by another 50 basis points at our next meeting in March”. Lagarde said the ECB would then evaluate future moves, but with inflation still high, the risks for further rate hikes are skewed to the upside. The ECB’s primary focus is to tame inflation. Headline inflation fell to 8.5% in January, down from 9.2% in December, but is still unacceptably high. Core CPI has been stickier than expected and wage increases are stemming the drop in inflation. ECB member Isabel Shnabel said last that investors risk underestimating inflation, a warning that the Fed has also made to the markets that have consistently been more dovish about rate policy than the Fed. Schnabel noted that the disinflation process has not started in the eurozone, another signal that the central bank will remain in a hawkish mode for the near future. Fed members continue to pound out the message that inflation remains too high and more rate hikes are needed. Investors are clearly concerned that the Fed will make good on these statements, which has sent risk sentiment lower and the US dollar higher. The markets had high hopes that the March rate increase would be a ‘one and done’, but it looks like the Fed will continue raising rates into the second quarter. According to CME’s FedWatch, the markets have priced in an 83% of a 25-bp hike and a 17% of a 50-bp increase. Read next: USD/JPY Pair Is Above 134.00, EUR/USD Pair Holds Below 1.07, GBP/USD Pair Managed To Rebound| FXMAG.COM EUR/USD Technical EUR/USD is testing resistance at 1.0704. Above, there is resistance at 1.0795 1.0604 and 1.0513 are the next support lines This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Listen: Higher for longer

Rates Spark: Looking backward to economic data and forward to geopolitics

ING Economics ING Economics 21.02.2023 08:52
Today promises another series of upbeat indicators reinforcing the higher-for-longer narrative. EUR rates appear to have only just reached fair value, helping to explain why investors still look at them with suspicion. Geopolitical tensions are rearing their ugly head Source: Shutterstock EUR rates are far from stretched. In fact, they've just reached fair value After a slow start this week, markets gear up for the release of important sentiment indicators for the month of February. While the PMI surveys contain specific questions on various aspects of economic activity, they remain essentially sentiment indicators. As such, they are subject to the same biases as the people answering them. One such bias is that economic agents, just like market participants, may well feel that current conditions are better just on the basis of really poor expectations late last year. We often talk about the circularity of the Zew survey of investors (also published today) having a market impact on the same investors but this is also true for other surveys. All this is merely to warn our readers that sentiment indicators can lead us astray when it comes to the direction of the economy, and certainly of financial markets. At the margin, an improvement from weak levels in today’s PMIs could go some way towards reinforcing the higher-for-longer narrative but we would caution that this reflects information already contained in financial market prices. 10Y Bund yields hovering around 2.5% and 10Y swap rates around 3% is roughly where we have pitched fair value This being said, we do not see current EUR market rates as being particularly high. Yesterday, Olli Rehn made comments consistent with hikes in June and later being acceptable to ECB doves. In fact, he kept the door firmly open to more hikes in the summer. Last week Panetta, another dove, stressed that hikes are set to continue after March, albeit at a 25bp pace. All these policy signals are indeed conditional on economic data, especially inflation, but they show that the roughly three more hikes priced by the swap curve are far from absurd. Similarly, 10Y Bund yields hovering around 2.5% and 10Y swap rates around 3% is roughly where we pitched fair value at the start of the year, so we’re open to the idea of a further increase in market rates. 10Y EUR rates are at roughly where we see fair value Source: Refinitiv, ING USD bonds find ready buyers despite stronger US data US data should paint a similarly upbeat picture today. Our US economist is fond of repeating that unseasonably warm January temperatures are boosting activity numbers this year, and housing indicators are no exception. The repricing higher in yields has already triggered inflows worth 2%+ in USD and GBP medium and long sovereign bond funds in the past four weeks, according to EPFR. This is in contrast with net selling in EUR (but balanced by inflow at shorter maturities). Past flow data isn’t sufficient to draw conclusions about the future direction of travel but it seems to echo our view that the ECB is behind the Fed and BoE when it comes to its tightening cycle, and so EUR-denominated bonds are looked upon with suspicion by investors. Behind this deluge of upbeat economic news lurks something more concerning. We have highlighted before that risk assets’ interest rates sensitivity this year seems to be much below that of 2022. In other words, despite a loss in momentum in some quarters, more hawkish pricing in rates hasn’t yet derailed the improvement in risk sentiment. More hawkish pricing in rates hasn’t yet derailed the improvement in risk sentiment The risks to this state of play are twofold. First we may well reach the point where investors judge that interest rates exceed feeble developed market economies’ ability to stomach them. Secondly, geopolitical tensions are rearing their ugly head once again - with flashpoints in Europe, the Middle East and East Asia. It is difficult to predict when these will register with the market’s consciousness but the mix of elevated valuations and rising interest rates make for a more fraught environment. The latter may well result in higher energy prices, which have proved detrimental to bonds last year, but with better growth prospect the justification for the latest sell-off, the impact on rates is harder to call. Rising intermediate and long USD and GBP yields have met rising demand Source: Refinitiv, ING Today's events and market view The main event today is the release of February PMIs for the eurozone and the UK. Consensus if for a small improvement to still modest levels straddling the 50 contraction-expansion line. This will be followed by the Zew survey which we suspect will be largely ignored as its main point is to predict PMIs. Germany and the UK are due to auction bonds maturing in 2028 and 2029 respectively. Spain has mandated banks for a 15Y syndicated deal which should materialise today. US markets returning from a three day weekend have to grapple with their own set of PMIs, and existing home sales. Both may well extend the string of good US economic numbers, comforting investors in their view that policy rates will remain higher for longer. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Technical Market Outlook: EUR/USD Bounces from Resistance, Eyes 100 MA on H4 Chart

About 20% Of Malawi’s Population Is Already Expected To Face Acute Food Insecurity

Saxo Bank Saxo Bank 21.02.2023 09:48
Summary:  US equity futures as well as most European indices retreated on Monday amid a spike in geopolitical concerns with President Biden in a surprise visit to Ukraine and China’s attempts to stand neutral. The backdrop of inflation concerns in the US is still keeping risks of a tighter than expected monetary policy, and yields remain a key focus as US markets return later today. China demand recovery optimism is however back, providing a bid to crude oil and metals. RBA’s minutes guided hawkish, and focus now on RBNZ meeting tomorrow with potential for volatility amid mixed market expectations.   What’s happening in markets? US markets closed, European indices mostly lower as geopolitical concerns weigh Muted trading overnight with US markets closed for President’s Day but geopolitical tensions at a high with President Biden making a surprise visit to Ukraine to pledge support. Futures for S&P 500 and NASDAQ 100 continue to trade in the red with fears of escalating tensions between US and China, as well as the upcoming anniversary of Russia’s invasion of Ukraine. Geopolitical concerns also spilled over to European markets, with most European indices closing in the red on Monday. EuroStoxx 50 (STOXX50.I) was down 0.09% while France’s CAC 40 (FRA40.I) was down 0.16%. Only UK’s FTSE 100 (UK100.I) closed in a positive territory. China markets led the way on Monday with strong gains of over 2% on potential liquidity injection on Friday and expectations of a recovery in momentum as the earnings season focus shifts to Asia. What to watch ahead? When trade resumes in the US today, focus will be on geopolitics as well as the services and manufacturing read outs - PMIs – expected to show the US economy’s recovery is gathering pace – but with the PMIs still in contractionary phase (to show reads of under 50). FOMC minutes due on Wednesday - will have eagle eyes on them - looking for terminal rate expectation comments – given some members hinted of a potential 50bps rate hike again. Later in the week - Friday’s release of January PCE - the Feds preferred inflation gauge - will be a focus - expected to show core inflation rose 0.4% up from 0.3% in December – with the YoY read expected slow to 4.3% (from 4.4%) - according to Bloomberg consensus. BHP’s numbers disappoint, shares slide 2%. Its 50 day simple moving average offers support Softer commodity prices in the half year drove a decline in BHP profits –greater than expected - with underlying attributable profit falling to $6.6 billion in the six months to December 2022, vs the $6.96 billion expected by consensus. The world’s biggest miner declared an interim dividend of $0.90 per share – marking a drop from last year’s record $1.50 per share - meaning its pay-out ratio dropped to 69% from 78%. We think that’s because the board is taking the proposed Oz Minerals takeover into account. As for production - significant wet weather of its coal business impacted production and unit costs - as did challenges in securing enough staff. As BHP’s outlook - it’s aiming to lift iron ore production to 330 mt/yr. Overall it reinforced its positive demand forecast in the second half of FY23 and into FY24 - with strengthening activity in China. BHP sees China and India demand offsetting the slowdown in trade with the US, Japan and Europe. Mining production costs are expected to be markedly higher than before the Covid-19 pandemic – due higher energy, labor and other input costs. Meanwhile we think BHP should benefit from higher-than-expected iron ore, met coal, and copper prices amid supply issues and the green transformation push. Also note, it started the process of divesting its two coal mines- as the business wants to focus on future facing commodities – copper, nickel and potash. Rio Tinto is expected to highlight similar issues  - slimmer profits and higher costs when it reports results tomorrow. For more, refer to Saxo’s Australian Resources equity theme basket. Hong Kong’s Hang Seng (HIG3) and China’s CSI300 (03188:xhkg) rallied with A-shares leading A-shares rallied strongly on Monday with the benchmark CSI300 rising 2.3%. Although the 1-year and 5-year loan prime rates remained unchanged at the monthly fixing this morning, the average mortgage interest in the largest 100 cities fell 6bps M/M to 4.04% in February, or 143bps Y/Y for first-home mortgages and 84bps for second-home mortgages.  China Securities Regulatory Commission (CSRC)’s announcement on Friday of rules to regulate and effectively revive overseas IPOs of mainland companies added fuel to the optimism. Construction materials, electronic appliances, telco, and brokerage names led the charge higher in A-shares. In Hong Kong, the Hang Seng Index opened lower but managed to finish the Monday session 0.9% higher, led by industrials and financials. . Aluminum Corp of China (02600:xhkg) surged 7.6% and China Hongqiao (01378:xhkg) jumped 9.9% following the Yunnan provincial government told local aluminum smelters to cut production due to power shortage. EV makers gained, led by Nio (09866:xhkg) and XPeng (09868:xhkg). The latest rise in tension between the U.S. and China over alleged Chinese support for Russia’s invasion of Ukraine, China’s increasing role in the day-to-day running of Hong Kong, and the issue of Taiwan are taking a backseat for the time being as investors are shifting their eyes to additional policy stimuli being rolled out at the upcoming two-session meetings to be held from March 4, 2023. FX: RBA’s hawkish minutes, RBNZ meeting keeps kiwi in check After extensive speeches last week from RBA Governor Lowe, focus turned back to AUD today with RBA minutes on tap. Th February meeting saw a 25bps rate hike but the statement had tilted more hawkish. AUDUSD took a brief look below 0.69 ahead of the minutes, but reversed higher as the minutes revealed that a pause was not an option at the February meeting. Focus more so on the RBNZ meeting tomorrow morning in Asia (9am SGT/HKT) with some calls for no rate hikes amid the recent flooding damages. NZDUSD slid below 0.6250 in early trading after being somewhat resilient overnight. USDJPY attempting another move to 134.50 with BOJ Governor Kuroda scheduled to appear in the parliament. Crude oil (CLH3 & LCOJ3) gains momentum on China demand and geopolitics Crude oil prices rebounded on sustained hopes of a recovery in China’s activity levels, especially after PBOC’s liquidity injection on Friday. State-owned enterprises have started ramping up purchases, such as Unipec which has purchased about 10mbbl from the UAE for loading in April. WTI futures traded above $77/barrel while Brent was above $84. The geopolitical backdrop added some worries, with fresh risks of sanctions on Russia that could continue to tighten the oil market. Signs of a commodity recovery gather pace: production ramps up in anticipation of demand picking up Fitch Ratings put out a report on China’s reopening driving a modest recovery in oil - this positive sentiment flowed to other commodities. Secondly – as Ole mentioned on Saxo Market Call Podcast, copper inventory has started to roll over in London, Shanghai, and New York - indicating demand for copper and other commodities would theoretically need to pick up. Copper prices (HGA) gained 1.3% on Monday to $4.18 – taking copper back over its 100-day moving average – to its highest levels since January and June last year. Iron ore (SCOA) prices moved up 1.9% to $130.85 – which is its highest level since June last year on supply concerns - with Brazil heading to peak rainy season at month end. Aluminium prices meanwhile are underpinned by a province in China - the Yunnan province – cutting smelter capacity as ordered by the local power grid amid an energy supply shortfall. Lastly - consider keeping an eye on Wheat prices - as the conflict in Ukraine will raise questions about farmers ability to plant wheat int the coming season, meanwhile France - also a key wheat producer – is suffering drought.  Read next: USD/JPY Pair Is Above 134.00, EUR/USD Pair Holds Below 1.07, GBP/USD Pair Managed To Rebound| FXMAG.COM What to consider? President Biden makes a surprise visit to Ukraine – playbook for geopolitical risks Biden made a surprise visit to Ukraine and met with Volodymyr Zelenskiy, declaring "unwavering support" as Russia's invasion nears the one-year mark. These visits come after Blinken’s rhetoric that the US has information that China is supplying arms to Russia, and VP Kamala Harris’ claim to charge Russia with war crimes against humanity. China is however trying to convince that it remains neutral, and State Councilor Wang Yi is set to visit Moscow in the coming days after floating fresh peace proposal to end the conflict. In Saxo’s view, the playbook for the week should be risk-off given the possibility of any ugly turns in geopolitics. That would mean long JPY, long commodities, long Defense stocks and short risky assets. Once we are past this week with hopefully no further escalations, focus will shift back to inflation concerns and driving Fed rate cut expectations further into 2024. Consider watching the US dollar strength, and Saxo’s Défense basket amid geopolitical tensions rising Amid the geopolitical risks rising - consider watching likely US dollar strength play out in key currency pairs. In equities – consider watching Saxo’s Defence basket. Over the last two days we’ve seen geopolitical tensions escalate. Biden made a surprise visit to Ukraine declaring ‘unwavering support’ and pledging $500 million in new aid. Meanwhile, EU diplomats are looking at pooling 4 billion Euros of ammunition purchases for Ukraine as early as next month, with EU states pushing to ramp up their ability to hit back against those helping Russia circumvent sanctions. Also – today Putin is also expected to give a state of the nation address - potentially focusing on escalations - he also may note that 500k Russian troops have been mobilised. Meanwhile China threw cold water on allegations that it is going to help arm Russia. And finally, the White House is reportedly mulling over increasing sanctions on Russia. We continue to watch this closely - and encourage investors and traders to exercise caution. Food security issues pick up; with fertilizers being used as a weapon A Russian cargo ship held back in the Dutch port of Rotterdam for months- has been escorted out by the United Nations’ World Food Program chartered ship. The Russian cargo, bound for Malawi – contains 20,000 metric tons of Russian fertilizer. And the fact that Russia was allegedly holding back fertilizers - meant the nations food security was at risk, with fertilizers essential in growing crops. About 20% of Malawi’s population is already expected to face acute food insecurity during the “lean season” to March. Moreover it’s not just the lack of supply that’s the issue- costs are too. Malawi is one of 48 nations in Africa, Asia and Latin America identified by the IMF as being most at risk of higher food and fertilizer costs after Russia invaded Ukraine. China and Russia have a foothold of the industry - being the world’s largest producers of fertilizers - including nitrogen, phosphates and potash. These issues in Rotterdam highlight that food security can be used as weapon - and we are concerned should geopolitical tensions escalate - which would pressure food prices higher. Large fertilizer companies to watch include CF industries, Mosaic, Nutrien. Refer to Saxo’s Commodity basket for more. Downshift in RBNZ’s rate hike trajectory could signal NZD weakness The Reserve Bank of New Zealand meets on Wednesday, 22 February and consensus expects a return to 50bps rate hikes after a 75bps in November when even the possibility of a 100bps was debated. Economic data has been soft since the last meeting, with 2-year inflation expectations easing and unemployment rate seeing a slight uptick. However, Cyclone Gabrielle has brought fresh risks of inflation pressures in the short-term. Calls for no rate hikes have also picked up although finmin Robertson was out calling for RBNZ having a responsibility to address inflation yesterday. Still, risks of further kiwi weakness loom large after NZD has weakened 1.7% against the USD so far this year. If RBNZ signals that the peak for the current rate hike cycle is near, the 38.2% retracement of NZDUSD uptrend from the October low at 0.6146 could be challenged. The cost of sea freight is back to pre-Covid levels This is positive news on the inflation front. The cost of sea freight is now back to pre-Covid levels. The drop in prices is both explained by cyclical (1) and structural (2) factors. The U.S. consumer is very resilient, as shown by the recent release of the U.S. retail sales. But this is not the case in other countries. The rise in the cost of living is causing a drop in global consumption (1). In addition, the sea freight market is facing a surplus of containers. And this will get worse in the months to come. The number of container ships under construction represents nearly 30 % of the fleet that is currently operational. That’s three times more than normal. Companies in the sector have misjudged the evolution of global demand in the post-Covid period. Wrongly, they anticipated it will remain unchanged or it will even increase. The fall in prices is likely to continue all this year and perhaps partially in 2024. The market consensus expects a drop in transported volumes of around 4 % this year.   For what to watch in the markets this week – read or watch our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: Markets Today: Geopolitical risks front and centre – 21 February 2023 | Saxo Group (home.saxo)
Biden Declared Unwavering Support For Ukraine, The Reserve Bank Of New Zealand May Go Back To Raising Rates

Biden Declared Unwavering Support For Ukraine, The Reserve Bank Of New Zealand May Go Back To Raising Rates

Saxo Bank Saxo Bank 21.02.2023 10:10
  Summary:  Markets are quiet as we are now on the other side of a three day weekend in the US and as geopolitical tensions and elevated yields provide a nervous backdrop. Hong Kong’s HSI index is pushing on the lowest levels since the first week of the year. The focus in Europe this morning is on preliminary PMI’s for February as the Eurozone bloc’s economy may show signs of slight expansion in the month. What is our trading focus? US equities (US500.I and USNAS100.I): skating on thin ice US equity futures are picking up from Friday’s weak session after yesterday’s US holiday with S&P 500 futures trading lower at around the 4,066 level putting US equities into negative territory for the month. Today’s key event is naturally the annual speech from Putin as it could ignite fresh geopolitical risks as described in yesterday’s equity note. In the US session earnings from Walmart and Home Depot can also impact sentiment as both companies are expected to show weak revenue growth. Hong Kong’s Hang Seng (HIG3) and China’s CSI300 (03188:xhkg) The Hang Seng Index slipped 1.3% amid signs that Chinese eCommerce platforms are heating up competition for business. JD.com (09618:xhkg) plunged nearly 8% following launching a subsidy campaign to compete with rivals. Alibaba (09988:xhkg), Tencent (00700:xhkg), and Meituan (03690:xhkg) dropped more than 3%. HSBC (00005:xhgk) pared initial gains from an earnings beat and special dividend and slid 1.6%. Meanwhile, Hang Seng Bank (00011:xhkg) rose 2.9% despite an earnings miss due to a jump in loan loss provision for mainland property loans. In mainland China, the CSI300 is flat. Resource names, such as non-ferrous metal, coal, and steel continued to do well, as did the auto stocks. The consumer and AI generated content space declined. FX: Awaiting USD direction after bearish reversal on Friday and long US weekend As US treasury yields rolled over on Friday, the US dollar did likewise and posted a modest bearish reversal on the same day it was trying to break free of resistance. Given the nervous geopolitical backdrop, headline risk is paramount in coming days as we await further resolution in the USD direction. Overnight, hawkish RBA minutes did little for the Aussie, given downbeat markets in Asia,  while the RBNZ meeting tonight could shake the kiwi in either direction, given the uncertainty of the RBNZ’s stance in the wake of disastrous floods in parts of the country, although NZ yields remain near the highs since early January. Crude oil (CLH3 & LCOJ3) fails to hold onto Monday’s gains Brent crude oil futures dropped back to $83 during Asian hours, thereby reversing Monday’s gain in response to fresh dollar strength and concerns about the near-term direction of US interest rates, and despite sustained hopes of a recovery in China’s activity levels, especially following a fresh liquidity injection by the PBoC last Friday. Geopolitical developments remain a worry but so far, the positive impact on prices have been very limited.  Overall, the oil market remains rangebound, in Brent between $80 and $89 and WTI between $73 and $82, as the market weighs the impact of rising demand in China and India versus a potential slowdown elsewhere. Copper receives a boost from BHP outlook Despite the hawkish tilt in Fed expectations which left other metals on the defensive, copper has managed a strong recovery as the key $4 area continued to provide support. BHP, the world’s biggest miner reported its half-year result today, and according to its CEO the company expects domestic demand in China and India “to provide stabilizing counterweights to the ongoing slowdown in global trade and in the economies of the US, Japan and Europe,”. Also supporting prices are continued threats to supply in Peru, Panama and Zambia. . Some support also coming through via rising aluminum prices after smelters in China’s Yunnan province cut capacity due to energy shortages following a period of weak hydro generation. Gold (XAUUSD) focus on dollar and interest rate trajectory Gold traded softer overnight in response to fresh dollar and yield strength following Monday’s US closed session. The market remains on the defensive after recent US economic data strength and hawkish comments from Fed policymakers led to market to adjust higher the trajectory of US Fed funds rate. Apart from a very uncertain geopolitical situation, the market will be focusing on minutes from the Fed’s last meeting on Wednesday as well as personal spending on Friday. Holdings in ETF’s meanwhile dropped again on Monday with the 3.1 tons reduction to 2882 tons, a three-year low, bringing this year's net sales to 34 tons or 1.1 million ounces. In other words, gold for now needs continued demand from central banks to provide a floor under the market. Support at $1820 followed by $1790. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) after Friday reversal. 2-year auction today US Treasury yields reversed sharply on Friday after posting new local highs. A heavy schedule of auctions lies ahead this week, starting with an auction of 2-year notes today after the benchmark traded within 10 basis points of the 15-year high of 4.80% posted last November. A 5-year auction will follow tomorrow and 7-year on Thursday.  The 10-year benchmark yield tested above the December high of 3.90% on Friday, but trades 3.85% this morning. The US data highlight this week is Friday’s January PCE inflation data. What is going on? The cost of sea freight is back to pre-Covid levels The cost of sea freight is now back to pre-Covid levels, which is positive news on the inflation front. The drop in prices is both explained by cyclical (1) and structural (2) factors. The U.S. consumer is very resilient, as shown by the recent release of the U.S. retail sales. But this is not the case in other countries. The rise in the cost of living is causing a drop in global consumption (1). In addition, the sea freight market is facing a surplus of containers. And this will get worse in the months to come. The number of container ships under construction represents nearly 30 % of the fleet that is currently operational. That’s three times more than normal. Companies in the sector have misjudged the evolution of global demand in the post-Covid period. Wrongly, they anticipated it would remain unchanged or it would even increase. The fall in prices is likely to continue all this year and perhaps partially in 2024. The market consensus expects a drop in transported volumes of around 4 % this year. Downshift in RBNZ’s rate hike trajectory could signal NZD weakness The Reserve Bank of New Zealand meets on Wednesday, 22 February and consensus expects a return to 50bps rate hikes after a 75bps in November when even the possibility of a 100bps was debated. Economic data has been soft since the last meeting, with 2-year inflation expectations easing and unemployment rate seeing a slight uptick. However, Cyclone Gabrielle has brought fresh risks of inflation pressures in the short-term. Calls for no rate hikes have also picked up although Finance Minister Robertson was out calling for the RBNZ to address inflation yesterday. Still, risks of further kiwi weakness loom large after NZD has weakened 1.7% against the USD so far this year. If RBNZ signals that the peak for the current rate hike cycle is near, the 38.2% retracement of NZDUSD uptrend from the October low at 0.6146 could be challenged. AUDNZD broke above 1.1030 and its 200-day moving average yesterday, posting a new 3-month high. BHP guides for a pick up in metals and readies its balance sheet to become a copper giant BHP - the world’s biggest miner saw profits in the six months to December 2022 decline by more than expected but sees the ongoing price recovery extend into the second half year and beyond as it sees demand picking up in China, but also in India - and this offsetting the slowdown in trade with the US, Japan and Europe. All in all, it also guided for mining production costs to be markedly higher than before the Covid-19 pandemic – amid higher energy, labour and other input costs. Its HY results were impacted by lower realised prices in copper, iron ore and coal across the last six months of 2022. Wet weather also impacted on its coal business’ production and pushed up unit costs – and there were difficulties in securing enough staff. This resulted in underlying attributable profit falling to $6.6 billion - vs the $6.96 billion expected by consensus (from continuing operations). BHP’s interim dividend was trimmed to $0.90 per share – down from last year’s record $1.50 per share. Still BHP’s payout ratio is 69% and that’s BHP’s 5th highest dividend on record. We also believe the lower dividend payout reflects that BHP is readying itself for the $9.6 billion takeover of Oz Minerals which, if approved, will occur in May. What are we watching next? Putin speech today. China said to hope broker peace deal over Ukraine after US warns China on lethal aid to Russia Biden made a surprise visit to Ukraine  yesterday and met with President Volodymyr Zelenskiy, declaring "unwavering support" as Russia's invasion nears the one-year mark. China is said to be promoting a peace plan for Ukraine as China’s top diplomat will arrive in Moscow today, but German and US authorities are already declaring themselves sceptical on China’s intentions and accuse it of taking sides. European source familiar with the plan (cited by Bloomberg, the officials asked not to be identified) said it would likely include a call for a cease-fire and the cessation of arms deliveries to Ukraine. Putin is set to make a speech today in Moscow, with added interest given the presence of a top Chinese official. In Saxo’s view, the playbook for the week should be risk-off given the possibility of any ugly turns in geopolitics. That would mean long JPY and USD, long commodities, long defense stocks and lowered exposure or hedging of risky assets. Once we are past this week with hopefully no further escalations, focus will shift back to inflation concerns and driving Fed rate cut expectations further into 2024. Earnings to watch Today’s US earnings focus is Walmart and Home Depot with analysts expecting Walmart to report revenue growth of 4.4% y/y and EPS $1.52 down 1% y/y as volume of goods sold is expected to be under pressure. Analysts expect Home Depot to report revenue growth of 0.6% y/y and EPS of $3.27 up 1.8% y/y reflecting lower volume across US home improvement industry. Tuesday: Teck Resources, Gapgemini, Engie, HSBC, Walmart, Home Depot, Medtronic, Palo Alto Networks Wednesday: Rio Tinto, Genmab, Danone, Lloyds Banking Group, Iberdrola, Nvidia, TJX, Stellantis, Baidu, eBay Thursday: EssilorLuxottica, Deutsche Telekom, Munich Re, Kuaishou Technology, Eni, Anglo American, BAE Systems Friday: BASF, Monster Beverage Economic calendar highlights for today (times GMT) 0815-0900 – Eurozone Flash Feb. Manufacturing and Services PMI 0930 – UK Flash Feb. Manufacturing and Services PMI 1000 – Germany Feb. ZEW Survey 1330 – Canada Dec. Retail Sales 1330 – Canada Jan. CPI 1445 – US Flash Feb. Manufacturing and Services PMI 1500 – US Jan. Existing Home Sales 1800 – US 2-year Auction 0030 – Australia Q4 Wage Price Index 0100 – RBNZ Official Cash Rate Source: Financial Markets Today: Quick Take – February 21, 2023 | Saxo Group (home.saxo)
Nasdaq 100 posted a new one year high. S&P 500 ended the day unchanged

Chinese equities rally, Meta announced a plan to roll out paid subscriptions

Swissquote Bank Swissquote Bank 21.02.2023 10:30
Chinese equities were boosted on Monday by a report from Goldman Sachs predicting that the MSCI China index could rally as much as 24% by the end of the year. BHP And mining stocks hope they are right because BHP announced a 32% drop in half-year profit as a result of rising costs and soft commodity prices, mostly hit by subdued activity in China. However, rising commodity prices is a scenario of catastrophe for global inflation, and the central bank expectations. The RBA The latest minutes from the Reserve Bank of Australia (RBA) showed that the Australian policymakers considered a 50bp hike at the latest meeting, before agreeing on a 25bp hike. Oil For now, though, oil bears defy all news of Chinese reopening. Yesterday’s rebound in US crude remained capped into the 50-DMA, a touch below the $78pb mark. Meta In the corporate space, Facebook’s Meta announced a plan to roll out paid subscriptions to compensate for the revenue loss from advertisements – which topped $10 billion last year after Apple changed its security settings. Read next: USD/JPY Pair Is Above 134.00, EUR/USD Pair Holds Below 1.07, GBP/USD Pair Managed To Rebound| FXMAG.COM The latter could give some boost to the revenues in the short run but it’s certainly a sign that Facebook is running out of ideas, and that’s not good for the longer-run perspective! Watch the full episode to find out more! 0:00 Intro 0:42 Chinese equities rally as Goldman predicts 24% rally this year 3:16 BHP hopes Chinese reopening will boost energy, commodity prices 4:02 But higher energy prices is bad news for most stocks 4:22 … and for central bank doves! 5:26 BoFA & JP Morgan bet against European stocks 6:38 Meta is like watching trainwreck in slow motion Ipek Ozkardeskaya  Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Facebook #Instagram #Meta #verified #account #China #stock #rally #commodity #energy #prices #crude #oil #BHP #earnings #inflation #RBA #Fed #expectations #AUD #USD #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
Rates Spark: Bracing for more

Rates Spark: Hawkish rates alongside higher inflation expectations

ING Economics ING Economics 22.02.2023 09:03
The US has seen a 1% rise in the 2yr inflation breakeven, and dis-inversion. Higher market rates makes full sense. Stronger-than-expected sentiment indicators have sent bond yields to new highs, and tonight’s Federal Open Market Committee minutes aren’t likely to change that. Broader market sentiment is souring as the reality of higher rates hits home The rise in US market rates coincides with a remarkable 1% rise in the 2yr breakeven We frequently noted in recent months how remarkably low the US 2yr breakeven inflation was. It got down to the 2% area in September last year, and was there again in mid-January this year. Remember, a 2% breakeven means inflation would have to get below that, well below, in order to average 2% over a two-year period. But that's where we were. Well no more, as we are now at 3%. That's a whole different picture for inflation in the coming quarters. So, there has been a remarkable 1% rise in the 2yr breakeven in a matter of four weeks. And there has been no material fall in the 2yr real yield, which remains in the 1.85% area. It fits with the market moves of the past few weeks, which has seen the 10yr move up from 3.4% to now over 3.9%. We had expected something like this, as the curve was far too inverted, and the back end was prematurely discounting interest rate cuts. The back end is being far more reactive to the front-end fears that the Fed is not done till they are actually done In this respect we had been watching the spread from 6mth Libor to the 10yr Treasury yield. That got down to an extreme of 1.8%. That spread which had the 10yr Treasury yield at 1.8% through the 6mth rate had never been as stretched as that before in modern times. Something had to give, and we called for 10yr yields to rise. They have, and the spread is now into 1.4%. It's still elevated, but now the back end is being far more reactive to the front-end fears that the Fed is not done till they are actually done. We are likely to see some buying into the market on the approach of 4% on the 10yr. Asset managers will look at a 4% handle as a good level. And liability managers will use these elevated 5-10yr fixed rates to do some swapping to floating for long term positive cumualtive carry. That should help to mute any big break above 4%. The market is not in a mood to do so though, and we'd likely need to see some stability before the flows really come in. As we noted some weeks back, a popular theme in this environment has been for be long the ultra front end; in money market funds earnings a rolling 4% to 5% on zero risk, and we noted flows into this space. That's been a good idea so far, but can be balanced up now by morphing some flows into longer duration product, while still holding a chunk of front end risk free exposure. Our recent piece going into all of these factors are to be found here and here. The rise in 2Y nominal yields is matched by higher inflation expectations Source: Refinitiv, ING PMIs are upbeat but market sentiment is souring Markets are dusting off the 2022 ‘sell everything’ playbook as government bonds are printing new highs for the year, and cracks are starting to appear in risk assets. The direction of travel for rates is easier to understand. Better-than-expected PMIs across Europe and the US added to the impression that the loss of economic momentum expected at the end of 2022 is proving much more benign than foreseen at the time. Note that PMIs are still flirting with the 50 level indicating anaemic expansion, but this was enough to provide a further boost to central bank tightening expectations, especially with wage pressure and higher selling prices being highlighted for the service sector. Markets are dusting off the 2022 ‘sell everything’ playbook Nowhere was the surprise as clear as in UK PMIs. After months of doom and gloom, the survey painted an upbeat picture, and cast a long shadow on hopes that the Bank of England’s hiking cycle is coming to an end. Our expectation is that one more 25bp hike will be delivered at the March meeting. The market is now pricing two full hikes in March and May, and a 50% chance of a third one in June. Our economics team has argued that inflation (softer than expected in the last report) and employment (stronger) are more important in dictating the next policy steps but, in any case, there will be one more release of each before the next BoE meeting. Higher core rates are starting to impact higher beta fixed income Source: Refinitiv, ING Markets set to look past less hawkish FOMC minutes Treasuries are going into tonight’s release of the February FOMC minutes at their highest yield level this year… and after touching their lowest level the day after that same meeting. In other words, information processed by the market since the February FOMC meeting triggered over 50bp repricing higher in 10Y yields (for the 2Y it’s closer to 60bp). In this light it is fair to say that the minutes are not just three weeks old, they’re also 50bp old. We struggle to see markets coming around to that disinflationary view We view the risks around this release as balanced. On the one hand, some subsequent Fed comments suggested that a couple of members may have made the case for a 50bp hike, instead of the 25bp it delivered. On the other hand, Powell’s less hawkish tone than in previous meetings may well be a reflection of the broader mood on the committee. The repeated focus on disinflation, in particular, was taken as a cue by the market that the Fed thinks it has made sufficient progress on its fight against inflation to stop hikes soon. We struggle to see markets coming around to that disinflationary view even if it was expressed that clearly in the minutes. The curve is now pricing three more 25bp hike, which implies the hiking cycle ending in June. USD rates are going into the February FOMC minutes with much more hawkish expectations Source: Refinitiv, ING Today's events and market view The delayed January inflation report for Germany published this morning saw no upward revision to the provisional number published earlier this month, but it showed core inflation accelerating from 5.2% annualised in December to 5.6% in January. The better-than-expected PMIs across Europe in February should also be reflected in Germany’s Ifo published today despite a lacklustre reading in Germany’s manufacturing PMI. In any case, we think the bar is high to douse the increasingly hawkish pricing in euro rates. In bond supply, Italy is due to sell inflation-linked as well as 2Y bonds. Germany will also add to this with a 10Y auction. The US data calendar is pretty light but the Fed will release the minutes of the February FOMC meeting. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Hungary's Economic Outlook: Anticipating Positive Second Quarter GDP Growth

Domino’s Pizza shares in gapped down in Australia, Putin vowed to press on with his faltering invasion of Ukraine

Saxo Bank Saxo Bank 22.02.2023 09:56
Summary:  Volatility charged higher as economic data continued to push for an upward repricing of the Fed path. US yields surged to fresh YTD highs, pushing S&P500 to close below 4,000 and NASDAQ 100 approaching 12,000. Fed’s terminal rate is now priced in at 5.37%, and dollar pushed higher with geopolitical concerns also still in play. Consumer stock earnings from Walmart and Home Depot sent margin pressure warnings. FOMC minutes will be dated, but may provide cues on what to expect from the March dot plot.   What’s happening in markets? The major US indices, the Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) fell ~2% while bond yields rose to new 2023 highs The risk off tone was set by geopolitical tensions picking up, as well as economic prints showing the US services and manufacturing PMIs improved more than expected – with swaps now projecting the Fed can keep pushing rates higher — with the market indicating 25-basis-point hikes are coming at the March, May and June meetings.  Sentiment was also weighed by downbeat outlooks from consumer spending bellwethers – Walmart (WMT) and Home Depot (HD). All while investors await Wednesday's Fed minutes release. Also ahead are earnings results from mining giant Rio Tinto (RIO), tourism and casino giant Ceazers Entertainment (CZR) and smartwatch and gadget business Garmin (GRMN). The three major indices shed at least 2%, with the Dow erasing 2023’s gains. On the weekly chart - the S&P500’s fell below its 50-day moving average –indicating there are more sellers than buyers – while also possibly indicating the market is likely to pull back to a cycle low. Pressuring sentiment - bond yields hit new 2023 cycle highs - with the 10-year note up 14 bps, while the dollar strengthened. Hong Kong’s Hang Seng Index (HIG3) fell amid intensifying competition among China’s eCommerce platforms Hong Kong stocks slipped on Tuesday amid signs that Chinese eCommerce platforms are heating up in competition for business. JD.com (09618:xhkg) plunged 8.5% following the eCommerce giant launching an RMB10 billion subsidy campaign to compete with rival Pinduoduo (PDD:xnas). Meituan (03690:xhkg) dropped more than 4.1% after the mainland food delivery giant announced hiring had started in Hong Kong, paying as much as HKD35,000 a month for delivery riders to prepare for an expansion to Hong Kong. Alibaba (09988:xhkg) and Tencent (00700:xhkg) also fell over 4%. HSBC (00005:xhkg) pared initial gains from an earning beat and special dividend as investors sold the shares of the banking giant citing concerns about a softer 2023 profit guidance and saw the shares down nearly 2% during Hong Kong trading hours. Meanwhile, Hang Seng Bank (00011:xhkg) rose 3.3% despite an earnings miss due to a jump in loan loss provision for mainland property loans. In mainland China, the CSI300 edged up 0.3%. Non-ferrous metals, coal, steel, and auto gained while beauty care, media, food and beverage, and retailing declined. Australia equities (ASXSP200.I) also seem pressured by the RBA’s fresh hawkishness The Australian share market has fallen about 3.5% from its new cycle high that it hit on Feb 3. Pressure on the ASX200 comes after the RBA indicated it has more work to do to keep inflation and wage pressure in order. The ASX200 now appears to be pulling back, with Saxo’s Technical Analyst reinforcing the technical indicators suggest the ASX200 could drop further. However, if the ASX200 closes above 7,477, the uptrend can resume. Today, Origin Energy (ORG) is the best performer in large caps, up 13% after receiving a revised takeover offer from the Brookfield Asset Management-led group following months of due diligence. Meanwhile Domino’s (DMP) is the worst performer down 19% on reporting weaker than expected half year results. Meanwhile, BHP (BHP) shares are up slighted after reporting a stronger outlook yesterday. For more on the world’s biggest mining company, and BHP’s expectations for stronger fundamentals this and next year click here – also note BHP remains in a technical uptrend. Ahead are earnings from Rio Tinto (RIO). FX: Yields and risk sentiment in play The US dollar was modestly higher as US 10-year yields reached a YTD high and in close sight of the key 4% mark, closing at 3.95%. Higher-than-expected PMIs in the US further faded recession concerns, bringing the market expectations of Fed terminal rate to a new high of 5.37%. USD gains were more restrained in that view, which also got a push higher from escalating geopolitical tensions as Putin suspended the Nuke deal with the US. GBP was the outperformer after very strong UK Flash PMIs, which suggested falling near-term recession concerns and pushed higher the odds of a 25bps rate hike from the BOE in March. GBPUSD touched highs of 1.2147 from 1.1987. AUDUSD was hurt by falling risk sentiment despite hawkish RBA minutes out yesterday and fell to 0.6848. AUDNZD still held up above 1.10 with the RBNZ expected to take a dovish turn today. USDJPY again testing 135 with FOMC minutes on tap, while EURUSD unable to sustainably break below 1.0650. Crude oil (CLH3 & LCOJ3) still pressured lower Crude oil prices dipped further with dollar strength in play as the expectations of rate hikes from the Fed continued to ramp up. WTI crude traded close to $76/barrel while Brent was below $83. Geopolitical concerns still running high this week, potentially providing a floor to oil prices. Meanwhile, an expected pickup in Chinese demand is also supporting. Overall, the oil market remains rangebound, in Brent between $80 and $89 and WTI between $73 and $82, as the market weighs the impact of rising demand in China and India versus a potential slowdown elsewhere.   What to consider? Putin suspends Nuclear pact with the US, threatens to push war in Ukraine Putin, in his State of the Nation address, announced a suspension of participation in the New START nuclear arms control treaty with the US. This was the last accord limiting their nuclear arsenals. He also vowed to press on with his faltering invasion of Ukraine. This has spurred the next leg of escalation concerns, invoking a response from President Biden in Poland saying that Russia will never win the war and pledging more support to Ukraine. The focus is now on China which needs to back up its peace treaty words with action after being accused of supplying arms to Russia. Senior Chinese diplomat Wang Yi is now visiting Russia and there are reports that President Xi could be visiting Moscow to meet with Putin in April or May. US S&P PMIs topped expectations, fading recession concerns Flash S&P PMIs for the US were better than expected, with services returning to an expansion territory of 50+. Manufacturing PMI also picked up traction coming in higher at 47.8 from 46.9 previously while Services and Composite both rose back into expansionary territory to 50.5 (exp. 47.2, prev. 46.8) and 50.2 (exp. 47.5, prev. 46.8), respectively. The report further pointed to fading recession concerns, while input price pressures also eased despite a shaper rise in output prices. Australian wage growth and construction data to keep the RBA on its hiking path for now With the RBA now being more hawkish and data dependent, today’s wage growth data and construction work done seemingly validate Australia’s central Bank, can keep on its hiking path for now. Australian wage growth grew 3.3% YoY, up from the revised higher read of 3.2% YoY prior. Despite wage growth growing less than 3.5% expected  - construction work done began to roll over  - falling 0.4% in Q4 – marking a slight fall the prior quarter’s revised jump of 3.7%. So despite both reads being softer than expected – we still need more data to validate core inflation could slow – especially as it’s still well above the RBA’s target. Money markets softened to imply a peak cash rate of 4.2% in August 2023 (down from 4.3%). The next data the RBA will look at - will be next week’s release of retail sales, private sector credit and net exports of GPD. More green shoots in the EZ data but… The EZ February PMIs are quite good at first glance. The French PMI composite was out at 51.6 versus prior 49.1 – this is a 7-month high and the first expansion above the 50 threshold since October 2022. The German PMI composite is in the expansion zone too (at 51.1). But if we dig beneath the surface, this is not as good as expected. In France, the PMI report contains a warning about new export orders: “Overall, this marked a twelfth successive monthly decline in new export orders. Notably, manufacturers recorded the steepest slump since the first COVID-19 lockdown period in the first half of 2020”. We see a similar weakness in German data with a stagnation of exports to non EU countries in January. Basically, in both cases, the order book and the manufacturing side look challenged while the services are the main drivers of the PMI composite. We still expect the eurozone will avoid a recession this year. Overall PMI for the bloc was also pushed higher by services sector outperformance which recorded a PMI of 53.0 (vs. 50.8 last month and 51.0 exp) while manufacturing lagged at 48.5 (vs. 48.8 last and 49.3 exp). Baidu (09888:xhkg) announces Q4 results Baidu is scheduled to announce its Q4 results on Wednesday. Investors are prepared for weaker advertising revenues, slower growth in its cloud business, and some margin compression. Analysts surveyed by Bloomberg are expecting adjusted EPS to fall by 22.4%. Walmart and Home Depot send margin pressure warnings Despite an earnings beat, Walmart’s profit forecast for this year fell short of analyst estimates and a cautious outlook suggested a lingering impact from the inventory buildup of last year as well as shifting consumer demand patterns in light of the higher inflation and interest rates. Meanwhile, home improvement retailer Home Depot missed expectations and gave a dull operating margin guidance – expecting FY operating margin at ~14.5% due to the extra wage costs, compared to an estimate of 15.1%. The results send a warning for other retailers like Target and Lowe’s due to report on March 1. Pizza chain Domino’s Pizza reports weaker than expected earnings amid inflationary pressures In the Australia session today, Domino’s reported underlying EBIT fell 21% Y/Y to A$113.9 million in the HY - with sales growth coming in weaker than expected and inflation also affecting earnings. Its European operations faced significant geopolitical disruptions, and the highest inflation levels across its business- while Asian sales were materially stronger than pre-Covid- but EBIT was lower. All in all, Domino’s financial metrics were down Y/Y, except its store count rose 16% Y/Y to 3,736 stores. The company also cut its half year dividend to A$0.674 per share. As for its - outlook that also disappointed - as customer counts have not met expectations since December - especially in Europe and Asia  - which is lowering store profitability. New store openings will continue to grow in FY23 - but could be below Domino’s medium-term outlook for +8-10% growth. This implies there is less franchisee demand to open stores. That said, management is confident it will return to positive same store sales growth once customer demand increases. Domino’s Pizza (DMP) shares in gapped down in Australia , erasing 2023’s gains – taking DMP to A$57.97 – November 2022 levels. We will also be watching Domino’s in the US – DPZ, as well the London listed business – DOM. The Chinese Communist Party’s Central Committee to hold a plenary session next week The Chinese Communist Party’s Politburo held a meeting on Tuesday and announced after the meeting to hold a Central Committee plenary session from Feb 26 to 28 to decide on key issues in preparation for the “two sessions” meeting of the government scheduled t commence on March 4. FOMC minutes on tap today The minutes of the February 1st Fed meeting will be out later today (3am SGT), and will be key for the cues on inflation expectations and terminal rate forecasts as a gauge for what to expect in the dot plot in March. Still, the hotter than expected inflation print for January (both CPI and PPI) were released after the FOMC meeting and that has shifted the narrative to a hawkish. The criteria for a pause may be on the lookout, and whether that is any push to driving the market’s rate cut expectations further out.   For what to watch in the markets this week – read or watch our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: Markets Today: US yields at fresh highs; FOMC minutes ahead – 22 February 2023 | Saxo Group (home.saxo)
Asia Morning Bites - 04.05.2023

The Risk Off Tone Was Set By Geopolitical Tensions Picking Up, The Australian Share Market Has Fallen

Saxo Bank Saxo Bank 22.02.2023 10:03
Summary:  Extra caution is creeping back into markets, with geopolitical tensions picking up, and hotter than expected economic prints, with swaps now expecting the Fed to hike rates at the March, May and June meetings. Sentiment was also weighed by downbeat outlooks from Walmart and Home Depot. On a weekly chart, the S&P500 fell under its 50 day moving average indicating traders could exercise risk-off trading ahead. Australian listed Domino’s Pizza reported weaker than expected numbers and a soggy outlook, sending its shares down 20%, which will likely impact Domino’s shares listed globally. FOMC minutes and Rio results ahead. The major US indices, the Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) fell ~2% while bond yields rose to new 2023 highs  The risk off tone was set by geopolitical tensions picking up -  as well as economic prints showing the US services and manufacturing PMIs improved more than expected – with swaps now projecting the Fed can keep pushing rates higher — with the market indicating 25-basis-point hikes are coming at the March, May and June meetings.  Sentiment was also weighed by downbeat outlooks from consumer spending bellwethers – Walmart (WMT) and Home Depot (HD). All while investors await Wednesday's Fed minutes release. Also ahead are earnings results from mining giant Rio Tinto (RIO), tourism and casino giant Ceazers Entertainment (CZR) and smartwatch and gadget business Garmin (GRMN). The three major indices shed at least 2%, with the Dow erasing 2023’s gains. On the weekly chart - the S&P500’s fell below its 50-day moving average –indicating there are more sellers than buyers – while also possibly indicating the market could potentially pull back. Pressuring sentiment - bond yields hit new 2023 cycle highs - with the 10-year note up 14 bps, while the dollar strengthened. Australia equities (ASXSP200.I) also seem pressured by the RBA’s fresh hawkishness  The Australian share market has fallen about 3.5% from its new cycle high that it hit on Feb 3. Pressure on the ASX200 comes after the RBA indicated it has more work to do to keep inflation and wage pressure in order. The ASX200 now appears to be pulling back, with Saxo’s Technical Analyst reinforcing the technical indicators suggest the ASX200 could drop further. However, if the ASX200 closes above 7,477, the uptrend can resume. Today, Origin Energy (ORG) is the best performer in large caps, up 13% after receiving a revised takeover offer from the Brookfield Asset Management-led group following months of due diligence. Meanwhile Domino’s (DMP) is the worst performer down 21% on reporting weaker than expected half year results. Meanwhile, BHP (BHP) shares are steady after reporting a stronger outlook yesterday. For more on BHP’s expectations for stronger fundamentals this and next year click here – also note BHP remains in a technical uptrend. Pizza chain Domino’s Pizza reports weaker than expected earnings amid inflationary pressures In the Australia session today, Domino’s reported underlying EBIT fell 21% Y/Y to A$113.9 million in the HY - with sales growth coming in weaker than expected and inflation also affecting earnings. Its European operations faced significant geopolitical disruptions, and the highest inflation levels across its business- while Asian sales were materially stronger than pre-Covid- but EBIT was lower. All in all, Domino’s financial metrics were down Y/Y, except its store count rose 16% Y/Y to 3,736 stores. The company also cut its half year dividend to A$0.674 per share. As for its - outlook that also disappointed -  as customer counts have not met expectations since December - especially in Europe and Asia  - which is lowering store profitability. New store openings will continue to grow in FY23 - but could be below Domino’s medium-term outlook for +8-10% growth. This implies there is less franchisee demand to open stores. That said, management is confident it will return to positive same store sales growth once customer demand increases. Domino’s Pizza (DMP) shares in gapped down in Australia , erasing 2023’s gains – taking DMP to A$57.97 – November 2022 levels. We will also be watching Domino’s in the US – DPZ, as well the London listed business – DOM.  To listen to our global team's take on markets - tune into our Podcast.     Source: Financial Insights: S&P500 falls below 50-day simple moving average on market pricing in more hikes. Domino's Pizza shares sliced | Saxo Group (home.saxo)
GBP/USD Trading Plan: Bulls Eyeing Further Growth, Resistance Level Holds Key, COT Report Signals Interest Rate Expectations

Reserve Bank Of New Zealand (RBNZ) Hiked Its Interest Rates, USD Gains On Rising Hawkish Fed Bets

Swissquote Bank Swissquote Bank 22.02.2023 10:22
US stocks now join the treasury selloff, and the US dollar pushes higher on the back of the increasingly hawkish Federal Reserve (Fed) bets. The preliminary PMI in the US came in better than expected for February, and the services PMI ticked above the 50 mark, into the expansion zone, for the first time since last July. Walmart and Home Depot  The strong economic data further fueled the Fed hawks. But this time, the stocks sold off as well, despite the strong economic data. The weak outlook from Walmart and Home Depot left the no-landing bets under the dark shadow of higher US yields. The S&P500 dived 2% on Tuesday, below the minor 23.6% Fibonacci retracement on the latest October to February rally, and below the 4000 psychological mark. Fed Today, the FOMC minutes will be closely watched. We know that the Fed officials will sound concerned with the strong jobs market and will point at the resilience of the economy to continue hiking the rates. That could further weigh on equity appetite. Fed hawks are supportive of the US dollar, however. Read next: The Pound Gained After The Publication Of PMI Reports, Euro Is Below 1.07, USD/JPY Pair Is Above 134.50| FXMAG.COM Reserve Bank of New Zealand Elsewhere, the Reserve Bank of New Zealand (RBNZ) hiked its interest rates by 50bp today, after a three-month break and Nvidia will be reporting Q4 earnings after the bell. Nvidia results may look ugly, but long-term investors could look beyond the potentially ugly results: Here is why: https://medium.com/@swissquote.education Watch the full episode to find out more! 0:00 Intro 0:36 US equities join the treasury selloff 1:46 Walmart, Home Depot beat, but warn of weaker outlook 4:55 USD gains on rising hawkish Fed bets 6:37 RBNZ hikes by 50bp 7:32 FOMC minutes to further weigh on sentiment 8:02 Should you look past potentially ugly Nvidia earnings? Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Walmart #HomeDepot #Nvidia #earnings #FOMC #minutes #Fed #expectations #RBNZ #rate #hike #USD #EUR #NZD #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
Euro and European bond yields decreased after the ECB decision. The end of tightening may be close

How the ECB’s rate hikes are filtering through to the eurozone economy

ING Economics ING Economics 22.02.2023 12:30
The European Central Bank's policy stance has become restrictive. To us, the impact on the economy is probably the most underestimated drag on growth for 2023. The good news is that we see no meaningful signs of fragmentation between countries, so monetary policy is not causing shocks in more vulnerable parts of the eurozone European Central Bank President Christine Lagarde   Last summer, when the ECB started hiking interest rates, the immediate question for financial markets was how far the Bank would dare to go. Ending an era of negative interest rates and unconventional monetary policy when inflation is approaching double-digit levels is one thing, actively breaking down the economy is, however, another. This is why the eurozone's nominal neutral interest rate – which was pegged at between 1.5% and 2% by almost everyone – suddenly became the focus of attention. Even ECB President Christine Lagarde referred to this illustrious neutral rate (the rate at which monetary policy neither stimulates nor restricts the economy), suggesting that the central bank use this as a rough anchor for when policy could start to become restrictive. When policy is restrictive, this leads to weakening economic activity and ultimately to lower inflation. The rate, however, is a very theoretical concept, impossible to measure and rather an ex-post instrument to describe a monetary policy stance rather than providing guidance for actually conducting monetary policy. This is why the ECB quickly, at least publicly, debunked the idea that it would follow this neutral interest rate concept. Wherever a neutral interest rate in the eurozone might be, hiking interest rates by 300bp, as the ECB has done so far, and with more hikes to come, the question is not whether the ECB’s hiking cycle will slow the eurozone economy but rather when. Most channels through which higher rates work are showing tightening impact Let’s use the ECB's own handy flowchart to explain how it sees monetary policy ultimately feeding through to prices (for the ECB’s own assessment, we can recommend Chief Economist Philip Lane’s speech from 16 February). The four main transmission channels are: money/credit, asset prices, bank rates and the exchange rate. All four channels have seen sizable adjustments since last summer: ECB's own take on monetary transmission Source: https://www.ecb.europa.eu/mopo/intro/transmission/html/index.en.html Source: ECB, ING Research   The money supply has fallen quickly since the ECB started reducing asset purchases. In fact, growth in real money (M1) has not been so negative since the ECB's record-keeping began. This historically corresponds with a significant correction in economic activity. When looking at asset prices, we see that stocks and bonds saw a significant correction in 2022 (although we have seen a rebound in prices as expectations of a peak in policy rates have grown this year). Real estate prices are somewhat slower to respond but are undoubtedly starting to turn. In countries like Germany and the Netherlands, price declines have already become somewhat sizable as the combination of higher bank rates, low consumer confidence and lower purchasing power is resulting in declining housing demand. This is not where it will stop. We expect this to have an impact on construction activity in the coming year. Bank rates have also considerably increased since the beginning of 2022, following the increase at the longer end of the yield curve. This is starting to curb investment as growth in bank lending has almost stalled for households and is considerably negative for businesses. Traditionally, business borrowing reacts with longer lags to higher rates than consumer borrowing. Last year, for example, borrowing by non-financial corporates held up until mid-2022 because of working capital needs – due to supply chain problems for example. Recently, however, there has been a sharp correction, which has been much quicker than in previous cycles. That correction corresponds to the Bank Lending Survey, which indicates that borrowing needs for investment reasons have fallen significantly in recent months. We expect this to have an important dampening impact on investment in the eurozone in the quarters ahead, although the recovery fund's impact on southern economies could mute the overall investment response seen in 2023. The euro has appreciated since the end of last year as investors are expecting more rate hikes from the ECB and because energy prices have fallen significantly from the peak which has resulted in a smaller trade deficit. This is starting to feed through to import prices, which have started to see lower year-on-year growth. In fairness, the bulk of that move down has resulted from the lower energy prices seen recently, but the impact of a stronger euro will be felt down the line. The early phase of monetary transmission is fast at work Source: ECB, Eurostat, ING Research No need for TPI as monetary transmission is not showing signs of fragmentation When looking at the above-defined categories per country, we see that there is not that much difference in transmission. The rise in percentage points for borrowing rates differs just modestly between countries and the nominal effective exchange rate has made roughly similar movements for most countries – as expected. Liquid assets have seen declines across the board, with a few stock markets in Southern Europe notably outperforming. House prices are still well above levels seen in late 2021, although Germany and the Netherlands are starting to see a correction as a downward trend has started which the table below does not pick up on. The money supply is of course handled centrally, but recent developments in bank lending can say something about credit reaching the real economy. Here, we see the most striking difference so far, as Italy and Spain have seen declines in borrowing from non-financial corporates, whereas Germany and France have not, yet. The important caveat here is that we have seen quite some borrowing for working capital and inventory reasons, which has driven up borrowing or at least made borrowing more volatile. For Germany, the bank lending survey suggests declining demand for investment borrowing, which means that transmission could be at work more than the numbers suggest. Compared to the average, we see that France is the country still experiencing a smaller impact on all counts, while Italy is experiencing a somewhat more significant impact. Overall though, there is no shock happening in the system for any country measured, and monetary transmission is therefore not causing problems. So far, there is no reason to use the ECB’s new Transmission Protection Instrument (TPI) as fragmentation of monetary transmission in the eurozone is not happening at the moment. The much feared fragmentation of monetary transmission has not happened so far Note: red indicates more tightening impact than eurozone average, green indicates less tightening than average Source: Macrobond, ECB, ING Research Most of the impact on inflation and growth still has to feed through While the initial boxes of monetary transmission have clearly been ticked, the timing of the actual impact of monetary policy on the real economy has always been difficult. In theory or in large macro models, it is assumed that it takes 9 to 12 months before monetary policy affects the real economy most. Recently, there have been central bankers (Fed members) suggesting that the lag could currently be shorter than in the past. In any case, the transmission of monetary policy can often be blurred by other factors. At the current juncture, the energy crisis is playing a large role in slowing down the economy and has also helped to ease inflation as recent developments have caused gas and electricity prices to come off their peaks. Supply chain problems have been fading recently and demand for goods has weakened, which has helped supply and demand in goods markets become better balanced again. Read next: Consumers Are Spending More On Food, So Walmart And Home Depot Are Making Cautious Predictions| FXMAG.COM How does this stack up to previous hiking cycles? It is difficult to compare current developments to previous tightening cycles by the ECB. The ECB has only engaged in three previous hiking cycles, of which the 2011 one only lasted for two meetings. The thing that stands out is that the underlying conditions of the economy matter a lot when looking at the pace of transmission. The 2005 hiking cycle happened when the economy was performing quite well, the 2000 cycle started in a strong economy, while 2011 was a famous example of hiking into a recession. That difference shows when looking at the response. In 2005, bank lending growth to businesses continued to accelerate despite rate hikes and only slowed when the 2008 recession started. We now see a much faster response. Asset prices are now also turning down much faster than in 2005 as this only happened years after the start of the tightening cycle in 2008, while we are already seeing the negative effects now. This also holds true for money growth. So while we have little to compare to, it does become evident that the key channels of monetary transmission are seeing faster downturns now than in the previous long tightening cycle of 2005. But it's too early for the ECB to declare victory yet While inflation is falling, core inflation is still trending up and is far above target at 5.2%. It is therefore too early to declare victory on price developments. Wage growth is also still moving up cautiously. While not nearly enough to raise concerns about a wage-price spiral, the labour market remains red hot and negotiated wage growth has moved from the 1.5% to 3% range in 2022. So supply and demand in labour markets have yet to adjust. Wage growth has started to trend up, causing upside risk to the inflation outlook Source: ECB   And expectations have started to feed through the monetary transmission system in the wrong way recently. As investors worry about recession and are optimistic about inflation returning to benign levels, we see that financial conditions are loosening again. This could work against tightening efforts from the ECB and we have seen ECB speakers speak out quite vocally against the premature easing of financial conditions. A lot is now moving in the right direction for the ECB to get inflation back to target, but uncertainty remains. No one really knows how persistent core inflation will be after this series of supply shocks that the eurozone has faced. There is also uncertainty over how long it will take for GDP and inflation to be impacted by the aggressive rate hikes from the ECB so far. Having moved to a restrictive level of policy recently and with more hikes in the pipeline, this uncertainty makes policy-making very difficult right now. Restrictive policy will have a significant downside impact on the economy this year While we are not seeing the full impact of monetary policy on prices yet, we do see transmission in full force, which will eventually have a larger impact on output and prices. With uncertain delays on economic activity and prices at work, the question is how hawkish the ECB will remain over the course of the year, given the tightening of monetary policy so far. At the March meeting, another 50bp hike is all but a done deal. Beyond the March meeting, however, the ECB will likely be entering a new phase in which further rate hikes will not necessarily get the same support from the Governing Council, as hiking deep into restrictive territory increases the risk of adverse effects on the economy. The main question beyond the March meeting will be whether the ECB will wait to see the impact of its tightening on the economy or whether it will continue hiking until core inflation starts to substantially come down. In the former case, the ECB could consider a pause in its tightening cycle and hike again at the June meeting. The latter would see continuous meeting-by-meeting hikes, possibly in smaller increments of 25bp. For our economic outlook, we think that restrictive monetary policy in 2023 will be a key factor preventing the economy from bouncing back from its current weak spell. While all eyes are on the energy crisis at the moment, higher rates will also be an important factor in dampening any meaningful recovery. While we don’t see the bulk of the impact yet, expect a eurozone economy that flirts with zero growth for most of the year as higher rates complete the transmission to demand. Read this article on THINK TagsInflation GDP Eurozone ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Any Upside Momentum For AUD/USD Is Likely To Remain Capped At Monday’s High

The Aussie (AUD) Is Trading In The Wake Of The U.S. Currency (USD)

InstaForex Analysis InstaForex Analysis 22.02.2023 12:53
The AUD/USD currency pair continues to decline steadily, despite hawkish signals from the Reserve Bank of Australia. The minutes of the RBA's February meeting, published yesterday, reflected the strong attitude of the regulator's members, who expressed their willingness to raise the interest rate within the next few months. The central bank refuted circulating rumors of a possible pause. But AUD/USD traders actually ignored this message: the aussie continues to follow the greenback, which, in turn, continues to strengthen its position across the market. What the RBA minutes say The AUD/USD pair was under pressure a few weeks ago after the release of key data on the growth of the Australian labor market in January. The data turned out to be weak in all respects: the unemployment rate rose to 3.7%, and the increase in the number of employed again turned out to be in the negative area. With a growth forecast of 20,000, a decrease of 11,500 was recorded. The negative dynamics of this indicator was due solely to the decline in full-time employment, while the part-time employment indicator, on the contrary, showed a strong growth. Note that the December Australian non-farm report also reflected the worsening situation in the labor market, so many analysts assumed that the minutes of the February meeting of the RBA would be dovish, even despite the growth of inflation indicators (consumer price index in Q4 unexpectedly exceeded forecast values). But the document published yesterday was clearly hawkish. In particular, the text of the minutes indicated that the Governing Council was considering a 25 or 50 basis point rate hike in February. The option of a pause was not considered at all. Recall that the RBA slowed down the pace of tightening of the monetary policy (up to 25 points) as far back as last autumn, that's why the announced option of a 50-point hike, which was "on the table" of the members of the regulator, demonstrates the hawkish attitude of the central bank. It signals that the RBA is considering two scenarios: either the central bank maintains the current pace or doubles down on the effort, returning to a 50-point rate of increase. That said, the minutes indicate that the further pace and duration of monetary tightening will "depend directly on incoming data and the Board's assessment of the inflation and labor market outlook." This is a rather streamlined phrase, which suggests that the RBA has "tied" its further decisions to the dynamics of inflation growth. In general, the document released yesterday reflected the intention of the RBA to raise the rate not only in March, but also in May (it is too early to talk about further prospects). At the same time, judging by the text of the February minutes, the central bank is considering two options: raising the rate by 25 points or by 50. Thus, the central bank de facto ruled out the option of a possible pause and guaranteed the maintenance of a hawkish rate at least until the end of the spring. Such hawkish attitude should promote the development of the upward trend. However, the aussie has received support from the RBA at a time when the greenback is gaining momentum across the market. Waiting for Fed minutes At the end of the U.S. session on Wednesday, another important document will be released: the minutes of the Fed's February meeting. The hawkish tone of this document may provide additional support to the U.S. dollar, which already feels quite confident against the background of strong non-farm payrolls and the combative mood of many representatives of the Federal Reserve. For example, one of the most influential members of the Fed—New York Fed President John Williams—has repeatedly stated that the regulator is likely to raise the rate to 5.5% (previously, the final level was assumed at 5.1%). At the same time, he urged the Fed to keep the rate at a high level "for several years." In one form or another, the hawkish position was voiced by other representatives of the Fed. The general essence of the voiced messages is that the regulator "has a lot of work to do" to control inflation. Conclusions The apathetic reaction of AUD/USD traders to the hawkish minutes of the RBA suggests that the Aussie is trading in the wake of the U.S. currency. The U.S. dollar, in turn, enjoys support from the Fed, whose representatives have tightened their rhetoric in response to a slowdown in inflation. Such a fundamental background contributes to the further development of the downward trend. Technically, the pair on the daily chart has overcome the 0.6850 support level (upper boundary of the Kumo cloud on D1) and is currently falling towards the bottom of the 68th figure. The next price barrier, which acts as the nearest target for the downward movement, is 0.6770. The main target of the downward trend is the level of 0.6720 (the lower boundary of the Kumo cloud on the same timeframe)   Relevance up to 10:00 2023-02-23 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/335794
Central Bank Policies: Hawkish Fed vs. Dovish Others"

Inflation Is Not Declining As Fast As The Fed Had Hoped Which Suggest That Fed Will Maintain Its Hawkish Monetary Policy

InstaForex Analysis InstaForex Analysis 22.02.2023 12:58
The Federal Reserve first spoke about its forward guidance at last year's economic symposium in Jackson Hole. In particular, it was Chairman Jerome Powell's keynote speech that hit the American public. It's about the Fed's intention to raise rates and keep those higher rates until the Fed hits its 2% inflation target. Following the December FOMC meeting, the Federal Reserve released its economic forecasts for 2023–2025, including the most recent dot plot. The dot plot is the Fed's mechanism for predicting future rates by having 17 Fed officials vote on the future of monetary policy. The December dot plot revealed an overwhelming majority that the Fed would raise rates to a target of just over 5% and keep rates high throughout calendar year 2023. Although the Fed has maintained its policy, it is market expectations that have recently shifted from disbelief to recognition that the Federal Reserve is unlikely to abandon its hawkish monetary policy. This includes further rate hikes and maintaining those higher rates throughout the year. Read next: Sweden And Finland Are Getting Closer To Becoming NATO Members| FXMAG.COM During February, market sentiment on the Federal Reserve's forward guidance changed from uncertainty to approval. This put pressure on precious metals prices. While it is true that inflation has been declining since the Federal Reserve began raising rates last March, recent data suggests that inflation is not declining as fast as the Fed had hoped. The January employment report is well above the forecast of 188,000 compared to 517,000, combined with the latest inflation reports, which suggest that inflation remains high and resilient in some sectors. The most recent data has reinforced the idea that the Federal Reserve will maintain its hawkish monetary policy with the real possibility of two more rate hikes and, most importantly, maintain new elevated rates in 2023.   Relevance up to 09:00 2023-02-27 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/335786
Australian dollar against US dollar: USD may rise on the back of the Republicans and Democrats negotiations

The AUD/USD Pair Remains Under Selling Pressure, The GBP/USD Pair Is Below 1.21 Again

Kamila Szypuła Kamila Szypuła 22.02.2023 13:38
The dollar rose slightly on Wednesday, continuing to trade near six-week highs on the back of strong economic data. Survey data released on Tuesday showed U.S. business activity unexpectedly rebounded in February to reach its highest in eight months. In the euro zone, a survey-based gauge of activity also surged, hitting a nine-month high. Investors' focus now turns to the release of the minutes from the Fed's latest meeting later on Wednesday, which could offer more insight into policymakers' plans. USD/JPY One pair is moving in a sine wave pattern today. In the first hours of trading, USD/JPY dropped to around 134.60 and then rose to around 1134.95. This move has been repeated once again, and USD/JPY is now heading down towards 134.65. Bond purchases and BOJ loans dominate the headlines in Japan. The Japanese yen found some support against the US dollar on Wednesday morning, while the Bank of Japan (BOJ) had to buy 10-year government bonds due to the yield breaking the upper limit set by the BoJ (0.5%) of their policy range. It was the second consecutive trading session during which this took place. BOJ's Tamura gave mixed messages, stating that loose monetary policy is now required, but future policy changes will be crucial at some point in the future. EUR/USD The movement of the EUR/USD pair in Asian Russia and at the beginning of the European traded in the range of 1.6550-1.6650. In the European session, the pair fell and is currently trading around 1.6300. Yesterday's data from the euro zone showed further improvement, with flash PMI beating estimates in the services sector, while production fell slightly. The Zew Sentiment Survey reflected an improvement in sentiment and optimism, with expectations and current conditions outperforming estimates in both the Eurozone and Germany. This morning brought German inflation data for January up from December, confirming comments from ECB President Christine Lagarde about a 50 basis point hike at the upcoming meeting Read next: Sweden And Finland Are Getting Closer To Becoming NATO Members| FXMAG.COM GBP/USD The cable pair in the Asian session kept its momentum above 1.21. The European session is not favorable for the gunt pair and the pair is below 1.21. At the time of writing, GBP/USD was trading at 1.2090. Sterling pulled back on Wednesday after rising sharply on stronger-than-expected British business activity as traders awaited consumer confidence data and focused on Britain's political headaches. The latest UK PMIs beat forecasts and showed business activity in the UK, especially in the services sector, picking up sharply in February. The latest data suggest that the UK economy may be improving, giving the Bank of England more wiggle room to increase interest rates. UK inflation is on the way down, but at a current level of 10.1% is sharply higher than the Bank of England’s (BoE) mandate of around 2%. Inflation is expected to fall quickly over the coming months, according to the BoE, as energy prices and the cost of imported goods fall. AUD/USD The AUD/USD pair adds to the significant losses from the previous day and remains under selling pressure for the second day in a row on Wednesday. The Aussie Pair is holding below 0.69. At the beginning of the day, AUD/USD started to fall to the level of 0.6830 and in the Asian session kept trading in the range of 0.6830-0.6840. In the first hours of trading in the European session, the Australian pair fell below 0.6820, but managed to rebound and at the time of writing was just above 0.6830. Source: finance.yahoo.com, investing.com
Saxo Bank Podcast: A Massive Collapse In Yields, Fed's Tightening Cycle And More

Rates Spark: Hawkish Fed continues to simmer

ING Economics ING Economics 23.02.2023 08:22
Federal Reserve minutes were as expected, but the market is far more inclined now to latch on to hawkish talk given the price action of the last few weeks. It still leaves us with a Fed that's not done with hiking FOMC minutes had a hawkish tint, but so too did Chair Powell on 1 February if listened to carefully Although market rates are a tad higher following the Fed minutes from the 1 February Federal Open Market Committee meeting, there was nothing material in them, at least nothing terribly unexpected. Bloomberg headlines noted that some (non-voting) members would have favoured a 50bp hike, but this was not new news. Bullard made that clear on a prior CNBC interview in fact. The 25bp hike delivered was unanimous, which was also not new news. The only item of note really was that the minutes were expected to be a tad more dovish. Reading through them, they had a clear hawkish tint. This is in stark contrast to the impact market reaction to the FOMC outcome itself, which had headlined with a nod toward a dis-inflationary tendency. Indeed this was mentioned in the minutes, but beyond that the dominant theme was a Fed continuing to fret about inflation, and noting that the labour market remains very tight. The dominant theme was a Fed continuing to fret about inflation, and noting that the labour market remains very tight In terms of liquidity conditions, the Fed noted some easing in the use of the reverse repo facility, and an expectation that that continues through 2023. The Fed noted a likely fall in reserves as we head into the April tax season. They also noted a likely tendency for money market conditions to tighten ahead, which should correlate with falls in the cash going into reverse repo and a rise in relative repo rates. In fact that is a theme to be expected right through 2023. Overall, the market reaction is for higher rates. A lot of this is down to the eyes of the beholder. At the FOMC itself, the market was looking for anything dovish to latch on to. From the minutes, that’s flipped, with the market now fretting over any hawkish hints. They were always there. But given the moves higher in market rates in the past weeks, there is an increased sensitivity to hawkish talk… More bank reserve reduction should compound Fed policy tightening in the coming months Source: Refinitiv, ING EUR rates looking for a fresh push at already lofty highs Bund yields appear to struggle moving higher from here, but as we noted before the levels above 2.50% already appear lofty. Rates retreated from their intra-day highs after some comparatively dovish remarks from Frances Villeroy. He noted that markets had “overreacted a little” with regards to the terminal rate and that the ECB was “in no way” obliged to hike at every meeting between March and September. Markets are already fully pricing in 125bp in ECB hikes, taking the terminal rate to 3.75% In turn though, it still implies that all of those meetings are fair game for hike speculation. And it does not mean that there could not be another push higher. Markets will remain perceptive to any hints that inflation proves more sticky. Cue, today's final eurozone inflation. Even if it should be well flagged, any upward revision to today’s final eurozone inflation for January would neatly fit into the narrative. But markets are already fully pricing in another 125bp in ECB hikes to take the terminal (deposit-)rate to 3.75%. The source of that next push higher in market rates would increasingly have to come from somewhere other than the front end – perhaps more related to a longer-term outlook, technical factors, or from outside the eurozone. Long-end sovereign issuance continues undeterred Supply can be counted on at least for a temporary bearish push in rates is illustrated by yesterday’s more than 4bp steepening in the 10-30y Bund curve. Yesterday Germany mandated a 30Y bond tap, the announcement of which accelerated a resteepening dynamics in Bunds, but not so much in swaps – the 10s30s swap curve which steepend only half as much. European sovereigns and supranational's strong ultra-long presence despite headwinds is an encouraging sign Fair, in current extraordinary times duration will demand more of a concession given still high volatility, the curve inversion and already sufficiently enticing yields at the front end. But when issuers tap into ultra-long funding they usually serve an existing and ongoing demand in the market. As such, European sovereigns' relatively strong ultra-long presence despite the aforementioned headwinds should be seen as an encouraging sign. Issuance data for the first two months in each of the past years shows that this year’s more than 27% share of ultra-long issuance (defined here as 15y maturity bucket and longer) is already above average, and that despite this year's record issuance in the first months.      European government bond and E-name issuance in the first two months of each year Source: Debt agencies, ING Today's events and market view In the eurozone many will look to the final inflation data for January. After German inflation data was not available for the calculation of the initial flash estimate, an upward revision now should be well flagged. Nonetheless, it will generate headlines that fit the current hawkish narrative. In the US the attention falls on the usual initial jobless claims data as a more real-time take on the temperature in the job market. We will also get the second print of fourth quarter 2022 GDP. In supply Germany has mandated a 30y bond tap which shoudl be today's business, The US Treasury will auction 7Y notes. With regards to the next potential drivers of direction rates markets will closely follow the first testimony of the BOJ new incoming governor Ueda and what he has to say on its policy of yield curve control tonight. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The USD/INR Traders Seem To Witness Additional Downside Movement

The USD/INR Pair Might Find Further Resistance Around 83.50

TeleTrade Comments TeleTrade Comments 23.02.2023 08:33
USD/INR is displaying wild moves as investors are discounting the impact of the release of the overnight FOMC minutes. Fed policymakers are favoring the continuation of policy tightening to avoid fears of a recovery in US inflation. The asset is testing the breakout of the Descending Triangle chart pattern around 82.70. The USD/INR pair is displaying wild moves in the opening session as investors are discounting the impact of the release of the hawkish Federal Open Market Committee (FOMC) minutes. According to the FOMC minutes, Federal Reserve (Fed) policymakers were loud and clear that a strong labor market and upbeat January Monthly Sales are posing a threat of pause in the declining trend of the United States Consumer Price Index (CPI). Therefore, the Fed should reach to terminal rate to bring down inflation to the 2% target. The US Dollar Index (DXY) has dropped to near 104.00 after printing a three-day high of 104.20 as the risk aversion theme has eased. S&P500 futures have added significant gains in the Asian session, portraying a sheer recovery in the risk appetite of the market participants. USD/INR is testing the breakout of the Descending Triangle chart pattern on an hourly scale. A breakout of the aforementioned chart pattern results in a volatility expansion after a sheer contraction. The downward-sloping trendline of the triangle is plotted from February 14 high at 83.04 while the horizontal support is placed from February 14 low at 82.57. The mighty 200-period Exponential Moving Average (EMA) at 82.73 is providing support to the US Dollar bulls. Meanwhile, the Relative Strength Index (RSI) (14) is looking for a cushion around 40.00 after a healthy correction. Should the asset break above February 22 high at around 83.00, US Dollar bulls will drive the asset toward October 23 high at 83.29. A breach of the latter will expose the asset to unchartered territory. The asset might find further resistance around 83.50, being a round-level number. On the flip side, a break below February 14 low at 82.57 will drag the asset toward February 10 low at 82.33 followed by January 31 high at 82.07. USD/INR hourly chart  
Escalated Geopolitical Tensions Are Here To Stay, China And Russia Confirming Stronger Ties

Escalated Geopolitical Tensions Are Here To Stay, China And Russia Confirming Stronger Ties

Saxo Bank Saxo Bank 23.02.2023 09:04
Summary:  Rate hike worries were kept alive by the FOMC minutes, even though these were from the pre-January economic data prints that have been more hawkish than expected. US equities closed mixed as yields stayed near recent highs, while Chinese equities on the backfoot again amid escalating geopolitical tensions. USD strength pressuring AUD despite hawkish RBA. Crude oil prices slumped about 3% and Gold is back to testing key support at $1820 again.   What’s happening in markets? The Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) fall for the second session with bond yields remaining at three-month highs US equity markets remain pressured as the US 10-year yields trades in the neighborhood of three-month highs at ~3.92% with the FOMC meeting minutes showing more tightening is on the horizon. The Nasdaq 100 fell for the second day, closing at its lowest level since February 1. The S&P500 also fell the second session - moving under the key 4,000 level, at 3,991, bringing the 200-day moving average just ~1% away - at the 3,941 mark - which will quickly be tested. Intel shares were a laggard down 2.2% after the computer processor giant cut its dividend 66% - declaring a quarterly payout of 12.5 cents a share. This followed on from Intel reporting one of its weakest quarterly earnings forecasts in its history. All in all, this highlights that companies are trying to preserve capital amid margin compression – and that’s been a major theme of earnings seasons and we think it will continue to play out in Q1 earnings reports.  Yesterday, Hong Kong’s Hang Seng (HIG3) and China’s CSI300 (03188:xhkg) slid with A-shares leading Hong Kong's Hang Seng Index (HSI) fell by 0.5% on Wednesday, with ongoing tensions between the U.S. and China over the latter’s alleged support to Russia, reports about China instructing state-owned enterprise to phase out the big-4 audit firms as their auditors for national security considerations, and overnight U.S. equity market weaknesses weighing on investor sentiment. Shares of banks outperformed but failed to offset losses in technology and industrial stocks. HSBC (00005) surged 5.3% and Hang Seng Bank (00011:xhkg) climbed 2.7%, being the top two gainers in the benchmark Hang Seng Index. Techtronic (00669:xhkg), plunging 6.9%, was the biggest loser. JD.com (9618:xhkg), down 3% led the decline in the China interest space. Hong Kong released its budget for this fiscal year, including HK$5000 per head in consumption vouchers, stamp duty reduction for first-time homebuyers, and support for airline operators. Hong Kong retail and property developer stocks rallied, with Chow Tai Fook (01929) rising 2.2%, Wharf Real Estate Investment (01997:xhkg) up 2%, and Henderson Land (00012:xhkg) up 1.6%. After Hong Kong market close, Baidu (09888:xhkg) reported revenues and earnings beating market expectations despite weaker advertisements in Q4. The search engine giant announced a share buyback programme of up to USD5 billion.  Baidu’s ADR (BIDU:xnas) fell 3.7%. In mainland China, the CSI300 slid 0.9%. Construction materials, media, brokerage, and non-ferrous metals led the decline.  Australian equities (ASXSP200.I) fall for third day -  but reopening stocks in logistics and car dealing seem supported on stronger earnings.  The Australian share market is being pressured by Australian bond yields rising, with the 10-year yield at its highest levels since January 4 - after the RBA affirmed it will continue to hike rates in the months ahead. The ASX200 fell briefly under its 50-day moving average with mining giants BHP and Rio trading lower after Rio reported weaker than expected numbers after the market close yesterday – but guided for a stronger 2023.  Travel stocks are continuing to gain attention on the revival of the travel sector – with a lack of fleet becoming an issue to keep up with strong demand. Qantas posted a record profit of A$1 billion in the six months to Dec 31, and announced A$500 million share buy back – as its sees relentless flight demand in 2023 - underscoring the surge in travel, post the pandemic. In fact, Qantas’ flagged higher than expected spending being needed to buy an extra aircraft, including nine Airbus A220s to keep up with surging passenger demand. Capital expenditure in the financial year ending June will rise by as much as A$400 million to between A$2.6-A$2.7 billion and will get as high as A$3.2 billion in the following 12 months. Despite guiding for strong demand, shareholders didn’t like hearing costs will need to rise – which send Qantas shares down 6% to $6.02, below its 100-day moving average. Qantas’ outlook underscores the pace and intensify of the travel industry’s recovery. Logistics giant, Qube is trading up 10% after its half year profit rose 41% to $125 million and it also noted it sees stronger growth ahead in 2023 – supported by China’s reopening. Car dealership giant, APE is up by about 7% after its results beat expectations, and it guides for a stronger year ahead with demand for new vehicles continuing to outstrip supply. Today’s earnings highlight the reopening trade is gaining pace and also growing beyond market expectations – this could be a driver of the Australian equity market in the half year, while commodity companies continue to guide for a stronger year ahead – backing our bullish commodity outlook. FX: A stronger US dollar – pressures the Australian dollar lower With ‘a few’ FOMC members supporting a larger hike to curb inflation - with James Bullard still favouring hiking rates to 5.375% as fast of possible, the US dollar gained the upper hand, pressuring most G10 currencies lower including the Aussie dollar. The AUD/USD pair closed below trend support, which opens up for a move lower to 0.6629, being the December low. The AUD/NZD pair however made a cleaner break down lower - with the Aussie against the Kiwi falling below its 50-day moving average. Weight on the pair also came after Australian wage growth data and construction work done were softer than expected, meaning the path of RBA hikes could slow after the RBA makes its tabled hikes in the ‘months’ ahead, versus the RNBZ, that just hiked by 50bps yesterday but gave a hawkish guidance.  Crude oil (CLJ3 & LCOJ3) prices slump ~3% A firmer dollar and expectations of more rate hikes from the Fed gathering pace saw a bearish momentum return in commodities on Wednesday, even ahead of the release of the marginally hawkish FOMC minutes. Crude oil prices slid by close to 3% with WTI below $74/barrel and Brent at $80 despite a Reuters report stating that Russia intends to cut crude exports from its western ports by a quarter in March/February, after prior reports that the country is cutting production in March by 500k BPD. API inventories were however higher, with crude stockpiles increasing by 9.9mn barrels last week suggesting demand weakness. Gold (XAUUSD) slumps to support again Gold gave up its recent gains amid the renewed pressure from USD and higher yields which are now close to their cycle highs despite some softening yesterday. The yellow metal is now close to the $1820 support, which held up last week after inflation concerns escalated. A break below will bring the 200DMA at 1776 in focus.  Read next: The AUD/USD Pair Remains Under Selling Pressure, The GBP/USD Pair Is Below 1.21 Again| FXMAG.COM What to consider? FOMC minutes marginally hawkish Despite the FOMC minutes being pre-January inflation print, they sounded hawkish at the margin suggesting there may be room for further escalation of that rhetoric given how the economic data has fared since the Jan 31-Feb 1 Fed meeting. A few of the participants favoured raising the rates by 50bps, and all agreed more rate hikes are needed thrashing pivot hopes. It also noted that a number of participants observed that financial conditions had eased in recent months, which some noted could necessitate a tighter stance of monetary policy. While this risk of a recession was noted, data since the meeting including the most recent PMI numbers this week have continued to ease recession concerns. US considering release of intel on China’s potential arms transfer to Russia No reports of a peace treaty, and instead Chinese senior diplomat Wang Yi’s visit to Moscow was accompanied with China and Russia confirming stronger ties and President Xi’s visit to Russia in the coming weeks. This is suggesting that these escalated geopolitical tensions are here to stay, and our Defense equity theme basket provides a good way to hedge geopolitical risks. The red line for US and Europe will be if there is evidence that China is supplying weapons to Russia, and that could threaten a potential escalation of the war into a confrontation between Russia and China on the one side and Ukraine and the US-led Nato military alliance on the other. A WSJ article reported that Western nations have picked up on intelligence that Beijing might end its previous self-imposed restraint on weapons supplies to Russia, according to U.S. and European officials, although it appears that China hasn’t yet made a final decision. Rio Tinto’s profits and dividend slide in 2022, but Rio guides for a stronger 2023 - underpinned by ‘climate change scenarios’ Shares of Rio Tinto in NY fell 3.3% overnight and are down 3% on the ASX today after the world’s second largest miner reported underlying profit fell 38% to $13.28 billion in 2022 - vs the expected $13.96 billion consensus forecast. Rio’s profit fell after realised commodity prices fell from their records in the second half of 2022 – while earnings were also impacted by higher energy, raw materials prices and wages. Rio’s free cash flows fell 49% Y/Y in 2022 to $9.01 billion, resulting in Rio cutting its final (HY) dividend to $2.25 a share (down from $4.17), taking its total 2022 dividend to $4.92 - that’s a 60% pay-out ratio. Similar to BHP, Rio’s output looks stronger in 2023 with Rio guiding for higher copper, alumina, aluminium and iron ore production (but lower diamond production). It sees commodity prices being underpinned by ‘climate change scenarios’ which drive demand. Also note - in recent weeks - signs of a recovery in China have fuelled iron ore and copper prices up -with iron ore prices up 15% year to date. Rio is expanding its copper-gold presence, with the purchase of Turquoise Hill Resources- that will see Rio double its stake in the Oyu Tolgoi copper-gold project in Mongolia. Rio is also progressing the Rincon Lithium Project in Argentina – cementing itself in lithium. And despite the Serbian Government quashing its lithium mine Rio is ‘continuing to explore possibilities’. UOB (U11:xses) reports higher Q4 earnings Singapore bank UOB reported 13% increase in Q4 net income on higher net interest income offsetting the drop in fees from wealth management and rising impairment charges. Core net profit, after adjusting for one-off expenses related to the acquisition of Citigroup’s Malaysia and Thailand consumer businesses, rose 37% to S$1.4bn. UOB has recommended a final dividend of 75 cents a share. Together with the interim dividend of 60 cents a share, the total dividend for the full year will be $1.35 a share, representing a payout ratio of 49%. OCBC (O39:xses) reports results on Friday. NVIDIA (NVDA:xnas) jumps on AI chips outlook NVIDIA reported stronger than expected Q4 results with EPS of $0.88 on revenue of $6.05 billion, compared to analyst estimates of $0.81 on revenue of $6.01 billion. After-market gains were however driven by a strong outlook for artificial intelligence processors which is helping to offset the slowdown in PCs. Q1 revenue guidance at $6.50 billion, vs. expectations of $6.35 billion. Alibaba (09988:xhkg/BABA:xnas) and NetEase (09999:xhkg/NTES:xnas) are reporting earnings Reporting results on Thursday after the Hong Kong market close but before the U.S. market opens, Alibaba and NetEase are scheduled to announce earnings. Analysts are expecting Alibaba’s results from last quarter to be soft, with the Adjusted EPS expected to fall slightly to RMB1.999 from RMB2.015 a year ago. Investors’ focus will be on the outlook regarding the current quarter. Analysts are expecting NetEase to achieve growth in both revenues and earnings on strength in the Justice Mobile and Eggy Party games.   For what to watch in the markets this week – read or watch our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source:Markets Today: Pre-CPI FOMC minutes suggest more rate hikes – 23 February 2023 | Saxo Group (home.saxo)
Nvidia Is Rolling Out Its Own Cloud Service Together With Oracle

Nvidia Is Rolling Out Its Own Cloud Service Together With Oracle

Saxo Bank Saxo Bank 23.02.2023 09:17
Summary:  Sentiment remains under significant pressure as higher global yields and a firmer US dollar are pressuring sentiment and financial conditions around the world. Europe remains resilient, but can’t expect to hold out on its own if the negative pressure persists. In currencies, focus will swing to Bank of Japan Governor nominee Kazuo Ueda, who will testify before Japan’s Lower House on Friday in Japan. What is our trading focus? US equities (US500.I and USNAS100.I): watch the bond market for clues on direction US equity futures were wobbly yesterday finishing lower with S&P 500 futures closing at the 3,999 level, the first close below 4,000 since 20 January, after intraday briefly flirting with the 200-day moving average. The equity market has now erased a good portion of this year’s rally and the upcoming inflation figures and the bond market’s reaction will determine where we go from here. As we wrote in our equity note yesterday, the next potential themes getting attention is margin compression during the upcoming Q1 earnings in April and May and the discussion about structural inflation. US equity futures were lifted late last night by a better-than-expected outlook from Nvidia. S&P 500 futures are trading around the 4,015 level in early European trading hours. Hang Seng (HIG3) and CSI300 (03188:xhkg) failed to sustain an attempt to rally The Hang Seng Index and CSI300 bounced in early trading but the attempt to rally failed to sustain itself. Both the Hong Kong and mainland benchmarks slipped by about 0.3%. Techtronic (00669:xhkg) plunged 17% and was the biggest loser within the Hang Seng Index, following a forensic research firm published a report alleging the tool maker inflating profits by capitalizing expenses as assets. Baidu (09888:xhkg) lost 1.1% despite reporting revenues and earnings that beat market expectations and announcing a share buyback programme of up to USD5 billion. The hype of ChatGPT concept cooled down somewhat as AI-generated content names were sold on mainland bourses. FX: USD eases off the pedal ahead of BoJ Governor nominee Kazuo Ueda testimony The US dollar eased back lower as risk sentiment stabilized in the wake of another nervous session yesterday and after EURUSD nearly touched 1.0600, AUDUSD took a stab at its 200-day moving average, and USDJPY rose toward 135.00. Risk sentiment will likely continue to drive USD pairs in coming session, with the Friday PCE inflation data the next more important event risk on the calendar (though a weekly refresh of the US labour market data is up with today’s weekly claims number.) Elsewhere, plenty of attention on the Japanese yen later today, as Japan reports its January CPI figures tonight, but even more importantly as the nominee to replace Kuroda as governor of the BoJ will speak at a confirmation hearing at the Lower House of Japan’s parliament overnight. Crude oil (CLJ3 & LCOJ3) prices steady after slumping around 3% A firmer dollar and expectations of more rate hikes from the Fed gathering pace saw a bearish momentum return in commodities on Wednesday, even ahead of the release of the marginally hawkish FOMC minutes in the US session. Crude oil prices slid by close to 3% with WTI below $74/barrel and Brent at $80 despite a Reuters report stating that Russia intends to cut crude exports from its western ports by a quarter in March/February, after prior reports that the country is cutting production in March by 500k BPD. API inventories were however higher, with crude stockpiles increasing by 9.9mn barrels last week suggesting demand weakness. Prices recovered marginally overnight in Asia. Gold (XAUUSD) slumps to support again Gold gave up its recent gains amid the renewed pressure from USD and higher yields which are now close to their cycle highs despite some softening yesterday. The yellow metal edged closer to the $1820 support again yesterday, but has rebounded above 1,830 overnight. A break below 1,810-1,800 would bring the 200DMA at 1,776 in focus. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) ease back from cycle highs US Treasury yields eased back slightly from new cycle highs yesterday, with a strong 5-year auction showing bidding metrics at the higher end of the longer term range. A 7-year auction is up today and US January PCE inflation data is out Friday. The Japanese government bond market could sway global fixed income if nominee Kazuo Ueda makes any pointed comments in his confirmation hearing tonight. What is going on? FOMC minutes marginally hawkish Despite the FOMC minutes stemming from the FOMC meeting three weeks ago and prior to the January US CPI print, they sounded hawkish at the margin suggesting there may be room for further escalation of that rhetoric, given how the economic data has fared since the Jan 31-Feb 1 Fed meeting. A few of the participants favoured raising the rates by 50bps, and all agreed more rate hikes are needed thrashing pivot hopes. It also noted that a number of participants observed that financial conditions had eased in recent months, which some noted could necessitate a tighter stance of monetary policy. While this risk of a recession was noted, data since the meeting, including the most recent PMI numbers this week have continued to allay recession concerns. Apple announces ability to monitor blood sugar non-invasively Apple’s Exploratory Design Group, a previously secretive outfit within the company, is reporting success in measuring blood glucose levels without needing to break the skin to test via a blood sample, with a method using semiconductor chips and silicon photonics. The project has been ongoing for years. The hope is to integrate the technology longer term into the Apple Watch, helping to boost Apple’s effort to grow its presence in health care. US considering release of intel on China’s potential arms transfer to Russia Chinese senior diplomat Wang Yi’s visit to Moscow was accompanied with China and Russia confirming stronger ties and President Xi’s visit to Russia in the coming weeks. This is suggesting that these escalated geopolitical tensions are here to stay. The red line for US and Europe will be if there is evidence that China is supplying weapons to Russia, and that could threaten a potential escalation of the war into an outright proxy-war style confrontation between Russia and China on the one side and Ukraine and the US-led Nato military alliance on the other. A WSJ article reported that Western nations are considering making public the intelligence they possess that Beijing might end its previous self-imposed restraint on weapons supplies to Russia, according to U.S. and European officials, although it appears that China hasn’t yet made a final decision. Nvidia jumps on AI chips outlook Nvidia reported last night Q4 revenue of $6.05bn in line with estimates with the gaming segment beating estimates while the data center segment disappointed. Q4 EPS came in at $0.88 vs est. $0.81 driven by a higher than estimated Q4 gross margin of 66.1% vs est. 65.8%. Nvidia guides Q1 revenue of $6.5bn +2/-2% vs est. $6.35bn driven by strong demand in gaming and data center segments. The company is also rolling out its own cloud service together with Oracle which will later be offered by Microsoft and Google. Nvidia does not expect more downward pressure on GPU prices and thus the inventory risk is largely behind the company. While Nvidia keeps ignoring the cryptocurrency industry’s impact on demand we guess that the acceleration in speculation in cryptocurrencies and higher mining activity is what is driving Nvidia’s higher demand this quarter. Shares rose 8% in extended trading. BAE Systems sees muted 2023 revenue growth The UK-based defence company reports this morning higher than expected FY22 revenue at £23.3bn and underlying EBIT of £2.5bn. The earnings statement the company states that it expects 3-5% revenue growth in 2023 and 4-6% growth in EBIT suggesting expanding margins on pricing power amid surging demand. In our view, the revenue guidance seems a bit conservative given the signals over the weekend from the Munich Security Conference. Rio Tinto’s profits and dividend slide, guides for a stronger 2023 Rio Tinto shares declined 3.4% after reporting underlying profit fell 38% to $13.3bn in 2022 vs est. $14bn. Rio’s profit fell after realised commodity prices fell from their records in the second half of 2022 while earnings were also impacted by higher energy, raw materials prices and wages. Rio Tinto’s free cash flows fell 49% y/y in 2022 to $9bn, resulting in the miner cutting its final (HY) dividend to $2.25 a share down from $4.17, taking its total 2022 dividend to $4.92. Rio Tinto’s output looks stronger in 2023 with higher copper, alumina, aluminium and iron ore production What are we watching next? Market sentiment is fragile after recent break lower in equities – next moves pivotal Rising global yields and the firmer US dollar have risk sentiment and financial conditions under significant pressure, particularly in the US indices, but also in emerging markets and credit spreads on corporate bonds. European equities have fared better, but have lost their upside momentum. With the break of key supports in the US, the next levels of even more critical support are not far away to the downside (200-day moving average in the US S&P 500 at 3,941 on the cash index, for example). Volatility expansion is a prominent risk on a capitulation in sentiment, with further pressure from rising yields or rising concerns of geopolitical tensions possible triggers. Earnings to watch Today’s key earnings are in the European session, so the impact from earnings in the US session is minimal. Thursday: EssilorLuxottica, Deutsche Telekom, Munich Re, Kuaishou Technology, Eni, Anglo American, BAE Systems Friday: BASF, Monster Beverage Economic calendar highlights for today (times GMT) 1000 – Eurozone Final Jan. CPI 1100 – Turkey Rate Decision 1330 – US Jan. Chicago Fed National Activity Index 1330 – US Q4 GDP Revision 1330 – US Weekly Initial Jobless Claims 1530 – US Weekly Natural Gas Storage Change 1600 – US Feb. Kansas City Fed Manufacturing Activity 2330 – Japan Jan. National CPI BoJ Governor Nominee Kazuo Ueda confirmation hearing 0001 – UK Feb. GfK Consumer Confidence   Source: Financial Markets Today: Quick Take – February 23, 2023 | Saxo Group (home.saxo)
Rates Spark: Crunch time

The Euro Fell Below 1.06, The USD/JPY Pair Is Close To 135.00

Kamila Szypuła Kamila Szypuła 23.02.2023 13:00
The dollar held shy of multi-week peaks against other major currencies on Thursday, a day after minutes from the Federal Reserve's last policy meeting supported, but did not add to markets' view the central bank will raise rates further. Minutes from the Federal Reserve meeting released last night confirmed the hawkish rhetoric of Fed officials over the past two weeks. The key takeaway, of course, is that the Fed is committed to keeping interest rates higher for longer to bring inflation down to the 2% target. The impact of the protocol was somewhat dampened as the meeting was preceded by a series of metrics released in February, most notably employment figures, which showed the US economy was doing well, leaving more room for the Fed to raise interest rates to bring down inflation. Markets will be focused on US GDP as well as the accompanying labor market data in the form of jobless claims. US GDP is expected to come in marginally weaker than the previous. USD/JPY USD/JPY struggles to gain any significant traction on Thursday and trades in a tight band just below the psychological 135.00 mark for the first half of the European session. The yen pair started the day above 134.90, in the Asian session USD/JPY fell towards 134.70. In the European session, USD/JPY increased and is now just below 135.00. In addition, the USD/JPY pair is also weighed down by hawkish concerns around the Bank of Japan (BoJ), due to the imminent end of the term of governor Haruhiko Kuroda. Alternatively, Fed policymakers are poised for further interest rate hikes, according to the latest Federal Open Market Committee (FOMC) meeting minutes, which in turn is fueling demand for the US dollar. EUR/USD EUR/USD in the Asian session was above 1.06, and the pair traded close to the 1.0630 level. In the Asian session, EUR/USD fell below 1.06. This morning brought data on inflation in the euro zone for January, in which annual inflation fell to 8.6% in the euro zone and to 10.0% in the EU. In January, food, alcohol and tobacco accounted for the largest contributors to the euro area's annual inflation rate, followed by energy, services and non-energy industrial goods, according to data released by Eurostat. In addition, EU members will hold further talks on a new package of sanctions against Russia after failing to reach an agreement on Wednesday. According to Reuters, the proposed package includes trade restrictions worth more than €10 billion. Russia is reportedly planning to cut oil production in response to Western sanctions. The heightened risk of rising energy prices, which will contribute to stronger inflation in the eurozone, could help the euro hold its position in the short term, as such a situation would force the European Central Bank (ECB) to raise interest rates further after March. Read next: Tesla Opens Its Global Engineering Headquarters In Palo Alto, California| FXMAG.COM GBP/USD The cable pair in the Asian session was rising towards 1.2070, but in the European session it lost momentum and fell to the level of 1.2020. Currently, GBP/USD is at 1.2022. GBP/USD extended its decline towards 1.2000 early Thursday after reversing much of the PMI-driven gains on Wednesday. Markets will be keeping a close eye on US stocks and Brexit developments for the remainder of the day. AUD/USD The AUD/USD pair was rising towards 0.6840 in the first hours of trading. Then the pair of the Australian fell and rebounded again. In the European session the Aussie Pair traded below 0.6820, currently the AUD/USD pair is trading above 0.6820. Australian capital expenditure data beat estimates across the board (reaching its highest level since Q4 2021) showing optimism in these sectors. Source: investing.com, finance.yahoo.com
US GDP Ahead, Energy Prices Push Lower, EUR/USD Pair Struggles

US GDP Ahead, Energy Prices Push Lower, EUR/USD Pair Struggles

Swissquote Bank Swissquote Bank 23.02.2023 13:09
Hawkish were the minutes from the latest FOMC meeting. They confirmed that the Federal Reserve (Fed) officials are indeed not lying when they say that they will continue hiking the interest rates to tame inflation toward the 2% mark. US and China Both the US 2 and 10-year yields bounced lower from early-week highs. A part of it was perhaps explained by the rising tensions between the US and China after China said that their relationship with Russia is ‘rock solid’. Stock market The S&P500 eased another 0.16%, Nasdaq tipped a toe into the bearish consolidation zone, but US equity futures are in the positive this morning, as the tech-heavy index is boosted by an almost 9% jump in Nvidia shares in the afterhours trading, after the company announced soft, but better than expected results. US GDP Due today, the US GDP is expected to have expanded 2.9% in the Q4, which is a fairly strong number. A read above expectations will certainly boost the Fed hawks on the idea that the US economy is resilient enough to withstand more hikes, while a number below expectations could ease the hawkish Fed tensions. But the days when bad news was good news are gone. At this point, we can’t really bet that a soft growth would soften the Fed’s hand. Only soft inflation could do that. Watch the full episode to find out more! 0:00 Intro 0:25 FOMC minutes confirmed hawkish stance 2:50 Nvidia results help Nasdaq shake off post-minutes moodiness 4:12 But could the US stock rally extend?! 6:30 Watch US GDP update today 7:30 USD consolidates gains, EURUSD struggles 8:27 Energy prices push lower Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #FOMC #minutes #Nvidia #earnings #EUR #inflation #natural #gas #crude #oil #EIA #US #GDP #data #USD #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
BRICS Summit's Expansion Discussion: Impact on De-dollarisation Speed

All Fed Policy Makers Supported Further Tightening Of Monetary Policy

Craig Erlam Craig Erlam 23.02.2023 14:03
Equity markets are heading for a positive start to the session, paring Wednesday’s gains as investors digest the latest Fed minutes. The usual caveat applies to the minutes, being that a lot of time has passed, and to a great extent, the contents of them are either outdated or known. Still, as we saw on Wednesday, that doesn’t always matter and markets can still respond accordingly. The starkest takeaway was arguably that some policymakers could have gotten behind another 50 basis point increase and all backed further tightening ahead. While that aligns with some commentary we’ve had recently, the meeting took place before the jobs and inflation reports, and the retail sales data for January, all of which were very strong. So either policy makers came to this judgment in anticipation of those reports or they did it despite a series of softer prints that had convinced investors that the end of the tightening cycle was just around the corner. While I do take Fed commentary with a relative pinch of salt – as I believe the plan has always been to remain hawkish and keep financial conditions tight until the last minute and then quickly pivot once success is all but assured – the latter may well indicate that at least a few hikes are planned and any hope of cuts this year are, as communicated, slim. That could be the difference between a recession and a soft landing, although again, I take these warnings with a large pinch of salt. If January proves to be a blip in the data due in part to warmer weather – and the fact that bumps in the road back to 2% were always highly likely – we could quickly see market pricing shift once more. And we’ll get another full round of data before the next meeting which will give us a much better idea of whether this is a blip or a trend. Growing belief Bitcoin is continuing to show remarkable resilience as it trades up 2% today and back above $24,000. Don’t get me wrong, it’s not alone in doing so, we’re seeing similar in equity markets although to a lesser extent. There’s clearly belief returning to crypto markets and some confidence that the darkest days are behind it. If the newsflow can remain onside then that could prove to be the case and a break of $24,500-$25,500 could further fuel that belief. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
EUR/USD Pair is Structurally Working On A Larger-Degree Upswing

The EUR/USD Pair Recovered 50% Of Its Losses From The Downward Trend

Paolo Greco Paolo Greco 24.02.2023 08:07
On Thursday, the EUR/USD currency pair maintained its rather weak downward trend. Although corrections continue to occur frequently, the pair is not losing much daily. On the other hand, it happens virtually daily and steadily. Recall that following a several-month increase of about 1,500 points, we have frequently warned that the European currency is severely overbought. Sincerely, there weren't any fundamental causes for this increase. There was another trend, a downward one that lasted two years, right before this one. Understandably, a correction of at least 400 points was required following such a significant and protracted downward trend. So we succeeded. The pair recovered 50% of its losses from the downward trend, raising the question: why should the euro continue to rise? While the ECB and Fed both raise rates at the same time, the Fed does it more quickly and forcefully. In other words, the dollar side is where this advantage lies. 90% of the time, the US economy won't experience a recession, but the EU economy could still get caught in a "trap." The US is experiencing a harsher, faster, and longer decline in inflation than the EU. The Fed's continued use of tough and aggressive rhetoric benefits the US currency as well. As a result, practically all factors continue to be in favor of the US dollar, which has declined significantly over the past six months. And now it has a legitimate reason to recoup its losses. Nevertheless, on the 24-hour TF, the pair figured out the Senkou Span B line, which we've discussed numerous times. The 38.2% Fibonacci level is 1.0609 as well. The fall might continue since there hasn't been a rebound from these supports yet. And if it persists, the pair runs the risk of dropping to prices of $1.03 and $1.02. This means that the euro may be priced similarly to the dollar within the next month. Except for the senior linear regression channel, all indicators on the 4-hour chart point downward. As a result, the downward trend continues and is not cause for concern. Even the CCI indicator cannot enter the oversold area and create a warning signal regarding an upward reversal since the downward movement is too weak. The "moderately hawkish" Fed policy. As we've already stated, in general, we don't think the Fed minutes are a big deal. Rarely do they contain crucial information, but they occasionally do. That was not the case on Wednesday night. The only thing worth mentioning is the regulator's monetary committee's continued "hawkish" stance, which still aims to raise the rate without pausing. However, as it turned out, several committee members decided to endorse a 0.5% rise all at once at the previous meeting. They certainly remained the minority, though. We feel that this fact should not mislead traders, because, for example, in the last three meetings of the Bank of England, two out of nine committee members voted against tightening. Even still, the rate continues to rise by 0.5% as 7 additional members support them. As a result, unless there is "more than half" of them, "a few officials voting for 0.5%" in the United States do not matter. Also, the likelihood of this decreases with each meeting. Even so, the rate is still increasing by 0.25%. Yet, it is already 4.75%. Even if inflation slows down, it will eventually stop growing. We, therefore, think that it will grow by a quarter point for however long it takes, rather than a predetermined number of times as many experts prefer to forecast. We think the Fed will respond to each inflation report and take appropriate action. For instance, we can already predict that the rate will rise by 0.25% in March with a 100% likelihood. Only a 0.1% yearly decline in inflation in January was unsatisfactory to the regulator. As a result, additional tightening is necessary. The public debt and its ceiling were also discussed in the protocol, which may soon cause the financial system to run into them once more. It is noteworthy that at least twice a year, a new season of the series "raising the debt ceiling in the United States" is released. And each time, the corresponding conclusion is reached following a protracted debate in Congress and the Senate. As a result, we think that this is rarely a problem and not even worth paying attention to. The key rate is expected to rise consistently throughout the first half of 2023, thus the dollar is still growing steadily. We think that the euro/dollar pair can decline for a few days in relative calm. As of February 24, the euro/dollar currency pair's average volatility over the previous five trading days was 60 points, which is considered to be "normal." Thus, on Friday, we anticipate the pair to move between 1.0525 and 1.0645 levels. A new round of correction will be signaled by the Heiken Ashi indicator's upward movement. Nearest levels of support S1 – 1.0498 S2 – 1.0376 S3 – 1.0254 Nearest levels of resistance R1 – 1.0620 R2 – 1.0742 R3 – 1.0864 Trade Advice: The EUR/USD pair is still moving downward. Unless the Heiken Ashi indication turns up, you can continue to hold short positions with targets of 1.0525 and 1.0498. If the price is fixed above the moving average line with a target of 1.0742, long positions can be opened. Explanations for the illustrations: Determine the present trend with the use of linear regression channels. The trend is now strong if they are both moving in the same direction. The short-term trend and the direction in which to trade right now are determined by the moving average line (settings 20.0, smoothed). Murray levels serve as the starting point for adjustments and movements. Based on current volatility indicators, volatility levels (red lines) represent the expected price channel in which the pair will trade the following day. A trend reversal in the opposite direction is imminent when the CCI indicator crosses into the overbought (above +250) or oversold (below -250) zones. Relevance up to 01:00 2023-02-25 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/335986
The Collapse Of The SVB Triggered A Massive Rally In Bond Markets

Rates Spark: Bonds are cheaper now, but does anyone want them?

ING Economics ING Economics 24.02.2023 08:30
Rates are struggling to break above important levels, noses are being turned up at US auctions that are much cheaper then they were, and markets' central bank hike expectations appear maxed out for now. We think next week's data stands a better chance to provide that final nudge, though we also have technical factors from supply to month-end to contend with US auctions being shunned on 50bp concession to those of a few weeks ago US auctions have been a tough sell this week. Both the 5yr and the 7yr tailed, meaning that the awarded yield was above the when-isssued (market) one. Not by much, but enough to show that the market is in no mood to take down extra interest rate risk. No doubt longer duration supply would have been an even tougher ask. Interestingly this happens in the wake of a significant concession built into the curve in the past number of weeks. Clearly the market is not convinced that the move higher in yields is behind us. The market is in no mood to take down extra interest rate risk It's in stark contrast to the stellar long duration auctions of a number of weeks back when the US 10yr was in the region of 3.4% (and lower). That was a time when the market was looking for any excuse to test the downside in yield. We noted back then that the best option was to cosy up to the ultra-front end, take the 4% handles on offer (on zero risk) and sleep easy at night. That thinking remains, but as noted we'd also be slowly averaging into the higher yields now attainable further out the curve, with the 10yr 50bp higher. So, we were cautious on Treasuries around the auctions that went ultra-well some weeks back, and we'd be more constructive into the more recent ones this week that have not gone well. The 4% area for the 10yr is now offering some duration at better levels, and for corporates that are over-fixed to look to swap some liabilities to floating. The latter is carry negative on impact (that's the tough bit), but cumulative carry positive, provided the Fed does some decent interest rate cutting as we venture closer and through 2024. US yields are back at their highs but not high enough to entice buyers at auctions Source: Refinitiv, ING Of data drivers... Data remains crucial. It is being tracked closely by central banks which have reverted to a meeting-by-meeting approach. It has become a main driver of rates direction as markets try to second-guess central bankers' actions in the months ahead. Ahead lies another data-heavy week. Highlight, certainly for EUR rates, will be the eurozone CPI flash estimate for February. The markets' sensitivity was highlighted by the reaction to the upward revisions in the final inflation rate for January just yesterday, to 8.6% year-on-year in headline and 5.3% YoY in core. Energy price development should bring down the headline rate from that level, but it is core inflation that remains the main concern. We have heard from European Central Bank officials that they see the peak in underlying inflation still ahead, so an unchanged rate is probably the best one can expect next week. It is core inflation that remains the main concern A sticky core rate means no relief for central bankers and thus also little reason for markets to budge from their pricing of 125bp of further rates increases from the ECB. However, we also have the feeling that given how far the EUR front-end pricing has already evolved, the further upside appears limited for now with even the ECB hawks already ‘out-hawked’ by the market. Outside the eurozone it had been the resilience of the US jobs market that gave the starting shot to the current leg higher in rates – and giving the Fed more reason to fret about sticky inflation. That jobs resilience is for now also reflected in the weekly initial jobless claims data seen again yesterday. But other data had also come in better, with one outsized surprise being the ISM services which had surged back from below 50 to 55.2. We will get the February reading next week, and while the consensus is looking for some moderation, certainly not of the sort to change the current narrative. EUR rates are also back at their highs but volatility suggests less impetus than in 2022 Source: Refinitiv, ING ... and temporary technical factors Primary market activity in Eurozone sovereign space should moderate next week, but it will have a notable ultra-long flavour again. The Netherlands and Germany will be in the market with 15Y bond taps, while France will have its auction geared at 10Y and longer tenors as well. Also on the slate are Spanish auctions and another tap from Germany in the 2Y maturity. That said the impact of auctions is usually fleeting. Case in point just yesterday was the reversal of the long end curve steepening on the back of the syndicated 30Y Bund tap. To note, the large order book of that particular deal provided another hint for ongoing demand in the sector. Another factor to take into consideration is the rebalancing around month end. The long end deals over the last month should imply duration buying from index trackers to match the index extension. US Treasury supply will take a break next week after last night’s 7Y note auction. Short-end EUR rates have been driving the long-end, but ECB hikes pricing seems to have peaked Source: Refinitiv, ING Today's events and market view Rates are struggling to break above the highs staked out in previous months. We doubt that today’s data alone can nudge rates higher given that markets should already have a good feel for them. We think next week’s data slate stands a better chance to offer fresh impetus. Today we will get more headlines on US inflation to under pin the Fed hike narrative with the monthly series of the PCE deflator up for release. After yesterday’s quarterly data release, the December month-on-month core rate should see an upward revision to 0.4% and we will likely see another 0.4% print for January. Personal income and spending data should reflect the increase in activity already seen in the bumper retail sales release for January. In today’s primary market Italy launches a new 7Y floating rate note alongside 5Y and 10Y bond taps. We will hear from the Fed’s Jefferson and Mester, as well as Bullard. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Nasdaq 100 posted a new one year high. S&P 500 ended the day unchanged

The DAX Index Is Now At Pre-War Levels, Nasdaq 100 Saw Support

Ipek Ozkardeskaya Ipek Ozkardeskaya 24.02.2023 09:03
S stocks had a wobbling trading session yesterday. The S&P500 tipped a toe below its 50-DMA yesterday, near 3980, then rebounded to close the session around 0.50% higher, above the 4000 psychological mark. Nasdaq 100 saw support into the 12000 psychological mark and gained almost 1% into the close. The 14% jump in Nvidia certainly helped improve the overall market mood, whereas the US economic data was mixed and was not supposed to pour water on the equity bears or improve sentiment regarding the Federal Reserve (Fed) hawks. The latest GDP update from the US revealed that the US economy expanded 2.7% in the Q4, instead of 2.9% penciled in by analyst. A softer economic growth could have been encouraging for easing inflation and softening the Fed's hand. BUT NO, because the GDP price index – another gauge of inflation which was released along with the GDP update, showed that inflation in the Q4 eased but eased much less than expected – as a perfect reflection of the CPI and PPI data released last week. The cocktail of slower-than-expected growth and higher-than-expected inflation is the worst possible outcome, and we could see the latter reflected in the corporate earnings. The S&P500 companies now all reported their results and earnings fell 1% in the latest quarter. At first glance, this is not a good number, but these earnings are compared to the blockbuster post-pandemic numbers, and despite a fall, they remain high. The question is, how far they will fall. It will depend on several factors, including how aggressive the Fed will continue tightening policy. How aggressive the Fed will continue tightening policy will depend on how sticky inflation is. We have one more important data point to watch before the week ends... and that's the US PCE index, the Fed's favourite gauge of inflation. Given the previous inflation data, we know that inflation has certainly eased, but not as much as expected. If there is not a big surprise, there should be no bloody market reaction to a slightly higher than expected PCE index. The S&P500 could close the week above the 50-DMA, and Nasdaq above its major 38.2% Fibonacci retracement. There is one more thing that probably helps equities hold their ground, and that's the easing US yields. I believe that the US yields have been easing since a couple of days due to the rising geopolitical tensions between the US and China – after China screamed loud and clear their support to Russia this week. These rising tensions certainly increase the safe haven flows to the US treasuries and interferes with the hawkish Fed pricing. As such, the US 2 and 10-year yields are softer compared to a peak earlier this week. European stocks up, euro down on record inflation!? The European stocks gained and the euro fell on Thursday, even though the latest inflation data from the eurozone revealed that the core inflation advanced to a record high. The rising inflation is normally a boost for the European Central Bank (ECB) hawks, who increase the bets that the ECB will raise the rates more forcefully. The latter should weigh on equity valuations and support the euro. But no. The contrary is happening because the major driving force of the market is the Fed and the dollar. So, the EURUSD fell as low as 1.0577 yesterday, while the European stocks were upbeat. The DAX index for example is now at pre-war levels, whereas the latest data is less than encouraging for the German economy. The European exports are recovering to the pre-pandemic levels, but the German exports are clearly lagging behind the zone's average. Spain and Italy are doing much better than their German peers. Why? Because the energy crisis has taken a toll on German manufacturing, whereas the post-pandemic reopening benefit Spanish and Italian tourism. As a result, the headline data is strong, but the underlying factors warn that the Eurozone growth is perhaps vulnerable. Sticky inflation and hawkish ECB are major risks to the actual European equity rally. 41-year high, Mr. Ueda! Speaking of inflation, the data released this morning showed that inflation in Japan rose to 4.3%, a 41-year high, and gave a rapid boost to the yen, sending the USDJPY down to the 134 mark. But we know that the Bank of Japan (BoJ), under the leadership of its new head Ueda, is not necessarily concerned about the rising inflation. The BoJ prefers keeping rates below zero, for now, and that should continue playing in favour of USDJPY bulls, at a time when the Fed members continue showing the world how serious they are in taming inflation.  
Gold Trading Analysis: Technical Signals and Price Movements

FX Daily: Geopolitics sees pro-risk trades unwind

ING Economics ING Economics 24.02.2023 09:07
US data and Fed commentary is keeping the dollar bid. At the same time, geopolitics and reports that China is preparing to increase its support for Russia are also seeing an unwind of 2023 global recovery trades. February and March are seasonally strong months for the dollar and 4.50% overnight deposit rates can keep the dollar supported a little longer  Incoming Bank of Japan Governor Kazuo Ueda USD: Dollar strength is not just a Fed story It has been quite surprising to see USD/CNH move back above the 6.90 area and also see USD/KRW stay bid above 1300. The 2023 narrative was meant to be about US disinflation, China re-opening and $/Asia playing a major part in the broad dollar decline. That has not been the case. Away from the US disinflation/Fed story, the rally in USD/Asia and USD/CNH may also be down to a re-appraisal that: a) Asian trade surpluses may be harder to come by given the slowdown in Europe and the US, plus b) geopolitics creeping into investment decisions. For example, reports overnight suggest that China may be preparing to up its support for Russia consistent with recent briefings out of Washington. The fear of an escalation in US sanctions may be prompting investors to re-appraise some of their investment holdings along geo-political lines.  This comes at a time of the year when the dollar is seasonally strong (February and March) and the bar to put money to work outside of 4.50% yielding overnight dollar deposits is not particularly low. Away from geopolitics, yesterday's US fourth quarter GDP revision saw the core deflator revised up to 4.3% annualised, from the 3.9% originally reported, and today should see the January core PCE deflator at a sticky 0.4% month-on-month. In other words, the US disinflation/bearish dollar narrative will find little from today's data. DXY looks like it can continue to press 105.00 and should USD/CNH trade back up to 7.00 on geopolitics, we could be looking at 105.60/106.00 on DXY.  Chris Turner EUR: Eurozone core inflation strikes new high Yesterday's revisions to eurozone January inflation saw core inflation revised to a new cycle high of 5.3% year-on-year. No wonder ECB officials such as Isabel Schnabel are keen to dispel any ideas that the disinflation process has started. And a core view slowly permeating through the market is that the ECB has perhaps another 100bp+ of tightening to do, but crucially will be leaving rates at those high levels throughout a large chunk of 2024. This should be a key factor in keeping EUR/USD supported on a multi-quarter view.  The eurozone calendar is light today, but given the dollar bid on the back of US data/geopolitics, the EUR/USD bias looks to a press of 1.0575 support and a potential move to 1.0500. Chris Turner GBP: A good week for UK data Following on from Tuesday's strong PMI release, the UK outlook has received another boost today in the form of a big jump in GFK consumer confidence. This has now returned to levels not seen since last April. At the margin, this will make the Bank of England's life harder as it seeks to cool aggregate demand to soften inflation. Markets are now quite comfortable in pricing the BoE's Bank Rate at 4.50% at the end of this year – pricing 25bp hikes in March and May. Slightly better growth prospects, sticky inflation and some further monetary tightening are the story across the US, the eurozone and the UK at the moment – suggesting bilateral FX rates do not need to move too much. This has seen three-month GBP/USD implied volatility drift under 10% and would tend to favour more modest moves in the spot. We think support levels at 1.1850/1950 may hold over the next couple of weeks. BoE dove Silvana Tenreyro speaks at 1730CET today. Chris Turner JPY: Few bombshells from BoJ Governor nominee The Japanese yen event risk has been overcome today in the form of testimony from the nominee Bank of Japan (BoJ) Governor Kazuo Ueda. The yen and Japanese government bond (JGB) yields moved little on his remarks that a dovish policy setting was still appropriate, but that normalisation would be needed were the BoJ to conclude that inflation had achieved 2% on a stable basis. The forward market for 10-year JGB yields does, however, price a further widening of the 10-year JGB band (+/- 50bp around zero) within the next three months. And the FX options market prices volatility around the key BoJ monetary policy dates of 10 March and 28 April. Our view is that this corrective dollar bounce could carry USD/JPY up to the 136/137 area over the next couple of weeks. But assuming that we are correct with the US disinflation story dominating again in the second quarter, USD/JPY should be back towards 125/126 into the summer. Chris Turner Read this article on THINK TagsYen FX Dollar Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
USD/JPY Pair Has Rebounded Firmly From The Upward-Sloping Trendline

Kazuo Uedy Signaled Little Need To Tighten BoJ Policy Which Weakened The Yen

Saxo Bank Saxo Bank 24.02.2023 09:14
Summary:  Markets remain nervous as new local lows were probed yesterday in the US equities but were rejected just ahead of the 200-day moving average in the S&P 500. A first Chinese peace proposal for the Russian aggression in Ukraine was dismissed by commentators on the first anniversary of the war. Elsewhere, nomination hearings for Kazuo Ueda, who would replace Kuroda as Bank of Japan governor, saw the JPY slightly weaker. What is our trading focus? US equities (US500.I and USNAS100.I): back to wait and see on inflation and rates US equities were bouncing around in yesterday’s session with S&P 500 futures ending the session above the 4,000 level as the US 10-year yield came down despite initial jobless claims suggesting the US labour market remains extremely tight. There are no major earnings releases in today’s session, so we expect a quiet session going into the weekend. The key upside level to watch is yesterday’s close in the S&P 500 futures at the 4,019 level on the downside it is the 4,000 level. Hong Kong’s Hang Seng Index (HIG3) and China’s CSI300 (03188:xhkg) declined around 1% The Hang Seng Index declined 1.2% and the CSI300 slid 0.8% as of writing. Alibaba (09988:xhkg) announced results beating estimates but the shares of the eCommerce giant plunged 4.6% following management comments on the need to increase investments to stay competitive. According to Nikkei Asia, Chinese regulators have told Tencent (0070:xhkg) and Alibaba’s Ant Group not to offer access to ChatGPT services to the public directly or through third party as the regulators are increasingly concerned about uncensored replies given to users. FX: USD bobs up and down with risk sentiment. JPY lower after Ueda testimony. The US dollar posted new highs yesterday, as EURUSD probed below 1.0600 for the first time since early January, AUDUSD took a peek below its 200-day moving average and below 0.6800 and GBPUSD tested the waters below 1.2000, but the USD rally seemed a passive coincident development with the swings in risk sentiment, with a late rally in US equities pushing the greenback back lower. In Japan overnight, the JPY was firm early in the Asian session despite slightly softer CPI data, and then weakened slightly later in the session during Kazuo Ueda’s nomination hearings for the Bank of Japan governorship, as he signalled little urgency on tightening BoJ policy. Crude oil rises despite another US inventory build Crude oil trades higher for a second day but remains on track for a monthly loss within the established range, in Brent between $80 and $89, and WTI between $82 and $73. The technical driven bounce occurred despite another built in US inventories, but soaring exports of 4.6m b/d and a continued rise in US gasoline demand helped underpin prices. Supply side concerns may also be in focus after Russia announced this week that it will cut exports to the West in March, in addition the previously announced production cuts. Gold (XAUUSD) slumps to support again Gold dropped to the lowest level of the year on Thursday amid continued pressure from USD and higher yields which both moved close to their cycle highs earlier in the week before easing a bit on Thursday. The yellow metal has so far managed to find support around $1820 but until macro-economic developments turn more friendly the risk remains of a further weakness towards $1788 followed by the 200DMA at $1,776. Gold has been troubled by a recovering dollar and rising treasury yields after recent US data strength supported the view the Fed will keep rates higher for longer to fight inflation and to cool the economy. US PCE deflator, the Fed’s preferred inflation gauge, will be watched closely today with expectations pointing to a robust print, both in headline and core. Copper retreats as hawkish Fed weighs on sentiment. Copper has retreated from the highest close in three weeks, and yesterday’s drop, the biggest one-day slump this year, has taken it back towards key support in the $4 a pound area. Together with other industrial metals, copper is heading for a monthly loss as the market becomes increasingly impatient with the recovery in demand in China. Instead, the attention has been turning to worries that higher US rates for longer may strengthen the dollar and hurt the outlook for growth and demand. However, with supply potentially struggling to keep up with demand, we view the current weakness as temporary and part of the general loss of confidence that has hit markets this month. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) drop. US Treasury yields fell yesterday after probing the cycle highs in the wake of another strong weekly jobless claims number, with the 2-year little changed, but longer yields falling more sharply, as the 10-year closed at 3.87% after posting a cycle-high 3.97% in early US trading. Read next: The Euro Fell Below 1.06, The USD/JPY Pair Is Close To 135.00| FXMAG.COM What is going on? US GDP revised a notch lower, jobless claims fell The second estimate of US Q4 GDP was revised lower to 2.7% from the prelim 2.9%. The Core PCE measure, the Fed’s preferred measure of inflation, was revised to 4.3% from 3.9%, suggesting price pressure in Q4 was higher than previously reported. While slower activity and higher inflation are making the Fed’s task more difficult, the labor market remained strong, suggesting that any slowdown in growth will likely be very slow. Weekly initial jobless claims dropped to the lowest in 4 weeks at 192k from the prior 195k. Worrying signal on the inflation front in the eurozone Yesterday, inflation was confirmed higher than initially reported in the eurozone in January (headline at 8.6 % year-over-year and core at 5.3 % - this represents a 0.1 percentage point higher). What is even more worrying is that the EZ CPI basket showed the most broad-based price increase on record. 76 % of the basket experienced a month-over-month increase above 0.2 %. This is up from 52 % in December 2022. There is little doubt that the European Central Bank (ECB) will hike interest rates by 50 basis points in March. But we think the ECB is not done anytime soon with the tightening process. The terminal rate is probably closer to 4 % than expected by the market consensus. Block results beat on the back of Bitcoin revenue rising more than expected Block rallied over 7% after Q4 net revenue rose more than expected, up 14% to $4.7bn, beating estimates of $4.6bn. It comes as Bitcoin revenue rose to $1.8bn vs est. $1.8bn, while hardware revenue from its Square terminals and Square registers rose slightly more than expected. Block sees FY23 adjusted EBITDA of $1.3bn vs est. $1.3bn. Japan’s January CPI softer than expected, BOJ gov nominee Ueda’s hearings bring flexibility to dovishness January inflation print in Japan came in-line with expectations on the headline at 4.3% YoY from the prior 4.0% YoY but was marginally below expectations on the core measures. Ex fresh food and energy was out at 3.2% YoY, above last month’s 3.0% YoY but below the expected 3.3%. Inflation remains above the Bank of Japan’s 2% target, and price pressures are broad-based. BOJ nominee Kazuo Ueda’s parliamentary hearings in the lower house today brought some clarity over his policy direction, suggesting he will stick to easing for now while remaining flexible to tweaks as needed. What are we watching next? The week ahead in geopolitics after China peace proposal issues and on macro dataNext week’s macro calendar is not the usually busy one as a new month rolls into view, as the key US labor market data is not up until Friday the 10th of March, although the latest string of strong weekly US jobless claims offer no evidence of a softening labor market. Next Wednesday we’ll get the latest ISM survey data as regional US manufacturing surveys for February thus far suggest little chance of a resurgence in the recessionary ISM Manufacturing survey, with the last three readings in a row below 50 ahead of the survey release next Wednesday. The ISM Services survey, meanwhile, is up on Friday and bears watching after two confusing prior readings – a very weak one in December followed by a resurgent one in January of 55.2. Otherwise, the intense focus on geopolitics will remain as the US considers making public the intelligence it has gathered on China considering supporting Russia’s war effort in Ukraine, as well as how China deals with US warnings against China providing lethal aid to Russia in the conflict. China’s first attempt at wading into the situation as a peace-broker with a cease-fire “position paper” today was dismissed by a US official and is seen as a likely “non-starter with the US and most European countries” according to Neil Thomas, a senior analyst at the Eurasia group. Earnings to watch Today’s key earnings release is from BASF which has already reported which is sour reading for investors. The German chemical company is terminating its share buyback programme on top of reporting revenue and EBIT below estimates. In addition, the company is cutting 2,600 jobs in response to the higher energy costs. There is also good news in the Q4 earnings release that might lift the mood of investors, and that is the FY23 revenue outlook of €84-87bn vs es.t €81.8bn. Friday: BASF, Monster Beverage Economic calendar highlights for today (times GMT) 1330 – US Jan. Personal Income and Spending1330 – US Jan. PCE Inflation1500 – US Jan. New Home Sales1500 – US Feb. Final University of Michigan Sentiment1515 – US Fed’s Mester (Non-voter) to speak1600 – US Feb. Kansas City Fed Services Activity1830 – US Fed’s Collins (Non-voter) to speak1830 – US Fed’s Waller (Voter) to speak   Source: Financial Markets Today: Quick Take – February 24, 2023 | Saxo Group (home.saxo)
Turkey cuts rate despite inflation threat, Japanese inflation hits 41-year high

Turkey cuts rate despite inflation threat, Japanese inflation hits 41-year high

Swissquote Bank Swissquote Bank 24.02.2023 10:58
US stocks had a wobbling trading session yesterday. US equities gained, then lost, then rebounded to close the session in the green. Nvidia The 14% jump in Nvidia certainly helped improve the overall market mood, whereas the US economic data was mixed and was not supposed to pour water on the equity bears or improve sentiment regarding the Federal Reserve (Fed) hawks.  US economy The latest GDP update from the US revealed that the US economy expanded slower than expected, while prices rose faster-than-expected. We have one more important data point to watch before the week ends… and that’s the US PCE index, the Fed’s favourite gauge of inflation. Given the previous inflation data, we know that inflation has certainly eased, but not as much as expected. Eurozone Across the Atlantic Ocean, the European stocks gained and the euro fell on Thursday, even though the latest inflation data from the eurozone revealed that the core inflation advanced to a record high. Japan While the data released this morning showed that inflation in Japan rose to 4.3%, a 41-year high, and gave a rapid boost to the yen, sending the USDJPY down to the 134 mark. Watch the full episode to find out more! 0:00 Intro 0:35 Mixed reaction to mixed data 3:55 Watch US PCE index today! 5:40 European stocks up, euro down after record core CPI. Why?! 7:38 Japanese inflation hits 41-year high 8:25 Turkey cuts rate despite inflation threat Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #USD #EUR #JPY #GDP #inflation #data #Turkey #rate #decision #TRY #EuroStoxx #DAX #BIST #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
The German economy underperformed in the Q4 of 2022, GDP declined

The German economy underperformed in the Q4 of 2022, GDP declined

Kenny Fisher Kenny Fisher 24.02.2023 14:28
The euro is down slightly on Friday. EUR/USD has been slowly moving lower and is down 1.1% this week. German GDP misses estimate The German economy, the biggest in the eurozone, underperformed in the fourth quarter of 2022. GDP declined by 0.4% in Q4 2022 q/q, below the 0.5% gain in Q3 and shy of the forecast of -0.2%. On an annualized basis, GDP slowed to 0.9%, down from 1.4% in Q3 and below the forecast of 1.1%. It was a rough end to 2022 for the German economy – the energy crisis, high inflation and the end of fuel subsidies all contributed to negative growth in the fourth quarter. The German consumer spent less in Q4 compared to Q3, but the silver lining is that consumer confidence continues to rise. GfK Consumer Climate is estimated to have improved to -30.5 in March, up from -33.8 in February. Consumer confidence is still deep in negative territory but has now accelerated over five consecutive months. The Federal Reserve remains in hawkish mode, as members continue to remind the markets that inflation is too high and more rate hikes are coming. The recent employment and retail sales reports helped convince the markets that the Fed means business, and investors are no longer talking about a ‘one and done’ rate hike in March with rate cuts before the end of the year. The markets appear to have bought into the ‘higher and longer’ stance that the Fed has been pushing, and expectations of a 0.50% hike in March have risen. According to CME’s FedWatch, the markets have currently priced the odds of a 25-basis point hike at 76% and a 50-bp increase at 24%. Earlier this week, the split was 83% for a 25-bp hike and 17% for a 50-bp rise.   EUR/USD Technical 1.0604 is a weak resistance line. Above, there is resistance at 1.0704 There is support at 1.0513 and 1.0413 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
WTI Oil Shows Signs of Short-Term Uptrend Amid Medium-Term Uptrend Phase

EUR/USD, GBP/USD And AUD/USD Drop, USD/JPY Rose Above 135.00

Kamila Szypuła Kamila Szypuła 24.02.2023 13:25
The dollar index rose to seven-week highs on Friday as investors braced for an extended hold on higher US interest rates after a series of strong economic data in the US. Investors await data on the US Personal Consumer Expenditure (PCE) Price Index. The annual core PCE price index, the Fed's preferred measure of inflation, is projected to fall to 4.3% in January from 4.4% in December. The core consumer price index (CPI) fell to 5.6% y/y in January from 5.7% in December. A modest fall in core PCE inflation should not come as a big surprise at this point. The PCE Core Price Index is expected to increase by 0.4% m/m. In the event that the monthly value exceeds the market consensus, the US dollar may gain strength. It is worth noting, however, that markets are already fully pricing in two more Fed rate hikes of 25 basis points in March and May. USD/JPY USD/JPY started the day with a decline towards 134.20. Then the yen pair moved upwards. USD/JPY hit 135.00 and is now trading at 135.3850 The Japanese yen may fall further after the new governor of the Bank of Japan, Kazuo Ueda, signaled that very loose monetary policy should be maintained. Ueda's comments after his approval in the lower house of Japan's parliament did not produce any clear hawkish signal that could fuel a resurgence of speculative demand for the yen in the near term. EUR/USD EUR/USD traded above 1.06 in the Asian session, mostly in the 1.0605-1.0610 range. In the European session, the EUR/USD pair lost momentum and returned to levels below 1.06. Currently, the pair is trading just below 1.06 at 1.0580. The euro started the European session weaker after worse than expected data on German GDP. GDP data showed that the German economy contracted (-0.4%) in the fourth quarter of 2022 and brought recession talk back. Moreover, a weaker-than-expected rise in monthly core PCE inflation could trigger a USD correction and help the EUR/USD rebound ahead of the weekend. Read next: Visa Success At The Expense Of Small Businesses| FXMAG.COM GBP/USD The cable pair in the Asian session and in the beginning of the European session traded around 1.2020. The GBP/USD pair lost momentum and fell below 1.20, at 1.1987. British consumers have become more optimistic about their personal finances and economic outlook, but their sentiment is much lower than it was before the COVID-19 pandemic, research firm GfK said on Friday. Improved consumer sentiment does not always translate to improved spending, as evidenced by the flat retail sales reading for February from the Confederation of British Industry on Thursday. However, energy prices are finally backing down from last year's highs and the UK economy is not looking as bad as expected just a few weeks ago, according to this week's Purchasing Management Index (PMI) business activity survey that showed an unexpected rebound in early February. AUD/USD The pair of the Australian in the Asian session stayed above 0.6819, but with the start of the European session it began to fall below 0.68. Currently the Aussie Pair is trading below 0.6870 The Australian yen gained in value after the alleged head of Japan's central bank maintained the status quo on monetary policy and was apparently in no rush to end its massive stimulus programme.. Source: investing.com, finance.yahoo.com
US Flash, that is to say preliminary, PMI for April came in at a better-than-expected 50.4 versus a downwardly revised 49.2 in March and a forecast 49

Key events in developed markets next week - 25.02.2023

ING Economics ING Economics 25.02.2023 11:53
US data next week should help to test our hypothesis – that the strength in activity data has been largely caused by spring-like temperatures in January. Hence, we see a partial correction in the ISM services indices. House prices should remain under downward pressure, but a collapse in pricing looks unlikely at this stage Shutterstock US: Strength in activity data likely caused by favourable seasonal adjustments January US activity data was, in general, very strong with the economy adding half a million jobs, retail sales jumping 3% month-on-month, and the ISM services new orders sub-component surging 15 points to its strongest level for five months. We cautioned that the stark contrast in weather between December’s wintery, cold conditions that caused travel chaos and January’s almost spring-like temperatures played a big part in the strength of data, while favourable-looking seasonal adjustments appear to have given an additional boost. This week we will get a first test of that hypothesis with the ISM manufacturing and service sector reports for February. February hasn’t been especially cold, but it has been closer to the seasonal norms so we expect to see a partial correction in the ISM services indices. The manufacturing index should move higher though, aided by the China re-opening story, while the more positive European energy backdrop could also be supportive. Meanwhile, durable goods orders should fall quite a lot, but this is entirely due to volatility in Boeing aircraft orders – the company received 55 orders for aircraft in January, down from 250 in December. Outside of transportation, orders are likely to be flat. There will also be plenty of housing data to take a look at. New home sales may get a bit of a lift due to the pleasant weather conditions in January, but the fact that mortgage applications for home purchases have halved since their peak is a huge structural headwind to overcome. Moreover, prices will remain under downward pressure given that demand has fallen so substantially, but the lack of supply means a collapse in pricing looks unlikely at this stage. There are lots of Fed speakers scheduled, but the message will remain that ongoing interest rate hikes should be expected until there is more confidence that inflation is under control. Key events in developed markets next week Refinitiv, ING This article is part of Our view on next week’s key events   View 3 articles TagsUS Read the article on ING Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
ECB cheat sheet: Difficult to pull away from the Fed

EUR/USD Pair Has Maintained A Moderate Downward Trend

Paolo Greco Paolo Greco 26.02.2023 12:29
Long-term outlook. Throughout the current week, the EUR/USD currency pair has maintained a moderate downward trend. As we have repeatedly stated in recent weeks, we anticipate the European currency to decline because it has increased excessively over the last six months, as is seen in the above illustration. Everything is normal from the perspective of a correction against the downward trend, given that the trend itself lasted two years and that a correction must be made against it. It is time and an honor to know, but the growth of the euro was not driven by fundamental or macroeconomic issues, thus the correction is a correction. This week, the macroeconomic and fundamental backdrops were mostly absent. You may remember several speeches by Fed officials, a report on the US economy, or a report on inflation in the European Union, but we have mentioned before that the significance of these publications lies solely in their signboard. The second estimate included GDP and inflation. Unsurprisingly, the market did not respond particularly well to this data. Also, it did not adhere to the so-called "moderately hawkish" Fed policy. We think that the market is now dominated by technical factors. Because the pair successfully passed the Kijun-sen line on the 24-hour TF and now has a strong probability of consolidating itself below the Ichimoku cloud, we think the fall may continue up to the levels of 1.0312 or 1.0200. In reality, the euro can achieve price parity and distance itself from its multi-year lows by doing just that. The betting component is still, in our opinion, crucial. The Fed is not going to ease down and occasionally gives hints of a more significant rate hike than anticipated. The euro is overbought at this time. The hikes that were previously known have been determined by the market, and the ECB has not yet indicated that it will tighten monetary policy further. It appears that the euro is falling and has a very good chance of continuing to move south. COT Technical difficulties prevented the delivery of COT reports for over a month, but on Friday, one of the delayed reports for January 31 was made available. Since a month has gone by since then and we still don't have access to the data from the subsequent reports, which are more or less relevant, this report is not meaningful. As a result, we keep looking at the available data. The illustration accurately reflected market conditions for the euro currency during the past few months. The aforementioned illustration makes it very evident that, from the start of September, the net position of significant players (the second indicator) has been improving. At about the same time, the value of the euro started to increase. Although the net position of non-commercial traders is currently "bullish" and growing virtually weekly, it is the relatively high value of the "net position" that now permits the upward trend's impending end. The first indicator, which frequently occurs before the trend's end and shows that the red and green lines are very far apart from one another, signals this. Although the euro has already begun to decline, it is still unclear if this is just a brief pullback or the start of a new downward trend. The number of buy-contracts from the non-commercial group increased by 9.0 thousand during the most recent reporting week, while the number of short positions declined by 7.1 thousand. The net position thus increased by 16.1 thousand contracts. Currently, there are 148 thousand more buy contracts than sell contracts for non-commercial traders. Nonetheless, the correction has been developing for a while, so it is obvious even without news that the pair should keep falling. Analysis of fundamental events In addition to the aforementioned activities, business activity indices in various industries were released in the United States and the European Union, while in Germany, an inflation report revealed an acceleration in consumer price growth. Again, there was essentially no response to these figures; nevertheless, it should be emphasized that business activity in the service sectors improved while output declined. Regarding the German inflation news, Jerome Powell and a few other central bankers specifically discussed it. After this process was finished, the price of oil and gas, which has been declining for the previous six months, either started to rise or stopped falling. Consequently, it is safe to divide into two all pessimistic predictions for the return of inflation to 2% during the next year or two. To combat excessive rates of price growth, central banks will have to continue their efforts rather than simply lowering the rate and waiting. As a result, we anticipate seeing plenty of financial surprises this year that will have an impact on how the pair moves. Trading strategy for the week of February 27 to March 3: 1) The pair started moving lower on the 24-hour period, surpassing the Kijun-sen line and the 38.2% Fibonacci level, or 1.0609. As a result, targets in the range of 1.0200-1.0300 can still be reached if the Senkou Span B line does not halt the descent. Sales, in our opinion, are currently appropriate. 2) The purchases of the euro/dollar pair are no longer significant. You should now wait for the price to return above the critical Ichimoku indicator lines before you start to think about long positions. There are currently no circumstances in which the euro currency can start moving higher again. But, in the present world, anything can happen at any time. Explanations for the illustrations Fibonacci levels, which serve as targets for the beginning of purchases or sales, and price levels of support and resistance (resistance/support). Take Profit levels may be positioned close by. Bollinger Bands, MACD, and Ichimoku indicators (standard settings) The net position size of each trading category is represented by indicator 1 on the COT charts. The net position size for the "Non-commercial" category is shown by indicator 2 on the COT charts.   Relevance up to 09:00 2023-02-27 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/336091
All Eyes On Capitol Hill, Jerome Powell Will Appear Before The Senate Banking Committee

Oanda Podcast: Ed Moya And Jonny Hart discussed the market reaction after the Fed’s preferred inflation index accelerated and more

Ed Moya Ed Moya 26.02.2023 13:14
OANDA Senior Market Analyst Ed Moya reviews the latest market news with Jonny Hart. They discussed the market reaction after the Fed’s preferred inflation index accelerated, incoming BOJ Governor Ueda’s testimony, cryptos, Coinbase earnings and the week ahead.     This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Riksbank's Potential Rate Hike Amid Economic Challenges: Analysis and Outlook

Week Ahead: Unemployment In Russia Is Expected To Have Jumped To 4%

Craig Erlam Craig Erlam 26.02.2023 13:17
US Disinflation trends are struggling and now Wall Street will look to see if improving manufacturing and service activity will further fuel pricing pressures. On Monday, durable goods data for January is expected to show higher borrowing costs are hurting manufacturers. Wall Street will also get a couple of Fed regional surveys from Dallas and Richmond.  Traders will pay close attention to Wednesday’s ISM manufacturing report and Friday’s Services Index.   Central bank speak will be closely monitored, especially new Fed member Goolsbee’s comments on Tuesday.  Jefferson will speak on inflation and the dual mandate on Monday, while Waller will talk about the outlook on Thursday. On Friday, we will hear from Logan, Bostic, and Bowman.   US President Biden will also host German Chancellor Scholz at the White House. Traders will look to see if they announce any new efforts to support Ukraine or sanctions against Russia.   Earnings season continues with key updates from Bayer, Berkshire Hathaway, Broadcom, Budweiser Brewing Co. Apac, Costco Wholesale, CRH, Dell Technologies, Dollar Tree, HP, Kroger, Kuehne + Nagel International, Lowe’s, Merck, National Bank of Canada, Occidental Petroleum, Salesforce, Toronto-Dominion Bank,  VMware, and Workday. Eurozone Next week offers a number of economic data points, the most notable of which will be the flash HICP readings. While headline inflation has been falling, core remains at the peak and policymakers are unlikely to ease off the brake until they’re seeing progress on this front. Forecasts suggest it’s still a little early for that. Markets are still pricing in a 50 basis point hike at the meeting in March although there’s an almost equal chance of 75, based on current rates. Which brings us nicely to the central bank speak, kicking off with President Lagarde who’s due to appear at the G20 conference over the weekend.  UK  It’s all a bit calm next week, with central bank appearances the most notable thing on the calendar. That includes Governor Bailey on Wednesday and Chief Economist Pill on Thursday. With 25 basis points almost entirely priced in for March and the committee clearly a little divided on the correct path going forward, I’m not sure what they could say that would cause much of a shock at this point. Russia Unemployment is expected to have jumped to 4% in January, from 3.7% the month before. Meanwhile PMIs on manufacturing and services on Wednesday and Friday, respectively, will be eyed. South Africa A quiet week in store with unemployment the only notable release. Turkey The CBRT cut rates last week by an unusually modest 50 basis points, taking the repo rate to 8.5%. Inflation remains extraordinarily high, with the official rate released by the Turkish Statistical Institute, sitting at 57.68%. The February reading will be released on Friday, while GDP data is due on Tuesday.   Switzerland A selection of data points will be eyed this upcoming week which should give an up-to-date view on the state of the economy. The week will start with GDP data on Tuesday for the fourth quarter, alongside the KOF indicator for February. This will be followed by retail sales for January and the manufacturing PMI for February on Wednesday.  China The official manufacturing and non-manufacturing PMIs for January will be released on Wednesday, in what will otherwise be a relatively quiet week. Of course, all eyes are on the transition and how quickly and strongly the economy will bounce back, with stimulus measures over the next couple of months likely to turbo-charge the recovery. India GDP and PMI data eyed next week, with the economy seen performing strongly again in the third quarter and surveys indicating ongoing optimism.  Australia & New Zealand The RBNZ’s first interest rate meeting of the year last week was in line with market expectations of another 50 basis point hike. The central bank minutes mentioned that a potential recession in the second quarter of this year might occur, putting pressure on the New Zealand dollar. Focus this week will be on Australian retail sales data for January and GDP for the fourth quarter, and New Zealand retail sales for the fourth quarter. Japan According to Japanese lawmakers, BOJ Governor nominee Kazuo Ueda is to speak in the upper house on 27 February, and deputy governor nominees are to appear in the upper house on 28 February. Ueda will attend the hearing at the National Diet and give a speech, which may have an impact on Japanese markets.  Retail Sales and the Tokyo core CPI will be in focus next week. Singapore Retail sales and the February PMI survey are the only releases of note. Economic Calendar Saturday, Feb. 25 Economic Events Berkshire Hathaway reports earnings   G-20 finance ministers and central bank governors conclude meetings Sunday, Feb. 26 Economic Events German Chancellor Scholz meets with Indian PM Modi Japan’s ruling LDP holds its annual convention Monday, Feb. 27 Economic Data/Events US durable goods Eurozone economic confidence, consumer confidence Hong Kong trade Israel unemployment Japan BOJ outright bond purchases Mexico trade US Congress returns after a recess US Treasury Secretary Yellen talks with President Zelenskiy ECB chief economist Lane speaks on “Macro-Financial Stability in the EU” ECB’s de Cos speaks at EIB event in Luxembourg BOE’s Broadbent speaks at a digital technologies conference in London Tuesday, Feb. 28 Economic Data/Events US wholesale inventories, Conference Board consumer confidence Australia current account, retail sales Canada GDP Finland GDP France CPI, GDP India GDP Japan industrial production, retail sales Mexico international reserves Singapore unemployment South Africa unemployment, trade balance Sweden GDP Switzerland GDP Thailand trade Turkey GDP Chevron investor day Mayoral election in Chicago New Fed member Goolsbee speaks at Ivy Tech Community College BOE chief economist Huw Pill makes closing remarks at digital technologies conference BOE’s Mann and ECB’s Vujcic speak at the EIB forum in Luxembourg Earnings from Target Wednesday, March 1 Economic Data/Events US construction spending, ISM Manufacturing, light vehicle sales Australia GDP China manufacturing PMI, non-manufacturing PMI, Caixin manufacturing PMI European Manufacturing PMIs: Eurozone, Germany, France, and the UK Germany CPI, unemployment India Manufacturing PMI New Zealand building permits Russia unemployment Start of the annual Conservative Political Action Conference (CPAC) Bundesbank publishes annual report BOJ’s Nakagawa speaks in Fukushima BOE Governor Bailey speaks at a conference focused on the cost of living crisis ECB’s Villeroy speaks at the French National Assembly’s finance committee ECB’s Visco speaks in Frankfurt Earnings reports from Dollar Tree, Kohl’s, Salesforce, and Lowe’s   Thursday, March 2 Economic Data/Events Australia building approvals Brazil GDP Eurozone CPI, unemployment Hong Kong retail sales Hungary GDP Italy CPI, unemployment Japan capital spending Mexico unemployment South Korea industrial production Spain unemployment Sri Lanka rate decision US initial jobless claims Bloomberg Intelligence’s Market Structure event in New York. Speakers include Securities and Exchange Commission Chair Gary Gensler and NYSE COO Michael Blaugrund The due date for the DOJ’s amicus brief with its view on Donald Trump’s claim that he should get absolute immunity against civil lawsuits seeking to hold him liable for the Jan. 6, 2021 attack on the US Capitol ECB publishes accounts of February policy meeting Bank of Japan board member Hajime Takata gives speech in Kanagawa BOE chief economist Huw Pill speaks on the economic outlook Retail earnings continue with Macy’s, Costco, and Nordstrom all reporting Friday, March 3 Economic Data/Events US President Biden and German Chancellor Scholz meet at the White House China Caixin services PMI Czech Republic GDP Eurozone Services PMI, PPI France industrial production Italy GDP Japan unemployment, Tokyo CPI Singapore retail sales ECB’s Vasle and Muller speak on inflation Italian PM Meloni visits Abu Dhabi BOE’s Hauser speaks at a workshop on market dysfunction hosted by the Initiative on Global Markets in Chicago Sovereign Rating Updates Austria (Fitch) Czech Republic (Fitch) Hungary (Moody’s) European Union (DBRS) This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
The Commodities Digest: US Crude Oil Inventories Decline Amidst Growing Supply Risks

US: Fed inflation fears keeps the pressure on for rate hikes

ING Economics ING Economics 26.02.2023 13:21
The Fed's favoured measure of inflation accelerated in January with markets now fully pricing 25bp moves in March, May and June. We agree that this is the most likely path ahead, but it will be painful for the housheold sector, coming at a time when real incomes are squeezed by inflation, borrowing costs continue to rise and lending conditions are tightening Inflation shows little sign of slowing The acceleration in the Federal Reserve’s favoured measure of inflation, the core personal consumer expenditure deflator, is a big story. It rose 0.6% month-on-month versus expectations of a 0.4% print and is also above the 0.4% increase reported by the core CPI report. There were upside revisions too, which means the year-on-year rate has ticked up to 4.7% from 4.6%, above the 4.3% rate expected. This will ensure the Fed mantra of ongoing hikes continues with 25bp moves in March, May and June fully priced by markets. Talk of a potential 50bp move at the March Federal Open Market Committee meeting can’t be completely discounted, although we don't think they will carry through with it. US inflation measures (ex food and energy (YoY%)) Source: Macrobond, ING   Meanwhile, personal incomes didn't rise quite as much as expected, up 0.6% MoM. The consensus was for a 1% gain because of the annual uprating of social security benefits by 9%, but there was a 2.7% MoM drop in farm income while “other benefits” fell 15.5%. Real personal spending rose 1.1% MoM as expected. We will see weaker prints in February and March, but consumer spending is still likely to grow in the 3.5-4% annualised range in the first quarter of this year. Household savings ratio and debt service ratio (% of household disposable income) Source: Macrobond, ING Household finances are under pressure though The combination of decent income growth, rising spending and robust inflation means March and May rate hikes are very likely and we have to accept that a further move in June is more likely than not. Our caution centres on the combination of squeezed real incomes, rising interest rates and tightening lending conditions all happening at the same time. Household saving ratios are now well below pre-pandemic levels while the proportion of income spent on servicing the debts on consumer loans is at the highest since 2009 (chart above measures them as % of household disposable income). This hints at financial pressures on the household sector and this will increasingly bite as we go through the year. It will only get worse if those lay-off announcements keep coming, which could lead to the economy to slow sharply in coming quarters, opening the door for a path to lower interest rates from the fourth quarter. Read this article on THINK TagsUS Spending Inflation Income Federal Reserve Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
How investors can best position themselves amid unclear Federal Reserve rate outlook?

The PCE Deflator For January Came In Hotter-Than-Expected, Japanese Yen Is The Weakest G10 Currency

Saxo Bank Saxo Bank 27.02.2023 08:16
Summary:  Equities and bonds took a hit on Friday amid another hot inflation data from the US as the January PCE came in higher-than-expected. That saw a hawkish shift in market expectations of the Fed path, bringing the terminal rate pricing to 5.4% and reducing the rate cuts priced in for 2023. US 2yr yields surged to fresh highs with the dollar higher as well, and Japanese yen being the weakest G10 currency amid Ueda’s neutral stance at the testimony. Focus this week on geopolitics amid China’s peace proposal, while more convincing signs of a pickup in Chinese activity are also awaited.   What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) tumbled as expectations of the Fed rate path shifted The white-hot Personal Consumption Price Indices released on Friday weighed on U.S. equities as investors increased rate hike expectations to 25 basis points each in the March, May, and June FOMC meetings as well as the expectation for rate cuts in the second half of 2023 almost completely vanished. The S&P 500 lost 1.1% and the Nasdaq 100 plunged 1.7%, bringing the weekly losses of the two benchmark indices to 2.9% and 3.8% respectively. Nine of the 11 sectors of the S&P 500 declined on Friday, with the rate-sensitive real estate sector and information technology sector, each down 1.8%, leading the charge lower. Autodesk, a leading computer-assisted design software firm tumbled 12.9% on releasing downbeat Q1 earnings guidance below analyst estimates and was the biggest loser in the S&P500 and Nasdaq 100 on Friday. Boeing (BA:xnys) lost 4.8%, following the aircraft manufacturing giant halted deliveries of the 787 Dreamliner jets due to documentation problems. Live Nation Entertainment (LYV:xnys) plunged 10% amid concerns over the COVID reopening play having peaked and increases in regulatory scrutiny. Farfetch (FTCH:xnys), an online luxury apparel product retailer, jumped 11% following an upbeat outlook for 2023. Farfetch is one of the constituent stocks in Saxo’s newly released Luxury Goods theme basket. US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) extended a five-week losing streak Treasuries tumbled in price, rising in yields after the stronger-than-expected PCE reports which registered strong upticks in January (including upward revisions of December data). Powell’s favoured measure, PCE Services less Housing jumped to 4.6% Y/Y in January from 4.3% Y/Y in December. The market has moved to completely price in at least a 25bp hike each at the March, May, and June FOMC meeting plus about a 25% chance that the hike in March is 50bps, bringing the terminal rate to 5.4. SOFR Jun-Dec 2023 spread narrowed 11bps to -11.5bps, eliminating expectations for rate cuts in the second half of 2023. Yields on the 2-year surged 12bps on Friday or 20bps over the week to 4.81%, the highest level since 2007. Yields on the 10-year climbed 7bps on Friday or 13bps over the week to 3.94% Hong Kong’s Hang Seng (HIG3) lost nearly 12% from January highs Hong Kong's Hang Seng Index declined 1.7% bringing the 4th weekly loss in a row to 3.4% or nearly 12% from its intraday high on 27 January. China Internet names reported quarterly results generally in line with market consensus estimates but investors tended to trim positions as sentiment was dampened by resurge of tension between the U.S. and China over Russia and Ukraine and the lack of substantive recovery in the Chinese economy aside from credit expansion and survey data. During the week, JD.com (09618xhkg) was down 15%, Alibaba (09988:xhkg) down 9.5%, and Meituan (03690:xhkg) down 6.8%, as concerns about competition heating up among eCommerce platforms. Alibaba announced results beating estimates but the shares of the eCommerce giant plunged 4.6% on Friday following management comments on the need to increase investments to stay competitive in the year ahead. On Friday, NetEase (09999:xhkg) plunged 11.2%, following an earnings miss dragged down by recognition of royalty fees on expiration of game licence. Techtronic (00669:xhkg) bounced 4.4% but was still down more than 22% over the week on an alleged overstatement of earnings by capitalizing expenses. The auto space was sold, led by a 9.1% decline in Great Wall Motor (02333:xhkg). Baidu (09888:xhkg) slid 6% in the Hong Kong bourse while A-share ChatGPT concept names rallied in mainland bourses. Digital China (000034:xsec) advanced by 6.8%. CSI300 slid 1% on Friday but managed to finish the week 0.7% higher and stay above its 50 and 200-day moving averages. Financial, food and beverage, and new energy vehicle stocks led the charge lower on Friday while defense and computing names bucked the decline. Australian equities (ASXSP200.I) are continuing their short term down trend That said, stocks benefiting from the economic reopening are up the most this year, including Flight Centre, Eagers Automative which are trading up over 20% this year. In terms of the ASX200 sectors- the Consumer Discretionary sector is up the most, up 8%, YTD, followed by the Information Technology sector up 6%. While the Mining (Materials) and Finanical sectors have been pulling back, which is pressuring the market. Some investors were spooked by weaker than expected results from BHP and RIO last year, while big banks such as CBA are allocating more capital for the year ahead - for bad debts provisions, as consumers are felling the pinch of higher interest rates. All in all, the ASX200 is continuing its short term downtrend/correction amid the RBA’s more hawkish tone. For the technical levels to watch, read our Technical Analyst, Kim Cramer Larsson’s note. Australia’s oil and gas giant - Woodside Energy (WDS) reported results today; delivering profits that more than trebled in 2022 - with bottom line profits up 228% - fuelled by the oil and gas price rallies, but also as it acquired BHP’s oil and gas business. Woodside reported a larger final dividend with of US$1.44 a share, up from US$1.05 a share at the same time last year. Its full year pay-out stands at US$4.8 billion thanks to cash flows surging. This sets the tone for energy companies for 2023. Keep in mind at Saxo, we expect the oil price to stay around $80 this quarter and move up to $90 next quarter. FX: Japanese yen at YTD lows, GBP in focus with Brexit talks The dollar strength was back in focus as PCE data on Friday in the US continued to push upwards the repricing of the Fed’s path. With 2year yields surging to their fresh highs, along with BOJ governor nominee Kazuo Ueda’s continued push for a loose monetary policy coming against market’s hawkish expectations, saw the Japanese yen plunge to its lowest levels this year. USDJPY now back top testing 136.50 and Ueda’s testimony in the upper house will be in focus today. Also worth watch will be AUDUSD which plunged in close sights of 0.67 with risk sentiment and commodity prices taking a beating. UK PM Sunak is making headlines with reports saying that he may have won big concessions in the looming Brexit deal, with reports suggesting that an agreement between the UK and European Union on Northern Ireland appears to be very close. UK PM Sunak and EU head Ursula Von Der Leyen will hold talks mid-day on Monday. There are being described as 'final talks'. This will be followed by a news conference and Sunak’s statement to the parliament. GBPUSD dropped below 1.20 with the 200DMA at 1.1928 in focus. Crude oil (CLJ3 & LCOJ3) reversed higher on Friday Crude oil prices jumped back higher recording gains of 1.2% on Friday, and extended gains in the Asian morning hours amid reports of further supply disruptions as Poland’s largest oil company unexpectedly stopped receiving oil via Russia’s Druzhba pipeline. Still, unconvincing signs of a pickup in demand from China so far continues to keep oil prices range-bound, and focus this week will be on geopolitics as well as China’s PMIs. WTI futures are now back above $76/barrel after taking a look below $74 last week, while Brent is above $83. Copper broke the $4 support With the US PCE data further aggravating concerns on Fed’s rate hike path and bringing the 2-year yields to fresh highs, base metals plummeted. Copper prices plunged below the key $4 support to $3.95, closing Friday with a weekly loss of 4%. Incongruent signs of a pickup in Chinese demand also continue to underpin, and the PMI reports this week will be key to signal whether activity levels are picking up. However, with supply potentially struggling to keep up with demand, we view the current weakness as temporary and part of the general loss of confidence that has hit markets this month. Gold (XAUUSD) breaks support but losses still contained Higher US dollar in the aftermath of hot US data and higher yields has weighed on the yellow metal. Gold prices broke below the $1820 support to lows of $1809 bringing the key 1800 level in focus. Risk remains of a further weakness towards $1788 followed by the 200DMA at $1776 amid a tough macro environment. US ISM PMIs in focus this week, along with more Fed speakers, as a guide to high how interest rates could go. Silver (XAGUSD) fell harder, down 2.5% on Friday and closing with a weekly loss of 4.5%, breaking below the 200DMA at $21.   What to consider? Hot US PCE brings terminal rate expectations up to 5.4% The PCE deflator for January came in hotter-than-expected, and together with upward revisions to the previous month’s prints these sent a strong hawkish signal to the markets reinforcing the Fed’s higher-for-longer message. Core PCE rose 4.7% Y/Y, accelerating from the upwardly revised 4.6% and above the expected 4.3%. The M/M rose 0.6%, hotter than the expected and upwardly revised prior of 0.4%. This brought an upward repricing of the Fed path, with increasing calls for 50bps at the March meeting and the terminal rate now priced in at 5.4% and only one rate cut being priced in for this year from three previously. US consumer confidence also rose in February to its highest in a year, with University of Michigan sentiment accelerating to 67 from 66.4 in January. Personal incomes grew 0.6% MoM in January, a notch below expectations but consumer spending was higher-than-expected at 1.8% due to low savings rates and increased use of consumer credit. Resilient spending, along with sustained wage growth, means Fed could continue to find it tough to bring inflation back to its 2% target. Fed members continue to remain cautious on the path of inflation Fed voter Jefferson spoke about labor market strength on Friday, saying that ongoing imbalance between supply/demand for labour suggests high inflation may come down only slowly and said the argument that policymakers should accept that disinflation will be costly is well-reasoned. Bullard (non-voter) was on the wires again as well, and reaffirmed the need to move quickly to shield credibility. Collins, also a non-voter, said that recent US data affirms the case for more rate hikes. Mester (non-voter) said the Fed has to do "a little more" on rate hikes saying the new inflation data affirms the case for more rate hikes to get inflation back to target. BOJ Ueda’s upper house testimony on tap today After Friday’s testimony in the lower house of the parliament, Bank of Japan governor nominee Kazuo Ueda now moves to the upper house today. His initial policy stance appeared to be confirming continuity of the current ultra-easy monetary policy in Japan, coming against market’s hawkish expectations. This saw the yen plunge 1.3% on Friday against the USD and being the weakest currency on the G10 board. Today markets will be looking at more hints on what tweaks may be considered by Ueda and lack of further color could mean more weakness in the yen, especially with global yields surging to new highs. Geopolitics remains in focus with China’s peace proposal talks After threats from US about making public the information on China supplying weapons to Russia, China came up with a 12-point peace proposal on Friday to be a neutral mediator in the Russia-Ukraine conflict. Reports suggested that China’s proposal took a clear anti-West stance, condemning NATO extension and sanctions against Russia, but Ukrainian President Volodymyr Zelensky has signaled he's open to China's new ceasefire plan and meeting President Xi. How these events turn this week will be key to watch, especially US comments and support to Ukraine if it was to accept China as a mediator. China’s Q4 Report on the Execution of Monetary Policy emphasized stability and signalled not to induce excessive investment, debts, and bubbles China’s central bank, the People’s Bank of China, said in its Q4 Report on the Execution of Monetary Policy that the primary objective of countercyclical monetary policy was to smooth the volatility in aggregate demand so as to avoid the destructive effects of excessive fluctuations of aggregate demand on the factors of production and the wealth of the society. The report emphasizes that the force of monetary policy must be stable and not bring about excessive liquidity that induces excessive investment, a surge in debts, and asset bubbles. In support of the real economy, the Q4 Report emphasizes stability and sustainability of credit growth but omits the stronger wording of “more forceful” and “increases of credit support” that were in the Q3 Report. China may be sending a signal to lower the expectations of the market on monetary easing.   For a global look at markets – tune into our Podcast.   Source: Markets Today: Hot US PCE brings 2yr yields to fresh highs – 27 February 2023 | Saxo Group (home.saxo)
Australian dollar against US dollar - "It seems that the currency will soon hit a price above 0.68"

More Downside In The Aussie Pair (AUD/USD) Looks Favored

TeleTrade Comments TeleTrade Comments 27.02.2023 08:35
AUD/USD has refreshed its seven-week low at 0.6700 amid geopolitical tensions and rising hawkish Fed bets. The USD Index has refreshed its day’s high above 104.90 and is expected to recapture the 105.00 resistance. A higher-than-projected Australia GDP will accelerate troubles for the RBA. The AUD/USD pair has refreshed its seven-week low near the round-level support of 0.6700. More downside in the Aussie asset looks favored as investors are channelizing their funds into the US Dollar Index (DXY). Investors are favoring investment in the USD Index to dodge volatility inspired by a revival in consumer spending in the United States and escalating geopolitical tensions. The USD Index has refreshed its day’s high above 104.90 and is expected to recapture the 105.00 resistance. Western nations are still concerned about the rumors of China’s support to Russia in providing arms and ammunition against Ukraine. United States National Security Advisor Jake Sullivan said on CNN’s “State of the Union,” China’s stance on the Russian invasion of Ukraine puts it in an “awkward” position internationally and any weapons support to Russia would come with “real costs.” Risk-perceived assets like S&P500 futures are facing heat of the geopolitical tensions. The 500-stocks futures basket has surrendered the majority of gains earned in morning, portraying further strengthening of the risk-aversion theme. Meanwhile, the return generated on 10-year US Treasury yields is hovering around 3.94%. Higher-than-projected US consumer spending in January has highlighted the fact that the battle between the Federal Reserve (Fed) and the sticky inflation is getting brawled further. Fed chair Jerome Powell has been left with no other option than to tap hawkish measures to bring down the stubborn inflation. Read next: The Effect Of Shifting The Aggregate Demand Curve - Demand Shocks| FXMAG.COM On the Australia front, recession fears are escalating as inflation is not showing signs of deceleration, which is bolstering the case of further policy tightening by the Reserve Bank of Australia (RBA). This week, Australia’s Gross Domestic Product (GDP) (Q4) numbers will be keenly watched. The quarter GDP is seen higher at 0.9% vs. the former release of 0.6%. This might create more troubles for RBA Governor Philip Lowe as higher activities will favor further hikes.  
FX Markets React to Rising US Rates: Implications and Outlook

In Europe Core Inflation Continuing To Edge To Record Highs, The DAX Posting Its Biggest Weekly Fall

Michael Hewson Michael Hewson 27.02.2023 08:53
When we started 2023 most of the narrative had been centred around when we would see start to see a Fed pivot and the timing of the first rate cut. Once it became apparent that this was somewhat wishful thinking, this narrative started to shift towards a Fed pause, even in the face of mounting evidence of a remarkably resilient US economy.     Even when the Fed downshifted the pace of its current rate hiking cycle to 25bps at the start of February, there was some disquiet that they might be sending the wrong signal to the market, about their determination to crack down on inflation.   The resilience of the January payrolls report which came in ahead of expectations at the beginning of this month started to sow the first seeds of doubt into the pause narrative, and while bond markets started to react to these shifting sands, the equity markets still held out the hope that a Fed pause was only a few weeks away. On Friday all notion of a possible pause appears to have gone the way of the dodo, in the face of a series of better-than-expected economic data releases, with markets now pricing in another three 25bps rate increases at the March, May, and June Fed meetings.   There had already been signs that the January core PCE numbers might have been susceptible to an upside surprise after retail sales in January surged by 3%, however, Friday's sharp jump in the Federal Reserve's preferred inflation measure to 4.7%, was as unwelcome as was the upward revision to December's number from 4.4% to 4.6%. Throw in the biggest upswing in personal spending in 12 months, by 1.8%, and you have all the ingredients of a US economy that shows few signs that higher prices are weighing on demand.   US 2-year yields reacted accordingly, jumping by 11bps, above their previous peaks in November last year, to close at their highest level since 2007, at 4.813%. It wasn't just yields in the US that moved sharply higher, with German 2-year yields rising to their highest levels since October 2008, closing above 3% Equity markets reacted as you would expect, falling back sharply, with the DAX posting its biggest weekly fall since mid-December. The FTSE100 also rolled over quite sharply wiping out the previous week's gains in the process, although both indexes remain in their uptrends from their October lows.     The S&P500 fell sharply but managed to hold above and rebound off its 200-day SMA, even as it fell to a one-month low, with the Nasdaq 100 also rebounding off its 200-day SMA as well.   This recovery off key technical supports should offer European markets a modest rebound when they open later this morning, after last week's sharp falls. As we look towards a new week, and the end of the month tomorrow, last week's falls have called into question whether markets in Europe can hold onto their February gains, while US markets have already slipped into negative territory for the month, after last week's sharp falls.   The US dollar appears to have accelerated its upward momentum, rising for the fourth week in a row, and is in sight of its highest levels this year, and on course to post its first positive month since September last year.   On the data front the main focus this week, in the absence of the February jobs report which has been pushed out to the 10th of March, is the latest ISM services report which is due at the end of this week and could be instrumental in reinforcing the hawkish narrative that has started to take hold in the last few weeks. A similarly strong report following on from the January report will further reinforce the case for 3 more 25bps rate hikes at the next few meetings.   In Europe, the narrative around sticky inflation appears to be evolving along similar lines, with rapid declines in headline inflation but core inflation continuing to edge to record highs.   This week we'll get to see the latest flash numbers for February, from Germany, whose economy could already be in recession, France as well as the EU, where core prices hit a record high of 5.3% in January and could well stay there in numbers due to be released towards the end of the week.     EUR/USD – the next support lies at the January lows at 1.0480/85, a break of which opens up the prospect of a test of the 200-day SMA at 1.0320. Currently have resistance at the 1.0620/30 area, and behind that at the 50-day SMA. GBP/USD – currently sitting on support at the 200-day SMA at 1.1930, a break of which retargets the 1.1830 area. Resistance currently at the 50-day SMA at 1.2150. EUR/GBP – continues to edge higher with the next resistance currently 0.8870. Support comes in at the 0.8780 area. USD/JPY – closing in on the 200-day SMA and Kumo cloud resistance area at 136.90/00. Interim support at 133.60, and below that at 132.60, and 50-day SMA.   FTSE100 is expected to open 32 points higher at 7,910. DAX is expected to open 48 points higher at 15,457 CAC40 is expected to open at 35 points higher 7,222   Email: marketcomment@cmcmarkets.com Follow CMC Markets on Twitter: @cmcmarkets Follow Michael Hewson (Chief Market Analyst) on Twitter: @mhewson_CMC
Britain's Rishi Sunak And EU's Ursula Von Der Leyen Will Meet Today To Finalize The Northern Ireland Drama

Britain's Rishi Sunak And EU's Ursula Von Der Leyen Will Meet Today To Finalize The Northern Ireland Drama

Ipek Ozkardeskaya Ipek Ozkardeskaya 27.02.2023 08:56
The week starts on a cautious note, as the Federal Reserve (Fed) rate hike expectations intensify the selloff in global stocks and bonds, while pushing the US dollar higher against most majors.   Friday's US PCE data was bad. We knew, from the earlier releases that US inflation wouldn't slow as much as expected, but Friday's PCE data showed that not only inflation didn't slow in January, but headline figure ticked higher to 5.4% from 5.3% printed a month earlier, and core inflation ticked higher to 4.7% from 4.6% printed a month earlier. The latter fueled the Fed hike expectations, because a slower-than-expected easing in inflation is one thing, but rebound in inflation is another thing. And the latter is much less cool for the Fed, and the Fed expectations. A rebound in inflation is the worst nightmare for the Fed.   And if the PCE drama was not enough, personal spending surged 1.8% in January, the strongest burst since March 2021, and the University of Michigan's consumer sentiment index hit a 13-month high this month. It's still much lower than the pre-pandemic levels, yes, but it also means that it has ways to recover.   In summary, the tight US jobs data, strong spending and improved sentiment may sound nice to you, but it sounds horrendous to the Fed.  A new study that was presented at a conference in New York on Friday now suggests that the Fed should maybe hike rates all the way up to 6.5% to win its battle against inflation in the US.  As a result, the US 2-year yield is pushing above the 4.80% mark, the 10-year yield is flirting with the 4% mark. Activity on Fed funds futures now assesses just slightly less than 30% probability for a 50bp hike at the FOMC's March meeting. This probability is up from below 10% at the start of this month.   The S&P500 slipped below the 50-DMA (3980) and tested the 200-DMA (3940) to the downside, and closed what was the worst trading week since the start of the year 2.7% down, and below the 4000 psychological mark. Nasdaq, on the other hand, pulled out the major 38.2% Fibonacci support on the latest rally, tested its own 200-DMA to the downside, and closed the week in the bearish consolidation zone and below the 12'000 psychological mark.   And all indicators point at a deeper selloff as long as the higher Fed discussions remain heated.  Read next: The Effect Of Shifting The Aggregate Demand Curve - Demand Shocks| FXMAG.COM FX and commo  It becomes increasingly  clear that we will see a pause in the USD downside correction. The US dollar index is now clearly headed higher.   In EURUSD, a further fall to and below 1.05 is just a matter of time, and the last support to the September to February rally stands near 1.0470, if cleared will send the pair into the medium term bearish consolidation zone, with prospect of further fall to 1.02-1.03 range.  And a softer euro will then make the energy imports more expensive for the Europeans yet again, and spur the European Central Bank (ECB) rate hike expectations.   Hawkish ECB bets will certainly not do much to tame the strong-USD-led inflation, but a more aggressive policy rate response from the ECB would be bad for European businesses, and weigh on European stocks.   Rising US yields and the stronger US dollar hint at further decline in gold prices, as well. Gold cleared a key Fibonacci support, the 38.2% retracement on the November to February rally, and starts this week in the bearish consolidation zone, with the next natural target for the bears standing at $1775, the 200-DMA.  Crude oil continues struggling. Oil bulls never really bought the Chinese reopening story, nor the sharp decline in Russian output. But they might well play the rising recession odds that come along with the tighter central bank policies around the world. As such, sellers are certainly waiting to sell US crude into the 50-DMA, a touch below the $78 per barrel.   Copper futures, on the other hand, sank below their 50-DMA for the first time since November in COMEX, as the higher rate prospects weigh on copper appetite, which is a good gauge of global growth.  Finally?!  In Europe, Britain's Rishi Sunak and EU's Ursula von der Leyen will meet today to finalize the Northern Ireland drama, which could soften barriers in a country that is willing to remain half seated in Europe and half seated in the United Kingdom, while the UK and Europe part ways.  There is however little chance today's annoucement, if any, solves the problem entirely. DUP is expected to oppose.  Mr. Sunak was expected to make an announcement last week. He didn't. And even if it did, I am not sure it would change the course of sterling. The pound is now below 1.20 against the US dollar as a result of a broadly stronger greenback, and is about to slip below the 200-DMA. Further retreat to 1.1650/1.17 band is on the cards.  
Commodity: The World's Two Biggest Commodity Consuming Nations, Both Delivered Price Softening News

The New Week Starts With Little Appetite, Metals And Energy Are Under Pressure

Swissquote Bank Swissquote Bank 27.02.2023 10:20
The week starts on a cautious note, as the Federal Reserve (Fed) rate hike expectations intensify the selloff in global stocks and bonds, while pushing the US dollar higher against most majors. PCE data Friday’s PCE data showed that not only inflation didn’t slow in January, but headline figure ticked higher to 5.4% from 5.3% printed a month earlier, and core inflation ticked higher to 4.7% from 4.6% printed a month earlier. The latter fueled the Fed hike expectations, because a slower-than-expected easing in inflation is one thing, but rebound in inflation is another thing. US Yields As a result, the US yields keep pushing higher, and equities lower.In the FX, it becomes increasingly clear that we will see a pause in the USD downside correction. EUR/USD The EURUSD could further fall to and below 1.05, and renewed euro softness could weigh on European equities. Commodities In commodities, rising US yields and the stronger US dollar hint at further decline in gold prices, as well, while crude oil continues struggling. Read next: Pfizer Is In The Early Stages Of An Acquisition Of Biotech Company Seagen, Twitter's Staff Has Shrunk Since Elon Musk Took Over| FXMAG.COM Europe In Europe, Britain’s Rishi Sunak and EU’s Ursula von der Leyen will meet today to finalize the Northern Ireland drama. Watch the full episode to find out more! 0:00 Intro 0:21 Rebound in US inflation sends stocks, bonds tumbling 3:48 USD appreciation is also bad for European stocks 6:35 Metals, energy under pressure 8:11 Light at the end of Northern Ireland tunnel? 9:12 Tesla’s investor day coming! Ipek Ozkardeskaya  Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #USD #inflation #selloff #Fed #ECB #expectations #EUR #GBP #Brexit #Northern #Ireland #XAU #Crude #Oil #Copper #DAX #Stoxx #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
UK PMI Weakness Supports Pause in Bank of England's Tightening Cycle

Inflation Risks Continue To Point Towards Further Acceleration

Saxo Bank Saxo Bank 27.02.2023 11:15
Summary:  Markets have been spooked recently by higher US inflation reinforcing the higher-for-longer interest rates rhetoric. Inflation risks continue to point towards further acceleration despite the easing of supply chain disruptions, mostly driven by services cost pressures underpinned by high wages. China’s reopening and the no-landing narrative will also bring fears of an additional inflationary impulse, along with structural issues of deglobalization and energy crunch. Broader expectations last year were inflation will fall back towards target in 2023, allowing central banks to cool down their pace of policy tightening. We have been in the inflation higher-for-longer camp since the days it has been called “transitory”, and a rude awakening for the markets is happening now bringing inflation expectations higher. January inflation data for the US and the Eurozone came in hot, fueling bets that central banks will have to do more to bring prices under control. Meanwhile, wages remain high due to the demand/supply imbalance in labor market further aggravating inflation concerns. US inflation concerns aggravate Fed’s preferred inflation gauge, the PCE deflator, came in hotter-than-expected for January. In addition, upward revisions to the previous month’s prints sent a strong hawkish signal to the markets reinforcing the Fed’s higher-for-longer message. Core PCE rose 4.7% YoY, accelerating from the upwardly revised 4.6% and above the expected 4.3% and the Fed’s target of 2%. The MoM rose 0.6%, hotter-than-expected and upwardly revised prior of 0.4%. This comes on top of a hot January CPI as well as PPI, all together underscoring persistent inflationary pressures and the need for the Fed to continue hiking rates. Supply chain disruptions easing, but risks won’t go away The cost of shopping containers have retreated from the covid-era peaks. Spot rates from Asia to the US West Coast, which increased more than 15-fold during the pandemic, have since returned to pre-Covid levels. Still, prices remain significantly higher that the pre-covid times, such as the short-term prices for containers from Europe to the US East Coast are still more than double what they were in late-2019. More importantly, risks remain elevated amid a rapidly deglobalizing world. The geopolitical tensions never went away since the year-ago Russian invasion of Ukraine, but have accelerated meaningfully again the last few weeks as we approached the one-year anniversary of the war. Alongside, rising tensions over Taiwan and the US-China relations have become an increasing focus. So even if spot prices in shipping are easing, the contracts have been renegotiated at higher prices in 2021 and 2022 at much higher rates, and the potential for discount remains limited for now given the high risk environment. That is a key reason why the disinflation in goods prices, which was highlighted by Chair Powell at the February FOMC, has quickly reversed and remains volatile at best. It’s hard to get comfortable about the trend in goods inflation, let alone the surging services inflation. Source: Freightos, Bloomberg, Saxo Wage pressures are a key concern Despite widespread news of tech layoffs, the January jobs growth of +517k sent a shockwave to the markets. Unemployment rate touched a 53-year low as service providers expanded their activities. Likewise, jobless claims data and surveys on unemployment all continue to point at hiring and wages would remain on an upward path. With the demand and supply imbalance in the labor markets continuing, companies are feeling wage pressures eat into their margins. As the US consumer is still holding up well even in the wake of high inflation and interest rates, companies with pricing power will pass on these wage costs to the consumers, thereby creating more upside pressures to inflation and a potential wage-price spiral. Re-acceleration of cyclical growth Transition from a recession to a goldilocks/soft-landing narrative to the current no-landing/acceleration narrative isn’t all positive for the markets. The Atlanta Fed GDPNow model estimate for real GDP growth in Q1 is now at 2.7% from 0.7%, which is hardly a sign of recession or stagnation. Overall, recent economic data suggests that the US economy is reheating, and the market is moving to price that in by bringing the terminal rate forecast higher and driving out the rate cuts priced in for this year to 2024. This also brings back the risk of higher inflation. The reopening of the Chinese economy also brings fears of an inflationary impulse through commodity and raw material prices. Cleveland Fed economists Randal Verbrugge and Saeed Zaman have said that it will likely take US inflation many more years than central bankers and financial markets expect to close in on 2% without a deep recession. Upward repricing of the Fed path Beyond cyclical risks, inflation continues to face upside threat from structural factors such as shortage of labor, deglobalization as well as the energy supply crunch. US breakevens are signalling renewed concern that inflation will stay elevated in the shorter term, with the 2-year rate above 3% for the first time since August 2022 and the 10-year rate holding at around 2.5%. As such, market expectations of the Fed path have seen a dramatic shift from expecting a pause/pivot to now pricing in a terminal rate of 5.4% from sub-5% a month back. Calls for 6-7% terminal rates have also picked up. But the Fed has already transitioned to a 25bps rate hike pace, and it would potentially be a credibility issue if they were to move back to 50bps rate hike increments. So, a longer tightening cycle looks like the most likely outcome. Source: Bloomberg, Saxo Source: Macro Insights: Inflating inflation fears | Saxo Group (home.saxo)
Gold Trading Analysis: Technical Signals and Price Movements

EUR/USD Pair Is Trading Around 1.0560, USD/JPY Is Above 136.20, GBP/USD Gained

Kamila Szypuła Kamila Szypuła 27.02.2023 14:03
The dollar fell from a seven-week high on Monday as investors took stock of last week's strong US economic data and outlook for global interest rates. Friday's data showed that US consumer spending rose sharply in January, while inflation accelerated. Traders now expect the Fed to raise interest rates to around 5.4% by the summer. USD/JPY The first day of the new week for the USD/JPY pair was mixed in both the Asian and European sessions. The pair started the week at 136.4430, but fell to 136.00 during the day. At the time of writing, the yen was trading at 136.2970. In late February, the Japanese yen weakened above 136 to the dollar, hitting its lowest level in more than two months as Ueda, nominated governor of the Bank of Japan, doubled down on the bank's very restrictive monetary policy. The new governor of the Bank of Japan, Kazuo Ueda, said on Monday that the benefits of the bank's current monetary policy outweigh the costs, stressing the need to maintain support for the Japanese economy with very low interest rates. The comments reinforced signals that the bank will not turn away from its dovish attitude anytime soon. Previously, Ueda had opposed monetary tightening in response to cost-driven inflation and rejected immediate changes to the bank's yield curve control, warning that such measures would deeply hurt growth. EUR/USD EUR/USD started the week at 1.0556. In the Asian session, it mostly traded near 1.0550 and even 1.0560, then fell below 1.0540. In the European session, the euro was rising towards 1.0570. Currently, the EUR/USD pair is trading around 1.0560. The US currency has benefited widely from the view that its central bank has more power and leeway to counter inflation. Meanwhile, the Eurozone has to meet the varying needs of its twenty national economies, some of which will struggle to cope with even minor further interest rate increases. Interest rate differentials are likely to dominate euro fundamentals this week, although some key domestic data is emerging, most notably official eurozone inflation data. Due for release on Thursday and the annual base rate is expected to remain unchanged at 5.3% Read next: BNP Paribas Sued For Providing Financial Services To Companies That Allegedly Contribute To Deforestation Of The Amazon Rainforest| FXMAG.COM GBP/USD The movement of the cable pair resembles the movement of EUR/USD. GBP/USD started the week at 1.1950, but during the day GBP/USD fell towards 1.1930. In the European session, it gained an upward momentum and exceeded the level of 1.1980. Politically, European Commission President Ursula von der Leyen is due to travel to the UK today to meet Prime Minister Rishi Sunak on a new Brexit deal. This could see a resumption of trade between Northern Ireland and the UK, but it has not really translated into the GBP yet. AUD/USD The AUD/USD pair is the worst performer among the major currency pairs. The Aussie Pair started the day above 0.6730 but fell towards 0.6700 in the next session. In the European session, AUD/USD has slightly increased and at the time of writing it is just above 0.6710. The Australian dollar weakened to around $0.67, trading at its lowest level in nearly 2 months as better-than-expected US economic data boosted expectations that the Federal Reserve would need to raise interest rates further to stem rising inflation. Weak domestic employment data also affected the currency with Australia's unemployment rate unexpectedly rising to 3.7% in Q4 despite expectations to hold steady at 3.5%. Meanwhile, the Reserve Bank of Australia's latest monetary policy statement showed it had revised its inflation forecast for this year higher, saying price pressures were spreading to services and wages. Source: investing.com, finance.yahoo.com
Listen: Higher for longer

Rates Spark: The mood for risk is key ahead

ING Economics ING Economics 28.02.2023 08:22
Market rates are fretting about economies that are not lying down, at least not as much as had been feared. But they are also not on the starter blocks. More like they are taking on some welcome fluids. Yes we've been looking for market rates to test higher, now that we're here we think (misplaced) risk-on is the most likely route to even higher rates; else we dip Market rates are loving this test higher momentum... Front ends are hitting new extremes as the rate hike narrative from central banks has become more credible. The German 2yr popped above 3% on Friday for the first time since the Great Financial Crisis caused a crash lower in front-end rates a decade and a half ago. It held above yesterday, and looks quite comfortable with that 3% handle. The market appropriate measure of pan-eurozone rates is 6mth Euribor, which is now in the 3.25% area. And 10yr Euribor is also now at back above 3%. The 10yr was higher last year, up in the 3.3% area, but is being pulled back up again on the realisation that the front end still has some material upside risks. It's a similar story on the US curve. Not only is a June hike of 25bp now fully priced (so we have 25bp priced for March, May and June), but a July 25bp hike is now being contemplated by the market. It's still discounted as being less likely than likely, but still, that's quite some change from where we were only a few weeks back when there was some debate as to whether the Fed would hike in May, and there were even some doubts over March. The talk now is for a potential 50bp move, although we view this as being quite unlikely, and indeed unnecessary. The Fed needs a degree of underlying stability in order to be in a positon to tighten, so upping the size of hikes here would be counter-productive. The Fed needs a degree of underlying stability in order to be in a positon to tighten, so upping the size of hikes here would be counter-productive. The other big change on the US front end has been the downsizing of the probability attached to interest rate cuts in late 2023. This is the other reason for the US 2yr to hit a new cycle high in recent days, as the 2yr is not just impacted by rate hike expectations, but also by what happens after the peak and over the subsequent period (over 2yrs, by definition). It's off the highs hit on Friday, but that 4.75% to 4.85% area is still only a smidgen below 5%, a level that the 2yr yield collaped from in 2007 as the US banks began to have that feeling of impending doom that imploded as correlation to a failing housing market wallopped all in its way. The US 10yr has responded to heaping pressure to move higher in yield in the past few weeks, but still remains a tad anomalous in the sense that in the 3.9% area it's still some 150bp below the market projected peak in the Fed funds rate. This is double that should be expected, and indeed most of the time the 10yr hits that same peak as the front end does, only much sooner. Here the 10yr peaked at 4.25% (or 4.33% for a fleeting moment) back in October. Based off that it's telling us that the market discount for the funds rate won't be realised. We're tempted to agree in fact. A June hike should be the last one, and even that one is a stretch given the stresses we see in the financial economy. ... but risk is liable to be turned off ahead (albeit not likely this week) The big question ahead is whether we can sensibly suggest that the US and eurozone economies are about to completely ignore the cumulative effect of rate hikes delivered. Remember these rate hikes have been quite aggressive, and quick, and they are not yet complete. At a certain point, economies will really creak. They began to last year. They've popped over the turn of the year. But that's far more likely to be a false dawn than the beginning of a trend. Yesterday's US durable order numbers confirmed a 3mth downtrend, and the housing data confirmed an angst environment there. We may well get data that points to pops in both the US and eurozone economies, but the bigger picture is still not great. And again, central banks are still tightening. The day ahead won't be pivotal in terms of key data releases. Rather we'll likely take our cue from the appetite for risk – stay risk-on, market rates are pressured up. Come off, and they can come down. We think market rates should be calming here after their hectic ride higher. But the mood is in fact to go the other way; risk-on and tempting market rates to dare to go higher. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Indian Rupee Pair Takes Clues From The Receding Fears Of Hawkish Fed Rate Moves

The Indian Rupee Will Display A Power-Pack Action After The Release Of The Q3 GDP Data

TeleTrade Comments TeleTrade Comments 28.02.2023 08:32
USD/INR has shifted its range below 82.70 amid an overnight correction in the USD Index. The Indian Rupee will display a power-pack action after the release of the Q3 GDP data. S&P500 futures have further added gains after a modest positive Monday, portraying ease in the risk-off mood. The USD/INR pair has shifted its business below 82.70 in the Asian session led by an overnight sell-off in the US Dollar Index (DXY). The asset has slipped as investors have ignored clouds of uncertainty associated with accelerating consumer spending in the United States amid an upbeat labor market. US tight labor market has shifted the bargaining power in the favor of job seekers from the hiring agencies amid a shortage of labor. This has flushed significant liquidity in the palms of households for disposal, which is fueling retail demand efficiently. No doubt, the fears of more rates by the Federal Reserve (Fed) are skyrocketing. But for now, the risk-off profile has eased gradually. S&P500 futures have further added gains after a modest positive Monday session, portraying an improvement in the risk appetite of the market participants. The alpha generated on 10-year US treasury bonds has turned lackluster around 3.92%. Meanwhile, the Indian Rupee will display a power-pack action after the release of the Q3 Gross Domestic Product (GDP) data for FY2022-23. The Indian economy showed double-digit growth in Q1 as helicopter money released by the Indian administration and expansionary monetary policy by the Reserve Bank of India (RBI) was spurting overall growth. In the second quarter, GDP started moderating and trimmed to 6.3% as the administration started contracting liquidity to bring down galloping inflation. The RBI projected the real GDP growth for 2022-23 at 6.8% and for the third quarter at 4.4%. On the oil front, the oil price has recovered to near $75.80 as the economy is betting on China’s reopening after a prolonged lockdown to contain the pandemic. It is worth noting that India is one of the leading importers of oil in the world and higher oil prices can impact the Indian rupee.  
Australian dollar - the sharp drop can be attributed to technical factors and hawkish Fed

Downtrend Of The AUD/USD Pair Is Still Far From Being Over

TeleTrade Comments TeleTrade Comments 28.02.2023 09:01
AUD/USD struggles to capitalize on its modest uptick amid renewed USD buying. Hawkish Fed expectations, elevated US bond yields help revive the USD demand. Recession fears offset the upbeat Australian Retail Sales and act as a headwind. The AUD/USD pair attracts some sellers following an uptick to mid-0.6700s and stalls a modest recovery from its lowest level since January touched the previous day. The pair retreats to the lower end of its daily range, around the 0.6730-0.6725 region during the early European session and is pressured by reviving US Dollar demand. The prospects for further policy tightening by the Fed remain supportive of elevated US Treasury bond yields and continue to act as a tailwind for the USD. In fact, the markets seem convinced that the US central bank will stick to its hawkish stance for longer in the wake of stubbornly high inflation. The bets were reaffirmed by the stronger US PCE Price Index released last Friday, which indicated that inflation isn't coming down quite as fast as hoped. Market participants, meanwhile, remain worried about economic headwinds stemming from rapidly rising borrowing costs. Apart from this, geopolitical tensions keep a lid on the overnight optimistic move in the equity markets, which further benefits the safe-have Greenback and contributes to capping the upside for the risk-sensitive Aussie. This overshadows better-than-expected Australian Retail Sales and does little to lend any support to the AUD/USD pair. In fact, the Australian Bureau of Statistics reported that Retail Sales grew by 1.9% in January against consensus estimates for a 1.5% rise and the 3.9% downfall recorded in the previous month. The AUD/USD pair's inability to gain any meaningful traction in reaction to the upbeat domestic data suggests that the downtrend witnessed since the beginning of this month is still far from being over. Bears, however, might wait for a sustained break below the 0.6700 mark. Traders now look to the US economic docket - featuring the release of regional manufacturing PMI and the Conference Board's Consumer Confidence Index. This, along with the US bond yields and the broader risk sentiment, might influence the USD price dynamics and provide some impetus to the AUD/USD pair later during the early North American session. Nevertheless, the fundamental backdrop suggests that the path of least resistance for spot prices is to the downside.
UK Gfk Consumer Confidence index got better fourth month in a row

Sterling (GBP) Modestly Firmer In The Wake Of Post-Brexit Settlement Between The EU And UK

Saxo Bank Saxo Bank 28.02.2023 09:23
Summary:  In FX, The US equity market tried to rally yesterday after Friday’s pummeling on hot inflation data, but generally failed to maintain altitude and dropped back close to unchanged on the session as key support remains in place. End of month flows could drive volatility today. In FX, sterling modestly firmer in the wake of post-Brexit settlement between the EU And UK on the Northern Ireland border issue. What is our trading focus? US equities (US500.I and USNAS100.I): S&P 500 futures remain in limbo US equities bounced back yesterday at point engulfing the entire selloff from last Friday before S&P 500 futures gave up its gains towards the end of the session. This morning the index futures opened higher but have sold off trading around the 3,984 level in early European trading hours. Equities have moved into a short-term hibernation until the market gets more clearer evidence of where the bond market wants to go and whether growth is picking up in China following the reopening of the economy post its zero-Covid policy. Hang Seng Index (HSI.I) pared early gains as tech names tumbled The Hang Seng Index jumped over 1% in early trading before paring all the gains and headed south, losing about 0.3% in the absence of headline drivers. Chinese developers, technology, and solar names led the charge lower. While A-share solar, energy storage, and chemical stocks retreated, the CSI300 was supported by consumer, textile, and pharmaceutical names and managed to advance 0.5%. FX: GBP rallies on Brexit trade deal, AUD still a laggard The USD softened in early Monday trading in the US yesterday, nearly erasing all of Friday’s gains as yields fell and stocks jumped in a risk-on environment, but the risk rally faded and the USD rebounded slightly. US durable goods data missed estimates, cooling off some of the momentum in short US yields. However, inflation fears continue to spell caution and no reversal in Fed’s tightening expectations was seen. Most of the USD softness came on the back of GBP strength on UK-EU finalizing a deal to smoothen Northern Ireland trade. GBPUSD surged from 1.1923 to 1.2060 and EURGBP slid below 0.88. AUDUSD failed to break below 0.67 handle but remained near recent lows even as metals recovered a notch. Crude oil remains anchored near lower end of range Crude oil futures slipped again on Monday before finding a bid overnight in Asia. Developments that continue to see the price action being confined within a narrowing range. Crude oil may nevertheless be heading for a fourth monthly loss as concerns about tighter monetary policies raises concerns about a hard landing and with that weaker demand for crude and products. While a slower than expected start to the year has triggered price downgrades from banks, the consensus still points to a pickup in demand and prices above $90 later in the year. A view shared by Vitol, the world’s largest independent oil trader who sees oil rise later in the year in response to a 2.2 million barrels a day jump in 2023 demand. In Brent we find ascending trendline support at $80.70 with resistance at $83.60. Copper back above $4 amid risk-on, Lithium supply concerns return A broad recovery in base metals was seen on Monday as the focus turns to this week’s Two Sessions gathering in Beijing where traders will be looking for fresh signals from the government. Copper trades back above $4 after finding support around $3.94, the December high. Also, in focus this week is China’s PMI releases due on Wednesday to assess the pickup in Chinese activity after Covid restrictions have been eased. Aluminum also gained following four weeks of losses amid ongoing supply concerns. Zinc and aluminium smelters in Yunnan have been asked to reduce output due to power rationing. Concerns about Lithium supply are also likely to rise as China investigates illegal mining. Operations in Yichun have been ordered to halt work indefinitely. The move could impact between 8-13% of global supply. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) flat ahead of end-of-month US Treasury yields rose slightly again yesterday to new 15-year highs after Friday’s jump on hot US PCE inflation but then eased back to approximately unchanged. It’s been a tough month for treasuries, with the 2-year yield benchmark surging some 60 basis points this month and the 10-year benchmark yield up over 30 basis points. Today is the last trading day of February and could see month-end rebalancing as we await incoming US data. Read next: EUR/USD Pair Is Trading Around 1.0560, USD/JPY Is Above 136.20, GBP/USD Gained| FXMAG.COM What is going on? UK-EU Brexit deal on Northern Ireland trade sealed The UK and EU reached a deal on Northern Ireland's trading arrangements aimed at ending years of friction caused by Brexit. The deal, known as “Windsor Framework”, aims to considerably cut customs paperwork and checks on goods moving from Great Britain but destined to stay in Northern Ireland. Existing requirements on trade from Northern Ireland to the UK will be removed. GBPUSD surged on the news to 1.20+. Yellen in Kyiv to show support Janet Yellen made an unannounced trip to Ukraine to highlight US support. She met with Zelensky and PM Shmyhal and also announced a disbursement of $1.25 billion in fresh economic aid, the first out of a total $10 billion pledged by the administration. It was also reported that the dignitaries discussed additional sanctions on Russia, including confiscating frozen Russian assets to benefit Ukraine's recovery, despite legal obstacles. Tesla shares gains 5% on German production ramp up Reuters reported yesterday that Tesla’s German car plant production hits 4,000 cars/wk which is ahead of schedule boosting sentiment. At this point, we do not know how big the cannibilazation is against its Shanghai production plant which has been the main exporter to Europe. On Friday, one of its more prolific investors Ross Gerber pulled his activist board seat bid suggesting shareholders are holding back from their criticism. Overnight one of Tesla’s suppliers, South Korea based L&F, announced that it had won a KRW 3.8trn cathode materials order, again suggesting demand is ramping up for Tesla. Zoom video rallied over 7% in post-market trading on a strong profit outlook The company reported slightly weaker sales than expected, but forecast Q1 profit of 96-98 cents per share versus analyst consensus of 87 cents and full year profits and especially 2024 profits well above analyst estimates. Zoom is reporting growth in enterprise customers while a shrinking revenue from individual consumers and small businesses. Energy giant Occidental reports disappointing results Occidental reported record quarterly earnings, but missed expectations after costs rose more than expected. The company guided for higher spending ahead, including on its direct air carbon reduction project. For the year ahead, it expects capital expenditure to be as high as $6.2b - vs $5.66b expected. OXY increased its dividend by 38% and announced a new $3 billion share buyback. Its adjusted EPS came in at $1.61, missing the $1.79 Bloomberg consensus. The miss also comes as it received lower than expected realised prices for natural gas - while realised prices for oil were slightly higher than expected.  Warren Buffett’s Berkshire Hathaway is the largest shareholder. A conference call to discuss the results for OXY is at 1 pm ET on Tuesday. Occidental shares fell 1% after hours. Occidental is the only major oil company reporting recently that missed market expectations – while Shell, BP and Woodside all beat. What are we watching next? Softer Eurozone flash February CPI may not be a big relief Broader expectations are for the Eurozone flash CPI to ease to 8.2% YoY in February from 8.6% last month amid lower energy prices. However, the core measure is still expected to be firm at 5.3% YoY, underpinned by higher non-energy industrial goods. This continues to suggest that the underlying price pressures remain firm, and another 50bps rate hike from the ECB remains likely in March. The minutes from the last ECB meeting are also out on Thursday, and the path after the next 50bps rate hike remains on watch. Lagarde previously noted that the ECB will not be at peak rates in March and there will most likely be ground left to cover, which suggested that hopes for a pause in May could be disappointed. France and Spain report preliminary Feb. CPI figures today, while Germany reports CPI tomorrow. Earnings to watch Today’s key US earnings to watch is Coupang and First Solar with the former being part of our earnings preview from last Friday and analysts expecting Coupang to announce 7% revenue growth and EBITDA of $197mn up from $-248mn a year ago as the company is under pressure to increase profitability. Coupang reports its Q4 earnings releases after the US market close. First Solar is expected to report its Q4 earnings after the US market close with analysts expecting 10% revenue growth y/y and EBITDA of $48mn down from $262mn a year ago. Tuesday: Bayer, Moncler, ASM International, Target, Monster Beverage, HP, First Solar, Coupang, Rivian Automotive Wednesday: Royal Bank of Canada, Beiersdorf, Reckitt Benckiser, Kuehne + Nagel, Salesforce, Lowe’s, Snowflake, NIO Thursday: Anheuser-Busch InBev, Argenx, Yunnan Energy New Material, Toronto-Dominion Bank, Fortum, Veolia Environment, Merck, Hapag-Lloyd, CRH, London Stock Exchange, Haleon, Flutter Entertainment, Universal Music Group, Broadcom, Costco, VMware, Marvell Technology, Dell Technologies Economic calendar highlights for today (times GMT) 0745 – France Feb. Flash CPI 0800 – Spain Feb. Flash CPI 1215 – UK Bank of England Chief Economist Huw Pill to speak 1330 – Canada Dec. GDP 1400 – US Dec. S&P CoreLogic Home Price Index 1500 – US Feb. Consumer Confidence 1500 – US Feb. Richmond Fed Business Conditions 1530 – US Feb. Dallas Fed Services Activity 1930 – US Fed’s Goolsbee (Voter 2023) to speak 2130 – API's Weekly Crude and Fuel Stock Report 0030 – Australia Q4 GDP 0030 – Australia Jan. CPI 0130 – China Feb. Manufacturing/Non-manufacturing PMI 0145 – China Feb. Caixin Manufacturing PMI     Source: Financial Markets Today: Quick Take – February 28, 2023 | Saxo Group (home.saxo)
Rates Spark: Balancing data and risk factors

Hawkish ECB May Slow But Not Reverse Euro Selloff

Swissquote Bank Swissquote Bank 28.02.2023 10:26
The Europeans and the Brits finally found an agreement on the very complicated Northern Ireland issue yesterday. But for now, investors warned that they don’t necessarily expect the deal to remove only all of the uncertainty weighing on prices. Brexit deal And if the Windsor Framework could help sterling and small British stocks recover, all the FTSE 100 wants is a rebound in energy and commodity prices, rather than a Brexit deal… Occidental Petroleum  Occidental Petroleum missed earnings and revenue expectations when it announced its Q4 results yesterday, and fell 1.2% in afterhours trading, despite announcing a 38% increase in its dividend and a $3 billion share buyback. Shell Shell, on the other hand, bounced almost 2% higher in Amsterdam yesterday despite a 1% decline in crude oil. European and US markets European and US markets traded in the green yesterday, but the news other than the Windsor Framework was not necessarily encouraging for the central bankers. US core durable orders expanded more than expected, and pending home sales surged 8% thanks to softer mortgage rates on a broad-based decline in yields. The latter data remained consistent with the strong and the resilient US economy, calling for more rate hikes from the Federal Reserve (Fed) to slow inflation. Stocks market So despite yesterday’s relief, the US yields will certainly remain under a decent positive pressure. And higher yields will, at some point, weigh on equity valuations. The S&P500 tested the 200-DMA, which stands at 3940, to the downside last Friday. A fall below that level is expected to accelerate the selloff. Watch the full episode to find out more! 0:00 Intro 0:42 EU & UK finally agrees on Northern Ireland! 3:53 Occidental Petroleum falls after earnings 4:13 Shell up on Goldman upgrade 5:47 Crude oil under pressure 6:24 Equity rally at risk 8:13 Hawkish ECB may slow but not reverse euro selloff Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Northern #Ireland #Brexit #deal #Windsor #Framework #USD #EUR #inflation #Fed #ECB #expectations #Crude #Oil #nat #gas #Occidental #Petroleum #Shell #EVPass #Stoxx #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
The European Economy Has Demonstrated Amazing Resiliency Following The Supply Shock Of The Russian Invasion Of Ukraine

ECB Terminal Rate Pricing Briefly Touched 4%, Focus Today Is On Commodities

Saxo Bank Saxo Bank 01.03.2023 08:22
Summary:  Hot Spanish and French inflation data, along with a soft US consumer confidence report and month-end flows, made for a bumpy ride in equities and bonds to close the month of February. Dollar strength however prevailed at the close of the month despite a bump higher in EUR and GBP earlier in the day. A big miss in Australia’s Q4 GDP and January inflation saw AUDUSD plunge 30bps. Target beat earnings estimates but missed margins and lowered annual guidance. On watch today will be China PMIs, German inflation and US ISM manufacturing.   What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) slipped on falls in consumer confidence and Chicago PMI The major U.S. equity indices posted their second negative month in three - despite starting the year higher. Treasury yields are denting sentiment amid fears that higher Fed Reserve rates would remain in place for longer after inflation fears have been creeping back into the market - while stronger European inflation data strengthened the case for more hikes. On Tuesday, the S&P 500 dropped 0.3% and Nasdaq 100 slipped 0.1% following an unexpected decline in the Conference Board Consumer Confidence and a weaker Chicago PMI print. Most sectors within the S&P500 were down while materials, communication services, and financials inched up. Target (TGT:xnys) gained 1% after the discount store chain beat earnings estimates but missed margins and lowered annual guidance. With traders again reducing bets that the Fed will cut rates this year, the S&P 500 was down 2.6% last month. In contrast, European indices closed in gains for the month of February, with France’s CAC up 2.7%, Euro Stoxx 600 up 1.8% and German DAX up 1.6% despite a big surge in European yields as well. Yields on the short end of the US Treasury curve (TLT:Xmas, IEF:xnas, SHY:xnas) climbed on hotter-than-expected inflation prints in France and Spain Yields on U.S. Treasuries climbed in early trading following the sell-off in European government bonds in response to hot inflation prints in France and Italy. The long end of the Treasury curve recovered after the Chicago PMI, Richmond Fed Manufacturing Index, and Conference Board Consumer Confidence unexpectedly slipped. The 10-year notes pared most losses and finished Tuesday only 1bp cheaper at 3.92% while the yield on the 2-year was 4bps higher at 4.82%. The 2-10 year curve flattened to -89. Hong Kong’s Hang Seng Index (HSI.I) and China’s CSI300 (000300.I) ended a three-month streak of gains The Hang Seng Index and CSI300 index finished February with the first monthly loss since October 2022, ending a three-month streak of gains. In February, Hang Seng Index fell sharply by 9.4% while A-shares’ broad benchmark CSI300 outperformed, sliding moderately by 2.1%. The weakness in Hang Seng Index was driven by large declines in mega-cap e-Commerce platforms. Weighed on by the prospect of intensifying competition, JD.com (09618:xhkg) tumbled 25%, Meituan (03690:xhkg) down 22.4%, and Alibaba (09988:xhkg) down 19.6% over the month. Baidu (09888:xhkg) bucked the market trend and weakness among peers, climbing 1.8% on traction gained in AI-generated content solutions. In the near term, investors will be having a gauge into the strength of the economic recovery from the official NBS Manufacturing PMI, Non-manufacturing PMI, and Caixin China Manufacturing PMI scheduled to release today. After that, the focus will be on the State Council’s Government Work Report which includes, among other items, the growth target for 2023, delivered to the National People’s Congress on 5 March, and then the reshuffling of top leadership in the State Council and other key offices of the Chinese government during the National People’s Congress. Australian equities (ASXSP200.I) retreat back to January levels, with markets pricing in more Fed and RBA hikes Focus today is on commodities – with oil and copper moving higher, while the broad market is being pressured with markets adjusting to higher for longer CPI. We will be watching the reaction to China PMIs - which are expected to boost sentiment in commodities. Short term pressure continues for the Australia dollar after GDP and CPI slowed Australian GDP data showed fourth-quarter economic growth slowed down to pace of 2.7% YoY as expected- quashed by higher inflation and interest rates. Meanwhile, headline monthly CPI showed inflation is cooling – falling to a pace of 7.4% YoY vs the 8.1% price growth forecast. This theoretically pressures the Aussie dollar lower in the shorter term, while the US dollar is continuing to move up – with the dollar index up 4% from its lows - with the market pricing in more Fed rate hikes and potentially no Fed cuts this year – which is in line with our view. Our view is that the Aussie dollar could see strength return in Q2, and we maintain a longer-term bullish view on the Aussie dollar in line with our positive commodity outlook. In other news, Sydney property prices, the bellwether of the Australia market, rose for the first time in 13 months in February in - this is a positive sign for home values – but goes against the grain of what the RBA expected and supports the notion of the RBA keeping rates higher for longer. FX: AUD and JPY were the laggards last month as dollar regained ground The dollar closed firmer at the end of the month which spelled inflation concerns coming back and sent the short-end yields surging to record highs. AUDUSD was the weakest on the G10 board as a beating of the risk sentiment and weaker metal prices saw pair test 0.67 despite the return of RBA’s hawkish stance. Yen had a double blow from surging yields and Ueda’s dovish read, and USDJPY tested 137 last night before getting back below 136.50. EURUSD touched highs of 1.0650 after the French/Spanish inflation prints last night but is back below 1.0570 now. GBPUSD also got in close sights of 1.2150 but back closer to 1.2000 now. Commodities: Copper and oil nudge up - we think the commodity bull market run will be on pause till Q2   The oil prices rose 1.5% with traders reading between the lines at IEA commentary - which alluded to Chinese demand rising - while there is a bigger worry for the EU - should there be a complete halt to Russian flows - which would be a bullish scenario for oil and perhaps see prices move back up to last year's unsustainable highs. As for other commodities - Copper moved further above the key $4 mark after rising almost 2%. Aluminium rose 0.6%, while other metals were lower. At Saxo - our view is that the Commodity bull market will be on pause - before restarting strongly in Q2 with material demand expected to rise from China. Crude oil showing some early signs of life A rally in crude oil prices to the top of last week’s trading range is suggesting some early signs of a recovery towards the top of the trading range that has been established since late 2022. With the Fed rate hikes now well priced in by the markets, focus is moving back to sanctions on Russia that continue to threaten supplies. Meanwhile, sentiment on China demand recovery may be back with the Two Sessions likely to announce a strong policy commitment to growth rebound this year. This is offsetting global demand concerns emanating from API data showing a 10th straight weekly crude build. WTI prices touched $78 overnight and Brent was at $84.   What to consider? US consumer confidence in a surprise drop, labor market strength intact The Conference Board's US consumer confidence index saw a surprise fall to 102.9 in February (vs. exp 108.5) from January’s 106 which was also revised lower from 107.1. The present situation index looked resilient at 152.8 from 151.1 and reaching its highest levels since April 2022, but the forward expectations index declined to 69.7 from 76.0 previously. While the headline figures may be a small input for the Fed, the labor-supply mismatch has become more evident from the consumer confidence report. The report showed that the labor differential improved to 41.5 in February from 37 in the prior month, rising for a third consecutive month and reaching its highest levels since April 2022. The differential represents the percentage of respondents who say jobs “are plentiful” less those who say jobs “are hard to get”. Its rise could be an early indication of labor market strength heading into next week’s payrolls and JOLTs reports. Focus turns to ISM manufacturing survey today which is expected to accelerate but still remain in contraction. ECB rate hike bets pick up after higher French and Spanish inflation Consumer prices in France jumped by a record 7.2% YoY in February as food and services costs increased, while Spain saw a stronger-than-expected 6.1% YoY advance. The strong inflation now results mostly from companies passing through to consumers higher prices in the service sector and higher food prices. Looking at the French data, food prices (price increase of+14.5% YoY) contribute twice more to inflation than energy prices. The increase of prices in the service sector (which represents about 50% of the CPI basket) is another source of worry. Expect it to get worse in the short-term. We also see a similar trend in most European countries (the situation is even uglier in the CEE region), with the first print of German February inflation due today and the Eurozone print due tomorrow. Euro bonds slid with German yields up 7bps and Spanish yields up 6bps as ECB terminal rate pricing briefly touched 4%. China PMIs are expected to show further recovery in the economy Scheduled to release on Wednesday, the official NBS Manufacturing PMI, according to survey from Bloomberg, is expected to bounce further into expansion at 50.6 in February from 50.1 in January and the Non-manufacturing PMI is forecasted to climb to 54.9 from 54.4. Despite the sluggishness in exports, Caixin China PMI is expected to return to the expansionary territory at 50.7 in February, from 49.2 in January. The Emerging Industries PMI jumped to 62.5 in February from 50.9 in January adding to the favourable forecasts for the NBS and Caixin PMIs. Target’s earnings beat with stronger-than-expected sales growth but margins missed and annual guidance weaker-than-expected Target (TGT:xnys) reported FYQ4 (ending Jan 31, 2023) EPS of USD1.89, nearly 28% above the consensus estimate of USD1.48. The earnings beat was driven by a stronger-than-expected 0.7% Y/Y growth in same-store sales and a 1.3% Y/Y growth in total sales, while both were expected to fall. Notable strength was found in food and beverage, beauty, and household essentials. Discretionary categories remained soft. Weakness, however, showed up in the gross margins which declined to 22.7% in Q4 from 25.7% in the prior-year quarter. EBIT margins fell to 3.7% from 6.8% a year ago. For the current fiscal year’s annual guidance, the management is expecting between a low-single-digit decline and a low-single-digit increase in same-store sales and a below-consensus operating income of about USD 4.9 billion. Brewers results on watch amid the reopening trade   Budweiser Brewing Co (1876 HK), the Asia distributor - is due to release results today. Q4 revenue is expected to get a little boost from the FIFA World Cup trading - but is still expected to dive. Its outlook could be tainted as higher beer taxes are ahead for South Korea - while Budweiser’s APAC brands are on notice with proposed liqueur taxes there looming – which could slow business growth. The world’s largest brewer Anheuser-Busch InBev SA/NV (BUD) reports on Thursday, and could see higher volatility - for more click here. EV makers on watch: Tesla bolsters efforts to boost production, Rivian gives lacklustre outlook Tesla is continuing to march ahead with its lofty EV production goals - and now looks set to build a plant in northern Mexico. The news precedes Wednesday's reveal of Elon Musk's next phase "master plan," which will test the resurgent enthusiasm for the EV maker. Further details of the Mexico plan are expected to also be released this week. Meanwhile, Tesla’s competitor, Rivian forecasts 50,000 EVs will be produced this year – which was weaker than the market expected. Its fourth quarter revenue also missed expectations making $663 million – vs the $717 million consensus expected.     For what to watch in the markets this week – read or watch our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: Markets Today: Crude oil and copper recover – 1 March 2023 | Saxo Group (home.saxo)
Rates Spark: Bracing for more

Rates Spark: Update on the rates view in light of latest impulses

ING Economics ING Economics 01.03.2023 08:25
The latest French and Spanish inflation numbers chime with recent US inflation numbers that show some stickiness attached to the inflation narrative. It keeps both the European Central Bank and the Federal Reserve in hiking mode. Here we update on the cycle for rates ahead, noting 5% and 3% as key levels on the horizon for both ends of the curve The cycle we expect on the front end; dominated by hikes for now Given what we know, we agree that the Fed will hike by 25bp per meeting for the next three meetings. That takes the funds rate range to a peak of 5.25% - 5.50% by June. Here’s where the Fed stops. It’s also reasonably consistent with the dot plot, which will make the Fed feel good about itself. Moreover, the cumulative delivery of 550bp of rate hikes (all the way from zero) is quite a dramatic rise in the cost of leverage for households and corporates. Even if it just holds there for a number of months it will add stresses and strains to the economy. The increased cost of leverage has an impact effect, a cumulative effect and a persistence strain The increased cost of leverage has an impact effect, a cumulative effect and a persistence strain. Even if players had ridden through the rate hike process to date and have felt some tolerable pain, that pain will continue to cumulate. US corporates will be in no mood to go on investment sprees in such an environment. And even though there has been a reluctance for employers to shed employees (as it was tough to get them in in the first place), in all probability lay-offs are liable to creep in as we progress further through 2023. There is a moment where inflation and higher rate costs really hit home. And this is why we think the Fed stops, and furthermore why we think the Fed will subsequently engineer some sizeable cuts. Our Chief International Economist James Knightley thinks the Fed can be in the rate cutting game by end-2023, and in any case through 2024 watch out for at least 200bp of interest rate cuts. Why? By the third quarter of the year the realisation will grow that the inflation threat has been significantly downsized, and the Fed will then focus on its second mandate, which is to facilitate a strong jobs market. By this time, employment reports will have turned to low to negative, requiring some support from the Fed, to prevent ongoing (by then) rises in the unemployment rate. Then we get pause and then cuts, with 3% and 5% handles key levels for market rates The 5% handle for the funds rate in all probability gets reduced down to a 3% handle. In fact we have the funds rate bottoming out at 3% flat in 2024. And before the funds rate gets to 3%, the 10yr Treasury yield is liable to get down there ahead of that. As higher interest rates really begin to bite and the recessionary tendency takes hold in the second half of 2023 the 10yr yield is liable to overshoot to the downside, getting to that 3% level. However, note that we characterise this as an overshoot. What we are saying here is 10yr yield should not go below 3%. Or course it could. But it really shouldn’t. And if it does, it should only be temporary. We are in a new world here where there is a more inflation prone set of circumstances This reflects our view that we are in a new world here where there is a more inflation prone set of circumstances that does not merit super-low rates like we’ve had in the previous decade and a half. Those super-lows were brought on by the Great Financial Crisis and reaction to the pandemic. Mean reversion to the 2% area seen for the US 10yr yield through these years does not make much sense going forward. We’d view 3% as a more suitable starting point, which can be broken out as 2% - 2.5% inflation and 0.5% to 1% real rate. In consequence that’s our target for the Fed funds rate bottom, and if that’s the bottom for the Fed, then the 10yr should not really be going below it. Which brings us to the pivot narrative. We’ve been a bit frustrated with the market obsession with this term throughout 2022. There is no pivot. There is a hiking phase (ongoing), a pause phase (second and third quarters of this year) and then a cutting phase that we believe starts in the fourth quarter and really takes hold through 2024. This cutting phase helps to cushion an economy that had finally caved to the prior interest rate elevation pressure. It can’t be overdone though as the US economy is more prone to inflation going forward. Bringing jobs back home does not mean cheaper jobs; de-globalization the same.   That’s based on what we know. Throw in another crisis and we go off on another tangent. Geo-politics always has the potential to engineer that too. But until it happens, it cannot be fully discounted. That all being said, one of the logical reasons for the remarkable early and deep inversion of the US curve is that longer maturities are a bit nervous about the future. Putin’s war in Ukraine shows how uncertain the wider world is, and how impacts from such events become global really quickly. And its ongoing. The Fed does what it can to focus on the US economy. The markets watch the Fed, and lots of other stuff that pushes things around; always quite a complex web. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
SNB stands firm in the face of market turbulence with 50bp rate hike

The Market’s Fears Of Higher Inflation And Interest Rates Keep The USD/CHF Buyers Hopeful

TeleTrade Comments TeleTrade Comments 01.03.2023 08:34
USD/CHF takes offers to renew intraday high even as risk-aversion prevails. US Dollar struggles to track upbeat yields amid strong China data, softer statistics at home. Downbeat  Swiss GDP, hawkish Fed bets favored buyers the previous day. USD/CHF renews its intraday low around 0.9410 as bulls take a breather following the strong February performance during early Wednesday. In doing so, the Swiss currency pair fails to justify the market’s mildly offbeat tone amid fears of higher rates and inflation. The reason could be linked to China as recent activity data from the world’s largest industrial player came in impressive for February. That said, China’s Caixin Manufacturing PMI traces official activity data per NBS Manufacturing and Non-Manufacturing PMI to mark a strong economic rebound in February. Even so, China Finance Minister Liu He said after the data release that the foundation of China's economic recovery is still not stable. It should be noted that the month-start consolidation and the recently softer US data also seem to favor the USD/CHF bears. On Tuesday, the US Conference Board’s (CB) Consumer Confidence dropped for the second consecutive month to 102.9 versus 106.0 prior (revised) while US Housing Price Index drops 0.1% in December versus -0.6% market forecasts and -0.1% prior. On the same line, the S&P/Case-Shiller Home Price Indices grew 4.6% YoY during the said month compared to 6.1% market expectations and 6.8% previous readings. Furthermore, Chicago Purchasing Managers’ Index for February eased to 43.6 from 44.3 previous readings and 45.0 market consensus whereas the Richmond Fed Manufacturing Index for the said month eased below 11.0 prior and -5.0 expected to -16. Even so, the market’s fears of higher inflation and interest rates keep the USD/CHF buyers hopeful. While portraying the mood, the S&P 500 Futures track Wall Street’s mild losses around 3,960. Further, the US 10-year Treasury bond yields rose two basis points (bps) to 3.93% while the two-year counterpart rises four bps to 4.84% by the press time. With this, both the key bond coupons march towards the three-month high marked in February after printing the biggest monthly gain since September 2022. Read next: Elon Musk Is Richest Man Again, The State Bank Of India Had Raised $1 Billion From Global Banks| FXMAG.COM Apart from the risk-off mood, downbeat data at home also could keep the USD/CHF buyers hopeful. Swiss Gross Domestic Product (GDP) arrived at 0% in the fourth quarter (Q4) of 2022 vs. a growth of 0.3% and 0.2% recorded in the third quarter. Moving forward, Swiss Real Retail Sales for January can direct immediate USD/CHF moves ahead of US activity data for the said month. However, major attention will be given to the next week’s monthly jobs report, Federal Reserve (Fed) Chairman Jerome Powell’s testimony and the Federal Open Market Committee (FOMC) monetary policy meeting for clear directions. Technical analysis USD/CHF pullback remains elusive unless the quote drops back below the 100-day Exponential Moving Average (EMA) level surrounding 0.9385.
Australian dollar against US dollar decreased amid weak China CPI data

The Outlook For The AUD/USD Pair Looks Gloomy

TeleTrade Comments TeleTrade Comments 01.03.2023 08:53
AUD/USD is struggling to extend recovery above 0.6760, upside looks favored amid the risk-on impulse. Federal Reserve might turn more hawkish if US ISM Manufacturing PMI delivers a surprise jump. A sense of relief has been observed by the Reserve Bank of Australia as inflation has softened significantly. AUD/USD looks failing to turn bullish despite a responsive buying move amid an Inverted Flag formation. AUD/USD has stretched its V-shape recovery move above to near the 0.6760 resistance in the early European session. The Aussie asset witnessed a sell-off in the Asian session after the release of the downbeat Australian Gross Domestic Product (GDP) and a sheer decline in the monthly Consumer Price Index (CPI). The downside bias in the Australian Dollar faded after the release of the upbeat Caixin Manufacturing PMI data, which infused fresh blood into the Aussie and resulted in a V-shape recovery. S&P500 futures have turned positive after recovering significant losses posted in the Tokyo session, portraying a sheer recovery in the risk appetite theme. The US Dollar Index (DXY) has refreshed its day low below 104.47 as investors have ignored the uncertainty associated with hawkish Federal Reserve (Fed) bets. Also, the safe-haven assets are struggling to find a cushion as investors have underpinned the risk-on mood. Contrary to the positive market sentiment, the return offered on the 10-year US Treasury bonds looks still solid around 3.94%. RBA senses relief as Australian Inflation softens and GDP trims Investors dumped the Australian Dollar in the Asian session after the Australian Bureau of Statistics reported significantly lower monthly Consumer Price Index (CPI) figures than anticipation. The monthly Consumer Price Index (CPI) (Jan) dropped significantly to 7.4% from the expectations of 8.0% and the prior release of 8.4%. A mammoth decline in the inflation data is going to provide a big relief to Reserve Bank of Australia (RBA) policymakers. The Reserve Bank of Australia has been making efforts in bringing down inflationary pressures by the continuation of policy tightening. Reserve Bank of Australia Governor Philip Lowe has already pushed its Official Cash Rate (OCR) to 3.35% in order to tame the stubborn inflation. And, more rates must be in pipeline to achieve price stability sooner. Apart from the monthly CPI, Australian Gross Domestic Product (GDP) (Q4) has dropped to 0.5% from the consensus of 0.8% and Q3 figure of 0.6%. On an annualized basis, the GDP has remained in line with expectations at 2.7%. A decline in GDP numbers also showcases lower demand from households, which will trim inflation projections ahead as producers will be forced to scale down the prices of their offerings. Upbeat Caixin Manufacturing PMI strengthens the Australian Dollar It was widely anticipated that China’s manufacturing sector will outperform after the rollback of strict lockdown measures. Chinese administration and the People’s Bank of China (PBoC) are dedicated to spurring economic recovery by improving domestic demand. The IHS Markit reported the Caixin Manufacturing PMI data at 51.6, higher than the expectations of 50.2 and the former release of 49.2. Apart from that, China’s National Bureau of Statistics (NBS) Manufacturing PMI (Feb) landed higher at 52.6 vs. the consensus of 50.5 and the prior release of 50.1. The Services Manufacturing PMI exploded to 56.3 against 54.4 released in January while the street was anticipating a downbeat figure at 49.7. It is worth noting that Australia is the leading trading partner of China and a sharp recovery in the Chinese economy is also supportive of the Australian Dollar. ISM Manufacturing PMI- the next trigger for the US Dollar The street is awaiting the release of the United States Institute of Supply Management (ISM) Manufacturing PMI data. As per the consensus, the economic data is seen at 48.0 from the former release of 47.4. Apart from that, the New Orders Index that conveys forward demand is expected to rebound to 43.7 from the prior figure of 42.5. It is worth noting that the Manufacturing PMI is in a contraction phase consecutively for the past three months. A figure below 50.0 is considered as a contraction in the extent of activities. Federal Reserve policymakers are expected to keenly watch the PMI figures as a surprise upside could strengthen the expectations of more hikes ahead. AUD/USD technical outlook Despite a responsive buying action near the round-level support of 0.6700, the outlook for AUD/USD looks gloomy as the asset is forming an Inverted Flag chart pattern. The chart pattern indicates a sheer consolidation that is followed by a breakdown. Usually, the consolidation phase of the chart pattern serves as an inventory adjustment in which those participants initiate shorts, which prefer to enter an auction after the establishment of a bearish bias. The 100-period Exponential Moving Average (EMA) around 0.6760 is acting as a barricade for the Aussie bulls. Also, the Relative Strength Index (RSI) (14) is oscillating in the 40.00-60.00 range, indicating a consolidation ahead
The Commodities Feed: Specs continue to cut oil longs

Talks Of Higher Supplies From The OPEC+ Group Exert Downside Pressure On Crude Oil

TeleTrade Comments TeleTrade Comments 01.03.2023 09:01
WTI crude oil rises for the second consecutive day, renews intraday high of late. Strong China PMI data bolster upbeat expectations from the world’s largest commodity user. Higher OPEC+ supplies, talks of more Russian Oil floating un-bid challenge WTI bulls. Fears of higher rates, inflation also keep a tab on energy benchmark ahead of US PMIs, official Oil inventories. WTI crude oil renews its intraday high around $77.60 during the initial hour of Wednesday’s European session. In doing so, the black gold marks another attempt to regain the $78.00 after the previous day’s pullback from a one-week high. That said, the energy benchmark’s previous pullback could be linked to the US Dollar’s run-up amid hawkish Fed bets, as well as inflation fears, while the fears of more Oil supplies joined the force to challenge the commodity bulls afterward. It’s worth mentioning that talks of higher supplies from the OPEC+ group, comprising the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, despite binding to the output cut commitments, exert downside pressure on the black gold price. On the same line could be the news shared via Bloomberg that says, “As many as 1.9 million barrels of Russian diesel-type fuel is currently in floating storage, the most since October 2020.” The news also mentioned that this phenomenon indicates some cargoes loaded from Russian ports without buyers. It should be noted, however, that the mixed US data and strong prints of China’s Caixin and NBS Manufacturing PMIs for February, as well as the Non-Manufacturing PMI for the said month, pushes back the hawkish Fed concerns and favor hopes of more demand from the world’s biggest commodity user. Looking ahead, the US S&P Global and ISM PMI details for February will be important for immediate directions ahead of the weekly official Oil inventory data from the US Energy Information Administration (EIA). Technical analysis A clear upside break of the 12-day-old descending trend line, previous resistance around $76.65, directs WTI crude oil buyers toward the 50-DMA hurdle of $78.00.
Is Gold Ready to Shine Again? US CPI and Fed Policy Insights

Gold Rally At The Turn Of Winter And Spring Looks Like A False Start

Marek Petkovich Marek Petkovich 01.03.2023 11:26
Gold has been hot and cold as of late. After rallying to $340 an ounce since early November, the precious metal lost more than $100 of its value in February. The last month of the winter was its worst since June 2021. The XAUUSD sell-off was based on the strengthening U.S. dollar and the return of 10-year U.S. Treasury bond yields to the 4% mark. Judging by Bank of America's forecasts of a 6% increase in the federal funds rate and Nordea Markets' forecasts of a 4.5% increase in the 10-year Treasury yield, gold's rebound at the turn of the winter and spring is limited. The precious metal entered 2023 in good spirits. Fears over an imminent recession and the growing popularity of disinflation were promising for the bulls on the XAUUSD. However, the October–January rally did not result in an inflow of capital to the ETFs, while the February sell-off forced investors to take money from them. Standard Chartered notes that by the end of the last month of winter, the outflow will amount to 20 tonnes, with 11 tonnes lost by specialized exchange-traded funds during the last four sessions. Not surprisingly, rising U.S. Treasury yields increase the opportunity cost of holding gold and force holders to get rid of it. At the same time, optimism prevails among the 30 experts participating in the LBMA survey. They forecast an average price of $1,860 an ounce for the precious metal in 2023, and the most ardent bulls see it at $2,025. Respondents believe the future dynamics of XAUUSD is based on three factors—the outlook for the dollar and inflation, as well as geopolitics. Currently, the dominant narrative in the market is "higher rates and a longer period of holding them at their peak." However, keep in mind that monetary tightening affects the economy with a time lag. The most aggressive increase in the federal funds rate in 10 years has not been fully accounted for, and if the Fed continues along these lines, it runs the risk of breaking something. Read next: Some Mcdonald's Locations Don't Promote Hip-Hop Stars' New Meal| FXMAG.COM Dynamics of gold and U.S. dollar The deterioration of U.S. macro statistics will bring back the topic of recession and the Fed's dovish turn to the market, which will lower Treasury yields, weaken the U.S. dollar and create a tailwind for XAUUSD. Nevertheless, weak data on consumer confidence and the purchasing managers' index from the Chicago Fed are unlikely to become a reliable source of weakness in the U.S. economy. Without statistics on the labor market and inflation, it is too early to talk about this. In this regard, the gold rally at the turn of winter and spring looks like a false start. The precious metal is clearly getting ahead of itself and can be punished for it. Technically, on the daily chart of gold, there was a rebound from the level of $1,807 per ounce mentioned in the previous article, which allowed us to form the longs. A failed resistance test at $1,835, $1,850 and $1,865 will allow us to take the profits and reverse. The recovery of the upward trend requires the growth of the precious metal above $1,880 per ounce.   Relevance up to 08:00 2023-03-06 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/336395
Musk Said Tesla’s Next Phase Of Growth Will Be Built Around Building Clean Energy Sources

Musk Said Tesla’s Next Phase Of Growth Will Be Built Around Building Clean Energy Sources

Saxo Bank Saxo Bank 02.03.2023 08:39
Summary:  China’s PMI data came in stronger than expected and signaled the economic recovery is picking up steam. The data triggered sharp rallies in the Hang Seng Index and commodity prices, particularly industrial metals. U.S. bond yields rose and equities slid, following the ISM price paid index rising to 51.3 and Fed officials’ hawkish comments keeping a 50-bp hike in the March FOMC on the table.   What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) slump to new lows on higher Fed rate bets Stocks were pressured after fresh economic data highlighted persistent inflationary pressures remain – pushing the S&P500 to close at its lowest level in six weeks after shedding 0.5%. It’s the second straight day the S&P closed under its 50-day moving average. While most sectors declined within the S&P500, energy rallied strongly by nearly 2%. The strong China PMI data helped sentiment in the materials and industrial sectors, both rising on Wednesday. Nasdaq 100 slid 0.9%. The extra pressure on equities came as the prices paid component of the ISM in surging above the 50 expansion/contraction threshold and higher for longer comments from Fed officials (see below). Key U.S. company news In regular trading, First Solar (FSLR:xnas) shares surged about 16% to its highest since 2009 after the panel maker’s backlog of orders look like they’ll take the 2nd half of the decade to fill. The surging demand comes as the company is benefiting from the Inflation Reduction Act- signed last year by President Joe Biden. Meanwhile, after close of trade - software giant Salesforce (CRM:xnys) gave a surprisingly upbeat forecast for the year ahead - and plans to step up share buybacks to $20 billion, which is positive vs its $167b market cap. Operating margins will be about 27% in fiscal 2024, exceeding Bloomberg consensus estimates of 22.4% growth. This also potentially eases pressures CRMs faces from a group of activist investors. Salesforce shares rose 14% in post market trade, after closing at $167.35 in normal trade. Next, we will be watching - Campbell Soup (CPB:xnys) which reports after market close Thursday. US Treasury curve (TLT:Xmas, IEF:xnas, SHY:xnas) sold off on Fed comments The 10-year yield breached above 4% briefly during the session before closing a touch below that at 3.99%, following comments from the Fed’s Kashkari saying undecided between a 25bp and 50bp hike at the March FOMC and Bostic’s 5-5.25% “well into next year” remarks. Yields on the 2-year notes rose 6bps to 4.88%, the highest level since 2007. The jump of the ISM Prices Paid (see below) also added fuel to the selloff. Hong Kong’s Hang Seng Index (HSI.I) and China’s CSI300 (000300.I) jumped on strong China PMIs Hang Seng Index surged 4.2% and CSI300 gained 1.4% on Wednesday following the release of strong PMI data in China much above consensus estimates. Hang Seng Tech Index jumped 6.6% as technology hardware, China internet, and EV makers advanced sharply. The percentage increase in the Hang Seng Index was the largest since early November and turnover in the Stock Exchange of Hong Kong reached HKD154 billion, the highest since late January. Chinese developers were among the top winners, with Longfor (00960:xhkg) up 9.6% and Country Garden (02007:xhkg) up 8.3% leading the charge higher. The chairman of Country Garden announced retirement. ASMPT (00522:xhkg) jumped 9% after the semiconductor equipment maker reported Q4 revenues beating estimates. After market close, Techtronic (00669:xhkg) reported H2 EPS of USD0.27 and revenues of USD6.2 billion, both below the consensus estimates due to soft demand for power tools.  In A-shares, telco, digital economy, software, gaming, media, and AI-generated content stocks were the top winners. Australian equities (ASXSP200.I) rise to four-day highs on commodities rebounding  - beware of companies going ex-dividend ahead After China PMIs beat expectations, with new orders surging back to 2017 level - focus is on commodities strongly rebounding - with the iron ore (SCOA) price rising to a five-day high $126.70, the spot Copper (HG1) price trading at a five-day high, while aluminium is also higher. Coles (COL), Woolworths (WOW) go ex-dividend today, along with Pilbara Minerals (PLS).  As a reminder – dividend paying giants, BHP and Rio go ex-dividend this time next week, which could pressure equities. FX: Dollar unable to bask in yields glory The US dollar was weaker on Wednesday mostly pressured by the gains in Chinese yuan in the Asian session after the upbeat China activity data sent the China reopening theme roaring once again. USDCNH dropped from 6.96 to sub-6.88. Some reversal in the dollar was seen in the US session but it was not enough to reverse earlier losses. Some other currencies also got a bid from the China theme, particularly EURUSD that surged to highs of 1.0691 also underpinned by rising hawkish ECB expectations after hot regional inflation prints. NZDUSD was the outperformer in G10 FX, rising to 0.6276 with Q4 terms of trade returning to positive territory at 1.8% from last month’s -3.9% QoQ. GBPUSD stayed below 1.2100 despite Bailey signaling more BOE hikes may be needed, and saying that the experience in the 1970s showed that doing "too little with interest rates now" may mean more increases later on.   AUD reverses course, rising above its 100-day moving average The Australian dollar against the US (AUDUSD) advanced for the first time following four days of losses, after China's manufacturing activity boosted sentiment – hitting a decade high – with new orders improving in February, surging to 54.1 - the highest level since September 2017. This enthusiasm is buoying commodity prices on the notion that demand will rise – the iron ore (SCOA) has risen to a five-day high of $126.70, spot Copper (HG1) hit a five-day high, while aluminium is also higher. This optimism is offsetting the slowing Australian prints released yesterday- with GDP grinding down to pace of 2.7% YoY in the 4Q as expected- while monthly CPI cooled to 7.4% YoY vs the 8.1% price growth forecast. It’s also important to note, short covering has also added to the Aussie dollar rising. Our view is that the Aussie dollar could see strength return in Q2, in line with our view that the commodity bull market will strongly restart in Q2. Crude oil struggling to lean on Asia/Europe vs. US demand Crude oil prices remained near recent highs despite the strong signal on Chinese demand recovery from upbeat PMI data. In addition, the inventory data was also bullish signalling a recovery of demand in Asia and Europe. US commercial crude oil inventories gained less than expected last week, rising only 1.2 million barrels as US exports of crude hit a record daily high of 5.6 million barrels last week (+22.4% w/w). However, on the other hand, US ISM data and hawkish Fed speakers continued to highlight inflation fears are here to stay and sparking some US demand concerns. WTI futures traded just below $78/barrel while Brent touched $84.50. Metals complex excited about China Copper, aluminum, zinc and iron all traded higher following the outperformance of Chinese PMI data on Wednesday, driving a return of focus to the China reopening theme. Copper, which earlier found support at $4 surged to $4.17 in the Asian morning today, and may take another look at $4.20. However, our head of Commodity Strategy Ole Hansen wrote that the next sustained move higher is unlikely to be triggered until the second quarter or later, the timing to a certain extend depending on the economic outlook for the rest of the world and whether recession, as we believe, will be avoided.   What to consider? Mixed US ISM survey details – but steady message on inflation The US ISM manufacturing marginally rose to 47.7 from 47.4, coming in below expectations of 48.0. New orders lifted to 47.0 (prev. 42.5), while employment fell to 49.1 (prev. 50.6), entering contractionary territory. But the message on price pressures continued to roil markets. ISM priced paid rose back into expansionary territory to 51.3, well above the prior 44.5 and the expected 45.1, re-affirming that it may be too soon to call goods inflation disinflationary. Hawkish Fed talk brings 10-year yields to top 4% Fed member Kashkari (voter) signaled an openness for a 50bps hike at the March meeting, saying he is open to both 25bps and 50bps. Still, he emphasized that the terminal rate is more important than the size of rate hikes, where also he hinted that it could be revised higher from December. Another member Bostic (non-voter) maintained his view that the Fed policy rate needs to rise to 5.00-5.25% range, but said that the rate should be left there “until well into 2024”. 10-year Treasury yields rose above the key 4% mark for the first time since November, sending another warning signal to equities. China’s PMIs signaled recovery picking up steam The headline official NBS PMI surged to 52.6 in February, the highest print since 2012, from 50.1 in January. The strength was across the board with production and new orders improving markedly and the new export orders unexpectedly surging to 52.4, the first time into the expansion territory in 23 months. The NBS non-manufacturing PMI and the Caixin Manufacturing PMI, also released today, both bounced strongly and signaled economic expansion. Readers can find more on China’s PMI here. Hot German inflation print creates further pressure for the ECB Coming on the heels of hotter than expected inflation prints in France and Spain for February, German CPI print was also hotter than expected at 9.3% YoY (vs. +9.0% exp and +9.2% prior). The message on disinflation has therefore continued to weaken, and both Fed and ECB are likewise pressured to do more on policy tightening to ensure the inflation comes back to target. Th aggregate Eurozone print is out today and expectations of a softening to 8.3% from 8.6% last month may be tested. Tesla plots a path to renewable energy at Tesla Investor Day As part of Tesla’s “Master Plan” for the company, Musk said Tesla’s next phase of growth will be built around building clean energy sources – that can serve a much larger world population - without great economic sacrifice. Moving into sustainable energy might mean moving into heat pumps- as they can dramatically cut home and office heating costs. Tesla dubs them one of the low hanging fruits in the sustainable energy transition. Tesla’s shares are up 97% from their January low.   For what to watch in the markets this week – read or watch our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: Markets Today: Sharp rise in China’s PMI data; inflation concerns in the U.S. - 2 March 2023 | Saxo Group (home.saxo)
InstaForex's Irina Manzenko talks British pound amid latest events

Sterling Was Thrown Overboard On Dovish Comments From Bank Of England Governor Bailey

Saxo Bank Saxo Bank 02.03.2023 09:36
Summary:  US equity futures are edging lower overnight and are below the critical support at the 200-day moving average that has been tested of late, setting up a compelling test of animal spirits in coming sessions. The treasury market is providing fresh headwinds as the US 10-year treasury yield edged above 4.00% for the first time since November. Sterling was thrown overboard on dovish comments from Bank of England Governor Bailey, while the euro remains firm on hot inflation data this week. What is our trading focus? US equities (US500.I and USNAS100.I): the ‘ketchup effect’ in US bond yields is here US equities continued their slide lower with S&P 500 futures making a new lower close at 3,956, the lowest level since 20 January, and this morning the index futures have continued lower trading around the 3,932 level. This suggests investors are sceptical that China’s reopening will make a significant difference for global growth in the first half. The decline also reflects that the US 10-year yield has finally pushed above the 4% level this morning trading around 4.04% which is a significant breakout and pushing interest rates to the highest level since 10 November. With S&P 500 futures breaking below many key levels over the past couple of session the 3,900 level is definitely in play now. Hang Seng Index (HSI.I) and CSI300 (000300.I) retreated after yesterday sharp gains Hang Sang Index slid 0.8% and CSI300 inched down 0.3%. China Internet names led the decline with Alibaba (09988:xhkg) falling 4.3%. Container liners outperformed, with Orient Overseas (00316:xhkg) rising 4.4% and COSCO Shipping (01919:xhkg) up 3.8% as yesterday’s new export orders sub-index in the PMI surveys signaled an improvement in China’s export outlook. Following the Ministry of Industry and Technology ‘s statement in a press conference that China will accelerate the rolling of 6G infrastructure, A-share telcos and communication equipment makers advanced. FX: GBP blasted on Bailey comments, USD edges higher as sentiment wilts The US dollar found only hesitant support in places yesterday on a fresh surge in treasury yields, where the longer portion of the yield curve finally tested a bit higher and the 10-year Treasury benchmark yield poked above 4.00% for the first time since November. But as the focus in recent days has been on hot EU inflation data and yesterday’s hot German CPI number, EU yields have led the charge higher this week, so the euro is quite firm togethe with the greenback. The JPY remains under pressure as EURJPY returned back above 145.00. Elsewhere, sterling was thrown overboard after Bank of England Governor Bailey’s noncommittal comments on inflation risks and policy tightening (see more below). GBPUSD south of 1.2000 this morning and EURGBP has now rejected its test below 0.8800 and what semed a capitulation back into the lower range, surging to nearly 0.8900. Crude oil weighs China demand against hawkish Fed speak Crude oil prices trade near recent highs supported by the strong signal on Chinese demand recovery from upbeat PMI data. In addition, the inventory data was also bullish signalling a recovery of demand in Asia and Europe. US commercial crude oil inventories gained less than expected last week, rising only 1.2 million barrels as US exports of crude hit a record 5.6 million barrels a day last week. However, on the other hand, US ISM data and hawkish comments from Atlanta Fed Bostic continued to highlight inflation fears are here to stay and may spark some US demand concerns. WTI futures traded just below $78/barrel while Brent touched $84.50. Gold trades lower on ISM and Bostic comment Financial markets, including the investment metals, have gone back to worrying about inflation, interest rates and growth after the prices paid component of the ISM index for February rose for a second month to 51.3. In addition, the Atlanta Fed’s Bostic said rates could rise to 5.25% and stay there well into 2024. Currently the market has priced a terminal rate around 5.65%. Gold gave back some of Wednesday’s strong gains after ten-year US yields topped the closely watched 4% and the dollar drifted higher. With +3 additional 25 basis point hikes priced in, the selling pressure on gold and silver have eased but for the current recovery to attract support from technical buyers, prices as a minimum need to break $1864, and silver $22 to signal an end to the current corrections. Metals complex excited about China, but.. Copper drifted lower in Asia with profit taking emerging after futures in New York and London failed to build on yesterday’s strong China PMI-led gains. The report reignited the reopening theme but as we wrote in are recent update, the next sustained move higher is unlikely to be triggered until the second quarter or later, the timing to a certain extend depending on the economic outlook for the rest of the world and whether recession, as we believe, will be avoided. For now, the 30-cent wide downward sloping channel is providing some resistance at $4.2/lb in HG and $9115/tons in LME. US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) sold off on ISM Price Paid Index The 10-year US Treasury yield breached 4% briefly during the session and edged higher overnight following a ISM Price Paid index shooting up above the expansion/contraction threshold. The implied terminal Fed Fund rate rose above 5.5% at one point yesterday. Comments from the Fed’s Kashkari saying he is undecided between a 25bp and 50bp hike at the March FOMC and Bostic’s 5-5.25% “well into next year” remarks added fuel to the selloff. Yields on the 2-year notes rose 6bps to 4.88%, the highest level since 2007. What is going on? Mixed US ISM Manufacturing survey details – but steady message on inflation The US ISM manufacturing marginally rose to 47.7 from 47.4, coming in below expectations of 48.0. New orders lifted to 47.0 (prev. 42.5), while employment fell to 49.1 (prev. 50.6), entering contractionary territory. But the message on price pressures continued to roil markets. ISM priced paid rose back into expansionary territory to 51.3, well above the prior 44.5 and the expected 45.1, re-affirming that it may be too soon to call goods inflation disinflationary. Hawkish Fed talk brings 10-year yields to top 4% Fed member Kashkari (voter) signaled an openness for a 50bps hike at the March meeting, saying he is open to both 25bps and 50bps. Still, he emphasized that the terminal rate is more important than the size of rate hikes, where also he hinted that it could be revised higher from December. Another member Bostic (non-voter) maintained his view that the Fed policy rate needs to rise to 5.00-5.25% range, but said that the rate should be left there “until well into 2024”. 10-year Treasury yields rose above the key 4% mark for the first time since November, sending another warning signal to equities. Hot German inflation print creates further pressure for the ECB Coming on the heels of hotter than expected inflation prints in France and Spain for February, German CPI print was also hotter than expected at 9.3% YoY (vs. +9.0% exp and +9.2% prior). The message on disinflation has therefore continued to weaken, and both Fed and ECB are likewise pressured to do more on policy tightening to ensure the inflation comes back to target. The aggregate Eurozone print is out today and expectations of a softening to 8.3% from 8.6% last month may be tested. Bank of England Governor Bailey comments pound sterling The Bank of England governor preferred to keep in question whether the Bank of England will continue to tighten policy or pause here, which looks especially dovish at a time when especially ECB expectations are ratcheting higher on hot inflation data for February released this week. “I would caution against suggesting either that we are done with increasing Bank Rate, or that we will inevitably need to do more....nothing is decided.” EURGBP rallied hard from the lows since January near 0.8750 to nearly 0.8900 yesterday. Tesla shares down 5% on Investor Day presentation There was little for Elon Musk to present. No new magic around boring tunnels or making robots run or thinking. It felt empty all along and shareholders agreed sending shares down 5%. The only real new news, which had already been leaked, was the new EV manufacturing plant in Mexico which would increase Tesla’s production capacity. At the very end of the presentation Elon Musk talked about the need for a significant increase in renewable energy production without sacrificing economics, but that was as concrete as it could get this time. A more detailed plan would be announced later. For all the showman Elon Musk is, there was a lot to support the grandiose show. Earnings recap: First Solar, Salesforce, and Snowflake First Solar shares surged about 16% to its highest since 2009 after the panel maker’s backlog of orders look like they will take the second half of the decade to fill. The surging demand comes as the company is benefiting from the Inflation Reduction Act, signed last year by President Joe Biden. The software giant Salesforce gave a surprisingly upbeat forecast for the year ahead - and plans to step up share buybacks to $20bn, which is positive vs its $167bn market cap. Operating margins will be about 27% in FY24 exceeding Bloomberg consensus estimates of 22.4%. This eases pressures Salesforce faces from a group of activist investors. Salesforce shares rose 14% in post market trade, after closing at $167.35 in normal trade. Snowflake shares fell 6% in extended trading following Q1 revenue guidance fell short of expectations and the fiscal year guidance on revenue was $2.7bn vs est. $2.8bn as companies are cutting down on their cloud spending. What are we watching next? China’s “two sessions” in focus Following on from Wednesday’s stronger than expected PMI which supported the view that China’s economy is picking up steam, focus now turns to the Chinese government and what they will do to further help along a post-lockdown economic recovery. The first session of the 14th National Committee of the Chinese People's Political Consultative Conference (CPPCC) will begin on March 4 and followed up the following day by the 14th National People’s Congress (NPC. During what is collectively known as the “two sessions”, Chinese officials will release a set of social and economic development goals and various policy measures to achieve them. Earnings to watch Today’s key US earnings releases are Dell Technologies and Broadcom both reporting after the close. Analysts expect Dell to report FY23 Q3 revenue growth of -16% y/y and EBITDA of $2.39bn down from $4bn a year ago as declining technology spending is hitting technology providers such as Dell hard. Analysts expect Broadcom to report FY23 Q1 (ending 31 Jan) revenue growth of 16% y/y and EBITDA of $5.6bn up from $4.4bn a year ago. Thursday: Anheuser-Busch InBev, Argenx, Yunnan Energy New Material, Toronto-Dominion Bank, Fortum, Veolia Environment, Merck, Hapag-Lloyd, CRH, London Stock Exchange, Haleon, Flutter Entertainment, Universal Music Group, Broadcom, Costco, VMware, Marvell Technology, Dell Technologies Economic calendar highlights for today (times GMT) 1000 – Italy Feb. Preliminary CPI 1000 – Eurozone Feb. Preliminary CPI 1230 – ECB Meeting Minutes of Feb. ECB meeting 1330 – US Weekly Initial Jobless Claims 1500 – UK Bank of England Chief Economist Huw Pill to speak 1530 – EIA's Weekly Natural Gas Storage Change 1900 – US Fed’s Waller (Voter) to discuss economic outlook 2100 – New Zealand Consumer Confidence Survey 2300 – US Fed’s Kashkari (Voter 2023) to speak 2330 – Japan Tokyo Feb. CPI 0145 – China Feb. Caixin Services PMI   Source: Global Market Quick Take: Europe – March 2, 2023 | Saxo Group (home.saxo)
Pound Sterling: Short-Term Repricing Complete, But Further Uncertainty Looms

Hotter-Than-Expected EU Inflation Data, Euro Is Recovering

Swissquote Bank Swissquote Bank 02.03.2023 10:40
Hotter-than-expected inflation data pushes the European yields higher. The higher yields support recovery in the euro, but not the European stock valuations. A slowing economic growth Across the Atlantic Ocean, the news is not great, either. The ISM manufacturing index revealed a slower contraction in February, but the improvement compared to the last month was less than expected.A slowing economic growth is not bad news for the Federal Reserve (Fed), but the mounting price pressure is. This is what the ISM report revealed yesterday, and further fueled Fed hawks. Fed Activity on Fed funds futures now gives more than 30% chance for a 50bp hike at the next meeting, and Fed swaps price in a peak Fed rate of around 5.5%. This number was around 4.9% at the start of the year. Yields Consequently, the US 2-year yield continues its steady climb toward to 5% mark, and the 10-year spiked above the 4% psychological level yesterday.The S&P500 tested the critical 200-DMA to the downside. There is major speculation about an aggressive selloff below this 200-DMA level. And given the persistent positive pressure on the yields, clearing the 200-DMA support is not a matter of if, but a matter of when. Read next: Twitter Employees Are Overburdened As Elon Musk Tries To Run Twitter With Fewer Staff| FXMAG.COM Watch the full episode to find out more! 0:00 Intro 0:37 European inflation pressures yields and euro higher, equities lower 4:03 Just a matter of time before S&P500 slips below 200-DMA 8:41 Crude oil gains, but China-led rally may never materialize 10:02 Why Elon Musk’s Master Plan III was a flop? Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Eurozone #inflation #ECB #rate #hike #EUR #USD #Crude #Oil #Tesla #Master #Plan #EV #Stoxx #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
ECB's Tenth Consecutive Rate Hike: The Final Move in the Current Cycle

Over 70% Chance That The Fed Will Raise Rates By 25 Basis Points

InstaForex Analysis InstaForex Analysis 02.03.2023 10:55
The main component of the dollar's weakness yesterday was a report from China indicating that their manufacturing sector is growing strongly. It is an important component of China's economic recovery after its massive shutdown. Another factor putting bearish pressure on the dollar was the strength of the euro. Together, these fundamental events led to a 0.39% decline in the dollar. Also, in the latest report from the Institute for Supply Management, U.S. manufacturing data shows that inflation continues to rise. The ISM said on Wednesday that the manufacturing purchasing managers' index rose to 47.7% in February from 44.7% in January. These data coincided with the consensus forecast. The report also noted that activity in the manufacturing sector continues to be at its lowest level since May 2020, when the global economy was forced to stop. Values of such diffusion indices above 50% mean economic growth, and vice versa. The further away from 50%, higher or lower, the faster or slower the rate of change. The report said that the price index rose to 51.3%. This is the first time in four months that U.S. producer prices have begun to rise. Analysts say rising manufacturing prices could mean that the Federal Reserve will not be able to control inflation even as it continues to aggressively tighten monetary policy. According to the CME FedWatch tool, there is a 73.8% chance that the Fed will raise rates by 25 basis points and 26.2% that the Fed will be more aggressive in raising rates by 50 basis points. Looking at the components of the report, the new orders index climbed to 47% from 42.5% in January. At the same time, the production index fell to 47.3% from the previous 48%. The labor market lost momentum, returning to a lower reading of 49.1% from 50.6% in January. On such mixed data, the dollar is still holding its former positions with small deviations, reinforcing itself with the yield of 10-year bonds. Yields on 10-year bonds topped 4% for the first time since October.   Relevance up to 08:00 2023-03-03 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/336525
Italy Eases Windfall Tax Impact Amid China's Deflation, Focus on US Inflation Report

Global Layoffs Are Affecting The Investment Banking Sector In Asia

Kamila Szypuła Kamila Szypuła 03.03.2023 08:09
Employment has increased in many industries during the pandemic, but the situation has changed and many companies are announcing job cuts. Until now, mainly technology companies have significantly reduced employment, aloe has recently been joined by other industries such as banking. In this article: Layoffs in Asian investment banking The Fed renewed investors' hopes The long-awaited update of the Ethereum network in Shanghai Layoffs in Asian investment banking Global banks including Goldman Sachs and Morgan Stanley are in the process of cutting thousands of jobs. Several other financial firms have also slashed jobs in recent months, including major asset managers and fintechs, amid a turbulent macroeconomic environment that has pressured consumers and soured demand in several mainstay business units. Bank of America and Citigroup cut several jobs in investment banking in Asia, joining global partners in cutting jobs Bank of America (BofA) cut about half a dozen Hong Kong investment banking jobs on Thursday, and Citi on Thursday cut four jobs from its China investment banking team. BofA, Citi cut handful of investing banking jobs in Asia - sources https://t.co/QmatsCtb9a pic.twitter.com/vBgz0scq7B — Reuters Business (@ReutersBiz) March 3, 2023 Read next: Despite The Decline Euro Remains Above 1.06, GBP/USD Is Trading Below 1.20| FXMAG.COM The Fed renewed investors' hopes Although inflation is slowing down, the fight against it continues. Banks around the world last year raised interest rates to record levels not seen since 2008. The actions of the Fed are attracting attention. After the publication of inflation data and a series of other reports (GDP, PMI), the market expects that the Fed will decide to hike by 25 bp. Recently, Atlanta Federal Reserve Chairman Raphael Bostic told the media that he favors lower – and slower – rate hikes. On top of that, the data suggests that the labor market, somewhat astonishingly, is still solid, which could prompt the Federal Reserve to raise rates when it meets later this month. Markets opened lower after this news. The situation of interest rates has an impact on the markets, especially currency, stocks and bonds. US stocks rose on Thursday with all major indexes closing in the green. A survey by the American Chamber of Commerce in China found that its members, for the first time in 25 years, do not consider China a top three investment priority. To boost sentiment, the Chinese government is courting potential investors and declaring a "Year of Investing in China". CNBC Daily Open: Markets rallied as Fed official renewed investors' hope for 25 basis-point hike https://t.co/Q5Ofm9iGOl — CNBC (@CNBC) March 3, 2023 The long-awaited update of the Ethereum network in Shanghai The eagerly awaited Shanghai Ethereum update, which will enable the withdrawal of staked ETH, is likely to happen in the first two weeks of April. Although the update was firmly scheduled for the March release, some Ethereum developers began to doubt it. Ethereum developers now plan to launch the Goerli testnet, essentially a comprehensive update dress rehearsal, in Shanghai around March 14. About a month later, if all goes smoothly, the actual Shanghai software update will go live in mid-April. LATEST: #Ethereum developers confirm Shanghai upgrade will likely occur in April instead of March. — CoinGecko (@coingecko) March 3, 2023
Would Federal Reserve (Fed) go for two more rate hikes this year? Non-voting Bullard say he would back such variant

The US Dollar Gained Broadly Against Major Currencies

Saxo Bank Saxo Bank 03.03.2023 08:35
Summary:  Despite U.S. bond yields continuing to climb and the 10-year going above 4% in yield, U.S. stocks managed to rebound nearly 1% on Fed Bostic comments. Hong Kong and China stocks slid and gave back some of the gains from the previous session in the absence of notable headlines ahead of the “two sessions” meeting starting this weekend. The US dollar gained broadly against major currencies. Crude oil continued to climb with WTI crude finishing Thursday at USD78.2.   What’s happening in markets? Nasdaq 100 and S&P 500 rebounded on Fedspeak The Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) clawed back early losses after dovish comments were made by the Fed’s Raphael Bostic  - seeing the indices gain 0.9% and 0.8% respectively. All sectors in the S&P 500 except consumer discretionary and financial advanced. Salesforce (CRM:xnys) shares rose 11.5% on a Q4 earnings beat and upbeat guidance – making it the top gainer in the S&P500. Kroger (KR:xnys) rose 5.4% after the grocery chain reported sales and earnings beat. Tesla (TSLA:xnas) fell 5.9% as investors were somewhat disappointed with the EV giant’s Investor Day held on the prior day. US Treasury curve bear steepened, 10-year yield at 4.06% US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) sold off across the curve in the morning following an upward revision of Q4 unit labour costs to 3.2% from the previously reported 1.1% and initial jobless claims continued to come in below 200K. After Atlanta Fed Bostic’s comments in favour of a 25bp hike at the March meeting and the Fed could pause by mid to late summer saw yields on the 2-year paring much of the loss from an intra-day high yield of 4.94% to finish at 4.89%. Yields on the belly of the curve however remained 6bps higher by the time of closing, with the 5-year yield at 4.31% and 10-year at 4.06%. The Treasury Department announced the auction of USD40 billion of 3-year notes, USD32 billion of 10-year notes, and USD18 billion of 30-year bonds next week. Hong Kong’s Hang Seng Index and China’s CSI300 retreated after yesterday’s sharp gains Hang Sang Index (HSI.I) dropped 0.9% and CSI300 (000300.I) slid 0.2% on Thursday after rising sharply the day before. China Internet names led the decline with Alibaba (09988:xhkg) falling 4.7% without notable news. Bilibili (09626:xhkg) plunged 7.8%.  After the Hong Kong market close, the online entertainment platform reported Q4 earnings beating the consensus estimate. Nio (09866:xhkg) tumbled 13.2% on a Q4 margin miss and a weaker-than-expected Q1 2023 guidance. Container liners outperformed, with Orient Overseas (00316:xhkg) rising 6.7% and COSCO Shipping (01919:xhkg) up 4.1% on an improved outlook of China’s exports. In A-shares, telcos and communication equipment makers advanced, following the news that the Ministry of Industry and Technology said that China will accelerate the rolling of 6G infrastructure. Australian equities (ASXSP200.I) trade lower for the fourth week  - markets prices out rate cuts – PMIs rise   So far this week - Monday to Friday the market is trading lower - marking its fourth straight week of losses. It comes as the Australian share market prices out rate cuts this year – and looks ahead to the RBA interest rates decision and commentary next week - with another 25bp hike expected. Today - hotter Australian and manufacturing prints showed PMIs rose back to expansionary phase, pushing Australian bond yields higher, up 6 bps to 3.92% - that’s near YTD highs of 4%, which is a cautionary signal given this is a better return than the average yield for the Australian share market.    FX: GBP edges below 1.2000 on dovish Bailey The US dollar was broadly in gains on Thursday as yields continued to surge higher despite supposedly dovish comments from Fed member Bostic. SEK was the underperformer on the G10 board amid risks of a deepening recession in Sweden. GBPUSD continued to tumble further below the 1.20 handle after dovish comments from BOE governor Bailey this week attempting to engineer a pause in market expectations. EURUSD also gave up some of its post-regional CPI gains to inch below 1.06. AUDUSD still in close sights of 0.67 as risk sentiment deteriorates while pickup in metals prices remains unconvincing for now. Crude oil volatility continues Oil fluctuated with traders weighing up a revival in demand from China, vied with inflation fears and OPEC boosting supplies. OPEC increased supplies by 120,000 b/d to 29.24 million a day in February – with Nigeria accounting for two-thirds of the increase - with its output hitting a one-year high. Meanwhile Russian seaborne diesel exports stranded at sea hit new records. This comes all while nations such as Turkey are trimming purchases of Russian crude. What to consider? Fed officials hinting at a higher dot plot The biggest headlines today are referring to Fed member Bostic’s (non-voter) comments as dovish, while he said he is firmly in favour of a 25bps hike path (to reduce the possibility of a hard outcome) and even said we could be in a position to pause by mid-to-late summer which appears to be exactly in-line with current market expectations. If his comments suggest 25bps rate hikes each at the March, May and June meetings, we still may end up in the 5.25-5.50% terminal rate which is higher than what the December dot plot suggested. Waller (voter) also hinted at an upwards shift in the dot plot, more clearly so, saying that Fed may need to raise rates beyond December's central tendency view of 5.1-5.4% if the incoming job and inflation data does not pull back from strong readings for January. US labor market strength sustains, focus shifting to ISM services US initial jobless claims fell by 2k to 190k last week from 192k prior and 195k expected, continuing to signal a tight labor market. Unit labor costs climbed an annualized 3.2% in the fourth quarter from the initial 1.1% read, well above expectations for a rise to 1.6%. Increased labor costs keep concerns of a wage-price spiral alive, and will likely keep the Fed on its toes in tightening policy. ISM services for February will be on watch later today, and is expected to ease to 54.5 from a big jump to 55.2 last month, but still remain comfortably in expansion. Attention will also be on the prices paid component after a similar component from the manufacturing print this week created jitters and services prices are likely to be more sticky. Worrying inflation prints in the Eurozone Yesterday, the eurozone core inflation rose to 5.60% year-over-year in February with both core goods (6.8%) and services (4.8%) reaching new record highs. This is much higher than expected (5.3%). We pay more attention to core inflation as it can show how entrenched inflation is. As a matter of that, it appears the inflation headache will remain an issue for most of the year. All the country prints which were released earlier this week came in above expectations: Germany 9.3% vs 9.0% exp. France 7.2% vs 7.0% exp. Spain 6.1% vs 5.7% exp. In these circumstances, talks about a potential monetary policy pause are ill-timed. From a monetary policy perspective, we think the ECB is unlikely to slow the pace of tightening until we see the first signs of underlying inflation peaking. Expect at least two other 50 basis point hikes in March and in May (there is no meeting in April). The market consensus forecasts that another 25 basis point hike could happen in June. It will depend on the evolution of inflation, of course. China and Australian trade relations are improving – adding to our optimist view that the commodity bull run could resume in Q2 China and Australia resumed diplomatic and economic discussions to stabilize and improve bilateral relations. It comes as China’s Foreign Minister Qin Gang met with counterpart Penny Wong at the G-20 summit in India. This is supporting commodity prices today – with the Iron Ore (SCOA) price trading higher for the fourth session following on from stronger-than-expected Chinese manufacturing data - showing overall Chinese orders are back at 2017 levels. Despite this the Aussie dollar vs the USD (AUDUSD) is little changed on the day and week at 0.6729 after losing 0.5% on Thursday. Downside is still in play with the Aussie trading below the d Qantas hires 8,500 workers – underscoring the aviation industry’s growth trajectory Qantas Airways (QAN) plans to hire 8,500 more workers in the next decade - which is about the same number it cut during in the pandemic. This highlights the aviation’s growth trajectory less than a year after the crisis. The hires include pilots, cabin crew and airport staff – with about 300 new aircraft arriving in the next 10 years – and Qantas also planning to open an engineering academy to help maintain its feet. For more on the travel sector, refer to Saxo’s Asia Pacific Travel equity theme basket.  We are in the early inning of the comeback of European equities European equities have previously outperformed US equities over long periods of time, but the relentless bull market in US technology stocks over the past 13 years has erased our memory of European equities being an interesting market. But since October last year, European equities have significantly outperformed US equities and clients are most interested than ever. In an article yesterday, Peter Garnry, Saxo’s Head of Equity Strategy, provides an overview of how Europe's equity market is constructed and how it differs from the US equities, and also why they are more interesting for investors amid the comeback of the physical world. His three main points are: Europe lost the digital technology race to the US with a 13-year-long period of significant underperformance, but since October 2022 things have turned around and maybe we are in the early inning of Europe’s comeback. European equities have 20 super-sectors and the diversification of European equities is much better compared to US equities. European equities are cheaper relative to US equities and they have recently improved their operating margins while US equities have seen a significant margin compression. China’s Caixin Services PMI is expected to rise to 54.5 Caixin Services PMI is expected to confirm the continuous expansion of activities in the services sector as indicated in the official NBS PMI survey. According to Bloomberg, Caixin Services PMI is expected to rise to 54.5 in February from 52.9 in January. China’s “Two Sessions” meeting commences this weekend China is holding the annual meetings of the National People’s Congress and the Chinese People’s Political Consultative Conference, which together are known as the “Two Sessions, this weekend. Premier Li will deliver the Government Work Report on 5 March, in which the focus will be on the GDP growth target for 2023. The weighted average of provincial GDP targets released was around 5.6% and economists are expecting a national target of between 5% and 5.5% for 2023. Investors will also pay attention to the fiscal deficit target and quota for bond financing. In addition, investors will pay close attention to the leadership reshuffle at the State Council and other top government bodies. It is widely expected that Li Qiang will be the new Premier and He Lifeng will be one of the Vice Premiers and given the portfolio of economic and financial affairs. Japan’s Tokyo CPI for February hinting at sticky prices Japan’s Tokyo-CPI for February came in at 3.4% YoY for the headline, softer than last month’s 4.4% but still hotter than the 3.3% expected. The slower print is partially a result of PM Kishida’s latest stimulus announcement to support utilities prices which included a 20% discount on household electricity rates. Core CPI at 3.3% YoY matched estimates while the core-core measure (ex-fresh food and energy) was a notch higher at 3.2% YoY vs. 3.1% expected. Inflation continues to be sticky and above the BOJ’s 2% target although the incoming Governor Ueda is unlikely to rush into any monetary policy moves at this point. Bilibili earnings beat, non-GAAP net loss narrowed as operating margin improved Q4 Revenues in Bilibili rose 6% Y/Y to RMB6.14 billion, slightly higher than the RMB6.12 billion expected. Non-GAAP net loss came in at RMB1.31 billion, better than the consensus of RMB 1.43 billion and 20.6% smaller than in Q4 last year. Mobile games revenue falling 12% Y/Y and advertisement revenue falling 5% Y/Y  were weaker than expected. Revenues from E-Commerce and others grew 13% Y/Y and those from Value-added Services rose 24%, both above consensus estimates. The number of monthly active users increased 20% Y/Y to 326 million. India’s Adani Group gets foreign interest as prices drop After a drop of over $100 billion in market value, Adani group stocks got a respite with US boutique investment firm GQG Partners purchasing shares worth $1.87 billion in four Adani group companies. The deal shows investor interest may be returning to Adani after record drops in its share prices, and any further interest from foreign investors could potentially put a floor to near-term pressures for the conglomerate. This week, the group told bondholders it had secured a $3bn credit line from investors including a sovereign wealth fund.   For what to watch in the markets this week – read or watch our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: Global Market Quick Take: Asia – March 3, 2023 | Saxo Group (home.saxo)
Assessing 'Significant Upside Risks to Inflation': Insights from FOMC Minutes

According To Schiff's Opinion Customers Must Cut Back On Their Spending

Jakub Novak Jakub Novak 03.03.2023 11:24
By the end of the week, the euro and the pound had deteriorated sharply when compared to the US dollar, but today could be different, especially in light of statistics showing a sharp increase in activity in the services sectors of the eurozone and the UK. This will likely lead to new discussions about the impending spring inflationary pressures that these nations will face. Now, though, I want to briefly discuss something else. There is constant discussion in the US about whether the Federal Reserve is acting morally by putting the economy at risk and sacrificing the labor and housing markets to get inflation back to its pre-crisis level. Comments by economist Peter Schiff  Recent comments by economist Peter Schiff on this topic revealed some of his preconceptions, according to which the US economy may suffer greatly from the Federal Reserve's battle against inflation. Schiff stated: "We had experienced months of lowering inflation very recently, but suddenly everything has shifted." Schiff was referring to recent economic statistics, notably the personal consumption price index, which increased by 0.6% in January. The economist argued that the Fed's campaign against inflation is entirely ineffectual, noting: "If the Fed is serious about battling inflation, which I doubt, it would have to fight much harder than it is right now. The rates should increase significantly more than the levels anticipated." Nevertheless, in Schiff's opinion, simply raising interest rates won't be sufficient. "Moreover, consumer lending should significantly decline. Loan rates must rise to a point where consumers will exercise financial restraint," he said. "People are making purchases. Their credit card debt increases. Inflation rises as a result of this. Customers must cut back on their spending." The economist emphasized that instead of spending, people should work, produce, and save. Also, according to Schiff, the federal government must take charge of the expenditure issue: "Government spending needs to be significantly reduced. Because it drives up costs, the government cannot just hand out cash to the populace." Jerome Powell  Since Fed Chairman Jerome Powell has recently repeatedly mentioned the imbalance between supply and demand, it is clear that Schiff is on the right track. If we can somehow influence this demand—which can be done by reducing consumer lending—then it will return to normal inflation levels a little more quickly. Another factor is that this will slow down GDP growth, but the Biden administration will still criticize the Fed in this case, especially in the years leading up to the elections. After the conversation, Schiff warned that if nothing is done, the Fed's activities will trigger a financial crisis or, even worse, an economic catastrophe. Additionally, he issued a warning that the Fed might even force the US government to take legal action against Social Security and Medicare cuts. In light of this, it is not surprising that there is sensitivity to and demand for the US dollar as a safe-haven asset. EUR/USD  Regarding the EUR/USD's technical picture, the pair is still under pressure, although today there is a potential for an upward correction. To restart the bull market, 1.0600 must be held and 1.0630 must be broken. You can easily advance from this level to 1.0660 and 1.0730 with the chance of doing so soon. If the trading instrument declines, I only anticipate activity from significant buyers around 1.0600. If no one is present, it would be preferable to hold off on initiating long positions until the 1.0565 low has been updated. GBP/USD Regarding the technical analysis of the GBP/USD, the bulls have even more difficulties. Buyers must rise above 1.2000 to regain control of the situation. The only way to increase the likelihood of a subsequent recovery in the area of 1.2030 and 1.2070, after which it will be able to discuss a more rapid movement of the pound up to the area of 1.2220, is if this resistance fails to hold. The breakdown of this range, which would occur if the bears took control of 1.1950, would strike the bulls' positions and drive the GBP/USD back to 1.1920 with potential growth to 1.1870.   Relevance up to 08:00 2023-03-04 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/336654
USD/JPY Weekly Review: Strong Dollar and Yen's Resilience in G10 Currencies

Adani Group Stocks Got A Respite With US Boutique Investment Firm GQG Partners Purchasing Shares

Saxo Bank Saxo Bank 03.03.2023 11:32
Summary:  Equities came back from the brink yesterday, as US stocks rallied late in the session after the major indices had broken below the 200-day moving average earlier in the day. Still, considerable tension afoot here as the 10-year US Treasury yield rose above 4.00% on further signs of a tight jobs market and ahead of today’s February ISM Services survey. European stocks have been choppy of late, but are generally resilient despite the jump in ECB rate tightening expectations this week on hot February inflation data. What is our trading focus? US equities (US500.I and USNAS100.I): can S&P 500 futures climb above 4,000? US equities rallied yesterday on no real news, so we expect it to be mainly flow driven rather than driven by changes to fundamentals. S&P 500 futures closed at the 3,985 level still failing to push above the 4,000 level, and if the US 10-year yield remains above the 4% our view is that US equity futures will struggle to maintain momentum into the close before the weekend. The upside risk to that view is of course the ISM February report out later today which could send another bullish signal on the US economy extending the rebound in economic activity we saw in January. Hong Kong’s Hang Seng Index (HSI.I) and China’s CSI300 (000300.I) rallied ahead of the Two Sessions Hang Seng Index advanced over 1% and CSI 300 climbed 0.3% ahead of the Two Sessions, which are the annual meetings of China’s legislature and top political advisory body, commencing this weekend. Caixin Services PMI rose to 55 in February from 52.9 in January, echoing the strength of the recovery in the official NBS PMI survey earlier in the week. Hang Seng TECH Index gained 2.8%, with China internet names leading the charge higher. BiliBili (09626:xhkg) surged 11.2% following the online entertainment firm reporting a smaller net loss in Q4. In A shares, shipping, semiconductor, and lodging stocks gained. FX: USD firm on higher US treasury yields The US dollar rose sharply yesterday on a surge in US treasury yields after another firm weekly jobless claims print & upward revision in Unit Labor Costs for Q4 (see below), but perhaps as well on the 4.00% psychological resistance in the US 10-year benchmark treasury yield falling. The greenback’s strength faded in late trading as risk sentiment managed to stage a comeback, with US equities avoiding a meltdown after testing below key support. The February ISM Survey is in focus today, but as we emphasize below, trust in this survey may be weak. Crude oil rises on China demand optimism Crude oil prices are heading for a weekly gain but overall remain stuck within a narrowing range as China demand optimism is being offset by concerns about US monetary policy as the battle against inflation remains a key focus. Overall, however, with the dollar trading down on the week and prompt spreads indicating a tightening market, prices have managed to recover. Brent trading above its 21-DMA for a third day may add some technical support with the next level of resistance being the February high at $86.90. Focus on China where the annual National People’s Congress kicks off this weekend (see below). Gold supported by China comeback and sticky inflation Gold is heading for its best week since mid-January following a week that saw a hot EU inflation print and strong economic data from China, a top buyer of gold. The result being a softer dollar and gold has moved higher to challenge the 21-DMA, currently at $1844 for the first time since February 3. Atlanta Fed’s Bostic saying rates could rise to 5.25% and stay there well into 2024 has been shrugged off as the market is already pricing a terminal rate around 5.5%. It is also worth noting that this week's 10 basis point jump in US 10-year bond yields has primarily been driven by rising breakeven rates (inflation) leaving real yields close to unchanged. For the current recovery to attract support from technical buyers, prices as a minimum need to break $1864, and silver $22 to signal an end to the current corrections. US natural gas rally pauses after weekly stock report US natural gas prices fell on Thursday following a six-day rally which lifted the front month futures price by 29% in response to signs of lower production and rising exports. In addition, a current cold spell through mid-March has also supported the short-term demand outlook. The small correction seen yesterday came after the EIA reported an 81 bcf drop in stocks compared with a five-year average decline of 134 bcf for this week. The smaller than normal draw lifted total stocks to 2,114 bcf, some 19.3% above the 5yr avg. for this time of year, and highest surplus since May 2020. A mild winter suppressing not only demand but also producers’ willingness to maintain record production levels has created a very volatile market in recent months. US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) sold off on ISM Price Paid Index The 10-year US Treasury yield surged above the psychologically important 4.00% that appeared to be supporting the treasury market of late, rising as high as 4.09% before retreating overnight to 4.03% in early European trading this morning. The sharp rise in EU yields has lead global yields higher this week on a series of hot inflation numbers across the bloc, capped by a further acceleration in the EU core CPI yesterday. But short yields in Europe retreated several basis points from new cycle highs yesterday, as did the US 2-year yield, which trades this morning at 4.87% after as high as 4.94% in the immediate wake of yesterday’s US data. The Treasury Department announced the auction of $40 billion of 3-yr notes, $32 billion of 10-year notes, and $18 billion of 30-year bonds next week. What is going on? Worrying inflation prints in the eurozone Eurozone core inflation rose to 5.60 % year-over-year in February with both core goods (6.8 %) and services (4.8 %) reaching new record highs. This is much higher than expected (5.3 %). We pay more attention to core inflation as it can show how entrenched inflation is, and it appears the inflation headache will remain an issue for most of the year. All the country prints which were released earlier this week came in above expectations, topped by Germany’s 9.3% vs 9.0%. In these circumstances, talks about a potential monetary policy pause are ill-timed, and from a monetary policy perspective, we think the ECB is unlikely to slow the pace of tightening until we see the first signs of underlying inflation peaking. Expect at least two more 50 basis point hikes in March and in May (there is no meeting in April). Depending on the trajectory of inflation, the market consensus forecasts that another 25-basis point hike could happen in June. Fed officials hinting at a higher dot plot The biggest headlines today are referring to Fed member Bostic’s (non-voter) comments as dovish, while he said he is firmly in favour of a 25bps hike path (to reduce the possibility of a hard outcome) and even said we could be in a position to pause by mid-to-late summer which appears to be exactly in-line with current market expectations. If his comments suggest 25bps rate hikes each at the March, May and June meetings, we still may end up in the 5.25-5.50% terminal rate which is higher than what the December dot plot suggested. Waller (voter) also hinted at an upwards shift in the dot plot, more clearly so, saying that Fed may need to raise rates beyond December's central tendency view of 5.1-5.4% if the incoming job and inflation data does not pull back from strong readings for January. US claims and unit labor cost data feed the inflation narrative US initial jobless claims fell by 2k to 190k last week from 192k prior and 195k expected, continuing to signal a tight US labor market. Unit labor costs were revised sharply higher to an annualized 3.2% in the fourth quarter, versus the initial 1.1% read. Increased labor costs keep concerns of a wage-price spiral alive and will likely keep the Fed on its toes in tightening policy. Japan’s Tokyo CPI for February hinting at sticky prices Japan’s Tokyo-CPI for February came in at 3.4% YoY for the headline, softer than last month’s 4.4% but still hotter than the 3.3% expected. The slower print is partially a result of PM Kishida’s latest stimulus announcement to support utilities prices which included a 20% discount on household electricity rates. Core CPI at 3.3% YoY matched estimates while the core-core measure (ex-fresh food and energy) was a notch higher at 3.2% YoY vs. 3.1% expected. Inflation continues to be sticky and above the BOJ’s 2% target although the incoming Governor Ueda is unlikely to rush into any monetary policy moves at this point. India’s Adani Group gets foreign interest as prices drop After a drop of over +$150 billion in market value to $83 billion, the Adani group stocks got a respite with US boutique investment firm GQG Partners purchasing shares worth $1.87 billion in four Adani group companies. The deal shows investor interest may be returning to Adani after record drops in its share prices, and any further interest from foreign investors could potentially put a floor to near-term pressures for the conglomerate. This week, the group told bondholders it had secured a $3bn credit line from investors including a sovereign wealth fund. Four days of gain this week has seen the total market capital across the ten companies in the group rise to $103 billion. What are we watching next? February US ISM Services in focus today after erratic readings in Dec. and Jan. The US ISM services survey for February will be on watch later today and is expected to ease to 54.5 from a big jump to 55.2 last month but remain comfortably in expansion. The last two months of this data series have shown erratic moves, with a bizarre collapse in the survey December to 49.2 after 55.5 in November and then the January survey resurgent at 55.2. Can we trust this data series? Attention will also be on the prices paid component after a similar component from the ISM manufacturing survey this week created jitters and services prices are likely to be stickier. China’s “two sessions” in focus Following on from Wednesday’s stronger than expected PMI which supported the view that China’s economy is picking up steam, focus now turns to the Chinese government and what they will do to further help along a post-lockdown economic recovery. The first session of the 14th National Committee of the Chinese People's Political Consultative Conference (CPPCC) will begin on March 4 and followed up the following day by the 14th National People’s Congress (NPC. During what is collectively known as the “two sessions”, Chinese officials will release a set of social and economic development goals and various policy measures to achieve them. Earnings to watch There are no important earnings releases today. We have highlighted next week’s most important earnings releases below with the most market attention going earnings from Adidas, CATL, and JD.com. Adidas has a huge inventory of Yeezy sneakers following the abrupt end to the partnership with Ye that caused a massive writedown in the previous quarter and investors have generally lost short-term trust in Adidas following a string of bad results. Analysts expect Adidas to report Q4 revenue of €5.2bn up 1% y/y and EBITDA of €-419mn. CATL is the world’s largest battery maker and is firing on all cylinders with analysts expecting Q4 revenue growth of 87% y/y and EPS of CNY 2.65 down 11% y/y as the company has not passed on all input costs to its EV customers after a significant surge in lithium carbonate prices last year. Monday: Trip.com Tuesday: Ashtead Group, Sea Ltd, Ferguson, Crowdstrike Wednesday: Ping An Bank, Thales, Adidas, Geberit Thursday: CATL, Deutsche Post, JD.com Friday: Daimer Truck, AIA Group, Oracle, DiDi Global Economic calendar highlights for today (times GMT) 0815-0900 – Eurozone Final Feb. Services PMI 0930 – UK Feb. Final Services PMI 1000 – Eurozone Jan. PPI 1330 – Canada Jan. Building Permits 1445 – US Feb Final Services PMI 1500 – US Feb. ISM Services 1600 – US Fed’s Logan (Voter 2023) to speak 1700 – ECB's Wunsch to speak 2000 – US Fed’s Bowman (Voter) to speak Source: Global Market Quick Take: Europe – March 3, 2023 | Saxo Group (home.saxo)
French Industrial Production Rebounds in July Amid Weak Demand and Gloomy Outlook

Post-Pandemic Consumption Habits Shifted From Services To Durable Goods

Conotoxia Comments Conotoxia Comments 03.03.2023 12:05
In order to more accurately predict the future of the economy and financial markets, it is important not only to use graphs and technical analysis, but also to understand the current economic situation and the factors influencing it. In this text, we will focus on analysing detailed data and interpreting it to answer the question of how these factors may affect financial markets. Inflation in the price of services, not products Source: FRED, Durables and service price inflation Above, the green colour shows US CPI inflation. The blue colour indicates the price change in the durable goods sector and the red colour the inflation of the services sector. As could be seen from the above data, during the pandemic, demand for durable goods increased dramatically, resulting in higher inflation in this sector. However, the situation has started to reverse in recent months, with prices in the durable goods sector starting to fall by more than 1% year-on-year. In October 2022, inflation in the services sector surpassed inflation in the durable goods sector for the first time since the start of the pandemic. It appears that the further direction of inflation may depend on the sectors adapting to changing consumption habits. Source: FRED, Change in consumer consumption Post-pandemic consumption habits shifted from services to durable goods in a way not seen before. Consumption of durable goods and services fell significantly in the first months of the pandemic. This difference appears to have resulted from fiscal support and a change in consumer habits caused by the pandemic, shifting demand from services, such as eating out in restaurants and travel, to purchases of furniture and fitness equipment. The graph above shows changes in personal consumption expenditure, where demand for durable goods is shown in blue and services in red. However, we could see a renewed shift in trends in consumer habits from durables, whose demand has hardly increased, to services, whose demand has been growing steadily since the beginning of 2021. This would confirm rising inflation in the services sector and falling inflation in durable goods. Source: FRED, Price inflation for the shelter, and non-shelter market Changes in the CPI consumer price index presents an interesting price trend in the rental market. According to the data, from January 2022 to January 2023, the rental cost index increased by 7.9%, which is more than 2 percentage points above the overall inflation rate of 6.3%. For all types of costs other than rent, the price index started to decrease from June 2022. This may mean that the peak inflation episode is coming to an end, at least as far as prices outside the rental market are concerned. It could also mean that investing in rental property is one of the most effective ways to combat inflation. Probability of recession still low Source: FRED, Smoothed probability of recession One model for estimating the probability of a recession in the US is the Markov model, which uses four monthly variables: non-farm payrolls, the index of industrial production, real personal income excluding transfers and real trade and industry turnover. It appears that the increasing likelihood of a recession may be affecting the S&P 500 Index (US500) in a negative way. Nevertheless, current values of almost 5% may imply a low probability of a recession. We could conclude from this that the lows on the previously mentioned index may be behind us. Source: Conotoxia MT5, US500, Daily A labour market that means companies don't want to hire? Source: Fred, change in the number of current and new job vacancies compared to 2020 In the chart above, the number of current job vacancies in the market against 2020 levels is shown in red and the change in new job vacancies in the market is shown in blue. We could see that after the pandemic slump in the labour market we are now above pre-pandemic levels. Nevertheless, we could see a stagnation in the job offers market from the beginning of 2022. Source: FRED, Number of economically inactive persons The labour force includes people who are currently employed or actively seeking employment. The pandemic has caused a significant proportion of the workforce to lose their jobs. The graph above shows a spike in the number of people out of the workforce in spring 2020, which has since declined but is still higher than pre-pandemic levels. The extended red trend line shows that there are now around 2.2 million more people outside the workforce than expected based on trends leading up to the pandemic, contributing to the current shortfall in the workforce. Grzegorz Dróżdż, Market Analyst of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76,41% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
The USD/JPY Price Seems To Be Optimistic

USD/JPY Pair Comes Under Some Selling Pressure, EUR/USD Holds Above 1.06 While GBP/USD Remains Below 1.20

Kamila Szypuła Kamila Szypuła 03.03.2023 14:31
The US dollar declined against its major trading partners early Friday ahead of the release of service sector data for February from S&P Global. The US economic docket will feature the ISM Services PMI report on Friday. Recession fears could return if the headline PMI comes in below and the US Dollar could come under pressure ahead of the weekend. The Fed appearance schedule is also full on Friday. Dallas Fed President Lorie Logan is scheduled to speak followed by Atlanta Fed President Raphael Bostic, Fed Governor Michelle Bowman and Richmond Fed President Tom Barkin. Logan and Bowman both vote on the Federal Open Market Committee in 2023. USD/JPY The yen pair traded in the range of 136.60-136.70 in the Asian session. In the European session there was a dip to close to 136.00, but USD/JPY rebounded and traded at 136.19 Following the previous day's sharp slide from a multi-week high, the US Dollar (USD) was back in demand amid a further rise in the US Treasury bond yields and turned out to be a key factor acting as a tailwind for the major. The Japanese Yen (JPY), on the other hand, is weighed down by expectations that the Bank of Japan (BoJ) will stick to its dovish stance for the foreseeable future. In fact, the incoming BoJ Governor Kazuo Ueda stressed the need to maintain the ultra-loose policy to support the fragile economy and said earlier this week that the central bank isn't seeking a quick move away from a decade of massive easing. The market focus now shifts to the upcoming BoJ monetary policy meeting, scheduled next week. In the meantime, the divergent Fed-BoJ outlook should continue to lend support to the USD/JPY pair. EUR/USD The last day of the trading week for the euro pair was up in the Asian session. Also in the European session, the EUR/USD pair was increasing with moments of decline. Currently, the pair is at the level of 1.0614 ECB Governing Council member Pierre Wunsch said early Friday that a terminal rate of 4% could not be excluded if core inflation in the eurozone remains persistently high. Meanwhile, Morgan Stanley said in its latest research note that they have updated the ECB terminal rate projection to 4% following "material revisions" to inflation forecasts. GBP/USD A pair of cable makes up for losses all Friday. GBP/USD started the day at around 1.1950 and is now trading above 1.1990 The pound rose on Friday, boosted by data that showed business activity rose at the fastest rate in eight months in February, bolstering investors' view that UK rates would continue to rise after March. The final version of the S&P Global/CIPS UK Services Purchasing Managers' Index (PMI) rose to 53.5 last month from 48.7 in January, the strongest rate of increase since June last year. Any reading above 50 means expansion. AUD/USD The Austalitic exchanged similarly to the pound today, but fell in the European session and is currently trading above 0.6750. Source: investing.com, finance.yahoo.com
Key Economic Events and Earnings Reports to Watch in US, Eurozone, and UK Next Week

The search for a new equilibrium

ING Economics ING Economics 04.03.2023 10:23
Optimism about an imminent strong economic recovery and a change of tack by the central banks was short-lived. We expect a longer period of subdued growth in the eurozone, while we also anticipate a significant slowdown of the US economy. It's no surprise markets and analysts are having a hard time seeing clearly at the moment The search for renewed balance in the global economy   Recent weeks have shown that optimism about an imminent strong economic recovery and a pivot by the major central banks was premature. Markets, economies and central banks are still searching for a new balance, a new equilibrium, of structural transition and cyclical developments, higher inflation and interest rates, stricter monetary policy and loose fiscal policy. The path to this new balance, wherever it may be, was always expected to be rough and volatile and not linear. In fact, major central banks are witnessing stubbornly high inflation and still very few signs that recent monetary tightening will destroy demand and hence bring down inflation. We have argued before that both markets and central banks are currently too impatient. It simply takes months before tighter monetary policy finds its way into the real economy. And it will. Or put differently, if the greatest monetary policy turnaround in years does not leave any marks on the real economy, we could also close all central banks. However, since last summer, central bankers seem to have become increasingly afraid that they may lose their grip on inflation. This is why there is currently so little patience and rather a trend of "high or higher for longer". No single central bank wants to be on the wrong side of inflation. Longer-term inflation projections are no longer the main anchor. It is rather a combination of current headline and core inflation, longer-term inflation projections and a large portion of gut feeling. In any case, probably the biggest concern for most central bankers at the moment is relaxing too early. This is why a scenario in which central banks overshoot with their rate hikes is more likely than a scenario in which central banks start cutting rates prematurely. All of this means that the US Federal Reserve and European Central Bank (ECB) will continue to hike interest rates in the coming months. While the global economy will still experience the full impact of the monetary policy tightening of the last year, major economies are clearly out of sync. The reopening of the Chinese economy is only gradually gaining traction and we expect it to last until the second half of the year before the recovery really takes off. The relief that the reopening of the Chinese economy should at least provide for the European economy will not be enough to stage a strong recovery. The eurozone economy seemed to have avoided a recession before we received downward revisions in German growth data. Now, a technical recession is still possible. Even though lower energy prices and the Chinese reopening could give a short-term boost to industry, the large inventory build-up as well as the ECB’s monetary tightening will weigh on the recovery. We expect a longer period of subdued growth in the eurozone. The resilience of the US economy has been remarkable. However, we do see the first cracks in the labour and housing markets and expect a significant slowdown of the economy. Still, with the Inflation Reduction Act and rich energy supply, the US economy should experience a rather textbook-style slowdown, followed by looser monetary policy and consequently a recovery in 2024. With economies struggling between cyclical and structural developments, governments moving from short-term stimulus to longer-term investments, stubbornly high inflation and a new era of "high for longer" at central banks, it shouldn’t be a surprise that markets and analysts are having a hard time seeing clearly at the moment. Remember Jimmy Cliff, who only saw all the obstacles in his way when the rain was gone? In the global economy, it will still take some time before the rain disappears. ING's base case scenario ING Alternative scenarios #2 ING Alternative scenarios #3 ING TagsMonthly Economic Update   Read the article on ING Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Saxo Bank Podcast: A Massive Collapse In Yields, Fed's Tightening Cycle And More

Our latest major central bank calls

ING Economics ING Economics 04.03.2023 10:36
We now expect the Fed funds rate to peak at a higher level, but still think rate cuts are likely by year-end. The European Central Bank is likely to slow the pace of hikes beyond March, while the Bank of England looks very close to the end of its tightening cycle In this article Federal Reserve European Central Bank Bank of England   Shutterstock Governor of the Bank of England Andrew Bailey, ECB President Christine Lagarde, US Federal Reserve Board Chairman Jerome Powell Our major central bank forecasts Macrobond, ING forecasts Federal Reserve Having implemented four consecutive 75bp rate hikes, the Federal Reserve switched to 50bp in December and then 25bp in February. The data since then has been strong with the economy adding 517,000 jobs in January, retail sales jumping 3% month-on-month and inflation re-accelerating at the core level. Several Fed officials have since commented that they would have considered a 50bp move in February had they known. But those giving this message are all non-voters this year and with borrowing costs rising broadly throughout the economy and banks tightening lending standards, we think the Fed will stick with 25bp increments. Nonetheless, given the current situation, we think the Fed will now hike in March, May and June. Inflation is still slowing and this process will likely accelerate over the summer months, and with job loss announcements on the rise we still anticipate rate cuts before year end – we look for a 50bp cut in December.  European Central Bank As long as core inflation remains stubbornly high in the eurozone, the ECB will continue hiking rates and will not consider future rate cuts. A 50bp rate hike at the March meeting has been pre-announced and looks like a done deal. Beyond the March meeting, the ECB seems to be entering a new game in which further rate hikes will not necessarily get the same support within the governing council, as hiking deep into restrictive territory increases the risk of adverse effects on the economy. The main question beyond the March meeting will be whether the ECB will wait to see the impact of its tightening on the economy or whether it will continue hiking until core inflation starts to substantially come down. We currently expect a compromise: two additional rate hikes of 25bp each in May and June, before pausing the hiking cycle and entering a longer wait-and-see period.  Bank of England The Bank of England's February meeting saw a stark change in communication, with policymakers signalling that the end of the tightening cycle is near. It said further hikes were contingent on signs of additional “inflation persistence”, which suggests policymakers are less beholden to month-to-month swings in data and are more focused on longer-term term trends. In truth, the news here is mixed. The Bank’s own survey has hinted both that recruitment difficulties are easing and price/wage expectations might have peaked. That can’t yet be said for the official wage data, though core services inflation did take a surprise nose-dive in the most recent numbers. Officials have hinted strongly that any future hikes will be in 25bp increments, and they have stressed that much of the impact of past hikes is yet to feed through. Barring inflation/wage data becoming more worrisome, we think a 25bp March hike is likely to be the last.  TagsCentral banks Read the article on ING Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Oanda Podcast: US Jobs Report, SVB Financial Fallout And More

US: Smoke, mirrors and uncertainty by the truckload

ING Economics ING Economics 04.03.2023 10:41
Firm numbers for the start of the year have led the market to embrace a higher-for-longer narrative for interest rates. The Federal Reserve is indeed set to raise interest rates more than we expected, but higher borrowing costs in an environment of tightening lending standards and weak sentiment runs the risk of a bad reaction down the line In this article A higher interest rate peak, but cuts will come Weather and seasonal adjustments provided a boost It isn't hard to find areas for concern Disinflation leaves the door open to rate cuts before year end   Shutterstock A higher interest rate peak, but cuts will come Until recently, the market narrative had been that the most aggressive and rapid pace of Federal Reserve interest rate increases in 40 years would inevitably lead to a major slowdown in economic activity, with the Fed set to revert to rate cuts in the second half of the year as inflation subsided. However, the data released for January suggests the economy is still running hot, with half a million jobs added and retail sales jumping higher. Inflation is also proving to be stickier than expected, leading the market to price at least three further 25bp rate hikes by June. Federal Reserve comments suggest a strong appetite to continue hiking interest rates and we now think it more likely than not that it will seek to raise the Fed funds target range to 5.25-5.50% in the second quarter. That said, we do not think that the economy is in as strong a position as the data prints indicate and continue to expect strong disinflation from the late second quarter onwards, with the Fed eventually cutting rates from December. Weather and seasonal adjustments provided a boost The January numbers have benefited from fine weather, especially considering the wintery conditions in December which led to depressed activity and disrupted holiday plans. Favourable seasonal adjustment factors also appear to have lifted the data. For example, the raw unadjusted data shows that retail sales fell 16% month-on-month in January 2023, which was comparable to the 15.5% drop in 2021 and the 17.4% drop in 2022. Yet on a 'seasonally adjusted' basis, which tries to smooth out seasonal holiday and working day effects, the 16% drop turned into a 3% gain. Likewise, the raw 2.5 million drop in January unadjusted payrolls wasn’t far from the 2.6mn decline in 2021 and 2.8mn fall in 2022 – and yet on a seasonally adjusted basis, we saw a 517,000 gain. Retail sales rose 3%, but the raw data doesn't look as rosy – MoM changes in retail sales by month and year Macrobond, ING   The weather has since deteriorated and we don’t expect as much support from the seasonal adjustment calculations over the coming months. Consequently, there are likely to be more headwinds to activity for February and March, especially if warmer temperatures merely brought forward consumer activity that would eventually have come about anyway (a new home search or a car purchase, for example). It isn't hard to find areas for concern Moreover, there are fundamental areas of weakness. Despite the positive reaction to the 517,000 job 'gain', the fact that full-time employment has flatlined since March 2022 (meaning that all job creation has been for part-time positions) was largely overlooked. Job lay-off announcements are also on the rise, so we're nervous that the jobs report may look fine on the surface while a compositional shift away from higher paid full-time jobs to lower paid, less secure, part-time positions could be taking place. On top of this, the Federal Reserve’s Senior Loan Officer survey shows that banks are sensing the economy is coming under pressure and are rapidly tightening lending standards for both households and businesses. This is restricting the availability of credit to the economy at a time when borrowing costs are moving higher once more, and is likely to intensify the pressure on struggling households and businesses. The chart below shows how, over the past 30 years or so, the phenomenon of banks pulling back access to credit has led to the unemployment rate climbing within nine months. Tighter bank lending standards lead to rising unemployment Macrobond, ING   We also know that household finances are coming under more pressure, with household savings rates in a 4-5% range after having been 6-9% pre-pandemic and up at 30%+ during the pandemic. At the same time, the proportion of income devoted to servicing debt repayments on consumer loans has risen to its highest since 2009. Then there is the renewed rise in mortgage rates that led to mortgage applications for home purchases dropping to a 28-year low last week – the monthly mortgage payment on a $400,000 mortgage taken out 12 months ago is now the same as for a $260,000 mortgage taken out today! With business confidence remaining weak, we suspect a more defensive mindset amongst corporate America will weigh on capex spending, adding to concerns about potential future job losses. Disinflation leaves the door open to rate cuts before year end Inflation has been running hotter than we expected, but the disinflation story remains in play with shelter-related components set to drag inflation sharply lower from the third quarter onwards. House prices are already falling, and this has led to rents topping out in all major cities. It's just a matter of time before this is reflected within the CPI and PCE deflator reports. We also expect the weakening activity to put downward pressure on corporate profit margins, which should also help lower inflation later in the year. Given the Federal Reserve has a dual mandate of targeting inflation at 2% and maximising employment, we still think interest rate cuts remain on the cards for 2023. However, our previous call of a third-quarter start looks ambitious. We are now forecasting the first 50bp cut in December, with the bulk of the rate cuts occurring in 2024. TagsUS Recession Inflattion Federal Reserve   Read the article on ING Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
FX Markets React to Rising US Rates: Implications and Outlook

A last hurrah for Asian inflation

ING Economics ING Economics 04.03.2023 10:54
The US is not alone in seeing an unwelcome acceleration in inflation in January – a number of Asian economies have seen something similar. But for many of Asia's economies, this is likely to be the peak, or if not, close to it   In this article It has been a bad start to the year for inflation in Asia A mixed bag of reasons for stubborn inflation Policy prognosis equally mixed   Shutterstock It has been a bad start to the year for inflation in Asia As well as the unwelcome resilience of inflation in the US and Europe, a number of Asian economies have provided upside misses to consensus inflation forecasts in the last month or two.  The biggest upset was in Australia, where monthly inflation rates in December jumped up to 8.4% year-on-year from 7.3% previously, a gain of more than a full percentage point. This has proved short-lived, with the January inflation figures already retreating back to 7.4%. There were also big increases in inflation in India and the Philippines.  Besides the reversal in Australian inflation, most other economies in the region have seen at least some small increase in the inflation rate between December 2022 and January 2023, and only in Thailand were the declines also particularly substantial with the year-on-year inflation rate dropping to 5.02% from 5.89%.  Inflation is still rising in most Asian economies CEIC, ING A mixed bag of reasons for stubborn inflation Exactly why inflation across most of the region staged a further increase in January seems to differ from economy to economy. Doing a lot of the damage to the Australian numbers in December was an eye-popping 30% increase in the costs of holidays – as reopening collided with seasonal holidays. That dropped out again in January, but it doesn't tell us much about the months ahead.  In India, food, as is often the case, was the main culprit. Rising wheat prices coupled with smaller declines in vegetable prices than in the previous month were responsible for much of the increase in the year-on-year rate, though base effects also played their role.    Japan's inflation, as the Bank of Japan has been keen to point out as it sticks to its ultra-easy monetary policy, remains largely driven by supply-side factors. Exclude food and energy, and the core rate is only 1.9% YoY even as headline inflation rose to 4.2% in January from 4.0% in December. The Philippines is a slightly different story, with contributions from almost all categories, presenting Bangko Sentral ng Pilipinas (BSP) – the central bank of the Philippines – with more of a price-taming headache than many of its Asian peers. And inflation rates also continued to push higher in Vietnam, Taiwan, South Korea and Singapore in January.   Policy prognosis equally mixed With a mixed bag of reasons for the persistence of inflation across the region, there is no single policy remedy or likely outcome as we head further into the year. For some economies, the January figures do look like the last hurrah of earlier price increases. And with last year's price levels strongly affected from February onwards by the Russian invasion of Ukraine, year-on-year comparisons should help to bring year-on-year inflation rates down, absent any further positive price-level shocks, which against the backdrop of tense geopolitics and increasingly frequent climate change-related extreme weather events, is not a caveat you can lightly make these days. Certainly, there are some economies in Asia where the inflation-taming struggle is not yet won, and the backdrop of a Federal Reserve also hard at work squeezing inflation out of the US economy will keep central banks of the more inflation-challenged economies in tightening mode.  For others, it has felt for a few months now that the worst of the inflation crisis has passed. And while it may not be the right time to start talking about an Asian pivot, if inflation rates do begin to ease lower over the middle of the year, the monetary tightening already put in place across the region could begin to look not only adequate but perhaps a little excessive, raising the prospect of some paring of rates further down the line. For now, though, such thoughts are not even on the long-range radar, though it would probably only take a month of benign price data to bring such thoughts back into view.    TagsAsian rates Asian inflation Asian economics   Read the article on ING Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Listen: Higher for longer

Rates: Risk mood to tip the balance ahead

ING Economics ING Economics 05.03.2023 09:11
We called for the recent rise in market rates, and when they eventually popped it was in a flash. Thematically, inflation stickiness is a key theme, and heads have turned to 'we told you so' central banks. Logically, upward pressure for market rates remains, which is probable if risk assets perform. If not, duration buying should mute the upside risk In this article Front ends are getting priced higher on more hikes and fewer cuts being discounted Long rates also rising, but still low versus the front end   Front ends are getting priced higher on more hikes and fewer cuts being discounted Front ends are hitting new extremes as the rate hike narrative from central banks has become more credible. The German 2yr has popped above 3% in the past week for the first time since the Great Financial Crisis. And the 10yr Euribor is also now back above 3%; comfortably in fact, at 3.2%. The marketplace is being bullied by inflation stickiness (see the latest French and Spanish readings) and the associated heightened European Central Bank rate hike risks. The front end is being bullied by inflation stickiness It's a similar story on the US curve. A June hike of 25bp is now fully priced (so we have 25bp priced for March, May and June). There is some talk of a 50bp move, although we view this as being quite unlikely, and indeed unnecessary. The Fed needs a degree of underlying stability, so upping the size of hikes here would be counter-productive. The other big change on the US front end has been the downsizing of the probability attached to interest rate cuts in late 2023. This is the other reason for the US 2yr to hit a new cycle high in recent days. It's off the highs hit in the week but is still only a smidgen below 5%, a level that the 2yr yield collapsed from in 2007 as US banks began to feel a sense of impending doom as the housing market collapsed. Long rates also rising, but still low versus the front end The US 10yr has responded to heaping pressure to move higher in yield over the past few weeks but still remains a tad anomalous, as the 3.9% area is still some 150bp below the market's projected peak in the Fed funds rate. Most of the time the 10yr hits the same peak as the front end, only much sooner. Here, the 10yr peaked at around 4.25% back in October. That’s a deep discount versus the terminal funds rate now discounted at 5.4%. Long rates suggest that economies will creak ahead One of the plausible reasons for the remarkable early and deep inversion of the US curve is longer maturities are a tad nervous about the future. Putin’s war in Ukraine shows how uncertain geopolitics is, and how impacts from such events become global really quickly. And it's ongoing. The bigger question ahead is whether we can sensibly suggest that the US and eurozone economies are about to successfully weather the cumulative effect of rate hikes delivered. Remember these rate hikes have been quite aggressive, and quick, and they are not yet complete. At a certain point, economies will creak.   The data ahead will of course be pivotal. But we'll also take our cue from the appetite for risk. Stay risk-on, and market rates are pressured up in tandem with recent data. Come off, and they can calm down as future data is projected to take a dip. We think market rates should be calming here after their hectic ride higher, and should be dominated by duration buying and fixed rate receiving, ultimately pulling market rates back down. But the current mood is in fact to go the other way; risk-on, tempting rates to dare to go higher still first. TagsRates     Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Inflation Numbers Signal Potential Pause in Fed Rate Hikes Amid Softening Categories

Week Ahead - UK And South Africa's GDP, Russian CPI And Also All Eyes Will Be On The National People’s Congress (NPC)

Craig Erlam Craig Erlam 05.03.2023 09:20
US The US has a very busy week ahead.  The two main events are Fed Chair Powell’s semi-annual testimony to Congress and the nonfarm payroll report.  Powell’s two days at Capitol Hill will undoubtedly draw scrutiny from lawmakers as more tightening will raise the risk this economy is recession bound.  Traders will look to see how hawkish Powell will remain given the mostly strong data, recently. The nonfarm payroll report is the main economic release of the week.  After a jaw-dropping 517,000 jobs were created in January, traders will look to see if that number gets a serious downward revision and if February’s job growth slows to 200,000.  Wage pressures are also key and if average hourly earnings come in hotter-than-expected that could fuel more Fed rate hiking bets. President Biden is also expected to release his budget for fiscal 2024, which might include higher taxes. Republicans are calling for sharp spending cuts, but that is not expected to be in this version. Raising the US debt limit will start to become a focal point, but this is still the early stages.   Earnings season is coming to an end with key updates from Adidas, Brown-Forman, CrowdStrike, Daimler Truck, Deutsche Post, and JD.com.  Eurozone Christine Lagarde’s appearance in the middle of next week will be highly anticipated following the February inflation data. The ECB President has insisted repeatedly that the central bank has a lot more to do, and the latest figures – especially the core which unexpectedly spiked to a new high – will reinforce that. That aside, there’ll be some interesting data points but nothing tier-one. UK  Not the busiest week coming, with GDP data on Friday probably the only notable event on the calendar. The UK avoided a recession in the second half of last year and everyone will be looking for early signs of the economy performing better again at the start of 2023. That aside, any BoE appearances will naturally get a lot of attention. Russia The February CPI number is the big release next week, with pressures continuing to abate with an expected reading of 10.8%, down from 11% the week before.  That aside, the focus remains on the war in Ukraine and any sanctions that will follow. Oil output has already been hit, with another 500,000 barrel daily drop this month and some are expecting that to double by the end of the year. South Africa Fourth-quarter GDP data is the only highlight this coming week and it’s expected to show a contraction in the fourth quarter of last year, meaning the country is at risk of being in recession if it hasn’t bounced back since January. Turkey Labor market figures are eyed alongside industrial production on Friday. That aside it’s looking fairly quiet.  Switzerland SNB Chair Thomas Jordan’s appearance on Tuesday is probably the most notable event next week, coming a day after the latest inflation release. The CPI figure is expected to show price pressures easing but probably not enough to put the central bank at ease. Markets are still fully pricing in a 50 basis point hike on 23 March. China All eyes will be on the National People’s Congress (NPC), as it kicks off its annual session.  This will set the tone in Asia as China will announce major personnel changes, government policy goals, and growth targets.   It will also be a busy week filled with economic releases.  Some of the data however will be impacted by the Lunar New Year holiday.  The February trade balance is expected to decline, while both CPI and PPI soften.  China’s credit last month was most likely reined in as aggregate financing and new yuan loans declined.   India It is likely to be a relatively quiet week for India, with the exception of January Industrial production, which is expected to improve from 4.3% to 5.6%.   Australia & New Zealand The RBA is expected to deliver another quarter-point rate rise and maintain a hawkish stance as inflation remains elevated.  Analysts are unanimous in expecting rates to rise by 25bps to 3.60%.    In New Zealand, it will be a week filled with a few economic releases.  The ANZ commodity price reading occurs on Monday.  In the middle of the week, we get a look at February card spending.  Friday includes the manufacturing PMI release.    Japan The end of Kuroda’s tenure is here.  In his last meeting, the BOJ is expected to stay the course and have no changes with YCC or with rates. Governor Kuroda is widely expected to stick to his stance of maintaining monetary easing to aim for sustainable, stable 2% inflation. BOJ Governor nominee Kazuo Ueda has already hinted he will stay the course, but currency traders are eagerly awaiting any signs on how the BOJ will exit this ultra-easy policy.   Singapore No major releases are expected.  Economic Calendar Saturday, March 4 Economic Events Fed’s Daly gives a speech on inflation at Princeton University Sunday, March 5 Economic Events China’s National People’s Congress begins in Beijing Monday, March 6 Economic Data/Events US factory orders, durable goods Australia inflation gauge Euro area retail sales Mexico vehicle production/exports New Zealand commodity prices SNB releases 2022 results  CERAWeek energy conference by S&P Global JPMorgan’s Global High Yield & Leveraged Finance Conference   International Atomic Energy Agency board of governors meeting Tuesday, March 7 Economic Data/Events Fed’s Powell presents his semi-annual Monetary Policy Report to the Senate Banking Committee US wholesale inventories, consumer credit Australia trade balance, reserves China trade balance, reserves Germany factory orders Greece GDP Japan cash earnings Mexico consumer confidence, international reserves South Africa GDP Singapore reserves Spain industrial production Thailand CPI RBA decision: Expected to raise cash rate target 25bps to 3.60% ECB consumer expectations survey Poland Monetary Policy Council rate meeting Riksbank Governor Thedeen speaks on the current economic situation House Ways and Means Committee has a field hearing on the state of the US economy Wednesday, March 8 Economic Data/Events Fed’s Powell presents his semiannual Monetary Policy Report to the House Financial Services Committee US MBA mortgage applications, ADP employment change, trade balance, JOLTS job openings Canada merchandise trade Euro area GDP Germany industrial production Indonesia consumer confidence Japan BoP, bank lending, leading index BOC rate decision: Expected to leave rates unchanged at 4.50% Poland rate decision: Expected to leave rates unchanged at 6.75% EIA crude oil inventories RBA Governor Lowe speaks at the AFR Business Summit in Sydney ECB President Lagarde speaks alongside WTO Director-General Ngozi Okonjo-Iweala at an International Women’s Day event Riksbank’s Breman speaks on the economy BOE’s Dhingra speaks at the Resolution Foundation BOE’s Tenreyro speaks at Conference of British Industry event Thursday, March 9 Economic Data/Events US Challenger job cuts, initial jobless claims, household change in net worth China CPI, PPI, aggregate financing, money supply, new yuan loans Japan GDP, money stock, machine tool orders Mexico CPI New Zealand heavy traffic index, card spending South Africa current account balance President Biden to release his US budget proposal for fiscal 2024 Riksbank’s Bunge speaks on the economic and monetary policy outlook Riksbank’s Jansson speaks on central bank digital currencies BOE’s Breeden speaks on macro-prudential and monetary policy interactions   Friday, March 10 Economic Data/Events US Feb change in nonfarm payrolls: 215Ke v 517K prior, unemployment rate, average hourly wages, monthly budget statement Bank of Japan policy rate decision: No changes expected to YCC or balance rate in Kuroda’s last meeting Canada unemployment France trade balance Germany CPI India industrial production Japan household spending, PPI Mexico nominal wages New Zealand PMI, house sales Russia CPI Thailand consumer confidence, foreign reserves, forward contracts Turkey industrial production UK industrial production, services index, trade balance Apple annual meeting of shareholders Sovereign Rating Updates Belgium (Fitch) Norway (S&P) Portugal (S&P) Greece (DBRS) This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
US Inflation Rises but Core Inflation Falls to Two-Year Low, All Eyes on ECB Rate Decision on Thursday

What Can Be Interesting For Investors In March According To Craig Erlam

Craig Erlam Craig Erlam 05.03.2023 09:35
OANDA Senior Market Analyst Craig Erlam highlights five things that he believes investors will be closely tracking over the next month.   This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Gold Has Extreme Bullish Condition

Outlook Of Gold Ahead Of A Big Week For The US

Craig Erlam Craig Erlam 05.03.2023 09:37
OANDA Senior Market Analyst Craig Erlam talks about how gold is trading ahead of a big week for the US.   This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Kelvin Wong talks JGB, US dollar against Japanese yen and more

Japan's "Shunto" Spring Wage Talks Will Be Key To Watch This Month

Saxo Bank Saxo Bank 06.03.2023 08:16
Summary:  US stock indices had a strong finish to the week, with the Nasdaq 100 rising 1.6% and the S&P 500 surging 2%. Despite the fading expectations for interest rate cuts in 2023, the S&P 500 has risen 5.4% and the Nasdaq 100 has soared 12.4% since the beginning of the year. Yields on the 10-year Treasury notes reversed and returned to below 4%, settling at 3.95% to close the week on Friday. On the first day of the First Session of the 14th National People’s Congress, China's Premier Li delivered his last Government Work Report. The report set a target of around 5% for the real GDP growth for 2023, which was at the lower end of expectations.   What’s happening in markets? US equities bounced on Friday to finish the week higher Nasdaq 100 (NAS100.I) rose 1.6% and S&P 500 (US500.I) surged 2% on Friday, securing a weekly gain of 1.9% and 2.6% respectively. All 11 sectors within the S&P 500 advanced, led by information technology, consumer discretionary, and communication services. Meta (META:xnas), First Solar (FSLR:xnas), and Broadcom (AVGO:xnas) were among the top gainers, rising more than or nearly 6%. Apple (AAPL:xnas) gained 3.5% after announcing the departure of its cloud business head next month. Rivian (RIVN:xnas) jumped 7.6% following raising its EV production target by 24% to 62,000 units. Since the beginning of the year, the S&P 500 has risen 5.4% and the Nasdaq 100 has soared 12.4% despite the expectations for interest rate cuts in 2023 having largely faded. NVidia (NVDA:xnas) up 65%, Tesla (TSLA:xnas) up 63%, and Meta up 53.9% were among the best-performing stocks that drove the indices higher. US Treasuries rallied with the 10-year yield reversing to below 4% After spending one day above 4% on Thursday, yields on the 10-year Treasury notes reversed and returned to below 4% and settled at 3.95% to close the week on Friday. Headlines were light. The decline in the ISM Services Index in February was smaller than expected and initially saw the short-end lower in prices and higher in yields before the losses faded and reversed as strong bids emerged in the long ends in the afternoon. The 2-10-year spread bull flattened 7bps to -91. Hang Seng Index and China’s CSI 300 advanced ahead of the Two Sessions On Friday, Hang Seng Index (HSI.I) was up 0.7%. Hang Seng TECH Index (HSTECH.I) was up 2.1% ahead of the Two Sessions in China, annual meetings of China’s legislature, and top political advisory body. Technology, auto, and Chinese developer stocks led the charge higher. Closing at 20567, Hang Seng Index was up 2.79% over the week.  Hang Seng TECH Index gained 2.8%, with China internet names leading the charge higher. Bilibili (09626:xhkg) surged 10.3% following the online entertainment firm reporting a smaller net loss in Q4. TVB (00511:xhkg) soared 51.6% on heavy volume after the television broadcaster announced cooperation plans with Alibaba’s Taobao for live-streaming broadcasts.  Wynn Macau (01128:xhkg) fell 4.3%, weighed on by hedging flows after the Macao casino operator issued a USD600m of convertible bonds. Benchmark A-share indices advanced. The CSI300 (000300.I) climbed 0.3% on Friday and gained 1.7% over the week. The Shanghai Stock Exchange Composite Index gained for the fifth day in a row, closing at 3328.39, the highest level since July 2022. The net purchase of northbound funds was RMB 2 billion. Large state-owned companies in strategic industries, typically those starting with the prefix “China”, were among the top gainers ahead of the Two Sessions. Australian equities remain pressured The Australian share market fell for the fourth straight week last week. And with BHP and Rio and Woodside all going ex-dividend this week, it could be very volatile week. For more on what to watch this week, refer to Saxo’s Week Ahead. FX: GBP recovers post-Bailey losses The USD was broadly weaker last week after a run higher in February on expectations that most of the Fed’s tightening is priced in and yields are potentially reaching close to their peaks. This week brings a test of this rhetoric with Chair Powell’s testimony and the US jobs report scheduled for release. GBPUSD once again found support at 1.1920 despite a dovish turn by BOE Gov Bailey last week, and returned to 1.2040. AUDUSD worth a watch again this week with support at 0.67 being eyed as the RBA meets this week and China’s lower growth expectations may weigh. USDJPY has reversed back below 136 as yields gains ease, but if US yields continue their run higher and/or Governor Kuroda stays overly dovish at his final Bank of Japan meeting this week then a return to 137+ remains likely.  Crude oil whipsaws but bulls in control Crude oil prices faced 2-way action on Friday with an initial move lower by over 2% on a WSJ report saying the UAE is debating internally whether to leave OPEC. But these reports were denied later on, and enthusiasm of the oil bulls going into China’s policy meetings over the weekend with policy stimulus expectations running high helped crude oil make a quick reversal. WTI prices got close to $80/barrel from a dip to $76 earlier, while Brent rose to $86 from $82.50. A modest weakness is coming back again this morning in Asia, keeping the range intact. However, China’s weaker than expected growth target set over the weekend may still keep oil prices choppy, with eyes also on any possibility of hawkish remarks from Chair Powell this week or the US jobs report.    What to consider? China’s 2023 GDP growth target at “around 5%” China sets a real GDP growth target of "around 5%" for 2023 in the Government Work Report to the National People's Congress. This target is at the lower end of expectations ranging from 5% to 5.5% going into the meeting. Other key macroeconomic targets include adding 12 million jobs to urban area employment for 2023, a consumer inflation target of 3%, and a fiscal deficit target of 3% of nominal GDP. The report emphasizes the importance of boosting domestic aggregate demand, particularly household consumption, and aims to deepen the reform of state-owned enterprises while encouraging private enterprises to grow. For more details, see our note here. US ISM services stays strong The headline ISM services cooled less than expected in February, falling to 55.1 from 55.2 in January, better than the expected 54.5. The prices paid component, which raised concerns again about the disinflation rhetoric from the manufacturing ISM report last week, cooled only slightly to 65.8 from 67.8 in January, showing sticky services prices. Employment rose to 54 from 50.0, matching the highest since March 2022 and therefore showing more signs of a tight labour market. New orders accelerated to 62.6 from 60.4 but business activity slowed to 56.3 from 60.4.  China’s Caixin Services PMI came in at the highest level since Sept 2022 Caixin Services PMI rose to 55 in February (consensus estimate: 54.5), the highest level since September 2022, from 52.9 in January, echoing the strength of the recovery in the official NBS PMI survey earlier in the week. Both the business activities component and the new order components were in the expansion territory. The Biden administration is drafting new rules to prohibit some U.S. investments in China In reports sent to Congress, the Biden administration told lawmakers that the Treasury Department and the Commerce Departing are drafting new regulations to prohibit U.S. companies from making advanced technology investments abroad, which is understood as focusing on China. Fed members continue to sound hawkish, eyes on Powell Fed member Mary Daly was on the wires over the weekend, and sounded hawkish as she raised the prospects of an upward shift in the Fed’s dot plot as well. She said that inflation is still high, and the Fed has to think about 'continuous tightening', signalling higher rates and remaining at elevated levels for a longer period of time, if inflation stays hot. Another member Barkin also clearly said that there will be no rate cuts this year. Focus will be on data in the run upto Fed’s March meeting, but Chair Powell’s testimony and the February jobs report this week will be key for the markets. Japan unions pushing for record wage increase The Japanese Trade Union Confederation (JTUC, more commonly known as Rengo) says its survey of 2000+ unions in the country shows an average pay rise request of 4.49% this year. This is the highest since 1998's 4.36% and is much higher than the 2.97% sought in 2022. The Bank of Japan continues to highlight that wage growth is key for achieving sustained demand-pull inflation. Japan's "shunto" spring wage talks will be key to watch this month as any larger than expected increase in wages will fuel more tightening expectations for the Bank of Japan, having a profound impact on global liquidity as well. COT reporting on Brent and (delayed) gold  Speculators or hedge funds raised bullish bets on Brent crude oil by 9.4k lots to near a 15-month high at 286k lots in the week to February 28. The cost of holding a short position in Brent, reflected through the current backwardation, supported a continued collapse in the gross short to a 12-year low at 22k lots.  While the ICE Europe Exchange is up to date in its reporting, the US CFTC is still catching up following a January 31 cyberattack on ION Cleared Derivatives, a third-party software and service provider for derivative trading. The latest report covered the week to February 7, when gold reached $1975 before crashing to $1885, triggering a 29% drop in the gold net long to 79k. The CFTC is expected to be up to data around mid-March.  Moving Visa, Mastercard, and Paypal from IT to Financials in the S&P500 Starting from 17 March, the S&P 500 will move Visa (V), Mastercard (MA), and Paypal (PYPL), which specialize in payment services from its Information Technology sector to the Financials sector, and Automatic Data Processing (ADP), which provide human resources services from the Information sector to the Industrials sector. For what to watch in the markets this week – read or watch our Saxo Spotlight.  For a global look at markets – tune into our Podcast. Source: Global Market Quick Take: Asia – March 6, 2023 | Saxo Group (home.saxo)
Disappointing activity data in China suggests more fiscal support is needed

The Chinese Government Signalled That This Year's GDP Target Would Be 5%

Michael Hewson Michael Hewson 06.03.2023 08:21
Despite another week of rising yields, European markets still managed to finish last week higher over concern that various inflation measures are starting to tick back higher again, having been in decline over the last few months.   The German DAX had a particularly good week posting its highest daily and weekly close in over a year, as confidence over falling energy prices and a more resilient global economy as China's economy reopens helps to foster a slightly less negative outlook about growth prospects.     The FTSE100 found itself lagging weighed down by underperformance in some of its more defensive names.      US markets also managed to finish the week higher, breaking a losing streak that had lasted three weeks in a row. Both the S&P500 and Nasdaq 100 managed to rebound after finding support at their respective 200-day SMA's.   Friday's rebound came against a backdrop of a sharp decline in US 10-year yields which fell back from their highest level since November, above 4%. Friday's ISM services report showed little sign that the big rebound in the US economy in January was a one-off, with the headline number falling slightly to 55.1, from 55.2, with further gains in employment to 54, and new orders rising to 62.4.   Prices paid did slow, but still remained high at 65.4.   As a leading indicator for this week's delayed non-farm payrolls number for February, it's a further indication that the US labour market continues to remain very resilient, with ADP and job openings (JOLTS) data also likely to add insight.     As we look ahead to this week the main focus, apart from Wednesday's ADP, and Friday's payrolls report, will be on Fed chair Jay Powell's testimony to US lawmakers tomorrow and Wednesday where he is likely to be quizzed on how he sees the US economy in light of recent strong data, and what measures the Fed might feel inclined to take if the data continues to come in strong.   It's unlikely that he will give too many clues given how close to the next meeting we are, and the main takeaway is likely to be data dependence, however, don't be surprised if markets pore over every single nuance just so that they can reinforce their own particular mindset.   We do have two other important rate decisions this week, namely from the RBA tomorrow, and the Bank of Canada on Wednesday, where the central bank may have cause to rue their decision to signal a pause at their last meeting given the strength of recent economic data.   Over the weekend the Chinese government signalled that this year's GDP target would be 5%, which comes across as a little on the low side given that last year saw a 5.5% target under more difficult circumstances. It's also potentially disappointing when it comes to the prospects for global GDP as a more restrained China means less potential for demand.   The lower-than-expected target might also suggest that Chinese officials are less likely to push stimulus into the economy as it strives for stability over anything else.   It could also be an acknowledgment that recent protectionist measures have damaged confidence in China as an investment opportunity, and consequently, investors could well be more cautious over the next 12 months.   This less-than-ambitious target appears to be weighing on commodity prices with Asia markets broadly positive as we look ahead to the start of today's European session, and a positive start to the week.   EUR/USD – struggled to get above the 1.0700 area last week but has remained above the bullish reversal of last Monday at the 1.0530 area. We need to push through the 50-day SMA at 1.0730 to open up 1.0820. While below 1.0730, the bias remains for a test of the January lows at 1.0480/85. GBP/USD – last week saw us ping between the 1.1920 area and the 200-day SMA, and the 50-day SMA at 1.2150 which remains a key resistance area. A break of 1.1900 retargets the 1.1830 area, while a break of the 1.2150 area is needed to retarget the 1.2300 area. EUR/GBP – failed to push above trend line resistance at 0.8900 from the January peaks last week. Above 0.8900 targets the 0.8980 area. We need to push below support at the 0.8820/30 area to retarget the 0.8780 area. USD/JPY – the failure to push through the 200-day SMA at 136.90/00 last week has seen the US dollar slide back. Support comes in at the 135.20 area. We also have interim support at 133.60. A break above 137.00 could see a move to 138.20.   FTSE100 is expected to open 5 points higher at 7,952 DAX is expected to open 47 points higher at 15,625 CAC40 is expected to open 37 points higher at 7,385 Email: marketcomment@cmcmarkets.com Follow CMC Markets on Twitter: @cmcmarkets Follow Michael Hewson (Chief Market Analyst) on Twitter: @mhewson_CMC
Rates Spark: Bracing for more

The RBA, Bank Of Canada And Bank Of Japan Will Be Announcing Their Latest Interest Rate Decision This Week

Ipek Ozkardeskaya Ipek Ozkardeskaya 06.03.2023 08:26
There are plenty of reasons that should push equities lower, but equities continue trending higher. Both European and American stocks closed last week with gains, and futures hint at a positive start to the week despite China's announcement of a modest 5% growth target. But the 5% growth target raises concerns about the amount of stimulus that the Chinese will put on the table, and the possible continuation of the government crackdown. The Chinese officials said that they don't want a disorderly growth in real estate – which is a major ingredient for the Chinese growth. Plus, the local governments could borrow and spend less, even though the Chinese as a whole increased their fiscal deficit projection. This means that China is on its way for more centralization of the power around Xi Jinping and less freedom for local entities. Combined with Xi's fight against euphoric growth and the West's limitation on investment and technology exports to China, we shall see investors reluctant to return to Chinese equities. China's modest 5% growth target weigh on energy and commodity prices. Iron ore and copper futures are down, and US crude's 100-DMA resistance, around the $80pb level, will likely remain strong. On this week's agenda FED talk Federal Reserve (Fed) Chair Jerome Powell will deliver his semi-annual testimony before the Senate this week, and he will certainly reiterate that the Fed is not yet done with its fight against inflation, that the labour market remains particularly strong, that a soft landing is possible, yet the Fed won't hesitate to sacrifice growth to abate inflation as soon as possible. Looking at the latest set of data, the U-turn of easing inflation and last month's blowout jobs figures, we don't expect to hear anything less than hawkish from Mr. Powell. But it's always possible that a word like 'disinflation' slips out of his mouth, and that we get a boost on risk. US jobs The US economy is expected to have added around 200'000 jobs, with the possibility of a negative surprise after last month's above half a million read. Unemployment is seen steady around 3.4% - a more than 50-year low, while average earnings are seen going up from 3.4% to 3.7% over the year. Nothing encouraging for the Fed doves. But who cares? RBA, BoC, BoJ The Reserve Bank of Australia (RBA), the Bank of Canada (BoC) and the Bank of Japan (BoJ) will be announcing their latest policy verdicts this week and among them, only the RBA is expected to hike the rates by another 25bp despite last week's surprise softening in latest inflation and growth numbers. More than 40% of the companies in the ASX 200 posted negative earnings surprise last quarter, up from 28% a year ago. The latest figures from macro and micro fronts raise questions about how far the RBA could go in terms of rate hikes. On the currency front, since the end of February, the AUDUSD slipped into the bearish consolidation zone, but the pair has been following the 100-DMA slightly to the upside, as the Chinese reopening sustains iron ore prices – except for today, of course, as China's 5% growth target hasn't been a boon for energy and commodity stocks. China could still rescue the Aussie from falling further, but the Chinese winds could hardly reverse the negative trend in AUDUSD as the Fed-supported US dollar is certainly not done its positive push yet.
Adidas And CALT Results Will Be On Watch, China’s Modest Growth Targets For 2023

Adidas And CALT Results Will Be On Watch, China’s Modest Growth Targets For 2023

Saxo Bank Saxo Bank 06.03.2023 08:33
Summary:  The US Treasury yields have started the week softer, but the narrative that the Fed’s hawkishness is priced in by the market may be put to test as Chair Powell appears for testimony and the US jobs data for February comes out in the week ahead. China’s modest growth targets for 2023 set at the weekend meetings may spur some caution and further policy announcements remain on watch. In addition, central bank meetings from Australia, Canada and Japan are likely to create short-term FX volatility, while company earnings from Trip.com, CATL, JD.com, Oracle and others will be on the radar. Powell’s testimony and US jobs data to keep markets wobbly The next test of the US economy comes at the tail end of this week as the February jobs data is reported. Over the last few weeks, data out of the US has been far more resilient than expected, fueling bets that the Fed will have to raise rates beyond what was communicated earlier and rates will stay elevated for longer as well. Bloomberg consensus expectations point to another strong jobs report after the blowout report of January, with headline jobs expected to come in again at 200k+, but risk of disappointment remains given the scope of correction from +517k in January. The unemployment rate is expected to remain unchanged at 3.4%, while wage growth is projected to accelerate. Most early indicators such as the business surveys from S&P pointed to an acceleration in hiring, while applications for unemployment benefits remained historically low.  Ahead of Friday’s jobs report, investors will also be watching Congressional testimony from Fed Chair Jerome Powell on Tuesday and Wednesday. He is expected to keep a hawkish stance in light of the strong data over the last few weeks. US yields and the US dollar can continue to run higher in that case, but if the message from Powell remains neutral then equities could continue to rally again. RBA expected to be more aggressive with its tone on Tuesday and Wednesday The RBA is expected to hike rates again by 25bps. However, the key is to watch RBA commentary - and if the RBA continues with its more hawkish tone. Consider the RBA’s aggressive rhetoric of making further hikes has pressured the Australian equity market, with the market now expecting interest rates to peak at 4.2% in September, with potentially no rate cuts this year. Should the RBA maintain its aggressive shift, the Aussie dollar (AUDUSD) could knee-jerk higher. RBA Governor Philip Lowe speaks the next day, on Wednesday, at the AFR Business Summit. Key agenda items to watch on China’s Two Sessions this week The key events to watch on the agenda of the National People’s Congress (NPC) this week are the presentation of the state institution reform proposal on Tuesday and the announcements of the appointment of top leaders and senior officials from Friday to Sunday. The NPC will conclude next Monday morning, March 13. China’s outstanding aggregate financing expected to rise as loans and bond issuance picking up While seasonality may drive a fall in new aggregate financing in February from January, the year-on-year growth of the outstanding amount is expected to pick up steam due to increases in bank loans and government bond issuance. The growth in CPI is expected to slow to 1.9% Y/Y in February from 2.1% in January and PPI to contract further to -1.3% Y/Y but the week’s highlight in the data front will be on the aggregate financing. Bank of Japan Governor Kuroda’s final meeting This week will be the last Bank of Japan meeting for its current Governor Kuroda, and there remain risks that he may part with sparks. Inflation and wage growth continue to pick up pace in Japan, even though growth signals have been bleak lately and are relying on a strong pickup in Chinese demand. Incoming Governor Ueda has also signaled policy continuity, with hints that he echoes Kuroda’s views on inflation being externally-driven and likely to come off soon. Tokyo CPI for February also came off its January highs, but mostly driven by PM Kishida’s subsidies that reduced the electricity price burden. If Kuroda ends his term with a very dovish tone, that could spell trouble for yen, especially if US yields continue their run higher this week. Company news to watch this week All eyes will be CATL - which is Tesla’s battery supplier and the world’s largest battery maker. The market is expecting revenue growth of above 80% and full-year EPS of 2.65. We think CATL’s results could be a pleasant surprise to the market, given it sold its $856 million stake in Australia’s biggest lithium company, Pilbara Minerals. CATL’s outlook will also be watched closely – as a guage of how much car makers battery costs could rise in 2023. Adidas results will also be on watch. As reported in Saxo’s Quick Take on Friday, the company accrued a large amount of Yeezy sneaker-inventory after Adidas abruptly ended Ye’s partnership. After a poor string of results, analysts expect Adidas to report Q4 revenue of €5.2bn up 1% y/y and EBITDA of €-419mn.Also on watch, are CrowdStrike (CRWD), Campbell Soup (CPB), JD.com (JD) and Oracle (ORCL) results. We cover what’s worth watching with these industry proxies in our Week Ahead report, which you can access here. The world’s largest commodity miners go-ex-dividend; which could trigger a rise in volatility   Woodside goes ex-dividend on March 8, followed by BHP and Rio on March 9. For investors it means they will  have a volatile week, while option holders of these stocks won’t see a change. For other investors implications and what else to know, click here.   Macro data on watch this week: Monday 6 March South Korea CPI (Feb) Eurozone S&P Global Construction PMI (Feb) Germany S&P Global Construction PMI (Feb) United Kingdom S&P Global/CIPS Construction PMI (Feb) Eurozone Retail Sales (Jan) United States Factory Orders (Jan) Tuesday 7 March South Korea GDP (Q4, revised) Australia Trade Balance (Jan) China (Mainland) Trade (Feb) Australia RBA Cash Rate (7 Mar) Germany Industrial Orders (Jan) Taiwan CPI and Trade (Feb) United States Wholesale Inventories (Jan) Fed Chair Powell’s Testimony Before Senate Wednesday 8 March Japan Current Account (Jan) Germany Industrial Production and Retail Sales (Jan) Eurozone GDP (Q4, revised) United States ADP National Employment (Feb) United States International Trade (Jan) Canada Trade Balance (Jan) United States JOLTS Job Openings (Jan) Canada BoC Rate Decision (8 Mar) Fed Chair Powell’s Testimony Before House Thursday 9 March Japan GDP (Q4, revised) China CPI, PPI (Feb) Malaysia Overnight Policy Rate United States Initial Jobless Claims Friday 10 March Germany CPI (Feb, final) United Kingdom monthly GDP (Jan) United Kingdom Goods Trade Balance (Jan) United States Non-Farm Payrolls, Unemployment, Average earnings (Feb) Canada Unemployment Rate (Feb) Japan BOJ Rate Decision (10 Mar) China M2, New Yuan Loans, Loan Growth (Feb) Earnings on watch this week: Monday: Trip.com Tuesday: Ashtead Group, Sea Ltd, Ferguson, Crowdstrike Wednesday: Ping An Bank, Thales, Adidas, Geberit, Cathay Pacific Thursday: CATL, Deutsche Post, JD.com, Prada Friday: Daimer Truck, AIA Group, Oracle, DiDi Global   Source: Saxo Spotlight: What’s on the radar for investors & traders this week? | Saxo Group (home.saxo)
The USD/MXN Pair’s Further Moves Rely On The Mexican Inflation Data

The Mexican Peso (MXN) Pair Tracks The Market’s Consolidation Mode

TeleTrade Comments TeleTrade Comments 06.03.2023 08:43
USD/MXN licks its wound near the lowest levels since April 2018. Mexican Peso marked the biggest weekly gains in seven months amid broad US Dollar declines. Key data/events eyed for clear directions, Fed Chair Powell needs to defend hawkish bias to avoid further USD fall. USD/MXN prints mild gains around 17.98 as it pares the biggest weekly loss in seven months during early Monday in Europe. In doing so, the Mexican Peso (MXN) pair tracks the market’s consolidation mode ahead of the top-tier data events. Even so, the US Dollar’s failure to regain the upside momentum, mainly due to the downbeat Treasury bond yields, joins the fresh concerns suggesting a monetary policy divergence between the US Federal Reserve (Fed) and Banxico to probe the USD/MXN buyers. The recently mixed concerns surrounding China and the weakness in Oil prices could be linked to the USD/MXN pair’s latest rebound. That said, the National Development and Reform Commission of the People's Republic of China (NDRC) recently said, it “Will further release the potential for consumption,” while also adding that China's economy steadily improving, per Reuters. Earlier in the day, market sentiment turned sour after China’s annual session of the National People's Congress (NPC) appeared a grim event due to its growth target and geopolitical concerns. Elsewhere, the Fed policymakers’ indecision and mixed US data contrast with Banxico’s hawkish bias to keep the USD/MXN bears hopeful. During the weekend, San Francisco Federal Reserve Bank President Mary Daly highlighted the importance of incoming data to determine how high the rates can go. Previously, Atlanta Fed President Raphael Bostic renewed concerns about the Fed’s policy pivot while Federal Reserve published a semi-annual Monetary Policy Report on Friday wherein it clearly said, “Ongoing increases in the Fed funds rate target are necessary.” The report also stated that the Fed is strongly committed to getting inflation back to 2%. Talking about the data, softer prints of the latest US Consumer Confidence, ISM PMI and Durable Goods Orders seem to challenge the US Dollar bulls. Alternatively, Mexico’s upbeat outcomes of the seasonally adjusted Trade Balance and Unemployment Rate for January seemed to have favored the USD/MXN bears. Against this backdrop, US 10-year Treasury bond yields, rose to the highest levels since November 2022 in the last week before easing to 3.95% by the end of Friday, making rounds to the same level at the latest. More importantly, the US two-year bond coupons rose to the highest levels last seen in 2008 before retreating to 4.85% by the press time. That said, the S&P 500 Futures print mild gains, tracking Wall Street’s moves amid a light sluggish start to the key week. Looking forward, Fed Chair Jerome Powell’s Testimony, China’s inflation data and Friday’s US jobs report for February, are likely to be the key catalysts to watch for clear directions. At home, Mexican Inflation data for February, up for publishing on Thursday, will be crucial for the guide. Technical analysis Although April 2018 low near 17.93 restricts immediate USD/MXN downside, the pair’s recovery moves remain unimpressive below the previous support line from late November 2022, close to 18.15 by the press time.
Metals Market Update: Decline in LME Copper On-Warrant Stocks, Zinc and Lead Surplus Continues, Nickel Market in Supply Surplus

FX Daily: Climbing the wall of worry

ING Economics ING Economics 06.03.2023 09:10
FX markets have opened the week on a steady footing, buoyed by a strong end to last week from equities and appearing to shake off a slightly lower-than-expected growth target from China. This week's focus will very much be on central bankers and activity data - the highlights being Fed Powell testimony (Tuesday and Wednesday) plus US jobs growth (Friday) USD: How strong is the US economy and what will the Fed do about it? After a few weeks where US price data has taken centre stage, this week will all be about activity data and Fed speak. On the activity side, Friday's release of February US jobs data should shed light on whether January's +517,000 surge was an aberration powered by seasonal adjustment factors or a genuinely strong number. Our US economist, James Knightley, tends to favour the former interpretation - although conviction levels are low. Running up to Friday's job data will be Wednesday's release of JOLTS and ADP data - again providing insights as to whether tight conditions in US labour markets are starting to ease. The other US highlight this week will be testimony to the Senate (Tuesday) and House (Wednesday) from Federal Reserve Chair Jerome Powell. He will be testifying on the Fed's semi-annual monetary policy report which was released on Friday. The market will be interested to hear what he thinks about re-accelerating the pace of hikes to 50bp from 25bp (+30bp is priced for the 22 March meeting) and any indication on what the terminal rate might be. Recently, we have been writing that an upward revision to the Dot Plots on 22 March will discourage investors from aggressively re-establishing dollar short positions. This week also sees central bank policy meetings in Japan, Australia, Canada, and Poland. Of these, the Reserve Bank of Australia (RBA) is the only one expected to hike rates (+25bp). However, Friday's Bank of Japan (BoJ) meeting will prove interesting as will tomorrow's release of Japanese wage data for January. Another widening of the BoJ's 10-year JGB target band on Friday would be a big surprise and drag USD/JPY lower. What does this all mean for the dollar? In today's session, the dollar has not found too much support from a slightly lower-than-expected Chinese growth target for 2023 at 5.0% (5.5-6.0% had been expected). Equally, equities continue to hold up quite well despite last week's big rise in bond yields and are providing a little support to pro-cyclical currencies. In all, we suspect it is another range-bound week for the dollar, where DXY continues to trade in a 104.00-105.50 range and local stories can win out.  Chris Turner EUR: ECB helps build the 1.05 EUR/USD floor European Central Bank speakers continue to point to a 50bp hike at the 16 March meeting as being a done deal. The market then prices a further 150bp of tightening by year-end - which looks a little aggressive. Still, the tough ECB talk has kept the EUR:USD interest rate differential supported at the short end of the market and firmed up the 1.05 support zone for EUR/USD this month. We think EUR/USD probably ends March in the 1.07/1.08 area. For today, the eurozone focus will be on January retail sales and the March Sentix Investor survey. Improvements are expected for both, although may not move markets. We also have ECB Chief Economist, Philip Lane, speaking in Dublin at 11 CET. He has recently shifted over to the hawkish side and it is probably too early for him to push back against the market's pricing of the ECB deposit rate at 4.00%. EUR/USD probably trades well inside a 1.0600-1.0700 range today. Elsewhere in Europe, Switzerland sees February CPI. The market expects some deceleration from January's firm readings. Any upside surprise could pressure EUR/CHF in its latest 0.9900-1.0000 range. Chris Turner GBP: Steady sterling this week This week it is hard to find a UK catalyst for sterling to break out of recent ranges. We doubt any further progress on the Windsor Framework deal is worth much more to sterling. And having heard from Bank of England big hitters (Andrew Bailey and Huw Pill) last week, we doubt that this week's BoE speakers make much of a dent in market pricing of the BoE cycle. Activity data for January looks like it could come in on the softish side, although the services sector will be in focus following the recent jump in the services PMI reading. In all, EUR/GBP should trade well within a 0.8800-0.8900 range, while GBP/USD will be bounced around on this week's big inputs from the US events calendar. Chris Turner CEE: Inflation numbers leave no room for rate cuts A busy calendar awaits us this week in the CEE region. Today, we start with labour market data in the Czech Republic, key for the Czech National Bank, and retail sales in Hungary. On Tuesday, industrial production for January will be released, which should confirm a weakening economy. On Wednesday, we will also see February inflation in Hungary, as the first number within the CEE region. We expect only a slight drop from 25.7% to 25.4% year-on-year, in line with market expectations, but also slightly higher core inflation. Later on, we will see the decision from the National Bank of Poland. In line with the market, we expect interest rates to remain unchanged. However, the main focus will be Governor Adam Glapinski's press conference a day later. The central bank will also publish a new forecast. While inflation was lower than expected in January, core inflation remains high. So the question will be how the governor's tone will change since the last forecast and whether he will officially announce the end of the hiking cycle or mention a possible rate cut later this year. We then move to the Czech Republic on Friday, where industrial production and inflation data will be published. CPI, in our view, fell slightly from 17.5% to 16.9% YoY, above the market and CNB forecasts.  In the sovereign rating space, Fitch maintained a negative outlook for the Czech Republic on Friday. In Hungary, Moody's again did not publish a rating review as it did in September, which means that the outlook and rating remain unchanged, and presumably, the agency is waiting further for developments in the negotiations between the Hungarian government and the European Commission regarding access to EU money.  On the FX side, global conditions for the CEE region remain mixed. The US dollar will hamper EM currencies, on the other hand, gas prices broke 45 EUR/MWh on Friday indicating a further rally in the Hungarian forint and Czech koruna. February inflation data should be a boost to both currencies, confirming the current hawkish market pricing, leaving no room for early rate cuts. On the other hand, a dovish NBP may bring pain to the Polish zloty. Thus, it will be key to watch for indications of a first rate cut during the governor's press conference on Thursday. The Czech koruna could retest levels below 23.40 EUR/CZK and the Hungarian forint below 375 EUR/HUF. However, the Polish zloty should test weaker levels above 4.740 EUR/PLN again.  Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
FX Daily: Resuming the Norm – Dollar Gains Momentum as Quarter-End Flows Fade

Equity Bulls Remain In Charge, US Jobs Data And Policy Decisions Will Be On Focus This Week

Swissquote Bank Swissquote Bank 06.03.2023 11:03
There are plenty of reasons that should push equities lower, but equities continue trending higher. European and American stocks Both European and American stocks closed last week with gains, and futures hint at a positive start to the week despite China’s announcement of a modest 5% growth target. China But the 5% growth target raises concerns about the amount of stimulus that the Chinese will put on the table, and the possible continuation of the government crackdown. China’s modest 5% growth target weigh on energy and commodity prices. Iron ore and copper futures are down, and US crude’s 100-DMA resistance, around the $80pb level, will likely remain strong. On this week’s agenda: FED talk: Federal Reserve (Fed) Chair Jerome Powell will deliver his semi-annual testimony before the Senate this week. US Jobs: the US economy is expected to have added around 200’000 jobs, with the possibility of a negative surprise after last month’s above half a million read. The other central banks: the Reserve Bank of Australia (RBA), the Bank of Canada (BoC) and the Bank of Japan (BoJ) will be announcing their latest policy verdicts this week and among them, only the RBA is expected to hike the rates by another 25bp despite last week’s surprise softening in latest inflation and growth numbers. Watch the full episode to find out more! 0:00 Intro 0:31 Equity bulls remain in charge despite many reasons to sell! 3:15 China’s 5% growth target… 5:05 … weigh on crude oil 6:13 Powell testimony, US jobs & budget proposal 8:46 RBA, BoC & BoJ policy decisions Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #China #growth #target #energy #crude #oil #commodity #prices #US #jobs #data #Fed #Powell #restimony #RBA #BOC #BOJ #rate #decision #USD #Stoxx #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
Crude Prices Are Rallying After A Mixed Jobs Report Sent The Dollar Lower

Crude Oil Declined After China Announced Cautious Growth Targets

Saxo Bank Saxo Bank 06.03.2023 11:17
Summary:  Equity markets surged higher on Friday as the treasury market suddenly found solid support on Friday, taking the US 10-year yield back below 4.00%. At the weekend, China set a “modest” growth target of around 5% at key meetings. The week ahead is thick with central bank action, starting with the RBA on Tuesday, with Fed Chair Powell testimony up tomorrow and Wednesday, and Friday’s Bank of Japan meeting the likely highlight of the week, as it is Governor Kuroda’s last meeting. What is our trading focus? US equities (US500.I and USNAS100.I): strong rally as bond yields decline US equities rallied strongly on Friday with S&P 500 futures gaining 1.7% pushing above the 4,000 level closing at 4,050 with the momentum extending this morning. The rally in US equities came on the back of a ISM report showing the US economy is still humming along. US bond yields declined on Friday together with a weaker USD helping lift sentiment in equities which was an odd move given that inflation expectations were rising last week. This week we have Fed President Powell’s speech that could impact equities (read our preview below). In S&P 500 futures the 4,100 is a key upside level to watch if momentum extends. Hang Seng Index and CSI 300 oscillated on a modest Government Work Report The Hang Seng Index and CSI 300 Index oscillated after China set out a modest GDP growth target for 2023 and signalled a measured approach to fiscal and monetary policies as well as balanced support to the housing sector with avoiding systemic risks as a key priority. Lenovo (00992:xhkg) rising over 4% and reaching a new high, was the biggest gainer. The PC and server maker gained following its arch-rival in the server business, Inspur (000977:xsec) might be having difficulties in getting US parts after Inspur’s parent being put on the US ‘entity list’. FX: GBP recovers post-Bailey losses The USD was broadly weaker last week after a run higher in February on expectations that most of the Fed’s tightening is priced in and yields are potentially reaching close to their peaks. This week brings a test of this rhetoric with Chair Powell’s testimony and the US jobs report scheduled for release. GBPUSD once again found support at 1.1920 despite a dovish turn by BOE Gov Bailey last week, and returned to 1.2040. AUDUSD worth a watch again this week with support at 0.67 being eyed as the RBA meets Tuesday and China’s lower growth expectations may weigh. USDJPY has reversed back below 136 as yields gains ease, but if US yields continue their run higher and/or Governor Kuroda stays overly dovish at his final Bank of Japan meeting this week then a return to 137+ remains likely. Crude oil whipsaws with no clear direction yet to emerge  Crude oil prices faced strong two-way action on Friday with an initial move lower by over 2% on a WSJ report, later denied, saying the UAE is debating internally whether to leave OPEC, before finishing on a strong note on short covering after across market risk appetite improved and traders looked to China’s policy meetings over the weekend for support.  Overnight, however, crude declined after China, the world’s top oil imported, announced cautious growth targets and avoided any larger stimulus measures. Crude oil remains stuck within narrowing ranges, Brent between $81 and $89 with focus returning to the US and speeches from Powell to policy makers on Capital Hill Tuesday and Wednesday, as well as Friday’s job report.    Gold supported by drop in US real yields Gold rallied strongly last week after the market started pricing in higher long-term inflation, thereby challenging the FOMC’s own targets. While support was provided by US ten-year yields dropping back below 4% on Friday to end the week close to unchanged, it was developments in Breakeven (inflation) up 14 bps on the week and real yields, down 13 bps that helped support gold’s recovery. The close back above the 21-DMA on Friday, now at $1844, signaling a return of positive momentum, the strength of which may still be challenged this week with Powell speeches and Friday's job report the focus. For the current recovery, to attract support from technical buyers, prices as a minimum need to break $1864, and silver $22 to signal an end to the recent period of weakness. Copper takes China’s cautious growth target on the chin Copper trades close to unchanged after China set a cautious economic growth target with no major new stimulus measures being announced. With the focus primarily on supporting and stabilizing the economy, the metal could still be challenged in the short term by long liquidation from bulls having bet too heavily on the recovery story and increased spending towards infrastructure projects. Especially considering the recent buildup in inventories monitored by futures exchanges in London and not least in Shanghai. We maintain our long-held bullish outlook for copper and industrial metals in general but with China not providing growth stimulus, the short-term outlook may equally depend on whether other large economies can avoid a recession. US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) rallied with the 10-year yield reversing to below 4% After spending one day above 4% on Thursday, yields on the 10-year Treasury notes reversed and returned to below 4% and settled at 3.95% to close the week on Friday. Headlines were light. The decline in the ISM Services Index in February was smaller than expected and initially saw the short-end lower in prices and higher in yields before the losses faded and reversed as strong bids emerged in the long ends in the afternoon. The 2-10-year spread bull flattened 7bps to -91. What is going on? China’s 2023 GDP growth target at “around 5%” China sets a real GDP growth target of "around 5%" for 2023 in the Government Work Report to the National People's Congress. This target is at the lower end of expectations ranging from 5% to 5.5% going into the meeting. Other key macroeconomic targets include adding 12 million jobs to urban area employment for 2023, a consumer inflation target of 3%, and a fiscal deficit target of 3% of nominal GDP. The report emphasizes the importance of boosting domestic aggregate demand, particularly household consumption, and aims to deepen the reform of state-owned enterprises. For more details, see our note here. COT reporting on Brent and (delayed) gold Hedge funds raised bullish bets on Brent crude oil by 9.4k lots to near a 15-month high at 286k lots in the week to February 28. The cost of holding a short position in Brent, reflected through the current backwardation, supported a continued collapse in the gross short to a 12-year low at 22k lots.  While the ICE Europe Exchange is up to date in its reporting, the US CFTC is still catching up following a January 31 cyberattack on ION Cleared Derivatives, a third-party software and service provider for derivative trading. The latest report covered the week to February 7, when gold reached $1975 before crashing to $1885, triggering a 29% drop in the net long to 79k. The CFTC is expected to be up to data around mid-March. US ISM services stays strong The headline ISM services cooled less than expected in February, falling to 55.1 from 55.2 in January, better than the expected 54.5. The prices paid component, which raised concerns again about the disinflation rhetoric from the manufacturing ISM report last week, cooled only slightly to 65.8 from 67.8 in January, showing sticky services prices. Employment rose to 54 from 50.0, matching the highest since March 2022 and therefore showing more signs of a tight labour market. New orders accelerated to 62.6 from 60.4 but business activity slowed to 56.3 from 60.4. Fed members continue to sound hawkish, eyes on Powell Fed member Mary Daly (non-voter in 2023) was on the wires over the weekend, and sounded hawkish as she raised the prospects of an upward shift in the Fed’s dot plot as well. She said that inflation is still high, and the Fed has to think about 'continuous tightening', signalling higher rates and remaining at elevated levels for a longer period of time, if inflation stays hot. Another member Barkin (non-voter in 2023) also clearly said that there will be no rate cuts this year. Focus will be on data in the runup to the Fed’s March meeting, but Chair Powell’s testimony before the Congress and the February jobs report this week will be key for the markets, as noted below.. Japan unions pushing for record wage increase The Japanese Trade Union Confederation (JTUC, more commonly known as Rengo) says its survey of 2000+ unions in the country shows an average pay rise request of 4.49% this year. This is the highest since 1998's 4.36% and is much higher than the 2.97% sought in 2022. The Bank of Japan continues to highlight that wage growth is key for achieving sustained demand-pull inflation. Japan's "shunto" spring wage talks will be key to watch this month as any larger than expected increase in wages will fuel more tightening expectations for the Bank of Japan, having a profound impact on global liquidity as well. What are we watching next? Busy agenda this week for central banks, topped by BoJ on Friday It’s a busy week for central bank messaging this week. First up is the RBA, which we expect will hike the policy rate another 25-basis points to 3.60%. This is not fully priced into market expectations, and the market has priced a total of 52 basis points of tightening over the next three meetings, including tonight’s.  The terminal rate is currently priced near 4.15%. On Wednesday, the BoC will discuss the pace of monetary policy, but at its last meeting signaled that it would like to pause the hike cycle to assess the economy, given the steep pace of policy tightening. We expect interest rates will remain unchanged at 4.5% after eight consecutive hikes. In the US, Fed Chair Powell will testify before Senate and House panels on Tuesday and Wednesday, respectively, on the economy and monetary policy. He will face hours of questioning and political posturing from Congress members. Finally, the most anticipated central bank meeting of the week will be Friday’s Bank of JA France general strike against pension reform France will face a rolling general strike against the pension reform starting tomorrow. The strike is likely to be prolonged for at least 10 days according to the trade unions. This could push the country’s GDP into contraction this quarter. Union representatives at EDF warned of the risk of reduced power output from France’s nuclear power plants due to the strike. US February labor market data up on Friday The US Feb. Nonfarm payrolls change report for February will be released on Friday. In January, US job creation increased at a very strong pace (507k). Consensus expectation look for a return to trend in February (consensus at +200k). The February unemployment rate is expected to marginally increase to 3.5% from the multi-decade low of 3.4% posted in January. Overall, the U.S. labor market is still very resilient, in a very good shape. This is unlikely to influence the Fed’s monetary policy decisions in the short-term. Earnings to watch This week’s most important earnings releases are listed below with the most market attention going to earnings from Adidas, CATL, and JD.com. Adidas has a huge inventory of Yeezy sneakers following the abrupt end to the partnership with Ye that caused a massive writedown in the previous quarter and investors have generally lost short-term trust in Adidas following a string of bad results. Analysts expect Adidas to report Q4 revenue of €5.2bn up 1% y/y and EBITDA of €-419mn. CATL is the world’s largest battery maker and is firing on all cylinders with analysts expecting Q4 revenue growth of 87% y/y and EPS of CNY 2.65 down 11% y/y as the company has not passed on all input costs to its EV customers after a significant surge in lithium carbonate prices last year. Monday: Trip.com Tuesday: Ashtead Group, Sea Ltd, Ferguson, Crowdstrike Wednesday: Ping An Bank, Thales, Adidas, Geberit Thursday: CATL, Deutsche Post, JD.com Friday: Daimer Truck, AIA Group, Oracle, DiDi Global Economic calendar highlights for today (times GMT) 0930 – UK Feb. Construction PMI 1000 – ECB Chief Economist Lane to speak 1000 – Eurozone Jan. Retail Sales 1500 – Canada Feb. Ivey PMI 1500 – US Jan. Factory Orders 2330 – Japan Jan. Labor Cash Earnings 0030 – Australia Jan. Trade Balance 0330 – Australia RBA Cash Rate Target announcement    Source: Global Market Quick Take: Europe – March 6, 2023 | Saxo Group (home.saxo)
The RBA Raised The Rates By 25bp As Expected

Important Week For The Australian Dollar And Japanese Yen, BoJ And RBA Monetary Policy Decision Ahead

Kamila Szypuła Kamila Szypuła 06.03.2023 13:45
The US dollar weakened on Monday as investors awaited testimony from Federal Reserve Chairman Jerome Powell ahead of February's employment report later in the week, which is likely to influence how much more the US central bank raises interest rates. After making massive hikes last year, the Fed raised rates by 25 basis points in its last two meetings, but a plethora of resilient economic data fueled market fears that the central bank might return to an aggressive path. USD/JPY The yen pair started the week at 136.0380 but failed to stay above 136.00 and fell to 135.3890. After this fall, the USD/JPY pair rebounded, but at the beginning of the European session it fell again. Also after the second drop, the pair rebounded and managed to break above 136.00, but failed to hold. USD/JPY is trading below 136.00 at 135.94. The Japanese yen strengthened above 136 to the dollar amid general dollar weakness as investors cautiously awaited Tuesday and Wednesday's congressional testimony from Federal Reserve Chairman Jerome Powell. Meanwhile, the yen remains more than 6% below its January highs as Ueda, nominated governor of the Bank of Japan, doubled down on the bank's ultra-easy monetary policy. During the second parliamentary hearing of the approval process, Ueda stated that the benefits of the BJ stimulus outweigh the negative effects for the current economic scenario, adding that a move to more restrictive policies would only be necessary if inflation increased significantly. Ahead this week, the Bank of Japan’s (BoJ) monetary policy decision will be made on Friday although the market is not expecting any changes there. EUR/USD The EUR/USD pair started trading at 1.0628 and initially traded in the range 1.0625-1.0630. The euro pair then rose to levels around 1.0650, then to above 1.0660. This increase in the European session did not last and the pair dropped to levels around 1.0625. The euro may end the month slightly higher against the dollar, supported by signals from the European Central Bank about further interest rate hikes. ECB officials continue to point to a 50bps rate hike at its March 16 meeting as a deal done, with the market pricing in another 150bps hike by year-end GBP/USD The cable pair started trading at 1.2032 and held in the range of 1.2025-1.2040 in the Asian session. In the European session, the GBP/USD pair, as well as the EUR/USD pair, fell below 1.20, but rebounded and at the time of writing is at 1.2008. Sterling trading could be stable this week as it's hard to find a catalyst to break the currency out of recent ranges. Any further progress on the UK-EU deal to review post-Brexit trade arrangements in Northern Ireland is unlikely to be worth much more than pound sterling. AUD/USD The Australian pair started the week with a dip to the 0.6757 level and then fell to the 0.6743 level. After this decline, the AUD/USD pair rose to 0.6770 but failed to maintain momentum. The last hours of the Asian session for the Australian were in the range of 0.6750-0.6760. With the start of the European session, the AUD/USD pair began a decline, and at the time of writing it reached the level of 0.6728. The Australian dollar lost some of its gains Monday morning after the Chinese National People's Congress (NPC) released more conservative 2023 GDP forecasts. The forecast is currently at 5%, as opposed to the expected range of 5.5-6%, which could be disappointing for commodity-exporting countries like Australia, but a lower base could allow for a better chance of an upside surprise. Looking ahead, the Reserve Bank of Australia (RBA) will be in the spotlight tomorrow morning with its interest rate decision. The consensus is in favor of another 25 bp rate hike, which will be the 10th rate hike in a row by the central bank. This could cause the Australian dollar to find some support against the US dollar Source: investing.com, finance.yahoo.com
Hawkish Fed Minutes Spark US Market Decline to One-Month Lows on August 17, 2023

The Key Focus Will Be On How Powell Sees The US Labour Market

Michael Hewson Michael Hewson 07.03.2023 08:36
We saw a broadly positive start to the week yesterday, with the France CAC40 posting a new record high of 7,401, while the FTSE100 lagged over disappointment around China's GDP target for 2023. This disappointment weighed on the mining sector yesterday after China set its 2023 GDP target at a fairly modest 5%, pointing to weaker demand for commodities. This target, which is below last year's 5.5% target, suggests that the Chinese government is less likely to be as generous when it comes to helping to stimulate demand and economic activity. This focus on stability appears to be an acknowledgment that recent years have been far too generous and created areas of financial instability and that the focus now is a more conservative approach. Today's China trade numbers for February have seen a marked improvement in the wake of the sharp slowdown seen in the last 2 months of 2022, which saw the various rolling restrictions and lockdowns impact the Chinese economy markedly. In Q4 the Chinese economy stagnated to the tune of growth of 0%, equating to annual GDP growth of 3%. With today's trade numbers for the months of January and February covering the period over the Chinese New Year, we now have a better idea of how much the relaxation of lockdown restrictions may have unleashed pent-up demand, although they also come against a backdrop of the stronger comparatives of a year ago before the Omicron wave had taken hold. Today's numbers have seen exports slide by -6.8%, which was slightly better than expected, while imports slid by -10.2% which was more than expected. The Reserve Bank of Australia also raised rates as expected by 0.25% to 3.6%, as the central bank continues to navigate concerns about upending the mortgage market, against a backdrop of inflation that still looks very sticky. While the guidance was hawkish there was a slight softening bias suggesting the bank might be close to a pause, with the Australian dollar slipping back a touch. Today's main focus will be on the first day of testimony from Fed chairman Jay Powell to US lawmakers with questions likely to focus on the resilience of the US economy. There'll be the usual showboating by some US politicians who will want the Fed to go easy when it comes to future rate hikes, along with those who think the Fed has dropped the ball when it comes to inflation. The key focus will be on how Powell sees the US labour market, and whether the FOMC think that economic conditions have improved or deteriorated since the last Fed meeting. Markets will also be paying attention to whether Powell continues to peddle the same narrative of disinflation, which was a hallmark of his last press conference. If he acknowledges that inflation could be much stickier than the Fed thought over a month ago, that could prompt a pullback in US equity markets. What is notable is that while US equity markets have recovered to the same levels, they were at the time of the February Fed meeting, after another strong finish yesterday, bond yields are much higher, with the US 2-year yield over 80bps higher, which suggests that once again there is a disconnect between what bond markets are pricing on inflation, and what equity markets are pricing. Today's European open looks set to be a positive one on the back of yesterday's strong US close. On the currencies front the euro outperformed yesterday as more ECB policymakers touted the prospect of further multiple 50bps rate hikes in the aftermath of the expected 50bps hike that is due to be delivered next week. Austrian central bank governor Robert Holzmann said the ECB should do 50bps hikes in March, May, June, and July, potentially taking the main financing rate to 5%. These comments followed comments from ECB chief economist Philip Lane who also acknowledged the need for further hikes, beyond next week's meeting, stating that current high levels of inflation continue to be a concern for the ECB, and that core inflation momentum remains strong. EUR/USD – continues to range trade between the recent peaks around the 1.0700 area and above trend line support from the recent 1.0530 lows. We need to push through the 50-day SMA at 1.0730 to open up 1.0820. While below 1.0730, the bias remains for a test of the January lows at 1.0480/85.GBP/USD – continues to range trade between the 1.1920 area and the 200-day SMA, and the 50-day SMA at 1.2150 which remains a key resistance area. A break of 1.1900 retargets the 1.1830 area, while a break of the 1.2150 area is needed to retarget the 1.2300 area.EUR/GBP – retesting trend line resistance at 0.8900 from the January peaks last week. Above 0.8900 targets the 0.8980 area. We need to push below support at the 0.8820/30 area to retarget the 0.8780 area.USD/JPY – still below the 200-day SMA at 136.90/00 which is currently capping further gains. Support comes in at the 135.20 area. We also have interim support at 133.60. A break above 137.00 could see a move to 138.20. FTSE100 is expected to open 13 points higher at 7,943DAX is expected to open 17 points higher at 15,670CAC40 is expected to open 9 points higher at 7,382Email: marketcomment@cmcmarkets.comFollow CMC Markets on Twitter: @cmcmarketsFollow Michael Hewson (Chief Market Analyst) on Twitter: @mhewson_CMC
The RBA Raised The Rates By 25bp As Expected

The RBA Raised The Rates By 25bp As Expected

Ipek Ozkardeskaya Ipek Ozkardeskaya 07.03.2023 08:40
The week started with worries that China setting its growth target to 5%, a meagre target for a post-pandemic kick-off, could mean a slower global growth ahead.   Today, the latest, and mixed trade figures further raised a couple of eyebrows regarding whether we are expecting too much from China. The decline in Chinese exports was less dramatic than expected, but imports fell more than 10% in February from a year ago.     Nasdaq's Golden China Dragon index kicked off the week down, while the S&P500 was better bid at the open, with gains up to 1%. But the gains melted to the close and all three major US indices closed Monday's session flat to very slightly positive. Still the S&P500 is heading to Powell's semi-annual testimony above the 4000 mark.   Today, all eyes and all ears are on  Federal Reserve (Fed) Chair Jerome Powell and what he thinks about the latest set of economic data.   Since the latest FOMC meeting, we saw a blowout NFP number, an uptick in inflation figures, lower-than-expected decline in the S&P500 earnings, and overall encouraging economic activity data.   And that's a problem. The fact that the US jobs market, or economic activity don't react to higher Fed rates is a problem for Fed, because it makes the Fed's arms less efficient for fighting against inflation. Many would argue that changes in rates take time to filter into the economy but the Fed's tightening campaign began in November 2021 - 17 months ago, the rate hikes began roughly a year ago. It's about time we start seeing the impact of higher rates through data.   Alas, half-a-million NFP read, with the lowest unemployment rate of the past half a decade and uptick in inflation are indeed worrying.  US crude above 100-DMA  Disenchanting growth target from China was expected to keep the oil bears in charge of the market, but the 100-DMA got surprisingly cleared to the upside yesterday.   Warning of tight global supply and rising Chinese demand from CERAWeek conference and Estonian foreign minister's idea that the EU should halve the Russian oil cap helped pushing the price of a barrel above the critical 100-DMA level.   Tight global supply, war, sanctions on Russia oil and the rising Chinese and global demand tilt the balance for higher oil prices in the medium run. But higher energy prices mean higher inflation, and higher inflation means tighter monetary policies which, in return, increase the global recession odds, and could weigh on oil prices.   Elsewhere  The Reserve Bank of Australia (RBA) raised the rates by 25bp as expected and said that there could be more rate hikes on the pipeline depending on the data, but the AUDUSD slipped below 67 cents.   The EURUSD extended gains and flirted with the 1.07 mark yesterday on the back of a surprisingly softer US dollar into Powell's testimony.   Gold sold off into the $1860 mark.   Hawkish Powell could reverse losses in the dollar later today. 
Sharp drop in Canadian inflation suggests rates have peaked

The Divergent Fed-Boc Policy Outlook Suggests That The Path Of Least Resistance For The Loonie Prices Is To The Upside

TeleTrade Comments TeleTrade Comments 07.03.2023 09:05
USD/CAD extends its sideways consolidative price moves through the early European session. Bullish Oil prices underpin the Loonie and act as a headwind amid a modest USD weakness. The downside remains cushioned ahead of Fed Chair Jerome Powell’s semi-annual testimony. The USD/CAD pair continues with its struggle to gain any meaningful traction on Tuesday and remains confined in a familiar trading range around the 1.3600 mark through the early European session. The latest optimism over a fuel demand recovery in China pushes Crude Oil prices to the highest level since last January, which, in turn, underpins the commodity-linked Loonie. Apart from this, a generally positive risk tone is seen weighing on the safe-haven US Dollar and acting as a headwind for the USD/CAD pair. The downside, however, remains cushioned as traders seem reluctant to place aggressive bets ahead of this week's key event/data risks and await a fresh catalyst before positioning for the next leg of a directional move. Tuesday's key focus will be on Fed Chair Jerome Powell's semi-annual congressional testimony, which will be looked upon for clues about the future rate-hike path amid bets for a 50 bps lift-off at the March FOMC meeting. The expectations were lifted by the incoming US macro data, which indicated that inflation isn't coming down quite as fast as hoped and pointed to an economy that remains resilient despite rapidly rising borrowing costs. Adding to this, a slew of FOMC policymakers recently backed the case for higher rate hikes. In contrast, the Bank of Canada (BoC) had signalled in January a likely pause in its tightening cycle and is now expected to leave rates unchanged at the upcoming policy meeting on Wednesday. This will be followed by the monthly employment details from Canada and the US (NFP), which should help determine the near-term trajectory for the USD/CAD pair. Nevertheless, the divergent Fed-BoC policy outlook suggests that the path of least resistance for spot prices is to the upside and any meaningful dip is likely to get bought into.
BRICS Summit's Expansion Discussion: Impact on De-dollarisation Speed

Fed Chair Powell Will Begin His Two-Day Testimony

Saxo Bank Saxo Bank 07.03.2023 09:11
Summary:  As the market awaits Powell’s testimony to Congress and jobs figures, the stock market ran out of puff, with the Nasdaq 100 closing slightly in the black and the S&P500 nudging further above its 50-day moving average. The Australia dollar is in danger, of hitting 0.67, but could the RBA’s decision today avert its course? Meanwhile the EUR is higher on a hawkish ECB. Gold’s next move hinges on Powell’s testimony which kicks off today. And why CATL’s results could have ripple effects, along with a TikTok ban.   What’s happening in markets? Mixed start to the week for the Nasdaq 100 (NAS100.I) and S&P 500 (US500.I)  As the market awaits Powell’s testimony to Congress and jobs figures, the stock market ran out of puff, with the Nasdaq 100 closing slightly in the black and the S&P500 nudging further above its 50-day moving average. Six S&P500 sectors rose, while five closed in the red. Apple shares were a standout, rising 1.9% after a US investment bank initiated a “Buy” on the company. Meanwhile, Tesla shares fell about 2% after its Model S and Model X prices were slashed for the second time this year, after lithium price retreated. Meanwhile, Meta shares fell about 0.2% despite the TikTok potential ban gaining momentum in the US - with several countries in Europe considering the same thing. US Treasuries pared early gains in an uneventful session With a light economic calendar and ahead of Fed Chair Powell’s testimony at the Senate Banking Committee, Treasuries took clues across the pond from German Bunds and were pressured in the afternoon after ECB’s Holzmann signalled potentially four or more 50bp rate hikes in the Eurozone. Hedging flows also weighed on Treasuries as corporate supply picked up with around USD 17 billion in new issues. Th e 10-year pared early gains to finish at 3.96%, 1bp higher in yield.  Hang Seng Index and China’s CSI 300 oscillated on a modest Government Work Report The Hong Kong stock market experienced a mixed session as investors digested the economic targets set in China’s Government Work Report, which came in with a modest GDP target set at around 5%. Hang Seng Index (HSI.I) managed to finish 0.2% higher with Chinese SOE names in the telecommunication outperforming as China is accelerating the construction of 5G infrastructure and development of 6G. China Tower (00788) surged 7.9% and China Mobile (00941:xhkg) gained 3.2%. Chinese property developers were laggards during the session following the Government Work Report emphasized again “housing is nor living in, not for speculation” and warned against the “disorderly expansion of capital” of property developers. China Merchant Bank (03698:xhkg) plunged 4.2% on its high exposure to the Chinese housing sector.  In A-shares, CSI300 retreated 0.5%. Property developers, coal mining, and financials were the top losers while telecommunication, solar energy, and tourism advanced. Australian equities are on edge, awaiting the RBA’s decision and commentary The RBA is expected to hike interest rates for the 10th straight time today, with a 25bps hike expected, which will likely impact forward earnings of Australia’s consumer discretionary, tech and real estate sectors. The RBA’s rate hikes mount despite, bellwethers, such as Commonwealth Bank of Australia, flagging that some households are likely remain under duress this year  - amid inflation and rising interest rate pressures – with Australia’s biggest bank putting aside a capital cushion for bad debts provisions and delinquencies. Philip Lowe’s guidance for further tightening will be on watch, especially as the last several economic readings have been weak. Interest rate futures suggest rates will peak at 4.1% in September, with no rate cuts this year. The Aussie dollar could notch fresh YTD lows, but if RBA is more aggressive than expected, the Aussie dollar (AUDUSD) could knee-jerk higher.  FX: AUDUSD is close sight of 0.67 ahead of RBA; EUR higher on hawkish ECB The USD started the week on the backfoot before equity markets got jittery about Powell’s speech later today. A soft GDP target out of China however weighed on AUD, with AUDUSD hitting a low of 0.6717. The AUD is now down 6.5% from its Feb 2 high. The RBA meets today with another 25bps rate hike expected, although focus will be more on Lowe’s comments on the path of interest rates from here. NZDUSD was also pushed lower to 0.6173. EURUSD however pushed above 1.0680 on hawkish ECB chatter (read below). Swiss inflation data came in hotter than expected at 3.4% YoY for February from 3.1% exp and 3.3% previous. USDCHF pushed lower to test the 0.93 handle while EURCHF wobbled.  Crude oil trades flat  The oil price is steady at just over $80 amid CERAWeek - the world's premier energy conference. Commentary made alluded to a pickup in demand, while supply remains somewhat restricted. It was said at the conference that 75% of global oil demand growth will come from China this year, while companies such as Chevon are working on options to export natural gas to Europe this year. Meanwhile, Estonia called for the EU to halve the $60 price cap on Russian oil this month. And US natural gas plunged on forecasts for milder-than-expected weather.  Gold eying Powell’s testimony Gold (XAUUSD) prices inched up to their highest levels since mid-February on Monday before a reversal from the peak at $1858 to 21-DMA at $1844 in the Asian morning today as caution on Fed Chair Powell’s testimony today starts to set in. The surge higher earlier came despite China’s modest growth target and risk of more rate hikes from the Federal Reserve. However, it must be noted that the recent rise in yields has come with higher breakeven inflation as well, suggesting that the market is now looking at inflation to settle higher in the medium-term. This has kept real yields under pressure, supporting the yellow metal. For the recovery to stay intact, however, support at 200DMA of $1840 and the last week’s low of $1805 will be eyed.    What to consider?   Powell’s testimony kicks off today Fed Chair Powell will begin his two-day testimony before the Senate and the House committees today. Over the last few weeks, data out of the US has been far more resilient than expected, fueling bets that the Fed will have to raise rates beyond what was communicated earlier and rates will stay elevated for longer as well. Most Fed members have also sounded hawkish, raising the prospect of a shift higher in March dot plot. If a similar message is conveyed by Chair Powell, we could see US Treasury yields getting above critical levels and USD reversing back to an uptrend.  Hawkish ECB chatter supporting EUR ECB’s Holzmann called for interest rates to be raised by 50bps at each of the next four meetings, and suggested a restrictive policy rate would start from ~4%. President Lagarde and Chief Economist Lane were also on the wires suggesting more rate hikes as well. One of the investment banks, as a result, came out with a terminal rate forecast of 4.25% in wake of Holzmann's remarks, and this led to a drop in EU bonds and a surge higher in EUR crosses.  Why CATL’s results could have ripple effects  CATL, the world’s largest battery maker - and Tesla’s battery supplier - reports results on Thursday. It’s expected to report revenue growth of over 80%. However, there is room for a positive surprise - given strong battery and energy storage demand. CATL is also expanding overseas - teaming up with Ford to build a battery manufacturing plant in Michigan, which we will hopefully get details on. As for its outlook - we expect it to be strong, as CATL’s increased its war chest, after selling its $856 million stake in Australia’s biggest lithium company, Pilbara Minerals. We also think guidance could be upgraded - given auto sales in China are expected to rise in 2023, following years of lockdowns. CATL outlook’s will be closely watched by not only EV makers - but also by EV investors – as they could give a gauge on how much car maker’s battery costs could rise.  TikTok ban making progress in the US  Senate Intelligence Committee Chairman Mark Warner is set to unveil a bill Tuesday that would allow the US to ban the popular video-sharing app TikTok and other Chinese technology. He said that the law will give the US the power to ban or prohibit foreign technology where necessary, considering companies like TikTok do not keep American data safely and is also a propaganda tool. US tech stocks Snap (+9%), Alphabet (+1.6%) and Pinterest (+1%) rallied on reports. Iron ore majors face rising volatility    China’s top economic body, the NDRC held a meeting with some industry experts over potential measures to curb iron ore price rises. The iron ore price has risen 62% from its October low - amid rising demand from China, and expectations this will continue - while supply remains tight. It’s not the first-time accusations have come from China. But this time - its allegedly some in the industry are calling on the Chinese government to tighten futures and spot markets oversight and punish those for hoarding and price gouging.  BHP and Rio make over 50% of their annual revenue from iron ore, Fortescue makes about 90%. Shares in Fortescue are trading lower for the third day, while BHP trades 2.3% lower at A$47.27, and Rio Tinto has fallen for the second session, losing 2%. Be mindful, BHP and Rio go ex-dividend on March 9. For potential implications on ex-dividends, click here.   Trip.com beats estimates Trip.com beat revenue and EPS forecasts as it reported Q4 results yesterday, fueling more weight to the case for the upcoming surge in Chinese outbound travel demand. We had launched the APAC tourism basket to get exposure to this trend, and Trip.com is also included in this basket. Trip.com reported revenue of $729mn (vs. $709mn expected) and EPS of 11 cents (vs. loss of 3 cents expected).   Corporate calendar to watch, including results and companies going ex-dividend   On Tuesday March 7, CrowdStrike (CRWD) reports results well as Darktrace (DARK) its peer. Ashtead Group, Sea Ltd, Ferguson also report.  On Wednesday March 8, Adidas (AD) and Campbell Soup (CPB) are due to report results, along with Ping An Bank, Thales, Geberit. Woodside (WDS) goes ex dividend.  On Thursday March 9, CATL (300750) is due to release results, as well as Jd.com (JD) and Deutsche Post. BHP (BHP) and Rio Tinto (RIO) go ex dividend, along with CSL (CSL), Occidental (OXY) and eBay (EBAY).  On Friday March 10, Oracle (ORCL), DocuSign (DOCU), Daimer Truck, AIA Group, and  DiDi Global are due to report.   For what to watch in the markets this week – read or watch our Saxo Spotlight. For our short black style Week Ahead – read or watch The Week Ahead.For a global look at markets – tune into our Podcast.   Source: Global Market Quick Take: Asia – March 7, 2023 | Saxo Group (home.saxo)
Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

The RBA Hiked The Rates To 3.6%, ECB’s Holzmann Called For Interest Rates To Be Raised By 50bps

Saxo Bank Saxo Bank 07.03.2023 09:13
Summary:  The snapback rally in equities extended and then faded yesterday, a mirror-image of the action in treasury yields, which failed to hold an extension lower. Oil rebounded and the gold rally faded. In Australia overnight, the Reserve Bank of Australia hiked as most expected, but signaled it would like to pause the tightening regime soon, triggering a sharp slide in the Aussie. Today, Fed Chair Powell will testify on the economy and monetary policy before a Senate panel. What is our trading focus? US equities (US500.I and USNAS100.I): US equity momentum extends US equities gained slightly yesterday with S&P 500 futures closing at 4,052 after trading as high as 4,082 intraday. This morning in early European trading hours S&P 500 futures are extending their gains as the US 10-year yield continues to push lower lifting overall sentiment. During yesterday’s session social media stocks such as Meta, Pinterest, Snap, and Alphabet were rallying as TikTok bans across the US and Europe are gaining traction. The earnings and macro calendars are light today so the only market moving event is Fed Chair Powell’s speech later today at 1500 GMT. Hang Seng Index and CSI 300: rally fades on Sino-American tensions After follow-through rallies in state-owned enterprises in Hong Kong and mainland bourses in the telecommunication and energy space in the morning, the Hang Seng Index and CSI 300 lost steam and turned south, losing 0.7% and 1.2% as of writing. In a press conference on the side-line of the Two Sessions, China’s Foreign Minister Qin Gang reiterated the “China-Russia comprehensive strategic partnership of coordination for a new era” and downplayed Russia’s invasion into Ukraine to that the “Ukraine crisis has complex historical fabrics and practical reasons with the underlying nature being the eruption of the conflicts in the security governance of Europe”. The pro-Russian stance, as opposed to the more conciliatory-leaning stance in recent months toward the West, added to investors’ concern over the Sino-American relationship. FX: AUD in the dumps on dovish RBA, EUR firm The US dollar is not the focus at the moment as the market awaits further signals from Fed Chair Powell today and tomorrow in his two days of testimony before Congressional panels. The euro is firm on hawkish rhetoric from the ECB (more below) that has the market pricing more than 150 basis points of further tightening this year. Elsewhere, the Aussie weakened sharply as the statement overnight suggested the RBA is looking for excuses to pause its tightening regime – more on that below. The JPY trades passively as we await a pivotal Bank of Japan meeting on Friday, Governor Kuroda’s final meeting before he leaves office in early April. Crude oil climbs to a five-week high Cude oil trades higher for a sixth session amid a broader rally in stocks and a softer dollar. The market will keep an eye on comments from oil insiders, currently meeting in Houston at the annual CERAWeek, one of the world's premier energy conferences. Commentary made alluded to a pickup in demand, while supply remains somewhat restricted. It was said at the conference that 75% of global oil demand growth will come from China this year. Meanwhile, Estonia called for the EU to halve the $60 price cap on Russian oil this month. Overall, crude oil remains rangebound with Brent currently stuck between $81 and $87. US natural gas plunged on forecasts for milder-than-expected weather, and in just two trading sessions it gave back almost half the 53% gain achieved during the prior two weeks. Gold eying Powell’s testimony Gold (XAUUSD) hit a five-week high on Monday at $1858 before reversing lower overnight to test support around the 21-DMA at $1844. Together with US real yields reversing higher following last week’s drop when inflation expectations moved higher, the market sentiment is becoming a bit more cautious ahead of testimonies on Capitol Hill from Fed Chair Powell today and tomorrow. However, with the market currently pricing in a terminal Fed fund rate around 5.5%, any weakness in incoming data – the next major being Friday’s job report – may add further support. For the current recovery to become more than just a bounce, the price as a minimum need to break above $1864, the 38.2% of the February drop. US wheat drops below $7/bu as market awaits monthly supply/demand report The Chicago benchmark wheat contract (ZWc1) dropped below $7 a bushel on Monday for the first time in 17 months, pressured by adequate global supplies, especially from Russia, and optimism a deal can be reached to extend the UN-brokered Ukraine grain corridor deal when the current deal expires later this month. Ukraine’s grain exports are down 26.6% at 32.9 million tonnes in the 2022/23 season so far. Meanwhile, the Australian Bureau of Agricultural and Resource Economics raised its estimate of its 2022/23 wheat harvest by 2.6 million tons to a record 39.2 million tons. Traders now look ahead to USDA’s monthly supply and demand report (WASDE) on Wednesday, in which the main change is expected to be another sizable drop in Argentine’s soybean and corn harvests following a troubled crop year hit by droughts and excessive heat. US Treasury yields (TLT:Xmas, IEF:xnas, SHY:xnas) close near unchanged after probe lower The US 10-year yield extended to below 3.90% at one point yesterday before resistance came in and yields rebounded to unchanged near 3.95% ahead of two days of testimony from Fed Chair Powell today, although yields may pay more attention to the February US jobs report this Friday and CPI next Tuesday as Powell may bring little new to the table in his semi-annual testimony today, which is often more about the political theatre of the Congressional politicians. What is going on? Dovish hike from the RBA, which guides for a tightening pause The RBA hiked by 25bps as expected to 3.6%, with the RBA seeing further tightening ahead. But a small change of phrase positioned this as a dovish hike and an RBA that may be seeking to pause its hiking regime at coming meetings. In the guidance on further tightening, February’s “In assessing how much further interest rates need to increase”, was changed in March to “In assessing when and how much further interest rates need to increase”, with the introduction of “when” a tip-off that the RBA is hoping to pause. Australia’s 2-year yield dropped some 14 basis points as the implied Australian cash rate this year peak fell from 4.1% to 4%. The RBA is concerned both that services inflation remains too high, but also that the lag effects of interest rates had not yet been felt in full by mortgage holders. AUDUSD erasing its intraday gain and slid into the red to below 0.6700 at one point. Hawkish ECB chatter supporting EUR ECB’s Holzmann called for interest rates to be raised by 50bps at each of the next four meetings, and suggested a restrictive policy rate would start from ~4%. President Lagarde and Chief Economist Lane were also on the wires suggesting more rate hikes as well. One of the investment banks, as a result, came out with a terminal rate forecast of 4.25% in wake of Holzmann's remarks, and this led to a drop in EU bonds and a surge higher in EUR crosses. HelloFresh slips 9% in pre-market trading The world’s largest meal-kit provider reports Q4 revenue of €1.87bn vs €1.92bn ahead of the European equity session and EBITDA of €160mn vs est. €137mn. HelloFresh is guiding FY23 EBITDA of €460-540mn vs est. €543mn. Investors are not impressed by these figures sending the shares down 9% in pre-market trading. TikTok ban making progress in the US Senate Intelligence Committee Chairman Mark Warner is set to unveil a bill Tuesday that would allow the US to ban the popular video-sharing app TikTok and other Chinese technology. He said that the law will give the US the power to ban or prohibit foreign technology where necessary, considering companies like TikTok do not keep American data safely and is also a propaganda tool. US tech stocks Snap (+9%), Alphabet (+1.6%) and Pinterest (+1%) rallied on reports. Similar TikTok bans are sweeping through the continent of Europe with the EU parliament banning TikTok across three institutions and other EU members are considering national bans. Trip.com beats estimates Trip.com beat revenue and EPS forecasts as it reported Q4 results yesterday, fuelling more weight to the case for the upcoming surge in Chinese outbound travel demand. We had launched the APAC tourism basket to get exposure to this trend, and Trip.com is also included in this basket. Trip.com reported revenue of $729mn (vs. $709mn expected) and EPS of 11 cents (vs. loss of 3 cents expected). What are we watching next? Powell’s testimony kicks off today Fed Chair Powell will begin his two-day testimony today before Congress, beginning with a session before the Senate Banking panel today. Over the last few weeks, data out of the US has been far more resilient than expected, fueling bets that the Fed will have to raise rates beyond what was communicated earlier and rates will stay elevated for longer as well. Most Fed members have also sounded hawkish, raising the prospect of a shift higher in March dot plot. If a similar message is conveyed by Chair Powell, we could see US Treasury yields rising again and the USD reversing back to an uptrend. Earnings to watch Today’s key earnings release is Crowdstrike expected to report FY23 Q4 (ending 31 Jan) results after the US market close. Analysts expect revenue of $625mn up 45% y/y and EBITDA of $113mn up from $7mn a year ago. Crowdstrike is expected to remain optimistic on its outlook as demand overall for cyber security solutions remain strong. It recent partnership with Dell Technologies provides additional exposure to on-premise workloads and should help on the outlook. Tuesday: Ashtead Group, Sea Ltd, Ferguson, Crowdstrike Wednesday: Ping An Bank, Thales, Adidas, Geberit Thursday: CATL, Deutsche Post, JD.com Friday: Daimer Truck, AIA Group, Oracle, DiDi Global Economic calendar highlights for today (times GMT) 1500 – US Fed Chair Powell before Senate Banking Panel 1700 – EIA's Short-term Energy Outlook (STEO) 1730 – Switzerland SNB President Jordan to speak 1800 – US Treasury to sell 3-year Notes 2130 – API's Weekly Crude and Fuel Stock Report 2155 – Australia RBA’s Lowe to speak   Source: Global Market Quick Take: Europe – March 7, 2023 | Saxo Group (home.saxo)
Australian dollar - the sharp drop can be attributed to technical factors and hawkish Fed

RBA hikes, Aussie Falls, Chinese Stocks Under Pressure

Swissquote Bank Swissquote Bank 07.03.2023 10:46
Disenchanting growth target from China was expected to keep the oil bears in charge of the market, but the 100-DMA got surprisingly cleared to the upside yesterday. Forex Stocks closed flat and the dollar softened. The Aussie fell after the Reserve Bank of Australia (RBA) announced 25bp hike and the EURUSD flirted with the 1.07 mark. Fed Today, all eyes and all ears are on Federal Reserve (Fed) Chair Jerome Powell and what he thinks about the latest set of economic data. Since the latest FOMC meeting, we saw a blowout NFP number, an uptick in inflation figures, lower-than-expected decline in the S&P500 earnings, and overall encouraging economic activity data. The S&P500 is above 4000 into Powell’s testimony, and the dollar is soft. Could Jay Powell reverse that? Watch the full episode to find out more! 0:00 Intro 0:38 Chinese stocks under pressure, US stocks zen pre-Powell 3:02 Powell will sound hawkish but investors may chose not to listen 6:24 US crude clears 100-DMA resistance 9:00 FX update: RBA hikes, Aussie falls, dollar bulls in retreat Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Fed #Powell #testimony #inflation #jobs #economic #data #China #growth #target #energy #crude #oil #RBA #rate #decision #USD #AUD #EUR #XAU #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH      
All Eyes On Capitol Hill, Jerome Powell Will Appear Before The Senate Banking Committee

All Eyes On Capitol Hill, Jerome Powell Will Appear Before The Senate Banking Committee

Kenny Fisher Kenny Fisher 07.03.2023 10:56
It’s shaping up to be another relatively flat day in the markets as investors turn their attention to Capitol Hill ahead of Jerome Powell’s first testimony. The Fed Chair will appear before the Senate Banking Committee later today to testify on the semi-annual monetary policy report. These events naturally attract a lot of attention but the reality is the Chair’s performance is usually quite polished and uncontroversial, and the occasion itself can drag on and frequently venture away from topic. In other words, we shouldn’t assume we’re about to get fireworks from Powell. What may make this occasion different is the fact that there’s so much uncertainty around the outlook for interest rates and inflation. While the Fed has maintained that rate hikes must continue, the economic data from January has forced markets to adjust to that reality too so there’s every chance we get a hawkish offensive from Powell. Considering the likelihood of the January data being a blip rather than a trend, I think it would probably be wiser for Powell to maintain his previous tone as he may risk spooking the markets but if the FOMC truly is weighing up a 50 basis point hike this month, this would be a good opportunity to lay the groundwork for it. Nearing the end The RBA appeared to soften its tone once more after hiking rates by another 25 basis points today. The central bank is now of the opinion that inflation has peaked and so multiple rate hikes may no longer be the base case. That said, the RBA will decide meeting by meeting and a lot can change in between. Markets are now pricing in at least one more hike in the cycle and maybe two. The Australian dollar is a little lower on the day as the decision was perceived to be a dovish hike. Some promising signs Chinese trade data highlighted some modest improvements but remain quite weak overall. The drop in imports can possibly be attributed to some one-off factors including Covid exit waves and the Lunar New Year and the data will surely improve over the coming months as the economy returns to normal. Exports remained under pressure, although the number was better than expected, indicating still soft global demand which aligns with what we’ve seen recently elsewhere. Hanging on in there Bitcoin has been in consolidation since Friday’s sell-off with traders seemingly fearful of further ripple effects but still willing to hang on for now just in case. It’s been a fantastic year for crypto so far but events late last week were a quick reminder of the challenges facing the industry in the short term and the consequences of that. There’ll also be an eye on Powell’s testimony today as it may influence overall risk appetite in the markets. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
Assessing 'Significant Upside Risks to Inflation': Insights from FOMC Minutes

Saxo Bank Podcast: RBA announced a dovish hike, Fed Chair Powell testimony starting today

Saxo Bank Saxo Bank 07.03.2023 11:40
Summary:  Today we look at the choppy equity market failing to extend the upside momentum for now as we triangulate mid-range ahead of a series of event risks, among these two days of Fed Chair Powell testimony starting today. Overnight, Australia's RBA announced a dovish hike, clearly looking for excuses to pause its tightening regime - is this a policy mistake in the making? We also look at evidence on what may have driven China's about-face on stimulating its economy, crude oil, natgas and wheat & other grain markets and much more. Today's pod features Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.  
Is Gold Ready to Shine Again? US CPI and Fed Policy Insights

Gold Is Consolidating As Investors Await Any Signs Over How Much More Restrictive Fed Policy Will Become

Ed Moya Ed Moya 07.03.2023 14:20
US stocks are slightly higher ahead of Fed Chair Powell’s Congressional testimony.  Everyone is expecting Fed Chair Powell to deliver his best hits of ‘we have more work to do’ and ‘higher for longer’.  Powell might not commit how much higher rates will go, but he will keep the door open for the Fed’s dot plots to move higher.  Lawmakers will argue that we don’t need to see a recession to bring inflation back to target.  Powell will likely signal that Americans could see economic pain later this year. Powell will most likely stay hawkish given how high inflation remains and the strength of the labor market.    Biden This week, Wall Street is expecting to get President Biden’s budget proposal for fiscal 2024. This morning, President Biden’s op-ed in the NY Times gave a sample of what he will be proposing.  He noted that, “my budget proposes to increase the Medicare tax rate on earned and unearned income above $400,000 to 5% from 3.8%.” He is aiming to keep the Medicare trust fund solvent beyond 2050.  This is just the beginning of budget negotiations as House Republicans will not get on board with this first pitch.  RBA The RBA did not surprise after raising its cash rate target by 25bps to 3.60%.  The RBA is nearing the end of its tightening cycle as they removed the language about hikes in the coming months. Australia doesn’t have the same wage pressures that the US has and that is why they believe inflation has peaked and that further hikes will be data dependent.  The RBA’s dovish hike sent the Australian dollar lower by 0.9% against the US dollar.  EUR After a day to digest ECB’s Holzmann case for four half-point rises, ECB hike odds continue to rise. It looks like no one wants to listen to doves, especially considering we keep seeing core CPI make fresh record highs.  Holzmann argued for 50bps point rises in March, May, June and July, with restrictive policy starting at 4.00%.  Nomura bumped up their ECB forecast from 3.50% to 4.25%.  Earlier in the week, Morgan Stanley increased their ECB forecast to 4.00%.  Dovish ECB member Lane argued against having policy on ‘autopilot’, emphasizing that it should not be on autopilot, but stay data dependent.     The euro could see some support once we get beyond Fed Chair Powell’s testimony and Friday’s nonfarm payroll report.  Oil Crude prices are wavering ahead of Fed Chair Powell’s testimony to the US Senate. Oil has had a nice start to the month, but lingering demand concerns and further oil inventory increases should cap this rebound.  Oil looks like it might need to trade in a range a little longer until we have a clearer outlook for the US economy.  The debate over what type of recession will hit the US economy will not be answered in a couple of months time, so we might see conservative calls for demand to remain healthy over the short-term.  In the event, risk appetite runs wild following Fed Chair Powell’s Senate appearance, WTI crude should find major resistance at the $84.80 region.  Gold Ahead of Fed Chair Powell’s testimony to the Senate, gold is consolidating as investors await any signs over how much more restrictive Fed policy will become.  A strong bullish argument for holding bullion could be made as global central banks are growing confident peak tightening will soon be in place.  The RBA rate decision provided optimism that inflation may have peaked and that further tightening might not be needed if disinflation trends remain firmly in place.  Gold might benefit if the rest of the major central banks start delivering dovish hikes. Also providing a boost for gold is the steady demand it is seeing from China.  This current macro environment should lead to stronger central bank buying.  The focus for many is the steady buying by the PBOC and if the weaker dollar trade unfolds later this year, gold could shine.  Bitcoin Bitcoin remains anchored despite a potential weekly death cross pattern.  Bitcoin had a great start to the year, but since the middle of February prices have gradually softened.  Contagion risks from Silvergate Capital and hard landing fears are keeping cryptos heavy, but the key trading range of $21,000 to $25,500 continues to hold up.  Crypto traders are closely watching the bond market and if yields refuse to breakout higher, Bitcoin may remain in this trading range.    This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
Rates Spark: Bracing for more

Rates Spark: Upping the ante on policy rates

ING Economics ING Economics 08.03.2023 08:21
Chair Powell has sent a clear message: the Fed is back in the driving seat. At a very minimum, the Fed has given itself the option to deliver a 50bp hike from the March meeting. It's now discounted that way. Friday's payrolls is key though. So is next week's US CPI report. As that rate hike pendelum still has swing potential back to 25bp. It's all about the data... Powell gives the Fed a free option to up the pace to 50bp, if needed... The market has now re-priced to a 50bp hike from the March meeting. It's not fully discounted, but it's discounted enough to give the Federal Reserve the option to deliver 50bp if required. In the end it will be up to the data releases to come, and especially this Friday's payrolls report. The clearest remark made was that the labour market remains very tight, and ex-housing services sector inflation too high. These are related, as a material loosening in the labour market is likely required in order to mute services sector inflation. Expect volatility in the rate hike expectation for March to remain elevated though. It could just take a sub-150k payrolls outcome on Friday to swing the rate hike pendulum back towards a 25bp hike, especially if accompanied with some calming in wage inflation. Typically the Fed can have a heads up on some data releases ahead of time, and if that's the case here then a subdued payrolls outcome is less likely. But clearly this is a key number, and is followed by the February CPI report due on Tuesday of next week. The back end is continuing to resist the full extent of the Fed's message for the front end Financial conditions have not materially tightened though, partly as longer dated market rates did not rise in any material fashion. The 10yr briefly broke above 4% as a bit of an impact reaction, but then fell back below. Risk assets came under some pressure, putting some interest back into core duration buying. The curve in consequence hit a new cycle extreme for inversion, with the 2/10yr breaking through -100bp. The back end is continuing to resist the full extent of the Fed's message for the front end. We'd argue that this degree of inversion is being driven by longer-dated real yields being too low. If the US economy is as dynamic as is being portrayed, then a real yield in the 10yr at 1.6% is too low. A move up to the 2% area would make sense, offset by further falls in the 10yr inflation breakeven (now 2.4%). That combination would not need to push the 10yr above 4.25%, but it could or should certainly be moving in that direction if a 50bp hike is to be really justified on pure macro grounds. In the background the Fed will no doubt have noted the remarkable rise in the 2yr inflation breakeven, which was at 2% in mid-January and reached 3.4% before Chair Powell spoke. It's now at 3.25% – a step in the right direction. 2023 forwards show the Fed is reacting to strong US data, but 2024 forwards lag behind Source: Refinitiv, ING European rates also show central banks are back in charge On European curves too, there are signs that central banks are back in control. Ever since Holzmann has put successive 50bp hikes until July on the table, markets are behaving more like the European Central Bank will do what is necessary to get inflation under control. The most obvious evidence of this is the further flattening of the yield curve, pricing both an aggressive central bank but also the depressing medium-term impact on growth and inflation. No doubt the moves in the US and Europe are compounding each other but we note that, aroudn 2.70%, 10Y Bund yields are already 130bp below the expected terminal deposit rate in this cycle. 10Y Bund yields are already 130bp below the expected terminal deposit rate in this cycle Exhibit two is the reversal in inflation swaps so far this week. To be sure, a decline in long-term inflation expectations in the ECB’s consumer survey has helped, but we think this is a reflection of a more general view that, here too, central banks are back on their front foot. This means upside to both front and back end yields, but a hawkish ECB should also bring further curve inversion. Whether this view survives next week’s ECB meeting is another question. Its communication has sometimes confused markets and a wide range of opinions has been expressed in the run-up to the quiet period starting tomorrow. We are fond of saying that risk sentiment cannot ride the recovery wave forever, as more aggressive central banks will inevitably take their toll on valuations. There were signs of this message affecting risk assets yesterday but, in a way, a scenario where central banks keep their eyes on the road and only step off the brake when inflation is under control is the better outcome. The even worse alternative is one where inflation expectations continue to rise for a while with an even more drastic intervention down the line. EUR inflation swaps have stopped rising after hawkish ECB comments Source: Refinitiv, ING Today's events and market view Speeches by the ECB’s Lagarde and Panetta feature prominently on today’s calendar. Today is also the last day before the pre-meeting ‘quiet period’ kicks off, and so the last chance to manage market policy expectations before next week. Also on the topic of central bank commentary, Powell will conduct the second of his two-day Congressional testimony. His prepared statement will be the same as yesterday’s but questions and answers might shed more light on the Fed’s thinking. Bond supply will come from Germany (7Y) and Portugal (10Y/13Y) in Europe, and from the US (5Y). Last but not least, two US job market indicators will be released today: ADP employment, and job openings. The former isn’t rated very highly by our economists but can still move the market in case of significant deviation from the 200k consensus. Job openings are more relevant in our view. The rebound in late December is one of the key indicators that helped rates find a floor at the start of February but consensus is now for a decline. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Hawkish Fed Minutes Spark US Market Decline to One-Month Lows on August 17, 2023

Testimony From Fed Chair Powell Was Indeed Hawkish

Saxo Bank Saxo Bank 08.03.2023 08:35
Summary:  Powell’s testimony to the Congress started with a hawkish message. Market is now tilting in favor of a 50bps Fed rate hike this month and a terminal rate expectation of over 5.6%. Friday’s jobs data and next Tuesday’s CPI print will be key tests for whether a 50bps March rate hike gets cemented, but what is clear is that Powell’s shift to disinflation narrative in February was premature. Risk assets may remain under pressure if data stays hot, while the path of least resistance for the dollar is higher. Powell’s credibility at risk The semi-annual testimony from Fed Chair Powell was indeed hawkish, despite a political stage being set up. Instead of being relieved by incoming growth indicators, Powell still seemed worried about inflation despite his relaxed stance at the February FOMC meeting where he started the chatter on disinflation. Powell increased the prospect of a return to larger rate hikes, saying, “If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes”. The resulting increase in the probability of a 50bps rate hike at the March 22 FOMC meeting is shown in the chart below. He also added that with the latest economic data having “come in stronger than expected”, it “suggests that the ultimate level of interest rates is likely to be higher than previously anticipated”. This change in stance, after just one month of strong data, is proof that Powell took comfort in disinflation prematurely. High stakes for the next set of data The reaction to Powell’s testimony remains at risk of reversal, unless upcoming data supports it. Friday’s jobs report or next Tuesday inflation print will be key to watch to make or break the expectations of a 50bps rate hike in March. Hotter-than-expected prints can also bring the terminal rate pricing closer to the 6% mark, making the Fed’s lag to the market ugly. Moreover, shifting to a 50bps rate hike after just one go at the 25bps rate hike pace will be an embarrassment for Fed and its models. Bloomberg consensus expectations point to another strong jobs report after the blowout report of January. Headline jobs are expected to come in again at 200k+, but risk of disappointment remains given the scope of correction from +517k in January. The unemployment rate is expected to remain unchanged at 3.4%, while wage growth is projected to accelerate. Most early indicators such as the business surveys from S&P pointed to an acceleration in hiring, while applications for unemployment benefits remained historically low. Overall message, despite a potentially softer headline print, is likely to be that US labor market is still tight and there are millions of open positions even as layoffs continue to ramp up in some of the sectors. Risky assets to remain under pressure Along with a higher probability of a 50bps rate hike in March, the shift in tone from Powell has also seen the terminal rate pricing for the Fed Funds target rate to rise to 5.65% from 4.9% at the end of 2022 and the 5-5.25% hinted in the December dot plot. A brutal sell off in Treasuries followed the remarks, with the yield on 2-year Treasuries rising over 12bps to over 5% for the first time since July 2007 and rising further to 5.05% in Asian session. The longer end of the curve, however, recovered from their intraday lows with the 10-year yield closing only 1bp cheaper at 3.96% and the 30-year yield 2bps richer at 3.87%. This made the 2-10-year yield curve flatten to -105bps, the deepest inversion since September 1981. But something seems amiss with the higher-for-longer message not moving the 10-year yields. Either the 10-year yield will need to move higher or the 2-year will need to revert back lower to give a consistent message. This means higher interest rate volatility will remain in the cards, also suggesting higher risk premium for equities. This keeps diversification beyond US equities in favor. We expect European and Asian equities to outperform this year. China also appears poised for an upswing in growth as economic momentum picks up, but the recovery can remain bumpy in light of regulatory and geopolitical risks. Dollar’s path of least resistance is higher The US dollar is now back at its YTD high with potential for another leg higher after a minor correction. For the DXY index, key levels to watch are the 200DMA and 76.4% retracement at 106.45. The dollar is benefitting from a host of tailwinds including: elevated short-end rates a restrained rise in long-end yields suggesting a bid for safety China’s lower-than-expected growth target for 2023 dovish turns from some central banks such as RBA, and BOC likely to pause this week excessive pricing in for ECB and BOE rates remaining at risk of a correction Even if the Fed was to go for a 25bps rate hike again at the March meeting, there is enough reason to believe that that the dot plot will shift higher. That will also be sufficient for the USD to stick to its current range. Source: Saxo   Source: Macro Insights: Bumpy inflation or bumpy Powell? | Saxo Group (home.saxo)
The ECB's Rate Hike: EUR/USD Rally in Question

Adidas Shares Are Down 3%, Gold And Silver Slumped

Saxo Bank Saxo Bank 08.03.2023 09:33
Summary:  Equity markets sold off steeply on a hawkish Fed Chair Powell, who testified before a Senate panel yesterday, and said that the Fed is willing to consider larger hikes again. Market pricing of peak Fed rates rose above 5.6% as the market now leans for a 50 basis point hike at the March 22 meeting. The US dollar was particularly reactive to Powell’s testimony, jumping to aggressive new highs for the cycle across the board. What is our trading focus? US equities (US500.I and USNAS100.I): fresh hawkish pivot from Powell reverses rally US equities turned sharply south yesterday on a hawkish pivot from Fed Chair Powell as he is clearly not comfortable with the most recent data. This took the 2-year rate above 5% for the first time in over 15 years and reversed the recent market rally, taking the S&P 500 back below the 4,000 level, though with some ways to go before the 200-day moving average comes into view just below 3,950. The Nasdaq 100 likewise reversed course, but is far more elevated relative to recent lows and the 200-day moving average – with the cash index trading 12,150, some 250 points above the moving average. Incoming US data and its impact on Fed expectations and especially longer yields will be key through next Tuesday’s US February CPI data. Hang Seng Index and CSI 300 declined on regulatory overhaul and US rates outlook Hang Seng Index dropped by 2.7% and the Hang Seng TECH Index plunged by nearly 4%. EV and China Internet stocks led the charge lower. In A-shares, CSI300 slid nearly 1%. On top of the tighter U.S. interest rate outlook stemming from Fed Chain’s Powell’s testimony, the establishment of the National Financial Regulation Bureau and the National Data Bureau and the consolidation of power around them may have stirred up concerns about uncertainty in the mind of investors about the regulatory trend on areas such as mobile payment and e-platform data.  FX: USD rips higher on hawkish Powell. CAD in focus on Bank of Canada meet today With Powell’s hawkish remarks, 2-year Treasury yields jumped some 13 basis points to close above 5% for the first time since 2007 and the USD rushed to fresh YTD highs. AUD and NZD were hurt by the deterioration in risk sentiment, with the former also pressured by a dovish turn from the RBA. Widening yield differential between US and Japan weighed on the yen, and USDJPY pierced above 137.50 in the Asian session despite volatility risks from the Bank of Japan meeting scheduled on Friday. GBPUSD broke below the 200DMA to reach YTD lows in the low 1.1800’s, with BOE’s Mann commenting that sterling could weaken further. EURUSD dropped below 1.0550, paring the hawkish ECB Holzmann reaction earlier in the week. CAD will be in focus today after the Bank of Canada trid to position for a tightening pause at its most recent meeting (read more below), with USDCAD likely to take a look at 1.38+ levels if the BoC doesn’t shift hawkish in line with the Fed. Gold and silver slump on Powell warning Gold and silver slumped after Fed Chair Powell, in his prepared remarks to Congress, said the Fed was prepared to increase the pace of rate hikes and to a higher-than-expected level should incoming data continued to show strength. Terminal Fed rate expectations shifted higher to 5.66% with the market pricing in a 60% risk of a 50 bp move at the March meeting. Across market risk appetite tumbled with the selloff in metals being led by silver’s 4.6% slump to a four-month low near $20.  Gold meanwhile has given back most of last week's bounce and following the failure to challenge resistance at $1864 and gain a foothold above the 21-DMA, the market is once again looking for support in the $1800 area ahead of $1775, the 200-DMA. With Powell signalling an incredible data dependency, the focus now turns to Friday’s job report. Crude oil drops over 3% on hawkish Powell Crude oil made an abrupt turnaround from a three-week high on Tuesday with growth and demand concerns taking center stage after Powell signaled his determination to fight inflation with more rate hikes. The most inverted US yield curve in decades now signals an even bigger risk of a recession and with that weakening demand for fuel. Together with China’s lower than expected growth target and OPEC Chief Haitham Al-Ghais seeing slowing oil consumption in US and Europe, both WTI and Brent dropped towards support at the lower end of their current ranges, in Brent at $81.30 and WTI at $73.50.  EIA also released its short-term energy outlook and lowered its crude oil production forecasts for US supply for both this year and next amid signs of subdued growth and higher costs. Copper trades back below the $4 mark Base metals were broadly pushed lower on Tuesday as the dollar surged to fresh YTD highs on remarks from Powell’s testimony opening the door for a bigger hike in March and a higher terminal Fed funds rate. China import data also gave mixed signals on the first two months of the year, with mined copper ore imports increasing but inflows of refined copper declining. Supply constraints from Peru also seemed to ease as the Peruvian government expects shipments of copper and zinc will normalise with days, following months of social unrest prompted by the impeachment of former President Pedro Castillo. Copper trades back below $4, bringing last week’s low of $3.93 and the 200DMA at $3.77 into focus. US Treasury yield curve sees next extreme in inversion. (TLT:Xmas, IEF:xnas, SHY:xnas) Fed Chair Powell’s surprisingly explicit rhetoric on the willingness to consider hiking by larger amounts again shocked the 2-year Treasury yield some 13 basis points higher with yields following through a few bps higher still in overnight trading. The 10-year yield only edged a few basis points higher and is still stuck near 4.00% this morning, which means the yield curve inversion has reached its deepest level yet for the cycle and sinc 1981 at below –105 basis points. The 3-year auction yesterday showed strong demand.  A 10-year auction is up today. What is going on? Powell’s testimony opens the door to a 50 bps rate hike in March Fed Chair Powell, in his prepared remarks to Congress, said that if “the totality” of incoming data indicates faster tightening is required, the Fed is prepared to increase the pace of rate hikes, warning that the ultimate level of interest rates is likely to be higher than previously anticipated given the string of hot January data. This is another signal that March “dot plot” of Fed rate forecasts could see an upward shift for this year and next. Powell even explicitly said that a 50-bp rate hike in March is possible and market pricing has shifted to favouring a bigger hike on March 22. Terminal rate expectations have shifted higher to 5.63% from 5.48% previously. Remarks brought the 2-year yields above 5% and the deepest inversion in the 2-10 year yield curve. Adidas cuts dividends and confirms uncertain outlook Adidas shares are down 3% in pre-market trading as the German sports retailer reports Q4 revenue of €5.2bn vs est. €5.3bn and operating loss of €724mn vs est. €717mn in addition to cutting 2022 dividend to €0.70 vs est. €1.64. The key questions remain for Adidas of whether China growth can come back, what to do with the Yeezy inventory of sneakers and clothes, and finally is the brand impacted so much that the turnaround case will take longer than estimated. Investing with a Gender Lens Gender Lens Investing is a strategy which puts weight on gender-based considerations in your investment decisions, so you can in some way contribute towards efforts to close the “gender gap”. As today is the International Women’s Day, we explore why and how we can invest with a gender lens in this video. We also look at some ETFs and Saxo's Women in Leadership equity theme basket which can help you get exposure to this theme. Here’s wishing everyone a very happy International Women’s Day from Saxo What are we watching next?  Bank of Canada meets next After RBA’s dovish hike, the stage is set for the Bank of Canada to pause on its tightening cycle at the meeting today. In light of the weaker-than-expected data and BOC’s signal from the January meeting, market is not expecting any rate hikes today although the message is likely to convey policy flexibility. Read our full preview here to know what it means for the CAD as the divergence of BOC to the Fed widens. More Powell today. Next US macro data and Bank of Japan loom After Powell surprised yesterday, the incoming data will need to support the market’s shift to a more hawkish stance, with potential for a further cementing of a 50 basis point move at the March 22 FOMC meeting possible on uniformly hot data (currently just above 40 basis points priced for March 22). Today we will get the February ADP payrolls change number and January JOLTS job openings data (together with some revisions of prior data), but these weigh less heavily than the official jobs report on Friday. Easily as important, the US February CPI data is up next Tuesday and will likely prove the arbiter of whether the Fed moves 50 basis points at the meeting. In the meantime, the global lift in yields is piling pressure on the yen this week, and on the Bank of Japan to shift away from its yield-curve-control policy ahead of its meeting this Friday, which will be the final meeting with Kuroda at the helm before he leaves early next month. Earnings to watch There are on US earnings releases today of importance. The market will focus on Adidas earnings (see review above) and then focus on earnings tomorrow from CATL and JD.com.  Wednesday: Ping An Bank, Thales, Adidas, Geberit  Thursday: CATL, Deutsche Post, JD.com  Friday: Daimer Truck, AIA Group, Oracle, DiDi Global  Economic calendar highlights for today (times GMT)  1000 – ECB President Lagarde to speak 1315 – US Feb. ADP Employment Change 1330 – US Jan. Trade Balance 1330 – Canada Jan. International Merchandise Trade 1500 – Canada Bank of Canada decision 1500 – US Fed Chair Powell to testify before House Panel 1500 – US Jan. JOLTS Job Openings 1530 – EIA's Weekly Crude and Fuel Stock Report 1700 – USDA's World Agriculture Supply and Demand Estimates (WASDE) 1800 – US 10-year Treasury Auction 1900 – US Fed Beige Book 0001 – UK Feb. RICS House Price Balance 0130 – China Feb. CPI/PPI Source: Global Market Quick Take: Europe – March 8, 2023 | Saxo Group (home.saxo)
Rates Spark: Bracing for more

Decision Of The Bank Of Canada Ahead, Powell’s Comments Sent The Rate Hike Expectations Significantly Up

Swissquote Bank Swissquote Bank 08.03.2023 10:09
Investors got a double shot of hawkishness from Federal Reserve (Fed) Chair Jerome Powell’s semi-annual testimony before the US Senate yesterday. Powell Powell’s comments sent the rate hike expectations significantly up and wreaked havoc across the US treasury and equity markets and the US dollar. Data Moving forward, the next few data points will be VERY important in cementing the expectation of a 50bp hike at the March 21-22 FOMC meeting. Today, the ADP report and job openings data. JOLTS data would better soften this month, after last month’s booming figure of 11 mio.On Friday, February jobs report will be released. We’d better see an easing here as well after last month’s blowout half-a-million NFP read. Finally, the latest CPI update is due next Tuesday. And again, it’d better head sufficiently lower after last month’s disinflation disillusion. Fed If the fresh data doesn’t go where the Fed wants to see them, bigger rate hikes will be on the menu, and hope of soft-landing and easy disinflation could fade away. USD And with all the hawks in the air, the US dollar went straight up yesterday and there is no reason to bet on a softer US dollar for the next couple of days. The dollar will likely consolidate and extend gains against most majors. Bank of Canada Bank of Canada (BoC) is expected to keep the rates unchanged at today’s monetary policy meeting. Watch the full episode to find out more! 0:00 Intro 0:35 Powell the Hawk 4:07 Data Watch 5:48 FX update: USD up, EUR, AUD down 8:31 BoC to do nothing Ipek Ozkardeskaya  Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Fed #Powell #testimony #inflation #jobs #economic #data #BoC #RBA #rate #decision #USD #AUD #EUR #CAD #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
EUR/USD: Examples of things that could get the market moving are US treasury yields moving out of the range on data improving or deteriorating

The European Currency Experienced Significant Pressure

Paolo Greco Paolo Greco 08.03.2023 10:15
The EUR/USD currency pair traded on Tuesday as though it were paying attention to our recommendations and forecasts. In recent days, we have frequently discussed how the price frequently reverses its direction of movement and surpasses the moving average line. The upward movement appeared to have started on Monday and might have continued, but on Tuesday the pair simply collapsed downward. Also, this is exactly what we anticipated given that we have recently been discussing the overbought European currency, its unwarranted increase in the second half of the year 2022, as well as the lack of growth factors. Yet, we think that Jerome Powell's statement was simply a trigger for the current strengthening of the US dollar that eventually occurred. In any event, Powell's "hawkish" statement accidentally caused the US dollar's decline when it was scheduled to start growing again. In the next few sections, we shall discuss the Fed chairman's speech, but for now, allow us to state the following. In the medium term, a new wave of movement to the south may well begin with the current collapse of the European currency. The market has already demonstrated recently that it is not prepared to purchase the euro. The European currency experienced significant pressure even in those years when growth would have been reasonable or at least not at odds with the underlying conditions. Hence, a new fall was coming. Of course, the pair may simply follow the British pound's lead and remain flat, but given that it has already departed its side channel, it may instead continue to decline. So, both pairs, which frequently move in the same manner, have fantastic potential to advance in the direction that we recently anticipated. The two once more rested on the Senkou Span B line on the 24-hour TF. If it is overcome, there is a greater possibility that quotes may decline more. In this instance, it may go all the way to the level of 1.0200. We think that such a move would be entirely appropriate, even from a fundamental perspective. The US rate will remain higher than the rate in the European Union for a considerable amount of time since the Fed continues to maintain a more hawkish stance than the ECB. The Fed's chairman made a hint about a longer rate increase. What specifically did the Fed chairman say to Congress, then? If readers recall or familiarize themselves with our most recent publications, they will be able to verify what we have repeatedly stated: the US rate will need to be raised considerably more than 5.25%, as many are currently anticipating. The basic calculation indicates that it will only take 1-2 more rises to bring inflation back to 2%. Nevertheless, the Fed intends to return to price stability as soon as feasible and will not prolong the pleasure for a long time. Even so, in the European Union or the UK, this scenario would take far longer. The rate should therefore keep rising in any event. In addition, we noted that since energy prices have declined, which has an impact on the costs of practically all goods and services, inflation has slowed down over the past six months in many nations throughout the world. But, the decline in the price of oil and gas could not endure indefinitely, thus this positive inflationary factor eventually had to be leveled. And that's what occurred. The Fed also enjoys a strong economy, a low likelihood of a recession, a strong labor market, and record-low unemployment. As a result, the Central Bank not only has the capability but also the motivation to actively fight rising inflation. Jerome Powell essentially acknowledged that on Tuesday in front of Congress. He predicted that the struggle against inflation would be long and uneven, and that interest rates would have to be raised much more than previously anticipated. There was a chance that inflation would stall in February or March because it barely slowed down in January. The likelihood of a 0.5% rate hike in March has now increased to roughly 50%, although traders were not even seriously considering this possibility a week ago. According to Powell, the regulator is prepared to speed up the tightening of monetary policy once again if necessary. To be honest, we did not expect such a dramatic reaction to Powell's speech, but we must say that the Fed chairman was exceptionally open and truthful this time. His speech could not help but strengthen the dollar, though it could have been lower, as only such a situation could have been foreseen recently. And given the recent figures on the nonfarm sector and inflation, what else might we anticipate? As of March 8, the euro/dollar currency pair's average volatility over the previous five trading days was 95 points, which is considered "high." Therefore, we anticipate that the pair will move on Wednesday between the levels of 1.0470 and 1.0660. A new phase of upward movement will be signaled by the Heiken Ashi indicator turning back to the top. Nearest levels of support S1 – 1.0498 S2 – 1.0376 S3 – 1.0254 Nearest levels of resistance R1 – 1.0620 R2 – 1.0742 R3 – 1.0964 Trade Suggestions: The moving average line has been reclaimed below by the EUR/USD pair's consolidation. Unless the Heiken Ashi indication turns up, you can continue to hold short positions with targets of 1.0498 and 1.0470. If the price is fixed above the moving average line with a target of 1.0742, long positions can be opened. Explanations for the illustrations: Determine the present trend with the use of linear regression channels. The trend is now strong if they are both moving in the same direction. The short-term trend and the direction in which to trade right now are determined by the moving average line (settings 20.0, smoothed). Murray levels serve as the starting point for adjustments and movements. Based on current volatility indicators, volatility levels (red lines) represent the expected price channel in which the pair will trade the following day. A trend reversal in the opposite direction is imminent when the CCI indicator crosses into the overbought (above +250) or oversold (below -250) zones.   Relevance up to 01:00 2023-03-09 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/337000
ECB's Tenth Consecutive Rate Hike: The Final Move in the Current Cycle

Fed Chair Jerome Powell Has Prioritized Inflation Containment

Franklin Templeton Franklin Templeton 08.03.2023 10:45
Making the case for international value investing—thoughts from Templeton Global Equity Group on why now’s the time to consider expanding one’s investment horizons. It seems to be common sense that if you are going to search for these unusually good bargains, you wouldn’t just search the United States … why not search everywhere? That’s what we’ve been doing for forty years. We search anywhere in the world. The post-global financial crisis (GFC) dominance of US equities has been completely unprecedented. Significant Underperformance Over a Generation International vs. US Equities: MSCI World ex-US vs. MSCI USARelative Total Returns, US Dollar, Since 1970   Sources: FactSet, MSCI, as of 31 December 2022. The MSCI World Index captures large and mid-cap representation across 23 developed markets countries. The MSCI USA Index is designed to measure the performance of the large- and mid-cap segments of the US market. Indexes are unmanaged and one cannot directly invest in them. They do not include fees, expenses or sales charges. Past performance is not an indicator or a guarantee of future results. MSCI makes no warranties and shall have no liability with respect to any MSCI data reproduced herein. No further redistribution or use is permitted. This report is not prepared or endorsed by MSCI.   Across numerous valuation metrics, international equities are near the cheapest relative to US equities they have been in roughly two decades. Material Valuation Discount on a Variety of Measures Relative Valuation: MSCI ACWI ex-US vs. MSCI USA   Sources: FactSet, MSCI, as of 31 December 2022. The MSCI ACWI ex USA Index captures large- and mid-cap representation across 22 of 23 developed markets countries (excluding the United States) and 24 emerging markets countries. The MSCI USA Index is designed to measure the performance of the large- and mid-cap segments of the US market. Indexes are unmanaged and one cannot directly invest in them. They do not include fees, expenses or sales charges. Past performance is not an indicator or a guarantee of future results.   There are many reasons why US equities have so dramatically outperformed, but the core explanation has to do with monetary policy. In response to the GFC—and then to the European sovereign debt crisis in 2011, the “taper tantrum” in 2013, “Volmageddon” in 2018, and the COVID-19 crisis in 2020 (to name a few recent episodes)—central bankers flooded the financial system with liquidity by pinning down interest rates and entering bond markets with the equivalent of a blank check. Globally, debt has soared by over US$100 trillion since the GFC. The US Federal Reserve (Fed) led the way in both size and timing, and the subsequent liquidity wave disproportionately buoyed US markets. Growth-oriented businesses in consumer and technology industries that comprise much of the US market capitalization were the main beneficiaries. But that was then. Today, we are experiencing the exact opposite of the conditions that formerly supported US growth stocks. Interest rates are rising to contain generationally high inflation that the years of aforementioned easy money had sparked. Western central banks have gone from providing liquidity to withdrawing liquidity. Economic growth is slowing as COVID-era stimulus programs roll off and companies and consumers alike contend with materially higher costs of capital. And asset bubbles everywhere—from  cryptocurrencies to real estate to profitless tech companies—are quickly deflating. Fed Chair Jerome Powell has prioritized inflation containment as the central bank’s top policy priority, and at a November 2022 press conference, indicated that the Fed still has “some ways to go” to fight inflation. While the pace of interest rate hikes looks to taper off in the quarters to come, Powell’s messaging suggests that rates will remain elevated and policy restrictive for the foreseeable future. As Exhibit 3 shows, this creates an environment that significantly favors international value strategies over the US growth strategies that led the last cycle. That’s not only because of the way that different discount rates impact the valuation of future cash flows (low rates ascribe more value to the longer-dated cash flows associated with growth stocks, while high rates put a premium on the present-day cash flows associated with value stocks). It’s also because higher interest rates make fundamentals more important. Higher Rates Favor International Value Over US Growth   Source: FactSet, MSCI, as of 31 December 2022. The MSCI ACWI ex -USA Value Index captures large- and mid-cap securities exhibiting overall value style characteristics across 22 developed and 24 emerging markets countries. The MSCI USA Growth Index captures large- and mid-cap securities exhibiting overall growth style characteristics in the United States. Indexes are unmanaged and one cannot directly invest in them. They do not include fees, expenses or sales charges. Past performance is not an indicator or a guarantee of future results.   Increasingly, there will no longer be a free lunch for companies that can’t earn above their cost of capital or service their debt at higher interest rates. The unfashionable discipline of fundamental analysis is again becoming the key framework for successful investors, replacing the paradigms of narrative formation and growth extrapolation that fueled the bull market of the previous cycle. The US dollar: From headwind to tailwind? Not only can US investors buy international stocks at unusually cheap valuations, but they can use a strong currency to do it. While international equity valuations stand near 20-year lows, the US dollar is trading close to a 20-year high. But the dollar—one of the most crowded long trades for the better part of two years—now looks vulnerable. In late 2022, net speculative positioning was near all-time highs, technical indicators showed the dollar to be historically overbought, and the dollar’s premium to its long-term average real effective exchange rate (REER) was at record levels. The US Dollar: From Headwind to Tailwind ICE US Dollar Index (DXY)   Sources: FactSet, as of 31 December 2022. The ICE US Dollar Index futures contract is a leading benchmark for the international value of the US dollar. Indexes are unmanaged and one cannot directly invest in them. They do not include fees, expenses or sales charges. Past performance is not an indicator or a guarantee of future results.   So, what could bring down king dollar? Fundamentals, for one. Interest rate differentials, relative economic strength (as measured by indicators like the purchasing manager’s index) and comparative current account positions have all supported the dollar but are now reaching extended levels that we believe are likely to mean revert over time. We have seen the dollar begin to roll over in late 2022/early 2023 and expect there will be more to come. Additional catalysts for a potential dollar decline include: A pause in rate hikes or eventual Fed policy pivot that lowers forward interest-rate expectations Slower growth in the United States Conflict resolution in Europe that supports the euro and reduces US dollar safe-haven demand We have long advocated investors use the strong dollar to buy discounted assets abroad. We believe this remains a good time to build positions, as an eventual downturn in the dollar is typically associated with the strong performance of ex-US assets. Conclusion There is plenty to think about as 2023 begins to unfold. Does recent strength represent a sustainable rebound, or just a bear market rally? When will inflation come down and how high will interest rates go? How will escalating geopolitical conflicts evolve? While we don’t have all the answers, we do believe it is an interesting time to be deploying capital to cheap international markets. WHAT ARE THE RISKS? All investments involve risks, including possible loss of principal. The value of investments can go down as well as up, and investors may not get back the full amount invested. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors or general market conditions. Value securities may not increase in price as anticipated or may decline further in value. Investments in foreign securities involve special risks including currency fluctuations, economic instability, and political developments. Investments in developing markets involve heightened risks related to the same factors, in addition to those associated with their relatively small size and lesser liquidity. Actively managed strategies could experience losses if the investment manager’s judgment about markets, interest rates or the attractiveness, relative values, liquidity or potential appreciation of particular investments made for a portfolio, proves to be incorrect. There can be no guarantee that an investment manager’s investment techniques or decisions will produce the desired results.
Japanese yen increased by over 0.5% on Friday. Japanese monetary policy may change soon

USD/JPY Is Above 137.00, The Aussie Pair Is Trading Below 0.66, GBP/USD And EUR/USD Are Also Lower

Kamila Szypuła Kamila Szypuła 08.03.2023 12:55
The dollar hit multi-month highs against most other major currencies on Wednesday after Federal Reserve Chairman Jerome Powell warned that US interest rates may need to rise even faster and higher than expected to contain stubborn inflation. Powell told lawmakers on Capitol Hill on Tuesday that recent economic data from the United States was better than expected, so the pace and size of future hikes may also need to be stepped up, pushing expectations for short-term US interest rates higher. Higher interest rates are good for the dollar as they improve its yield and investors seek safety while global stock markets fall. The dollar also surpassed its 200-day moving average against the yen for the first time this year. The dovish slope from the RBA contrasted with the hawkish Jerome Powell. USD/JPY The yen pair started the day trading above 137.40 and rising towards 137.90. After this increase, the USD/JPY pair began to fall. At the time of writing, the USD/JPY pair was above 137.40, but has the potential to fall further towards 137.30. On the Japanese front, during the final political meeting with Governor Haruhiko Kuroda this week, the Japanese central bank will maintain a very loose monetary policy. Data on Tuesday showed Japan's real wages fell by the most in nine years in January, as four-decade high inflation erodes Japan's purchasing power. EUR/USD The EUR/USD pair started trading above 1.0545, but quickly started a decline towards 1.0530. After this decline, the EUR/USD pair started rising towards 1.0545 and kept trading in the 1.0540-1.545 range. At the time of writing, papra has dropped to 1.0540 and is now at 1.0537. German data released today showed that retail sales weakened more than expected, while industrial production rose sharply, easily beating forecasts. Moreover, the hawkish tone of Powell's comments also seems to have an impact on expectations of interest rate hikes by the European Central Bank (ECB). According to Reuters, markets see a 65% probability that the ECB's final interest rate will be 4.25% this year, compared to a 4.00% final interest rate last week alone. The ECB's hawkish bets could help the euro limit losses in the short term. GBP/USD The cable pair started trading above 1.1825 but similarly to the euro then fell. After falling to the level of 1.1810, the GBP/USD pair rebounded and rose towards 1.1840. After breaking above 1.1845, the pound pair fell back towards 1.1830. The pound reacted negatively to Fed Chairman Jerome Powell's more aggressive guidance during yesterday's appearance before the Senate Banking Committee. UK OIS markets are now fully pricing in a 25 basis point (BoE) rate hike for the first time since February 27. While BoE expectations are hawkish, the policy divergence is more pronounced than ever with CME Group's FedWatch tool pointing to a 75% probability of a 50 bp rate hike at the next Fed meeting. AUD/USD The movement of the Australian pair is similar to that of the pound-euro pair. After falling to the level of 0.6570, the AUD/USD pair broke again and broke above 0.66, but did not hold and fell to the level of 0.6698. The Australian dollar fell to a four-month low on Wednesday as diverging interest rate expectations between the US and Australia sent local yields to their biggest discount to government bonds in nearly four decades. Source: finance.yahoo.com, investing.com
Is Gold Ready to Shine Again? US CPI and Fed Policy Insights

Gold Has Managed To Find Support Ahead Of Key Support In The $1800 Area

Saxo Bank Saxo Bank 08.03.2023 14:12
Summary:  Gold and especially silver slumped on Tuesday after Fed Chair Powell said the Fed was prepared to increase the pace of rate hikes and to a higher-than-expected level should incoming data continued to show strength. Gold has despite the stronger dollar and rising rates risk managed to find support ahead of key support in the $1800 area, driven by the risk of either economic data turning softer or higher rates forcing a policy mistake leading to peak rates and recession, all events that may end up being supportive for gold and precious metals in general Today's Saxo Market Call podcastToday's Market Quick Take from the Saxo Strategy TeamEquity update: Powell turns hawkish - The calm before the storm?Forex update: Powellb surprises hawkish, data still in driver's seat Gold and especially silver slumped on Tuesday after Fed Chair Powell, in his prepared remarks to Congress, said the Fed was prepared to increase the pace of rate hikes and to a higher-than-expected level should incoming data continued to show strength. Terminal Fed rate expectations shifted higher to 5.66% with the market now pricing in a 60% risk of a 50 bp move at the March 22 meeting.  Across market risk appetite tumbled, not least due to the dollar hitting a fresh high for the year,  with the selloff in metals being led by silver’s 4.6% slump to a four-month low near $20. Gold meanwhile has given back most of last week's bounce and following the failure to challenge resistance at $1864 and stay above the 21-day moving average, a development that otherwise would have signalled a return of positive momentum, the market is once again looking for support in the $1800 area ahead of $1775, the 200-day moving average. Source: Saxo During the Q&A session that followed his prepared statement, a tasty exchange between Powell and Sen. Elizabeth Warren (D) highlighted the risk the FOMC, not fully understanding their limitations in bringing inflation under control, will continue to hike rates until something brakes. The senator asked Powell what he would say to two million people losing their jobs if he keeps raising rates. To this he answered: “Will working people be better off if we just walk away from our jobs and inflation remains 5%-6%?”.His comment further supported the view that the FOMC will hike faster, higher and for longer, with the obvious risk to the economic outlook and with that the eventual need to cut rates. We will continue to watch the dollar closely given its strong inverted correlation with gold, and now also increasingly how the market price the risk of a recession and with that the scale of the eventual drop in rates. We follow this through the size of the 2-10 year inversion of the US yield curve, currently at 107 basis points, and highest since 1981, and the one year spread between the September 2023 and September 2024 Fed funds futures. From a the current peak priced in around September the spread is looking for a +100 basis point drop the following twelve months. This is important given gold’s often powerful performance in the months that followed a Fed pause in rates. In the short-term with Powell signalling an incredible data dependency, the focus now turns to incoming US data with the first being Friday’s job report. Given the level of elevated rate hike expectation currently priced in, any weakness in incoming data may now trigger a stronger positive response than otherwise called for.   
The Bank Of Canada Paused Rates Hiking, The ADP Employment Report Had A 242K Increase In Jobs

The Bank Of Canada Paused Rates Hiking, The ADP Employment Report Had A 242K Increase In Jobs

Saxo Bank Saxo Bank 09.03.2023 08:16
Summary:  The ADP employment and JOLTS job opening numbers released on Wednesday leaned into the notion that the Fed can resume a faster pace. But it seems the market is coming to terms with the fact that interest rates will remain elevated as the VIX Index declined, and the US Dollar Index steadied manner. Ahead are CATL results, JD.com and DocuSign. The all-important jobs report on Friday and the U.S. CPI next week could bring about another round of market volatilities. Read on for more.   What’s happening in markets? US equities edged up modestly, digesting the message from Powell and job data The Nasdaq 100 (NAS100.I) gained 0.4% and S&P 500 (US500.I) inched up 0.1% on Wednesday, remaining calm to the hotter-than-expected ADP employment and JOLTS job openings data and Powell’s congressional testimony in his second day. The volume of 10.2 billion shares across U.S. exchanges was below average. As WTI crude fell by more than 1% to USD76.5, the energy sector was the biggest loser within the S&P500. Telsa (TSLA:xnas) slid 3%, following the National Highway Traffic Safety Administration highlighting potential issues in the EV maker’s Autopilot system and steering wheels that can detach on the Model Y SUVs. Campbell Soup (CPB:xnys) gained nearly 2% on earnings beat and sales increases. Crowdstrike (CRWD:xnas) rose 3.2%, paring some of the post-result after market gains the day before. In Europe, the STOXX Europe 600 finished the session flat. Yields on U.S. Treasuries moved higher on hot JOLTS job openings and a poor 10-year auction The Treasuries market did not act much to the hotter-than-expected ADP employment data and Powell’s second-day congressional testimony. Short-covering flows especially in the futures contracts drove the market higher and yields lower in the morning until selling emerged following the JOLTS job openings data which was stronger than estimates. Demand in the 10-year auction was weak as the auction stopped at nearly 3bps cheaper from the market level at the time of the auction and had a bid-to-cover ratio of 2.35, lower than 2.66 last time. The Treasury is auctioning USD18 billion of 30-year bonds today. The 2-year yield rose 6bps to 5.07% and the 10-year yield edged up 2bps to 3.99%, inverting the curve further to -109bps. Hang Seng Index and China’s CSI 300 decline on regulatory overhaul in China and U.S. interest rates Yesterday, the Hang Seng Index dropped by 2.4% and the Hang Seng TECH Index plunged by 3.2%.  EV and China Internet stocks led the charge lower. XPeng (09868:xhkg) plunged 7.1% and Li Auto (02015:xhkg) lost 6.3%. China internet names slid, with Alibaba (099088:xhkg), Meituan  (03690:xhkg) and JD.com (09618:xhkg) each down 3-4%. On top of the tighter U.S. interest rate outlook stemming from Fed Chain’s Powell’s testimony, the establishment of the National Financial Regulation Bureau and the National Data Bureau and the consolidation of power around them may have stirred up concerns about uncertainty in the mind of investors about the regulatory trend on areas such as mobile payment and e-platform data.  China telecommunication stocks were among the top gainers. China Unicom (00762:xhg) rose 3.5% after reporting Q4 earnings in line with estimates. TVB (00511) jumped 85% on Wednesday, following the Hong Kong TV broadcasting company holding its first live-streaming online shopping on the Taobao platform in mainland China. The 6-hour live-streaming session had around 4.85 million viewers. Over the past 4 sessions, the share price of TVB has gone up by 247%. In A-shares, the CSI300 finished 0.4% lower, clawing back most of the early losses, with telecommunication, defense, computing, media, and 6G concept names leading the rebound.  The US dollar consolidates, post-Powell gains The US dollar was little changed versus major currencies and was consolidating its strong gains after Powell’s first-day testimony the day before. USDJPY fell back below 107. Australia’s shares are under pressure as the heavy weights trade ex-dividend today BHP and Rio are trading ex-dividend, which is pressuring the equity market, while on the other side Myer shares jolted higher after the retailer declared a super-sized dividend. While accounting software company Xero also trades higher on announcing it will cut 800 jobs to improve its profitability. Meanwhile, in breaking news - part of the Aukus security partnership, Australia looks set to buy as many as five nuclear-powered Virginia class submarines from the US, with the submarine plan expected to be announced next week – when US President Joe Biden meets UK Prime Minister Rishi Sunak and Australian Prime Minister Anthony Albanese  - as part of the 18-month old Aukus partnership. Gold ticks higher as the market digests the latest hawkish Fed commentary that could lead the US into a recession Gold advanced on Wednesday after slipping about 2% in the prior session  - gaining strength as the US dollar's rally cooled. Despite the stronger dollar overall, gold has found support in the $1800 area – driven by economic uncertainty and the probability of a recession creeping higher. We await Friday’s jobs report – given rates are expected to remain higher – weakness in the data on Friday may be a catalyst for the US dollar to take a step back, which could theatrically trigger upside in the precious metal.   What to consider? Bank of Canada kept rates unchanged The Bank of Canada (BOC) was the first major central bank to pause from hiking rates. As widely expected, The BOC kept the policy rate unchanged at 4.50% but the door is open to come back on the hiking track to fight inflation as the central bank dropped the forward guidance that it expects to hold the policy rate unchanged if the economy evolves in line with its outlook. Powell largely repeated his message on the second day of his testimony On the second day of his congressional testimony, this time to the House Financial Services Committee, Powell told lawmakers that no decision had yet been made on the size of the rate hike at the March FOMC while he reiterated that the Fed was likely to bring the policy rate higher than previously anticipated and could move at a faster pace. More hot job data coming out of the U.S. The ADP Employment report had a 242K increase in jobs in February, rising from 119K (revised from 106K previously reported) in January and way above the 200K consensus estimate. JOLTS Job Opening also came in stronger than expected at 10,824K (consensus estimate: 10,546K; January 11,234K). Europe leads Australia, with more females in executive roles. The US lags  Various studies have shown that gender diverse executive teams can outperform the overall equity market. So, for International Women’s Day we dissected the makeup of listed companies' executive teams. We found that Europe has the most female representation followed by Australia - with the US lagging. An astounding 33 companies in the Stoxx600 have executive teams that are made up of over 50% women. Healthcare company Halma - also in the Stoxx600 - has a 60% female executive team. While media business- Future PLC, takes the cake - with a 100% female executive team. Australia follows Europe with a high portion of diversity.  14 of the ASX200 companies have executive teams that are over 50% female lead. Gold mining giant- Newcrest Mining- has an 86% women executive team. What’s also pleasing to see is that the world’s biggest mining company, BHP has over 50% female representation on its executive leadership team. And lastly- in the US- in the S&P500, just five companies have executive teams that are made up over 50% women. That includes Bed & Body Work with its 60% executive team - being female. To explore this thematic further, refer to Saxo’s Women in Leadership equity basket.   China’s inflation is expected to slow in February The growth in CPI is expected to slow to 1.9% Y/Y in February from 2.1% in January and PPI to contract further to -1.3% Y/Y. Eyes on CATL’s growth and outlook CATL, the world’s largest battery maker - and Tesla’s battery supplier - reports results on Thursday. It’s expected to report revenue growth of over 80%. However, there is room for a positive surprise - given strong battery and energy storage demand. CATL is also expanding overseas - teaming up with Ford to build a battery manufacturing plant in Michigan, which we will hopefully get detail on. As for its outlook - we expect it to be strong, as CATL’s increased its war chest, after selling its $856 million stake in Australia’s biggest lithium company, Pilbara Minerals. We also think guidance could be upgraded - given auto sales in China are expected to rise in 2023, following years of lockdowns. CATL outlook’s will be closely watched by not only EV makers - but also by EV investors – as they could give a gauge on how much car maker’s battery costs could rise.   Other company reports to watch ahead include JD.com - a Chinese consumer spending bellwether and DocuSign- a covid-19 stalwart All eyes will be on JD.com, the Amazon equivalent in China. It could give further insight into Chinese consumers’ appetite post lockdown. And what they’re seeing in consumer spending ahead. It's also worth watching Saxo’s China Consumer and Technology basket of stocks. And in the US - DocuSign reports after the market close on Thursday – this will be interesting to watch as over the last two years DOCU has beaten EPS and revenue estimates. The electronic signature company raised full its guidance when it reported third-quarter results that topped expectations. It’s also joined the spate of tech companies making mass-layoffs and cut 10% of its employees.   For what to watch in the markets this week – read or watch our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: Global Market Quick Take: Asia – March 9, 2023 | Saxo Group (home.saxo)
Gold's Hedge Appeal Shines Amid Economic Uncertainty and Fed's Soft-Landing Challenge

Asia Morning Bites - 09.03.2023

ING Economics ING Economics 09.03.2023 08:19
China inflation out this morning with a focus on PPI. US initial jobless claims and Challenger job cuts up next before we get payrolls data on Friday Source: shutterstock Global Macro and Markets Global Markets: US Equities struggled for most of Wednesday, though managed a late rally to leave them up on the day, though barely. The S&P 500 gained 0.14%, while the NASDAQ rose 0.4%. Equity futures are currently giving no clear direction. Chinese stocks did less well. The CSI 300 fell 0.36%, while the Hang Seng index dropped 2.35%. The Fed’s Powell repeated his earlier remarks about the prospects for higher rates and possibly bigger hikes at round-2 of his testimony to Congress, which didn’t help sentiment (see more below). 2Y US Treasury yields continued to move higher, reaching 5.05%, with Fed funds futures implied peak rates reaching 5.685% in the October contract. That seems a bit high - but ask us again after tomorrow’s payrolls. The 10Y US treasury yield also rose, but only by 2.8bp and still sits below 4% - just  - at 3.991%.  EURUSD retreated back to 1.0548 yesterday and showed few signs of rising. Other G-10 currencies followed suit. The AUD dropped to 0.6591. Cable is now down to 1.1848, and the JPY has risen to 137.27. Other Asian FX was also mostly weaker yesterday, with the KRW, THB and MYR all weakening by more than a per cent against the USD. The CNY was roughly stable at 6.9592. G-7 Macro: Although essentially the same message, Powell’s tone yesterday to Congress was regarded by many commentators as slightly softer, noting that data would be the final arbiter of the size of the next hike and that no decision on the size of the March hike had yet been made.  The Fed’s Beige Book, which was released in the early hours of our Asian morning, showed about half the districts reporting economic activity expanded at a modest pace, with the rest showing little or no change. A couple of districts reported stronger retail spending than normal for the time of year, and travel and tourism held up strongly. The ADP survey showed job gains of 242,000 in February, though the January figure was not much changed at 119K. It’s hard to see this as clarifying the employment picture ahead of tomorrow’s payrolls release, which remains a lottery. Overall, this latest set of data suggests that the Fed still has work to do, though how much remains an open question, and the expectations for economic activity in the months ahead, according to this latest Beige Book, were fairly downbeat. Eurozone GDP for 4Q22 managed zero growth, thereby just enabling the region to avoid reporting a technical recession, with 3Q22 growth of just 0.1%. This is nit-picking though. The Bank of Canada left rates unchanged at 4.5%. US Challenger job cuts and jobless claims will be in focus later. China: CPI should show a slower YoY increase in February as consumption was quieter in the month after the long holidays in January. PPI should still be in yearly contraction. We believe that infrastructure growth will only pick up slowly. The central government is concerned about the rising risk of local government debt. As such, infrastructure, the funding for which comes mainly from local governments, will only be a supplementary measure to support growth when consumption increases slower than expected.  What to look out for: China inflation and US initial jobless claims China CPI and PPI inflation (9 March) Malaysia BNM policy meeting (9 March) US initial jobless claims (9 March) Fed’s Barr speaks (9 March) Japan PPI inflation (10 March) US NFP (10 March) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Sharp drop in Canadian inflation suggests rates have peaked

Bank of Canada bets on deflationary path

ING Economics ING Economics 09.03.2023 08:28
As widely expected, the Bank of Canada kept rates unchanged at 4.5% today. The Bank observed that restrictive monetary policy is already showing its effect on the Canadian economy, and sees a path for a return to 3% inflation by mid-2023. The option for a new hike is open, but we doubt that will be necessary, and the next move should be a cut Bank of Canada building in Ottawa A stark contrast to the Fed communication The contrast between the Bank of Canada (BoC) and the renewed hawkishness at the Federal Reserve is increasingly stark. Today, BoC confirmed that rates most likely peaked in January with “restrictive monetary policy” weighing on household spending and investment. While BoC acknowledges that the labour market “remains very tight”, it doesn't have the same fears as the Federal Reserve that this will keep inflation pressures elevated. Indeed, BoC argues that “weak economic growth for the next couple of quarters” and increasing “competitive pressures” will bear down on inflation and allow it to “come down to around 3% in the middle of this year”. Consequently, it repeated the line that should economic conditions evolve broadly in line with expectations, then it will continue to hold the policy rate “at its current level”, but reserved the right to “increase the policy rate further if needed to return inflation to the 2% target”. We don’t think the central bank will need to. Canada’s high household debt levels and greater exposure to interest rates rate hikes via a higher prevalence of variable rate borrowing make the economy more at risk of a deeper downturn than the US. For example, in the US the 30Y fixed rate mortgage is the most common borrowing method while in Canada it is five years or less before it faces a change in interest rate. As such, the next move is more likely to be an interest cut in our view Markets scale back tightening bets The Canadian dollar traded marginally on the soft side after the BoC announcement, probably as some investors were expecting some stronger concerns about potentially stickier inflation like in the US. The conviction call on the deflationary path (inflation at 3% by mid-2023) clearly suggests there is no real discussion about a resumption of monetary tightening at the moment. We are observing some unwinding of tightening bets at the time of writing. The CAD 2Y swap rate is trading around 10bp lower than pre-announcement, and the OIS curve is no longer pricing in a 25bp rate hike at the July meeting. This is no game changer for our medium-term (bearish) view on USD/CAD, which was not based on a hawkish surprise or additional tightening by BoC. However, it may trigger a bit more loonie underperformance in the near term. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Rates Spark: Bracing for more

Rates Spark: Bracing for more

ING Economics ING Economics 09.03.2023 08:31
Central bankers' hawkish response to indications of ever-stickier inflation have struck a nerve with markets which continue to ramp up rate expectations. But it is seen as the right medicine, with market-based inflation expectations dropping further while risk assets are holding up fairly well for now Markets are increasingly bracing for the Fed upping the pace again The US jobs data remains the key data point looming large at the end of this week, but that hasn’t kept markets from further raising their expectation for a 50bp Fed hike yesterday. We think markets will need to see material evidence from Friday's report to row back after Fed Chair Powell opened the possibility of increasing the hiking pace again in his testimony. Data in the meantime chimes with the narrative of a still tight labour market Data in the meantime chimes with the narrative of a still tight labour market. The ADP payrolls estimate beat expectations, and job openings were reported in excess of 10.8 million yesterday, meaning that there are still around 1.9 openings for every unemployed worker. Today’s eyes are on the initial jobless claims where a number below 200k would also give little evidence of the labour market cooling. The US market is in the driving seat into the payrolls. While the front end has pushed higher, the back end is resisting to get back above 4%, thus further inverting the curve which is now stretching towards -110bp. That is not to say that investors are eager to pick the close to 4% in 10Y US Treasury yields. Yesterday’s 10Y auction was in stark contrast to the stellar results of prior bonds sales this year, highlighting some unease ahead of the payrolls and also next week’s key CPI data. What the doctor ordered: Hawkish central banks are having the desired effect on inflation expectations Source: Refinitiv, ING Risk sentiment does not stand in the way of higher rates for now If data does not stand in the way of higher rates, the other factor potentially capping the rise in longer dated yields especially remains risk sentiment. Clearly, the deep inversion of curves is already a reflection of concerns that central banks are overdoing it, but risk markets themselves are proving remarkably resilient in light of tightening already delivered and still expected. Italian spreads have withstood rising volatility and hawkish comments In the eurozone markets the key spread of 10Y Italian government bond yields over German Bunds withstood rising volatility and hawkish comments. It has actually tightened and now resides below 180bp. This is even more impressive as just this week the European Central Bank’s Holzmann has broken with the unwritten rule of not discussing the ECB’s forward guidance on the reinvestment of Pandemic Emergency Purchase Programme portfolio, where a full reinvestment is currently still signalled at least until the end of 2024. Holzmann had suggested to include PEPP in quantitative tightening this autumn. Recall that the possibility to flexibly reinvest PEPP maturities still is the ECB’s easiest-to-activate first line of defence against any spread turmoil. Rolling off the portfolio could be seen as diminishing this firepower. While measures of (implied) rates volatility have started to tick up again since late February, spreads that have before shown to be quite sensitive to such dynamics have indeed budged very little. Collateral scarcity fears are no longer holding back Bunds Source: Refinitiv, ING   The Bund spread versus swaps can also be subsumed under market risk measures, though it has become more of a measure of collateral scarcity fears since the ECB’s pandemic interventions. And collateral scarcity really became an increasing concern with rising market volatility at the start of the broader market sell-off in 2022, driving also the directionality of the Bund asset swap spread – Bund yields had struggled to keep pace with the quick rise in swap rates. Since then a lot has changed: The ECB and the debt agency have made more collateral available for lending, and especially last month the ECB has shown its sensitivity to the issue in the handling of government deposits on its balance sheet. Add to that the ECB's quantitative tightening is underway since this month as well. What we now see is that the directionality of the spread has been broken, and it is also budging the latest uptick in implied volatility measures. Today's events and market view Today’s data calendar is fairly light with the highlight being the US initial jobless claims. The market is looking for a small increase in initial claims to 195k, which would still leave it below the pre-pandemic average of around 219k for 2018 to 2019. The key to validating current market pricing remains tomorrow’s US jobs data. After European bond supply from Ireland and the BTP Italia sale to institutional investors today, the focus in primary markets should be tonight’s 30Y UST auction. It follows yesterday’s weaker 10Y sale, although past 30Y sales have already stood out weaker compared to the strong sales metrics in the other maturities this year so far.    Late in the night, attention will turn to Japan for the last Bank of Japan policy meeting under governor Kuroda. Our economists note that he is well known for surprising markets, but believe that he will leave a decsion on the future of the bank's yield curve control policy to his successor Kazuo Ueda.  Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Astonished by the week ahead? Barclays, NatWest Group and Microsoft earnings are also released shortly

Apple Reorganization From China To India, The Final Bank Of Japan Meeting With Kuroda At The Helm Ahead

Saxo Bank Saxo Bank 09.03.2023 09:13
Summary:  After Wednesday’s sentiment shock on hawkish Fed Chair Powell testimony, yesterday saw markets frozen in their tracks, awaiting key incoming data that will determine whether the Fed must continue turning the rate tightening screws, starting with the US February jobs data up tomorrow. In Asia’s Friday session tonight, we await the final Bank of Japan meeting with Kuroda at the helm before his exit next month. Will he surprise again as in December or leave the next steps in the direction of normalization for his successor? What is our trading focus? US equities (US500.I and USNAS100.I): more wait and see Following the big move in Tuesday’s session on Powell’s hawkish comments on policy rates and inflation yesterday’s session had much lower energy and ended with a small rebound in S&P 500 futures gaining 0.1%. Stronger than expected ADP job figures had a small initial negative impact as the jobs data continue to suggest a strong US labour market despite the higher interest rates underpinning the structurally higher inflation case. This morning the low energy in US equity futures continues and it feels like the equity market is back at the wait-and-see mode on inflation and the economy. As we have said before, it is the bond market that will dictate where equities go from here. If S&P 500 futures slips below Tuesday’s close, then the 3,950 level is the next level to watch and the approximate area for the 200-day moving average. Chinese equities (HK50.I and 02846:xhkg): oscillated in a lacklustre session Hang Seng Index and CSI 300 Index swung between small gains and losses. China’s CPI growth slowed to 1% Y/Y in February, much lower than the consensus estimate of 1.9%. Growth in food prices decelerated to 2.6% Y/Y from 6.2% Y/Y while growth in non-food prices halved to 0.6% Y/Y in February from 1.2% in January. PPI slide 1.4% Y/Y in February, bringing the producer prices deeper into deflation. Semiconductor Manufacturing (00981:xhkg) and Hua Hong Semiconductor (01347:xhkg) advanced, as investors expect the domestic chip making leaders to benefit from government policy initiatives and import substitution. COSCO China Shipping Energy Transportation (01138:xhkg) jumped 11.5% as investors anticipated the Chinese tanker and dry bulk shipping operator to benefit from recent rises in freight rates. FX: USD strength eases ahead of data. JPY firms. CAD weak on BoC The USD strength on the back of Fed Chair Powell testimony failed to find further momentum as the market awaits key incoming US data tomorrow (Feb. jobs report) and next Tuesday (Feb. CPI) for further conviction. With the rise in yields easing slightly, the JPY perked up after USDJPY failed to close above the 200-day moving average and as the market awaits a possible surprise from the outgoing Kuroda at tonight’s (Friday in Asia) Bank of Japan meeting (preview below). The Bank of Canada confirmed its prior guidance and did pause its rate tightening cycle at its meeting yesterday, continuing to signal a wait-and-see stance, which looks dovish in this environement. This saw CAD weak across the board yesterday, and USDCAD traded above 1.3800 at one point for the first time since November. Crude oil holds Powell-led losses, but support is not far away Crude oil futures remain stuck near a one-week low as the negative sentiment around further monetary tightening more than offset a surprise drop in US stocks, the first in ten weeks. Brent and WTI trade below their 21-day moving averages for a second day but the loss of momentum has yet to see either of them challenge trendline support, in Brent at $81.40 and WTI at $73.50. Rangebound for months and in no hurry to change that amid a balanced flow of supply and demand related news, the market is likely to pay close attention to the general level of risk appetite which is currently being dictated by the FOMC and its close attention to incoming data. With that in mind the next major market moving event is likely to be Friday’s US job report. Gold trades near key support on Powell’s higher, faster and longer threat Gold trades near support in the $1800 area as traders continue to digest Fed chair Powell’s comment on Capitol Hill that interest rates could go higher, faster and for longer. In the short-term with Powell signalling an incredible data dependency, the focus now turns to incoming US data, and ahead of Friday’s job report, another report showed US job openings drop to 10.8 million, still a number too high for the Fed. However, given the level of elevated rate hike expectation currently priced in, any weakness in incoming data may now trigger a stronger positive response than otherwise called for. Below the $1800 area the next level of interest is the 200-DMA at $1775. Yields on U.S. Treasuries moved higher on hot JOLTS job openings and a poor 10-year auction The Treasuries market did not react much to the hotter-than-expected ADP employment data and Powell’s second-day congressional testimony. Short-covering flows especially in the futures contracts drove the market higher and yields lower in the morning until selling emerged following the JOLTS job openings data which was stronger than estimates. Demand in the 10-year auction was weak as the auction stopped at nearly 3bps cheaper from the market level at the time of the auction and had a bid-to-cover ratio of 2.35, lower than 2.66 last time. The Treasury is auctioning USD 18 billions of 30-year bonds today. The 2-year yield rose 6bps to 5.07% and the 10-year yield edged up 2bps to 3.99%, inverting the curve further to -109bps. What is going on? The Netherlands proposing a chip gear export restriction to China As part of the US CHIPS Act the US pushing its trading partners to also restrict semiconductor technology to China which has hurt chipmakers including Nvidia. So far, the Dutch-based ASML, the world’s largest lithography machine makers for chip production, has said that those restrictions did not apply to them. However, non-compliance by ASML and other equipment makers would make it possible for China’s semiconductor industry to circumvent the intentions in the new US policy on semiconductors. Yesterday, the Dutch government announced that the Netherlands is proposing chip gear export restrictions to China and will include DUV (deep ultraviolet) lithography machines which are the most advanced machines for chip production. ASML says that the new export restrictions will not affect the 2023 outlook nor the long-term outlook, but the latter part might be a stretch and only time will tell. Apple to put more focus on India growth Apple is revamping its global sales unit shifting its focus to India from China with a new separate sales office and reporting line in India. This move follows the decision to increase production capacity of various Apple products to India from China underscoring the shifting geopolitical interest for the US and its corporate sector. With Apple being one of the most important companies in the US this is an important signal to other US companies about how to change global supply chains and where to get revenue exposure. WASDE adds further downside pressure on corn and wheat futures Chicago corn and not least wheat futures extended their slump on Wednesday after the USDA said domestic stockpiles rose by more than expected in response to lower exports. The agency also boosted the outlook for Ukraine corn exports while wheat, already under pressure from Russian sales and expectations the Ukraine grain corridor deal will be extended, dropped to an 18-month low after the agency raised production estimates for Kazakhstan, Australia and India. Soybeans meanwhile found support after the USDA slashed production from drought-stricken Argentina by more than expected. The world’s biggest exporter of soymeal and soyoil will harvest 33 million tons of beans this year, the smallest crop since 2011 and a 20% decline from its February estimate. More hot job data coming out of the US The ADP Employment report had a 242K increase in jobs in February, rising from 119K (revised from 106K previously reported) in January and way above the 200K consensus estimate. JOLTS Job Opening also came in stronger than expected at 10,824K (consensus estimate: 10,546K; January 11,234K). Bank of Canada confirms pause in rate tightening regime The Bank of Canada confirmed its guidance from the prior meeting and did not hike the policy rate yesterday, a particularly jarring divergence relative to the hawkishness we saw this week from Fed Chair Powell which has the market debating a re-acceleration in the pace of Fed hikes, and at a time when the ECB, for example, is priced to hike another 150 basis points or more this year. The Bank of Canada continues to expect that inflation in Canada will ease to “around 3%” by mid-year. The guidance on further in the policy statement remained unchanged: "Governing Council will continue to assess economic developments and the impact of past interest rate increases, and is prepared to increase the policy rate further if needed to return inflation to the 2% target.". One particularly complicating factor for the Canadian economy is the heavy load of private debt, much of it in mortgages, with a large minority of Canadians financing with adjustable rate mortgages and even fixed rate mortgages adjust their rate every five years, which will stress the budgets of a growing portion of Canadian households with every month that passes at the current yield levels – several multiples of where rates were for the 2020-2021 timeframe. Powell largely repeated his message on the second day of his testimony On the second day of his congressional testimony, this time to the House Financial Services Committee, Powell told lawmakers that no decision had yet been made on the size of the rate hike at the March FOMC while he reiterated that the Fed was likely to bring the policy rate higher than previously anticipated and could move at a faster pace. What are we watching next? Bank of Japan meeting tonight will be Kuroda’s last after 10 years as Governor Significant two-way volatility potential for the JPY tonight on the Bank of Japan meeting as the market well remembers the surprise decision from Governor Kuroda to expand the yield-curve-control “band” for 10-year Japanese Government bonds (really a cap in this era of higher interest rates) to +/- 0.50% from the prior 0.25%. One-week implied volatility in USDJPY options remains very elevated at almost 19% in anticipation of tonight’s decision and guidance, as the market is uncertain whether Kuroda might significantly tighten policy at his last meeting as a kind of declaration of victory on succeeding in bringing more sustained inflation to the Japanese economy, or whether he will leave the bulk of the tough process of policy normalization to his likely successor, Kazuo Ueda. USDJPY rose above its 200-day moving average this week at 137.20 and traded most of the way to 138, but has retreated this morning to well below 137.00. The market is only pricing a policy rate (the short rate) of positive 0.15% by the end of this year, versus –0.10% currently. More likely for the Bank of Japan to focus on loosening yield-curve-control for now rather than tinkering with the policy rate. Earnings to watch Today’s key earnings release to watch are CATL and JD.com which will provide fresh information from China’s corporate sector. JD.com is expected to report FY22 Q4 earnings before the US market open with analysts expecting revenue growth of 7% y/y down from 23% y/y a year ago, and EBITDA of CNY 8.06bn up from CNY 5.08bn a year ago. The outlook from JD.com matters a lot this time as it will reflect management’s confidence and expectations related to the Chinese reopening. CATL is expected to report sometime after the Chinese equity market close and is expected to report Q4 revenue growth of 87% y/y reflecting the strong demand for electric vehicles and batteries. Thursday: CATL, Deutsche Post, JD.com Friday: Daimer Truck, AIA Group, Oracle, DiDi Global Economic calendar highlights for today (times GMT) 1200 – Mexico Feb. CPI 1230 – US Feb. Challenger Job Cuts 1330 – US Weekly Initial Jobless Claims 1400 – Poland National Bank Governor Glapinski press conference 1530 – EIA's Weekly Natural Gas Storage Change 1800 – US Treasury to auction 30-year T-bonds 1845 – Canada Bank of Canada Deputy Governor Rogers to speak Asian session: Bank of Japan meeting   Source: Global Market Quick Take: Europe – March 9, 2023 | Saxo Group (home.saxo)
UK PMI Weakness Supports Pause in Bank of England's Tightening Cycle

Chinese Inflation Slows, Powell Tried To Walk Back A Part Of His Hawkish Comments

Swissquote Bank Swissquote Bank 09.03.2023 10:36
We could see some relief, and correction after two difficult days for risk assets, but investors will likely refrain from opening fresh positions before Friday’s US jobs data, because only God knows what could happen when the data falls in. Risks are two-sided, as soft data could easily spur a risk rally. Watch the full episode to find out more! 0:00 Intro 0:42 Why European stocks should’ve reacted more to the hawkish Powell? 3:53 Powell’s attempt to cool Fed hawks was spoiled by fresh data 6:43 Catch your breath before Friday’s US jobs data 7:42 Wasn’t gold supposed to have a good year? 8:32 Crude oil sold after hitting 100-DMA 9:48 Chinese inflation slows… 10:09 The ’ TikTok bill Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Fed #Powell #testimony #inflation #jobs #economic #data #USD #EUR #XAU #Crude #oil #Occidental #Petroleum #China #TikTok #ban #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
Saxo Bank Podcast: The Bank Of Japan Meeting And More

Saxo Bank Podcast: The Bank Of Japan Meeting And More

Saxo Bank Saxo Bank 09.03.2023 11:01
Summary:  Today we look at a market that is holding its breath in anticipation of incoming US data to refresh the probabilities that the Fed feels forced to re-accelerate the pace of rate hikes at the March 22. But as well, all traders need to consider the Bank of Japan meeting risk up overnight tonight as a surprisingly large adjustment from Kuroda could set even global bond and equity markets on edge, not just the Japanese yen. We also look at interesting stories in equities, from the latest on ASML to CATL and other companies. Today's pod features Garnry on equities, with John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: Bank of Japan could cast a very long shadow over global markets | Saxo Group (home.saxo)
Oanda Podcast: US Jobs Report, SVB Financial Fallout And More

The US Economy Will Continue To Grow This Year, Obviously At A Lower Rate Than In 2022

Saxo Bank Saxo Bank 09.03.2023 11:06
Summary:  We are not in the recession camp. We believe that as long as the velocity of money is rising, the likelihood of a U.S. recession is low this year. At the end of 2022, the market consensus was expecting a recession in the United States for this year. This has not happened yet. And this is unlikely to happen, in our view. This week’s employment data for February are likely to show the economy is still very resilient despite broad-based inflationary pressures and higher cost of capital. The consensus expects that job creations are back to normal in February around 200k after a strong jump in January at 507k. The unemployment rate is expected to marginally increase to 3.5 %. These are very good figures. One can say that the labor market is a lagging indicator of the business cycle. This is true. More fundamentally, we don’t see how the United States could enter a recession in the short-term with the velocity of money being on the rise. The velocity of money (V) is the rate at which money is being spent in the economy. In simpler terms, this is how fast the same “100 USD” changes hands. V is generally a function of two things: the pace of growth in the economy and growth in the money supply. We can both use M1 and M2 for the calculation of the money supply. Think of M1 as the more focused number. It includes cash and transaction deposits whereas M2 is a larger indicator and encompasses savings and money markets among other things. Conventional economic theory usually considers that the faster the money changes hands (through the daily function of an economy), the more the economy grows. This fully makes sense. The below chart shows the evolution of V since the early 1960s in the United States. After reaching a peak in the mid-1990s at 2.2, it has decreased to an historical low of 1.1 in 2020 due to the deep and broad shock related to the pandemic. This is not surprising. What is interesting is that V is now increasing, though from a low starting level. As long as V is expanding, the probably is high the U.S. economy will grow. This can be puzzling given the cost of capital is rising and inflation is hitting purchasing power. In our view, the $5tr stimulus that was triggered to fight the economic consequences of the pandemic partially explains the rise in V. Our baseline is the U.S. economy will continue to grow this year, at a lower level than in 2022 of course. But a recession is far from certain (unless it is voluntarily engineered by the U.S. Federal Reserve to tame inflation – this is not the case so far).   
UK Public Sector Borrowing Sees Decline in July: Market Insights - August 22, 2023

AUD/USD Rose Above 0.66, USD/JPY Drop Below 137.00

Kamila Szypuła Kamila Szypuła 09.03.2023 11:40
The dollar held near a three-month high on Thursday, backed by a message from Federal Reserve Chairman Jerome Powell that interest rates will need to go higher and possibly faster. On the second day of his testimony before Congress on Wednesday, Powell confirmed his message, though he made a cautious point, saying that the debate over the scale and path of future interest rate hikes is still ongoing and will depend on the data. USD/JPY The yen pair has been in a downtrend since the beginning of the day. During the day, USD/JPY dropped from 137.2360 to 136.2230. Concerns about a deeper global economic downturn continue to weigh on investor sentiment, which in turn favors a safe haven for the Japanese yen (JPY) and puts some downward pressure on the major currency. Market concerns were further fueled by the latest Chinese inflation data, which showed that domestic demand remains weak and weakened hopes for a strong recovery in the world's second largest economy. However, any significant pullback in USD/JPY still seems elusive amid expectations that the Bank of Japan (BoJ) will remain dovish to support a fragile domestic economy. In fact, the new BoJ governor, Kazuo Ueda, recently stressed the need to maintain ultra-loose policy settings and said the central bank is not aiming for a quick turnaround from a decade of massive easing. Bets were further raised after the release of the final GDP print, which showed Japan's economy narrowly avoided a technical recession in the final months of 2022. EUR/USD The euro pair started the day with a drop from 1.0556 to 1.0542. After this decline, the EUR/USD pair started an upward move towards 1.0570. After this move, the EUR/USD pair fell to the level of 1.0562. EUR/USD remains close to monthly lows after the recovery faded near 1.0570 during the US session. The US dollar failed to pick up a new leg, but maintained its recent gains. The dollar looks solid as markets are priced at "higher for longer" US interest rates. Data released on Wednesday helped consolidate expectations. Market participants also see a more hawkish European Central Bank (ECB) as recent research points to a higher final rate. Thursday's economic report does not include first-tier reports for the eurozone and preliminary claims for US unemployment benefits. Markets will continue to weigh Powell's message as they prepare for non-farm payrolls. GBP/USD The beginning of trading in the GBP/USD pair started trading with the application to the euro. Then, still in the Asian session, it rose slightly. The cable pair recorded a significant increase at the beginning of the European session and exceeded 1.1880. Currently, the level of the GBP/USD pair is above 1.1870. A permanent rebound seems unlikely as buyers refrain from betting on sterling further strengthening due to policy divergence between the US Federal Reserve and the Bank of England, although BoE expectations are hawkish. AUD/USD The Australian pair traded in the 0.6580-0.6595 range at the beginning of the Asian session. Still in the Asian session there was a significant increase above 0.6610. After this surge, AUD/USD traded in the 0.6610-0.6615 range. At the time of writing, the Aussie pair is trading at 0.6612. The Australian dollar is trying to bounce back this Thursday after Tuesday's decline. The morning started with weak economic data from Australia in the form of building permits and private home permits for January. Both sets of data printed in line with estimates but reached levels last seen in January 2022. This deterioration in the housing and construction sectors is a reflection of the high interest rate environment created by the Reserve Bank of Australia (RBA). Source: investing.com, finance.yahoo.com
Gold Stocks Have Performed Very Well Under Pressure

Gold Stocks Have Performed Very Well Under Pressure

InstaForex Analysis InstaForex Analysis 09.03.2023 11:51
McEwen Mining Chairman Rob McEwen believes gold will reach $5,000 an ounce by 2027, and silver will reach $250 an ounce. McEwan has almost forty years of experience in the mining industry. In 2019, he sold his GoldCorp company to Newmont for $10 billion, saying that as governments pursue soft fiscal and monetary policies, the weakening of fiat currencies will benefit hard assets such as precious metals. "Hard assets will increase in value as the dollar drops in relative value to other currencies, because governments are irresponsible," he said. "They steal from their citizens by printing excess money and borrowing in ways they shouldn't. Look at the amount of the debt most of the Western world has right now, it's enormous." McEwan said he is positioning his portfolio to capitalize on the expected rise in gold prices through his investments in mining companies, including juniors. Pierre Lassonde, Chairman Emeritus of Franco-Nevada and CEO of Fireside Investments, also believes that gold will rise. As geopolitical tensions mount, central banks are buying more bullion, and countries like Russia are looking to get rid of the U.S. dollar after the dollar has become a weapon, so the price of gold will hit $2,400 by 2028. A dual currency system may also appear. As geopolitical tensions rise around the world, central banks are buying more gold. Gold purchases in 2022 by central banks has been the highest since 1950, with central banks purchasing 1,136 tons. And central banks, especially in the BRICS countries (Brazil, Russia, India, China and South Africa), are buying gold as a prelude to creating an alternative to the U.S. dollar as a reserve currency. The BRICS countries are concerned about U .S. influence in their affairs, and moving away from the U.S. dollar will help them gain more autonomy. The forecast of a bifurcation of the global monetary system was supported by a number of voices, including Canadian mining tycoon Frank Giustra. Lassonde also suggested that some young miners might do well as gold reaches new heights. In his opinion, there will be a recession and a stock market crash in 2023. And the resulting economic chaos will benefit gold. He also believes that the U.S. Federal Reserve will respond to the recession by cutting rates, but "not fast enough." In turn, this will hurt the U.S. dollar and make investors flock to gold. Gold stocks have performed very well under pressure. They are also worth paying attention to.   Relevance up to 10:00 UTC+2 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/337128
US core inflation hits 5.5% and it's the second lowest reading since November 2021

Nonfarm Data Can Strengthen The U.S. Currency, Provoking Another Dollar Rally

InstaForex Analysis InstaForex Analysis 09.03.2023 12:49
The EUR/USD pair consolidated within the fifth figure, thanks to Jerome Powell, who voiced hawkish rhetoric in the walls of the U.S. Congress. But despite the strengthening bearish moods in the pair, the sellers could not overcome the 1.0520 support level, corresponding to the lower line of the Bollinger Bands indicator on the D1 timeframe. It is an important price barrier, overcoming which will open the way to the area of the 4th figure. Obviously, traders need additional information impulse for the next downward spurt. The February Nonfarm Payrolls report, which will be released tomorrow, March 10, could be such momentum. Powell and Nonfarm The U.S. Nonfarm Payrolls is important in its own right, but in light of recent events, the significance of this release has increased in many ways. Speaking to Congress, Fed Chairman Powell said that the labor market is "extremely tight" and contributes to inflation. By and large, Fed officials have been saying the same thing for weeks, ever since the January Nonfarm Payrolls (which showed a half-million gain in employment) were released. The market, in particular, has started to talk about a possible "second order effect," whereby rising wages further unwinds inflation in a wage-price spiral. Responding to questions from congressmen, Powell suggested that some easing in the labor market is needed to bring inflation under control. He said this is necessary so that "inflation will come down in the broad service sector, a labor-intensive part of the economy where prices continue to rise." What the ADP report said Yesterday, the U.S. ADP employment report was released, which can be considered as a "preview" of Friday's nonfarm report. The ADP report came out in the "green zone," stating the creation of 242,000 jobs in the private sector. This result was somewhat surprising, since most experts predicted a more modest increase of 180,000. But the actual result exceeded the analysts' forecast. It is worth noting that recently the report has shown a fairly high correlation with the official release, so the good February figures from ADP suggest that the main components of the release tomorrow will please dollar bulls with a "green color." Preliminary forecasts for February Nonfarm Payrolls also suggest that the U.S. labor market will not disappoint, at the very least. Unites States unemployment should remain at January levels, i.e., at 3.4%. The nonfarm payrolls growth figure should show a more modest result than the previous month, but we should not forget that there was a half-million gain in January. February is expected to see an increase of 205,000. The private sector of the economy is projected to grow by 210,000. In light of Powell's recent statements, the wage component of the release is especially important. According to forecasts, the salary index should resume growth, rising to 4.7%, after the January decline to 4.4%. The trend itself will be important here, as with the major inflation indicators (CPI, core PCE index). Conclusions If nonfarm data comes out in the green zone on Friday, the dollar will again strengthen its position throughout the market. A strong report would suggest that the Fed will accelerate the pace of rate hikes at its March meeting and announce a hawkish stance on the prospects of monetary tightening. We are talking about an almost guaranteed 50-point interest rate hike in March. The regulator may also revise the level of the final rate—tentatively to 5.5% (possibly up to 5.75%). And while much will depend on the dynamics of the February and March inflation indicators, this scenario looks the most realistic. According to the CME FedWatch Tool, the likelihood of the 50-point scenario materializing in March is now nearly 75%. As to further prospects, the market is still fluctuating. As of today, the probability of a 25-point rate hike in May is 59%, while the 50-point increase is 25%. In anticipation of such a significant release, it is advisable for traders of the EUR/USD pair to maintain a wait-and-see attitude. Nonfarm data can strengthen the U.S. currency, provoking another dollar rally. But they can also put pressure on the greenback. From the technical point of view, the pair on the daily chart is between the middle and lower lines of the Bollinger Bands indicator, as well as below all the lines of the Ichimoku indicator. It is important for the EUR/USD bears to consolidate below the lower line of the Bollinger Bands (i.e., below 1.0520) – in this case, they will be able to test the area of the 4th figure, and in the future – the 1.0450 support level (Kijun-sen line on the same timeframe).   Relevance up to 11:00 2023-03-10 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/337134
Astonished by the week ahead? Barclays, NatWest Group and Microsoft earnings are also released shortly

The US And India Are Looking To Sign Semiconductors Agreement

Saxo Bank Saxo Bank 10.03.2023 08:37
Summary:  U.S. banking stocks tumbled on Silicon Valley Bank’s liquidity crisis and bond portfolio losses as well as the winding-down of Silvergate Capital, a crypto-focused bank. The KWB Bank index tumbled 7.7%. Yields on the 10-year Treasuries dropped to 3.90%. All eyes today are on the Bank of Japan meeting and the U.S. employment report.   What’s happening in markets? US equities slide with banking stocks being heavily pressured Banks were front and center in yesterday’s sell-off in U.S. equities. Financials plunged 4.1% and were the biggest loser among the 11 S&P 500 sectors. The KWB Bank Index tumbled 7.7%, its biggest drop since June 2022. The S&P 500 broke below its 200-day moving average, a key support level, and ended 1.9% lower, while the Nasdaq 100 shed 1.8%. SVB Financial (SIVB:xnas), parent of Silicon Valley Bank, suffered a record 60% crash in share prices after the bank said it suffered from a liquidity crisis and sold off a swad of securities in a portfolio that’s been hit by significant losses. Silvergate Capital (SI:xnys) plunged 41.8% following the crypto-focused bank said that it was winding down and returning deposits to customers. Bank of America (BAC:xnys) plunged 6.2%; JP Morgan Chase (JPM:xnys) shed 5.4%. Oracle (ORCL:xnys) dropped 4.1% in extended-hour trading following reporting inline revenue and earnings beat but a miss in cloud license and on-premise license. Yields on U.S. Treasuries dropped on a spike in jobless claims and bank stocks woes A bounce in initial jobless claims to 211K (consensus 195K) from 190K triggered the short-covering in the front end ahead of the employment report which is scheduled to release on Friday. The buying intensified as banking stocks tumbled on woes on Silvergate Capital and SVB Financial. Large block buying emerged in the June 2023 SOFR contracts. Yields on the 2-year plunged 20bps to settle at 4.87%. The 10-year yield dropped 9bps to 3.90%. The 2-10-year yield curve steepened to -97bps, Hang Seng Index and China’s CSI 300 retreated as the Sino-American tech friction escalated Hang Seng Index dropped 0.6% and CSI 300 Index slid 0.4%. China’s CPI softened to 1% Y/Y and PPI declined 1.4% Y/Y in February did not excite investors with monetary stimulus expectations but added to the worries about the strength of the economic recovery in China. China consumer names were under selling pressure. Restaurant chains Xiabuxiabu (00520:xhkg) and Haidilao (06862:xhkg) plunged 7%  and 4.5% respectively. China Resources Mixc Lifestyle Services, a leading property management name, dropped 4.7% and was the biggest loser within the Hang Seng Index on Thursday. The latest announcement from the Netherlands to impose additional restrictions on exports of advanced microchip equipment to China and the U.S. moving close to banning TikTok caused concerns of escalation of the technology friction and geopolitical tension between China and the U.S. The Dutch company ASML is the world’s largest and most dominant supplier of advanced chip-making equipment including the immersion DUV lithography machines in the latest export ban. State-owned telcos continued to rise, with China Telecom (00728:xhkg) surging 4% and China Mobile (00941:xhkg) climbing 3.1%. COSCO China Shipping Energy Transportation (01138:xhkg) jumped 12.5% as investors anticipated the Chinese tanker and dry bulk shipping operator to benefit from increases in freight rates. In A-shares, consumer stocks were among the biggest losers with Chinese white liquor, retailer, catering, and tourism stocks leading the charge lower. Semiconductor names gained on anticipation of import substitution. Australian equities (ASXSP200.I) slide 1.6% on Friday, but are almost steady over the week Despite the S&P500 sliding 3% Monday to Thursday, the ASX200 is managing to hold almost steady, and is down 0.2% Monday to Friday (at the time of writing). Today most sectors are under water today, bar the defensive, Utility sector, while Financials down the most following alarm bells being rung in the banking sector on Wall Street. Pressure is also being felt in lithium stocks after CATL’s results beat expectations. Meanwhile BHP is trading 2% lower, despite the iron ore (SCOA) price moving up 1% to $129.10. FX: USD modestly weaker ahead of BOJ and NFP The rise in jobless claims on Thursday saw yields dipping lower, taking the dollar off the recent highs as well. The Japanese yen saw a recovery with lower yields, and focus now shifts to Bank of Japan meeting which can cause significant volatility. USDJPY finding support at 136 for now after reaching 3-month highs earlier this week on Powell’s hawkish testimony. GBPUSD rose back above 1.19 ahead of UK data dump today likely to show that a recession has been delayed, but focus will shift to NFP later as the key USD driver. CAD remained the underperformer, with USDCAD rising to 1.3830, as Fed-BOC divergence widened and oil prices remained weak. The choppiness in crude oil prices continued WTI prices ended the day below $76/barrel after touching highs of $78 earlier, while Brent dipped below $82 from $84 earlier. Even as the jobless claims data cooled, markets were in a flight to safety mode ahead of NFP as jitters on a tighter monetary policy remained. Demand concerns remained despite crude inventory recording its first weekly fall after several weeks of gains. EIA inventory report showed crude stocks down 1.7mn barrels last week vs. expectations of +1.6mn. Signs of a pickup in Chinese demand also remain mixed. The highs earlier in crude oil prices were reached on the back of supply concerns arising out of French refineries because of the nationwide strikes in France. Gold reverses back higher from support Gold caught a bid in the run upto the jobless claims release last night, reversing higher from near its support levels at $1800 to reach $1835. Focus turns to NFP today after Fed Chair Powell in his testimony this week opened the door to a 50bps rate hike in March. Now, data will need to confirm the need for that, else expectations may be quick to reverse. Support at 100DMA at $1806 remains key to hold.   What to consider? Jobless claims cool, focus now on NFP data today Initial claims rose 211k in the week of 4th March, above the 190k prior and the 195k expected. It was the first time that the jobless claims came above the 200k mark since January, and it was the highest claim YTD. The continued claims also rose to 1.718 mn from 1.649 mn, coming in above estimates as well. While this may have raised some concerns that the US labor market is softening, the print is still strong and eyes now turn to the February payrolls data out today in the US. Our full preview is here, which says that Overall message, despite a potentially softer headline print, is likely to be that US labor market is still tight and there are millions of open positions even as layoffs continue to ramp up in some of the sectors. Headline jobs are expected to come in again at 200k+, but risk of disappointment remains given the scope of correction from +517k in January. A strong print could further cement the case for a 50bps rate hike this month. SVB’s nosedive of 60% highlights the venture capital and tech bubble is spilling to banks- Is this just the beginning? Investors were spooked by Silicon Valley Bank announcing its  taking emergency steps to shore up capital after suffering a $1.8 billion after-tax loss in the first quarter. SVB sold about $21 billion of securities from its portfolio and plans to raise $2.25 billion. SVB’s shares tumbled 60% on the announcement, taking its shares to its lowest level since September 2016, while erasing $9.6 billion in market value. This reflects the pain of higher interest rates and tighter liquidity on the venture capital start-up bubble and how that’s heavily flown right to banks - who are also now suffering a liquidity crisis. It seem a vicious cycle. While, at the same time, people’s trust in the financial system is weakening, which is why we saw the banking sector heavily sold off on Thursday, with the KWB Bank Index tumbling 7.7%, its biggest drop since June 2022. Not only have we seen floundering prominent startups go bust – such as FTX, but banks have been making exuberant investment in such firms for years. This is all despite banks slowing their pace of investing and offering stingier terms. This not only reflects the hot air been blown into starts up - yet banks have become heavily reliant on such risky and volatile businesses.Also on Thursday, another California lender, Silvergate Capital Corp, which is targeting cryptocurrency firms, such as FTX, announced its winding down operations, following the meltdown of its financial strength, after digital assets plunged, seeing Silvergate lose billions in deposits. After announcing plans to liquidate, it says it will repay all deposits in full. Silvergate was previously scrutinised by regulators for its dealings with fallen crypto giants FTX and Alameda Research. Silvergate shares sank 40%. Bank of Japan is the biggest event risk While data and commentary from officials has been less supportive of the case for further tweaks in Bank of Japan policy, outgoing governor Kuroda is known for his surprises. At his last meeting on Friday, he may want to part with some sparks resulting in a numb yen in the run upto the meeting. We discussed all this and more in our central banks note this week, and significant scope of two-way volatility in the yen is seen. China’s CPI softened sharply to +1% Y/Y, PPI deep into deflation at -1.4%Y/Y China’s CPI growth slowed to 1% Y/Y in February, much lower than the consensus estimate of 1.9%. Growth in food prices decelerated to 2.6% Y/Y from 6.2% Y/Y while growth in non-food prices halved to 0.6% Y/Y in February from 1.2% in January. PPI slide 1.4% Y/Y in February, bringing the producer prices deeper into deflation. US-India ties expand into semiconductors The US and India are looking to sign an agreement to boost coordination of their chip industry to focus further on information sharing and policy dialogue, as India forges ahead to boost its presence in the global technology supply chain amid China’s crackdowns on the private sector and growing geopolitical issues. CATL delivers stronger than expected results underscoring surging EV demand China’s Contemporary Amperex Technologies Limited (CATL), the world's biggest battery maker and Tesla’s battery supplier, delivered results eclipsing estimates, amid stronger EV demand, while its results also cement CATL as the industry leader. Net income surged 93% y/y, to 30.72-billion-yuan, vs 28.8 billion yuan expected – with both its power battery and energy storage division’s revenue growing far more than expected amid clean energy demand. Power battery revenue rose to 236.59 billion yuan, up from the 91.49-billion-yuan same time last year - while exceeding the 228.46-billion-yuan consensus expected. That said, its power battery gross margin came in at 17.2%, on par with estimates – as EV sales growth in China slowed in Q4 as the economy was hit by a wave of COVID-19 infections with Tesla cutting output in Shanghai, with CATL suffering rising inventory. That said, CATL’s outlook seems bright and it’s continuing its global expansion, planning to set up 13 production bases, including in Germany and Hungary, with five R&D centres. It recently licensed its LFP battery technology for Ford to use in a new $3.5 billion EV battery plant – which Ford will run in Michigan.  We expect CATL’s results will continue to grow strongly given COVID disruptions came to an end. Fitch suggests EV sales in China will account for 35% of vehicles sales this year, up from 27% in 2022. EV sales grew 60% in 2022 to 10.4 million units and are expected to reach 13.9 million units this year, with most growth in China, according to Bloomberg. This also reflects strong demand for EV batteries ahead, as well as the key battery components including lithium, copper, graphite and aluminium. You can explore some of the companies in this space in Saxo's Lithium- Powering EVs equity theme basket.  CATL's had 37% share of EV battery global market in 2022, which is testament to its cheaper-to-produce lithium-iron-phosphate batteries. In joint second place, South Korea’s LG Energy Solution and China’s BYD Co, with a 13.6% share each. JD.COM gave a downbeat Q1 revenue guidance citing cautious Chinese consumers JD.COM (09618) reported Q4 revenue of RMB 295 billion, rising 7% Y/Y, in line with consensus estimates. Benefiting from a 1.4pp Y/Y improvement in operating margin to 2.5%, the e-commerce giant’s non-GAAP net profit came in at RMB 7.66 billion, a 115% increase Y/Y and nearly 40% above consensus. However, the share price of its ADRs plunged 11.3% overnight or 6.2% from its Hong Kong closing price on Thursday, on downbeat guidance on Q1 revenues. JD.COM expects JD Retail’s sales to fall by a low-to-mid single-digit percentage Y/Y in Q1, below analysts’ estimates of 1-3% growth. The Company’s management said the sentiment of Chinese consumers is still fragile and consumers have become more prudent on discretionary items. Reopening might also divert some of the online purchasing to off-line consumption such as dining and traveling.   For what to watch in the markets this week – read or watch our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: Global Market Quick Take: Asia – March 10, 2023 | Saxo Group (home.saxo)
Asia week ahead: RBA policy meeting plus regional trade data

In China Core Inflation Excluding Food And Energy Fell To 0.6%

Marc Chandler Marc Chandler 10.03.2023 09:12
Overview: Seeing the drama he inspired on Tuesday, the Fed chair tried soft-pedaling the idea that he was signaling a 50 bp hike in March. The market did not buy it. And the odds, discounted by the Fed funds futures rose a little above 70% from about 62% at Tuesday's close. The two-year note yield solidified its foothold above the 5% mark. With the Bank of Canada confirming its pause, the Reserve Bank of Australia does not seem that far behind, and even the Bank of England Governor Baily has recently pushed against the aggressive market pricing, saying that the central bank has moved away from the "presumption" that more rate hikes are needed. The dollar remains firm but mostly consolidating today, ahead of tomorrow's employment report. Some position adjusting ahead of the conclusion of the BOJ's meeting is lifting the yen today, which is the best performing G10 currency, gaining about 0.85%. The US 10-year yield is little changed, slightly below 4% today, while European benchmark yields are mostly 3-4 bp higher. Asia Pacific equity markets were mixed, with Japan and Australia rising and China, Hong Kong, South Korea, Taiwan, and India falling. Europe's Stoxx 600 is off 0.6% to nearly double this loss. US index futures are trading softer. With the greenback and US rates consolidating, gold is finding a reprieve after falling from around $1858 on Monday to a little below $1810 yesterday. April WTI is stuck in a tight range a little above yesterday's low (~$76.10). Lastly, we note that there is much talk about the tax hikes that will be in President Biden's budget proposals. We suggest, given the configuration of Congress that is more about political messaging, perhaps ahead of a formal declaration that he will seek re-election than the actual budget that will be eventually passed. Asia Pacific  China reported February consumer and producer prices, and both were weaker than expected. The end of the Lunar New Year holiday saw food, transportation, and recreation prices moderate, and the year-over-year rate of CPI slow to 1.0% from 2.1% in January. Food price inflation slowed to 2.6% year-over-year from 6.2% in January. Core inflation, excluding food and energy slowed to 0.6% from 1.0%. The new forecast/targets announced at the start of this week's National People's Congress has CPI rising to 3% this year. The market (median forecast in Bloomberg's survey) was at 2.4%. Producer prices fell 1.4% year-over-year, a larger decline than expected after a -0.8% pace in January. It was fifth consecutive monthly decline.  Even with fiscal and monetary stimulus, the Japanese economy continues to struggle and that constrains the policy options of the new leadership at the central bank. Growth in Q4 was revised from 0.2% quarter-over-quarter to flat. The revision is owed to weaker private consumption (0.3% rather than 0.5%). Net exports blunted some of the impact and was revised to 0.4% boost to GDP from 0.3%. Separately, the weekly Ministry of Finance report on portfolio flows shows that Japanese investors turned sellers of global bonds last week for the first time since the end of January. In the first nine weeks of the year, Japanese investors have bought JPY5.35 trillion or about $39.6 bln of foreign bonds. In the first nine weeks of 2022, Japanese investors sold around JPY1.66 trillion foreign bonds. Softer US rates and some anxiety over the conclusion of the Bank of Japan meeting tomorrow has seen the yen strengthen. The US dollar is pulling back from the three-month high set yesterday near JPY137.90 yesterday to almost JPY136.10 today. The week's low was set Monday slightly above JPY135.35. Large options set to expire today at JPY137 (~$1.4 bln) and JPY136.50 (~$1.05 bln) may have added fuel to the pullback. Options for $2.6 bln expire tomorrow at JPY136.00. Ahead of the BOJ meeting and the US employment data, a few hours later tomorrow, overnight yen volatility has spiked to over 41% from around 11.25% late yesterday. The Australian dollar is consolidating losses that took it to a new low since last November (~$0.6570) yesterday. It is inside yesterday's range and needs to rise above the high (~$0.6630) to lift the tone. It seems likely to spend the North American session consolidating. The dollar is also confined to a narrow range inside yesterday's price action against the Chinese yuan. The PBOC set the dollar's reference rate tightly against expectations, unlikely yesterday, when it was set notably weaker. The fix was at CNY6.9666, which is the strongest of the year, while the median in Bloomberg's survey was for CNY6.9667. Europe There is a light European economic calendar today. The next big event is the ECB meeting on March 16, where the staff will also update the economic forecasts. It we take a step back; we note that Germany's 10-year yield rose from around 2% in mid-January to 2.77% last week. The 10-year breakeven (the difference between the inflation-linked and conventional yields) also widened from about 2% to a little above 2.65% last week. However, it has collapsed to almost 2.40% and is near 2.44% now. That is to say that most of the rise in the nominal yield can be explained by an increase in the market-measure of inflation expectations. The higher-for-longer on rates, and the overnight index swaps show a 4.07% policy rate in October, a 70 bp increase since the end of January, seems to be souring the economic outlook. While the inversion of the US 2-10 curve draws much attention, the German curve is also inverted. At nearly 70 bp, the inversion is the most in more than 30 years and is nearly twice as inverted as it was at the end of January. Sweden's economy unexpected grew and grew strongly in January. The 2.0% monthly GDP gain contrasts with the median forecast in Bloomberg's survey for a 0.1% contraction. Household consumption rose by 0.5% (as much as it declined in December), and private sector production and services expanded strongly. The one source of weakness in today's reports was the 20.2% drop in industrial orders, which tends to be a volatile series. It had gains 23.3% in December. The euro is confined to a narrow range between about $1.0540 and $1.0570. There are options for almost 1.8 bln euros at $1.06 that expire today and 1.2 bln euros that expire there tomorrow. The near-term risk still seems to be on the downside and the 1.3 bln euros in options that expire tomorrow at $1.05 may still draw the price action. Yesterday's low was near $1.0525. The UK reports January GDP figures tomorrow and a small gain is expected after the 0.5% contraction in December. The British Chamber of Commerce became the latest to signal that the UK may avoid a recession. Sterling approached $1.18 yesterday and has recovered to almost $1.1890 today. The 200-day moving average is slightly above $1.19. There are options for almost GBP620 mln that expire there tomorrow. America Since Monday, the odds of a 50 bp hike by the Fed on March 22 has risen from about a 25% chance to around a 70% chance. This seems excessive, but arguably prudent ahead of tomorrow's jobs report. The terminal rate expectation has risen to 5.65%, up nearly 20 bp since Monday's settlement, and reflects a recognition of the increased risk of a 5.75% peak. The Beige Book, prepared for the upcoming FOMC meeting, was mixed. While it noted inflation pressures remained widespread, price increases moderated in many districts and prices are expected to continue to moderate. At the same time, growth was said to have accelerated slightly at the start of the year, but the pace in Q3 22 and Q4 22 were already above the Fed's long-term non-inflationary pace. Labor market conditions were "solid," though few districts reported businesses were becoming less flexible with some reduction of remote work options. That seems to be consistent with some easing of the tightness and several districts cited the lack of available childcare impeding work force participation. Some districts report easing of wage pressures, and this was seen as a trend in the coming months. As widely expected, the Bank of Canada stood pat, leaving the overnight target rate at 4.5%. Amid the more general theme of "higher for longer" the Canadian dollar was punished for the less aggressive posture and the Canadian dollar was the weakest of the G10 currencies, losing about 0.25% to fall to new four-month lows. The central bank's statement recognized the tightness of the labor market, and the need for inflation expectation to ease some more, but concluded that on balance the economy is evolving as expected. That includes CPI still falling to around 3% by midyear. It was at 5.9% in January, though the core measures were closer to 5%.  The Bank of Canada is putting emphasis on the cumulative effect of the tightening and the weaker growth to drive down inflation. Still, the market is doubtful that the pause is the peak. The swaps market is pricing about a 25% chance of a hike at next meeting on April 12, down a little bit from Tuesday. However, it is completed discounted by the July 12 meeting, slightly more confident than earlier in the week. That said, the market is still in flux and tomorrow's jobs report is an important data point, though the Bank of Canada will see the March figures (due April 6) before it meets, as well as the February CPI (March 21). In addition, the Bank of Canada may feel less comfortable if the policy rate with the Fed exceeds 100 bp.  Mexico reports February CPI today. It is expected to have slowed to 8.35% on the headline (from 8.45%) and 7.68% at the core level (from 7.91%). Headline CPI peaked slightly above 8.50% last November. The core rate peaked last August and September at 8.70%. The stickiness of price pressures spurred the central bank to lift the overnight target rate by 50 bp at its February 9 meeting. Most had expected a quarter-point move. Banxico meets on March 30 and the risk of another 50 bp hike has increased primarily because of the shift in Fed expectations. The median forecast in Bloomberg's survey sees inflation ending the year around 5.8%.  The US dollar marginally extended yesterday's gains against the Canadian dollar to a little through CAD1.3815 before coming back offered in the European morning and trading to almost CAD1.3790. It is consolidating in a narrow range just inside the upper Bollinger Band (~CAD1.3825). A break of the CAD1.3750 is needed to help stabilize the technical tone. That seems unlikely ahead of tomorrow's jobs reports. Fed Chair Powell's initial comments on Tuesday saw the greenback spike up to almost MXN18.18. However, this was greeted with fresh dollar sales and peso purchases. The dollar recorded a marginally new five-year low today near MXN17.90. It is difficult to talk about meaningful support, but the next important chart area is near MXN17.50. The lower Bollinger Band is near MXN17.85 today.  Disclaimer
National Bank of Poland Meeting Preview: Anticipating a 25 Basis Point Rate Cut

The Collapse Of Silvergate Capital And A Severe Rout In SVB Stock Plunged The Banking Sector Into Darkness Yesterday

Ipek Ozkardeskaya Ipek Ozkardeskaya 10.03.2023 09:16
Thursday could've been a calm trading session. Especially given that after a deluge of strong economic figures concerning inflation and jobs, the little uptick in the US weekly jobless claims to above 200'000 for the first time since January – and which sent the US short-term yields tumbling - could've given some piece of mind to investors and lead to a minor correction in equities before today's all-important US jobs figures. But, no. A severe rout in banking stocks spoiled what could've been a calm session on Thursday. The collapse of Silvergate Capital and a severe rout in SVB stock plunged the banking sector into darkness yesterday. While Silvergate Capital's fall was mainly crypto-related and didn't spur worries for the rest of the banking sector, SVB's plunge fueled fears that the rest of the banks could also experience similar issues. Why? Because SVB bank launched a stock offering of around $2 billion to strengthen its balance sheet, because the bank needed to close a hole due to the sale of around $21 billion loss-making assets to ensure that they could pay depositors in the actual environment of rising interest rates. And the SVB's portfolio had a lot of US treasuries and mortgage-backed securities in it. This is an issue that could hit all the banks, including the big banks, because the banks amassed a lot of assets since the 2007/2008 financial crisis at rising prices, and they had to pay nearly no compensation for bank deposits, as interest rates have been near zero for such a long time. And in theory, the rising interest rates would've been a boon for the banking sector as it would top their net interest income, as they would start making money on deposits, yet again. But the problem is that the interest rates rose too fast. The Fed raised the rates by 450bp since last year. And now, with inflation hanging at multi-decade highs, bank depositors ask higher compensation for their deposits, and to pay them, banks could be brought to sell their assets. But the assets must be sold at a severe loss, because the asset valuations sank severely from their all-time-high levels as a result of an aggressive Federal Reserve (Fed) tightening. This is why JP Morgan lost more than 5%, Wells Fargo and Bank of America lost more than 6% as SVB plunged 60%. As a result, the S&P500 didn't wait for today's NFP print to slip below both the 100 and 200-DMA and below the major 38.2% Fibonacci retracement on October to February rally. Weak US jobs data could slow bleeding. Bank stocks will likely remain under the pressure of higher, and rising interest rates, as the rate hikes in the US could get more aggressive again, if the US jobs market doesn't weaken, and inflation doesn't cool down. The expectation of a 50bp hike in the next FOMC meeting spiked above 80% earlier this week, as Fed Chair Jerome Powell told the US Senate that the Fed could increase the pace of interest rates if the 'totality of the data' requires so. Activity in Fed funds futures currently gives slightly less than 60% chance for a 50bp hike. Today's US jobs data could keep the 50bp hike expectations alive, or tilt the balance to 25bp hike again. It all depends on the strength of the latest jobs data. The expectation is that the US economy may have added around 200K new nonfarm jobs in February, after last month's whooping half-a-million NFP print. The wages are seen going up from 4.4% to 4.7%, and the unemployment rate is seen steady at 3.4% - a more-than-50-year low. A good thing would be to see the US jobs figures weaken. Otherwise, the Fed will be brought to action a 50bp hike this month, and the latter could accelerate the equity selloff. As such, soft, and ideally softer-than-expected jobs data from the US today could reset the Fed rate hike expectations back to a 25bp hike, whereas another set of strong jobs data will likely cement the idea of a 50bp hike from the Fed later this month, send the US yields and the US dollar up, and equities down.
Japan: stronger-than-expected GDP supports BoJ policy normalization

The Bank Of Japan Kept Its Policy Unchanged, Lower Yields Saw The Dollar Trade Softer

Saxo Bank Saxo Bank 10.03.2023 09:36
Summary:  Financial market turbulence returned on Thursday after steep losses in two small US lenders, SVB Financial and Silvergate Capital Corp triggered a 7.7% sell off in the KBW Bank Index which includes major US banks. The S&P 500 fell to the lowest since January 19 while bond yields reversed sharply lower to surrender most of the gains triggered by Fed Chair Powell’s combatant statements on Capitol Hill earlier in the week. Lower yields saw the dollar trade softer while the loss of risk appetite sent crude oil and industrial metals lower. Before the banking woes took center stage, stocks had gained after a bigger than expected jump in weekly jobless claims raised speculation about a soft US job report due later today. What is our trading focus? US equities (US500.I and USNAS100.I): a warning shot has been fired The equity market has moved into risk-off mode following the 60% plunge in SVB Financial (indicated down again pre-market) as the bank has been forced to sell a considerable amount of its bond holdings causing big losses and the need raise more equity and hybrid capital. The S&P 500 Banks Index plunged 6.5% with JPMorgan Chase down 5.4%. We have seen a more muted reaction in the VIX Index only increasing to 22.6 which is a low figure given the risks coming into the market. Bill Ackman, a hedge fund manager, has said that the US government should consider bailing out SVB Financial as the bank is important the Silicon Valley ecosystem and for funding of start-ups in the US. The discussions about zero-days to expiry options (0DTE) and to what extent they can cause a big intraday move in the market will be tested today if the US jobs report fails to calm the market. Chinese equities (HK50.I and 02846:xhkg): tumbled on cautious consumer and tech war Hang Seng Index plunged 2.6% and CSI300 shed 1%. Investors were selling China internet and consumer names following downbeat comments from JD.COM on Chinese consumers.  The management of the Chinese e-commerce giant said that the sentiment of Chinese consumers is still fragile and consumers have become more prudent on discretionary items. In addition, reopening might also divert some of the online purchasing to offline consumption such as dining and traveling. JD.Com (09618:xhkg) tumbled 11.2%. Meanwhile, Hang Seng TECH Index dropped 3.2%. EV stocks fell sharply, led by an 8.7% decline of BYD (01211:xhkg). The tech war on semiconductors may extend from advanced equipment to materials. Investors are concerned that Japan may impose restrictions on the export of essential chemicals such as photoresist to China. The U.S. banking stock turmoil overnight in the U.S. also weighed on sentiment. FX: USD modestly weaker as risk sentiment weakens, JPY sold on unchanged BOJ The rise in jobless claims as well as the broader risk off arising from the SVB scare on Thursday saw yields dipping lower, taking the dollar off the recent highs as well but the decline remained modest with the USD coming in favor on the safe haven bid as well. Swiss franc also got a safe haven bid, and USDCHF plunged below 0.93 bringing the 50DMA at 0.9269 in focus. Bank of Japan’s unchanged monetary policy saw the JPY being the underperformer in the Asian session on Friday, but USDJPY could not pierce above 137. GBPUSD rose back above 1.19 ahead of UK data dump today likely to show that a recession has been delayed, but focus will shift to NFP later as the key USD driver in the very near-term. USDCAD continued to surge to fresh highs as Fed-BOC divergence widened and oil prices remained weak. The choppiness in crude oil prices continued Crude oil is heading for a weekly loss following another choppy session on Thursday which in the end took its cue from another loss of risk appetite as stress emerged in the US banking sector. Brent trades back below $81 after breaking below the trendline going back to the December low. While the signs of a pickup in Chinese demand remain mixed, the market has also been spooked by Powell’s combatant mood on Capitol Hill earlier in the week where he basically said recession was a price worth paying to get inflation under control. Gold finds support as stock market weakness drives bond yields sharply lower Gold caught a bid on Thursday in response to the high US jobless claims number and later a steep drop in US bond yields as the US banking sector slumped. The terminal US Fed fund rate dropped back to 1.5% while the market priced in a 1.25% rate cut in the following 12 months, developments that highlights the potential for US rates not being raised to the extend Fed chair Powell led the market to believe earlier in the week. Focus now turns to today’s job report after Fed Chair Powell in his testimony said the strength and duration of future rate hikes would be data dependent. Gold is once again testing the 21-day moving average resistance at $1835 ahead of at $1858 while support in the $1800 remains firm. Yields drop on financial market turbulence and spike in jobless claims A bounce in initial jobless claims to 211K (consensus 195K) from 190K kicked off the short-covering in the front end ahead of the employment report, due later today. The buying intensified later in the US on safe haven buying after the banking sector suffered its biggest drop since June 2020, with stocks in troubled Silvergate Capital and SVB Financial both tumbling. Yields on the 2-year plunged from 5.08% to 4.78% while the 10-year yield trades down to 3.82% from above 4% earlier in the week. The 2-10-year yield curve steepened to –97bps from –111 bps earlier in the session. What is going on? SVB’s 60% slump highlights the venture capital and tech bubble is spilling over to banks Investors were spooked by Silicon Valley Bank announcing it taking emergency steps to shore up capital after suffering a $1.8 billion after-tax loss in the first quarter. SVB sold about $21 billion of securities from its portfolio and plans to raise $2.25 billion. Having ended the regular session down 60% at 106 it went on the drop another 22% to 83 in afterhours trading. This reflects the pain of higher interest rates and tighter liquidity on the venture capital start-up bubble and it triggered heavy selling across banking stocks with KBW Bank Index tumbling 7.7%, its biggest drop since June 2020. Also on Thursday, another California lender, Silvergate Capital Corp, down 80% this month, which is targeting cryptocurrency firms, such as FTX, announced its winding down operations, following the meltdown of its financial strength, after digital assets plunged. Oracle shares down on cloud miss The software and database maker reported FY23 Q3 revenue growth of 18% y/y and adjusted EPS of $0.71 down 17%, but the disappointment was mostly in the outlook and especially in Oracle’s cloud business as customers are reducing spending growth. Oracle shares were down 4% in extended trading. Bank of Japan’s Kuroda ends term without sparks The Bank of Japan kept its policy unchanged at Governor Kuroda’s last meeting of his decade-long tenure. The target band for the 10-year JGB yield was kept unchanged at around 0%, with an upper limit of 0.50% after being raised in December. The BOJ held its short-term rate at -0.1%. Although data and recent communication had hinted at no change in monetary policy, there were some apprehensions given Kuroda is famous for giving surprises to the market. However, the outcome carried his usual dovish tone, ensuring a smooth handover to incoming Governor Kazuo Ueda who has conveyed policy continuity in his first remarks after being nominated. Jobless claims cool, focus now on NFP data today Initial claims rose 211k in the week of 4th March, above the 190k prior and the 195k expected. It was the first time that the jobless claims came above the 200k mark since January, and it was the highest claim YTD. The continued claims also rose to 1.718 mn from 1.649 mn, coming in above estimates as well. While this may have raised some concerns that the US labor market is softening, the print is still strong and eyes now turn to the February payrolls data out today in the US. Our full preview is here, which says that Overall message, despite a potentially softer headline print, is likely to be that US labor market is still tight and there are millions of open positions even as layoffs continue to ramp up in some of the sectors. Headline jobs are expected to come in again at 200k+, but risk of disappointment remains given the scope of correction from +517k in January. A strong print could further cement the case for a 50bps rate hike this month. US-India ties expand into semiconductors The US and India are looking to sign an agreement to boost coordination of their chip industry to focus further on information sharing and policy dialogue, as India forges ahead to boost its presence in the global technology supply chain amid China’s crackdowns on the private sector and growing geopolitical issues. CATL delivers stronger than expected results underscoring surging EV demand CATL, the world's biggest battery maker and Tesla’s battery supplier, delivered results eclipsing estimates, amid stronger EV demand, while its results also cement CATL as the industry leader. Net income surged 93% y/y, to CNY 30.7bn vs est. CNY 28.8bn with both its power battery and energy storage division’s revenue growing far more than expected amid clean energy demand. What are we watching next? The Australia, UK and US alliance thrusts the Defence and Nuclear sectors into the spotlight US President Joe Biden will host a meeting with the UK Prime Minister Rishi Sunak and Australian Prime Minister Anthony Albanese in San Diego on Monday, where they are expected to decide on how to move ahead with a multibillion submarine plan, which could involve Australia buying as many as five US Virginia class nuclear-powered submarines in the 2030s. They are also expected to deliberate on how to get other high-tech weaponry to Australia. This is all a part of the AUKUS alliance, which was formed 18 months ago, aimed at the countries sharing defence and military capabilities, to protect the Indo-Pacific region, and counter China. For the investor, it makes one reflect on the capital being spent in the industry, which may present as a potential investment opportunity to explore. So, we break down the next steps of the AUKUS alliance, where the vessels will be built, the potential financial outlay, the likely companies involved and Saxo’s Equity Defence and Nuclear theme equity baskets to watch. Read our article here. Earnings to watch Today’s key earnings releases are not market moving and thus the focus is on next week’s earnings with the most interesting earnings releases being Volkswagen, BMW, Adobe, and FedEx. Friday: Daimer Truck, AIA Group, DiDi Global Next week’s earnings releases: Tuesday: Foxconn, Volkswagen, Generali Wednesday: Constellation Software, BMW, E.ON, Ping An Insurance, Prudential, Inditex, Adobe, Lennar Thursday: Verbund, Rheinmetall, KE Holdings, Enel, FedEx, Dollar General Friday: Vonovia Economic calendar highlights for today (times GMT) 1330 – US Feb. Nonfarm Payrolls Change 1330 – US Feb. Unemployment Rate 1330 – US Feb Average Hourly Earnings 1330 – Canada Feb. Employment Data   Source: Global Market Quick Take: Europe – March 10, 2023 | Saxo Group (home.saxo)
US Inflation Eases, but Fed's Influence Remains Crucial

The US Jobs Data Is In Focus, SVB Turmoil

Swissquote Bank Swissquote Bank 10.03.2023 10:39
Thursday could’ve been a calm trading session. Especially given that after a deluge of strong economic figures concerning inflation and jobs, the little uptick in the US weekly jobless claims to above 200’000 for the first time since January – and which sent the US short-term yields tumbling - could’ve given some piece of mind to investors and lead to a minor correction in equities before today’s all-important US jobs figures. But, no. A severe rout in banking stocks spoiled what could’ve been a calm session on Thursday. Silicon Valley Bank’s 60% plunge due to difficulties following sharp rise in interest rates fueled worries across the banking sector. And things could get worse before they get better. Today, the US jobs data is in focus. A strong set of figures could cement the expectation of 50bp hike from the Fed later this month and further weigh on equity valuations. Bank of Japan Elsewhere, the Bank of Japan (BoJ) kept its policy unchanged at Mr. Kuroda’s last meeting, the yen fell against the dollar. But the USD will be remain seated at the driver seat until the weekly closing bell as all the attention will be on the US jobs data! Watch the full episode to find out more! 0:00 Intro 0:33 US bank stocks tumble amid Silvergate, SVB turmoil 6:53 US jobs data is crucial for Fed rate expectations! 8:49 Kuroda waves eventless Good Bye! Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #SVB #Silvergate #collapse #bank #selloff #US #NFP #jobs #data #Fed #rate #expectations #USD #BoJ #decision #JPY #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH        
Softer New Jobs Reading Would Likely Weigh On The Canadian Dollar

Softer New Jobs Reading Would Likely Weigh On The Canadian Dollar

Kenny Fisher Kenny Fisher 10.03.2023 13:00
The Canadian dollar continues to sag and has dropped 1.9% this week. Hold onto your hats, as we could have some further volatility from USD/CAD in the North American session, with the release of the US and Canadian employment reports. All eyes on NFP The highlight of the day is the US nonfarm payrolls report, which is expected to head back to earth after a blowout gain of 517,000 in January. The consensus for February stands at 205,000 and a wide miss of this figure on either side will likely shake up the US dollar.  A weak reading would fuel speculation of a Fed pivot and likely weigh on the US dollar, while a strong figure would support the Fed’s hawkish stance and should be bullish for the greenback. The ADP payroll report, which precedes the nonfarm payroll release, improved to 242,000, up from an upwardly revised 119,000 and above the estimate of 200,000. The ADP reading is not considered all that reliable at forecasting the nonfarm payrolls report so I wouldn’t read too much into it. Still, the US labour market remains strong despite the Fed’s tightening, and I would not be surprised to see nonfarm payrolls follow the ADP’s lead and beat the estimate. In addition to nonfarm payrolls, the Fed will also be keeping a close eye on wage growth. Average hourly earnings is expected to rise to 4.7% y/y in February, up from 4.4% y/y in January. The Fed is focussed on lowering inflation and an acceleration in wage growth could prompt the Fed to be more aggressive with its pace of rate increases. Canada also recorded a sharp gain in new jobs in January, with a reading of 150,000, up from 104,000 prior. The markets are braced for a small gain of 10,000 in February, and a soft print of 5,000 or lower would likely weigh on the Canadian dollar. The unemployment rate is expected to tick up to 5.1%, up from 5.0%.   USD/CAD Technical There is support at 1.3787 and 1.3660 1.3927 and 1.4190 are the next resistance lines This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
Kuroda Stayed On The Sidelines And The Yen Responded With Losses

Kuroda Stayed On The Sidelines And The Yen Responded With Losses

Kenny Fisher Kenny Fisher 10.03.2023 13:30
The Japanese yen is trading at 1.36.83 in the European session, down 0.52%. USD/JPY fell 0.90% on Thursday but has recovered much of those losses today. Kuroda exits with a whimper Bank of Japan Governor Kuroda didn’t fire any final shots at his final meeting today. The BoJ maintained interest rates at -0.1%, where they have been pegged since 2016, and didn’t make any changes to its to yield curve control (YCC) policy. Traditionally, BoJ governors do not make waves at their final meeting, but there was an outside chance that Kuroda might buck the trend. Kuroda has surprised the markets in the past, most notably when he widened the yield curve band in December and jolted the markets. This time, Kuroda stayed on the sidelines and the yen responded with losses as some investors were disappointed that he didn’t tweak the YCC. Kazuo Ueda takes over as BoJ Governor next month, and there is growing speculation that Ueda will change forward guidance and tweak or even abandon YCC, as distortions in the yield curve are damaging the bond markets. Ueda may not press the trigger when he chairs his first meeting in April but is expected to shift policy in the coming months. The US releases its February employment report, highlighted by nonfarm payrolls, later today. The blowout January reading of 517,000 is widely seen as a blip, although the labour market remains surprisingly resilient, despite the bite of rising interest rates. The estimate for February stands at 205,000 and a wide miss of this figure on either side will likely shake up the US dollar.  A weak reading would fuel speculation of a Fed pivot and likely weigh on the US dollar, while a strong figure would support the Fed’s hawkish stance and should be bullish for the greenback. The Fed will also be keeping a close eye on wage growth, in addition to nonfarm payrolls. Average hourly earnings are expected to rise to 4.7% y/y in February, up from 4.4% y/y in January. Higher wages drive inflation higher and an acceleration in wage growth would complicate the Fed’s battle to curb inflation.   USD/JPY Technical 136.06 is under pressure in support. 13502 is next 136.86 and 1.37.90 are the next resistance lines This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
WTI Oil Shows Signs of Short-Term Uptrend Amid Medium-Term Uptrend Phase

FX Weekly Summary: USD/JPY Ended Above 135.00, GBP/USD Was At 1.2032, EUR/USD Ended At 1.0643, AUD/USD Was Below 0.66

Kamila Szypuła Kamila Szypuła 11.03.2023 09:31
The dollar weakened on Friday after U.S. labor data for February showed slower wage growth, suggesting an easing of inflation pressures may keep the Federal Reserve's pace of interest rate hikes modest and thereby reduce the greenback's appeal. USD/JPY The yen pair started trading this week at 135.9770. For the first two days, USD/JPY traded mostly below 136.00. After that, the yen pair rose and reached a trading high of 137.8850. After reaching the top, the pair turned down and the pair fell towards 136.00. The lowest trading level was recorded on the last day of trading at 134.1710. The USD/JPY pair traded at 135.0480 . In his last meeting as the BOJ Governor Haruhiko Kuroda left policy settings steady, in line with expectations, given the Japanese central bank adjusted the yield band as recently as December. Incoming BOJ Governor Kazuo Ueda has said the central bank must maintain its current ultra-easy policy for now until there are signs that inflation has sustained above BOJ’s 2% target. EUR/USD The euro pair started trading at 1.0632. For the first two days of trading, the EUR/USD pair rose towards 1.0695, but failed to maintain momentum and plummeted below 1.06. After this drop, the euro remained below 1.06 for the next trading days, reaching its lowest level at 1.0529 on Wednesday. Despite the low level below 1.06, the pair was increasing its level day by day. The highest level was recorded by the EUR/USD pair on the last day of trading and it managed to exceed the level of 1.07 (1.0701). The trading session closed at 1.0643 . Moreover, the hawkish tone of Powell's comments also seems to have an impact on expectations of interest rate hikes by the European Central Bank (ECB). The ECB is scheduled to meet on Thursday, March 16 ahead of the Fed, which begins its meeting next week on March 22. GBP/USD The cable pair started trading at 1.2033. For the first two days of trading, GBP/USD traded in the 1.2000-1.2050 range, but failed to maintain momentum and plummeted below 1.19. After this decline, the pound pair remained in the range of 1.1810-1.1850 for the next trading days, and the lowest level was recorded in the range at 1.1812. The GBP/USD pair broke the high end of the range in the second half of Thursday and has been on the rise since then, crossing the 1.19 level. The highest level of the week was reached by the pair on the last day of trading at 1.21107. The closing of the trading session was at 1.2032. AUD/USD The Australian pair started the week trading at 0.6755. The AUD/USD pair was falling, but remained above 0.67 for the first few days. Already on Tuesday in the American session, the AUD/USD pair recorded a significant drop to levels below 0.66. Over the next few days, AUD/USD traded in the 0.6575-0.6625 range. The lowest level was also recorded by the Aussie pair in this range, at 0.6572. The highest level of the week was in the first trading days on Monday at 0.6771. The AUD/USD pair ended the week at 0.6584 . Weak economic data from Australia in the form of building permits and private home permits for January arrived this week. Both sets of data printed in line with estimates but reached levels last seen in January 2022. This deterioration in the housing and construction sectors is a reflection of the high interest rate environment created by the Reserve Bank of Australia (RBA). The Reserve Bank of Australia raised its cash rate by a quarter of a percentage point to 3.60% and said further monetary policy tightening would be needed. Source: finance.yahoo.com, investing.com
Inflation Numbers Signal Potential Pause in Fed Rate Hikes Amid Softening Categories

The Improvement In Economic Data Over The Last Month Has Been Robust And Broad-Based

Franklin Templeton Franklin Templeton 11.03.2023 09:58
ClearBridge Investments continue to believe a recession is more likely than a soft landing, given many of these data points are lagging or coincident in nature. Key takeaways A string of positively surprising economic releases including robust jobs and retail sales reports has caused Wall Street and even some FOMC members to more firmly embrace the soft landing narrative. We continue to believe a recession is more likely than a soft landing, given many of these data points are lagging or coincident in nature. A recessionary red overall signal on the ClearBridge Recession Risk Dashboard supports this view. Leading indicators continue to erode, portending market volatility in the coming months. This could lead to a reversal in market leadership with a return to favor for the stalwarts of the 2022 bear market, including high-quality dividend growth stocks. Improving economic data suggest reacceleration over recession The first two months of the year have been anything but boring when it comes to the prevailing economic narrative. Coming into 2023, consensus was convinced a recession was imminent. By mid/late January, a soft landing became the primary storyline following cooler inflation and wage prints, with several Federal Open Market Committee (FOMC) members reinforcing this possibility. Given firming inflation data and an economy that appears to be reaccelerating, today the main narrative centers around whether the Federal Reserve (Fed) is (once again) behind the curve. In a more “normal” environment, one could shrug off this potential uptick given one of the fastest starts to a hiking cycle in modern history. However, this cycle has been anything but normal, with the pandemic altering many “typical” business cycle dynamics over the past three years. The improvement in economic data over the last month has been robust and broad-based, including but not limited to nonfarm payrolls, job openings and retail sales. Tellingly, the Citigroup Economic Surprise Index started the month at -6.1 and rose to +38.6 in February, indicating a series of better-than-expected economic data releases. On the back of this renewed economic momentum, many investors adopted the view that a soft (or no) landing will materialize. In fact, when looking at Google search trends, searches for “soft landing” jumped to a 15-year high last month. Search activity was last at (or greater than) current levels in May 2008, a few months prior to Lehman’s bankruptcy and the beginning of the Global Financial Crisis. While today’s backdrop is clearly different, this should serve as an important reminder that many head fakes and pockets of optimism occur along the way as the economy moves toward and through a recessionary period. Exhibit 1: Soft Landing Searches are Spiking   Note: 3-Month Moving Average; Search Interest is a relative measure where a value of 100 represents peak popularity and 50 means the term is half as popular.Data as of Feb. 28, 2023. Source: Google Trends. Past performance is not an indicator or a guarantee of future results.   When faced with conflicting data, we come back to the ClearBridge Recession Risk Dashboard as a guiding light when evaluating the most likely path for the economy. The dashboard has maintained an overall recessionary red signal since August 2022 and has continued to weaken under the surface in recent months. At present, the dashboard shows only three non-red signals and had no indicator changes in February. Despite improving economic momentum, we continue to believe a U.S. recession is in the cards this year. Exhibit 2: ClearBridge Recession Risk Dashboard   Data as of Feb. 28, 2023. Source: ClearBridge Investments.   We think a recession is more likely than a soft landing given the nature of the economic data that has been surpassing expectations. Most of the reports that have surprised to the upside have been lagging or coincident in nature, telling us more about where the economy has been rather than where it might be headed. Nonfarm payrolls, for example, is a coincident indicator that is useful in interpreting what is happening in real time. However, payrolls demonstrate non-linearity in recessions, collapsing rapidly as a recession takes hold. As a result, healthy payroll readings in one month do not mean much in terms of where they may be in the next quarter or two. This suggests investors should temper their enthusiasm about what a healthy labor market means in terms of the economic outlook for 2023. Put differently, we believe emerging signs of a soft landing are more of a head fake than the real McCoy. By contrast, many leading indicators look far more precarious at present. January marked the 10th consecutive monthly decline in the Conference Board’s Leading Economic Index (LEI), more than double the string of declines seen ahead of past recessions (four months). Combined with the recessionary red signal emanating from the dashboard, which focuses more on leading indicators, this affirms our view that a recession is looming on the horizon later in 2023. Exhibit 3: Leading Indicators Point to Recession   Data as of Jan. 30, 2023, latest available as of Feb. 28, 2023. Source: Conference Board US and FactSet. Past performance is not an indicator or a guarantee of future results.   With recession risks remaining elevated, we continue to see a choppy year for equities. With financial markets discounting less of a recession over the last few months, we believe a tactical opportunity is emerging in high-quality dividend growers. The 2023 rally has been led by 2022’s laggards (growth stocks) with investors buying (and/or covering shorts) in the most beaten-down areas of the market based on an improving outlook. At the same time, better economic data points have helped to create a bid for more cyclical areas of the market, meaning defensives and quality have been relative laggards so far this year. If our recession call for 2023 is correct, a reversal of the recent leadership should ensue, supporting blue chip dividend growth stocks. Such stocks have historically outperformed during and after the onset of monetary tightening cycles. Separately, equities demonstrating these characteristics could also do well in a “no landing” scenario in which the Fed would need to hike rates even further than currently anticipated due to overly resilient economic growth and elevated inflation, similar to much of 2022. Exhibit 4: Dividend Growers Have Historically Outperformed   Source: BMO Capital Markets Investment Strategy Group, FactSet, Compustat, FRB. Dividend Growth Screening Methodology: S&P 500 stocks screened each month end, no dividend cuts in the past five years, latest one-year dividend per share growth greater than the S&P 500, current dividend yield greater than the S&P 500, free cash flow yield greater than the dividend yield, dividend payout ratio lower than the S&P 500. Past performance is not an indicator or a guarantee of future results.   Definitions The ClearBridge Recession Risk Dashboard is a group of 12 indicators that examine the health of the U.S. economy and the likelihood of a downturn. The Federal Open Market Committee (FOMC) is a policy-making body of the Federal Reserve System responsible for the formulation of a policy designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments. The Federal Reserve Board ("Fed") is responsible for the formulation of U.S. policies designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments. The Global Financial Crisis (GFC) refers to the economic disruption that followed the collapse of prominent investment banks in 2007-2008, marked by a general loss of liquidity in the credit markets and declines in stock prices. The term “soft landing” refers to an effort on the part of the Fed to slow the economy and bring down inflation, while preventing the U.S. from entering a recession. "The real McCoy" is an idiom and metaphor used in much of the English-speaking world to mean "the real thing" or "the genuine piece/article". The S&P 500 Index is an unmanaged index of 500 stocks that is generally representative of the performance of larger companies in the U.S. The Citigroup Economic Surprise Index tracks whether a core set of economic data series has been coming in under expectations, at expectations, or over expectations. The Conference Board’s Leading Economic Index (LEI) is an American economic leading indicator intended to forecast future economic activity from the values of ten key variables. WHAT ARE THE RISKS? Past performance is no guarantee of future results.  Please note that an investor cannot invest directly in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges. Equity securities are subject to price fluctuation and possible loss of principal. Fixed-income securities involve interest rate, credit, inflation and reinvestment risks; and possible loss of principal. As interest rates rise, the value of fixed income securities falls. International investments are subject to special risks including currency fluctuations, social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets. Commodities and currencies contain heightened risk that include market, political, regulatory, and natural conditions and may not be suitable for all investors. U.S. Treasuries are direct debt obligations issued and backed by the “full faith and credit” of the U.S. government. The U.S. government guarantees the principal and interest payments on U.S. Treasuries when the securities are held to maturity. Unlike U.S. Treasuries, debt securities issued by the federal agencies and instrumentalities and related investments may or may not be backed by the full faith and credit of the U.S. government. Even when the U.S. government guarantees principal and interest payments on securities, this guarantee does not apply to losses resulting from declines in the market value of these securities. Any companies and/or case studies referenced herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Franklin Templeton. The information provided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio.  
Listen: Higher for longer

Listen: Higher for longer

ING Economics ING Economics 11.03.2023 10:03
In this podcast, ING's James Knightley, Carsten Brzeski and James Smith discuss where interest rates may be heading in the US, Europe and UK while Chris Turner explains what this could mean for global markets   Federal Reserve Chair Jerome Powell cautioned this week that the central bank may need to raise interest rates higher and faster than expected to tame inflation. European Central Bank member Robert Holzmann has called for another four rate hikes of 50bp a piece while in the UK, Bank of England policymaker Catherine Mann has also signalled further tightening ahead. In this podcast, ING's Chris Turner, Carsten Brzeski, James Knightley and James Smith reflect on this hawkish commentary and discuss what it means for monetary policy, economic growth and global markets. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Euro and European bond yields decreased after the ECB decision. The end of tightening may be close

A 50bp Rate Hike Next Week In Eurozone Looks Like A Done Deal

Kamila Szypuła Kamila Szypuła 11.03.2023 10:31
Thursday's European Central Bank interest-rate decision and U.S. inflation data on Tuesday will be the main focus next week. Interest rates The ECB, Fed, Bank of England (BoE) and other central banks have aggressively raised interest rates in an attempt to bring inflation back to the 2% target. The UK and US raised their benchmark interest rates from near zero a year ago to 4% and 4.5% respectively, while the corresponding ECB rate is up to 2.5% Interest rate expectations in the Eurozone and the US have been rising recently, putting these two developments in the spotlight. The ECB is widely expected to raise interest rates by 50 basis points, taking the deposit rate to 3.00%. Inflation still too high The world's major economies have been battling rapid inflation for almost two years. After many years of very slow price growth, in 2022 annual inflation in many economies reached double-digit values. This was due to supply chain disruptions in response to COVID-19 and the war in Ukraine, which has pushed up energy and food prices. In the euro zone core inflation increased from 5.3% in January to 5.6% in February. In addition to the main factors influencing inflation, other equally important reasons can be indicated. The reason why core inflation remains elevated may be the fact that unemployment is so low . For example, in the service sector in the Eurozone, we see wages rising as companies compete to pay for workers. Another factor was companies raising prices faster than usual to maintain their profit margins. As most consumers already know all too well, increased inflation lowers the standard of living. This means people can buy fewer items for the same amount of money, making weekly shopping more and more stressful. As signaled by Powell (the head of the Fed) and Lagarde (ECB), the latest inflation data indicate the need for further aggressive interest rate increases. Now 50bp and May too? March's move was well signaled by the central bank, focusing on any signals as to how far and how quickly interest rates will rise in the future, in particular whether the ECB will go ahead with another 50 basis point hike in May. Some analysts raised their ECB interest rate forecasts due to recent strong inflation data, which pushed eurozone bond yields higher. Comments from ECB President Christine Lagarde at the press conference following Thursday's decision will be crucial for the eurozone, especially after ECB policymaker Robert Holzmann called for three more moves of 50bps after this month's meeting. Expect the worst? While there have been some positive developments in confidence metrics since the start of the year, the hard data is still far from rosy. Interestingly, two downward revisions of German GDP data and one downward revision of Irish GDP data brought the Eurozone economy to the brink of recession in Q4 2022 and another stagnation in Q1 cannot yet be ruled out. The ECB's own consumer expectations survey this week showed a further decline in consumer inflation expectations. At the same time, however, core inflation continued to rise and so far there are no signs of a peak. Industry selling price expectations have dropped significantly but remain close to all-time highs for services. Source: investing.com
The Commodities Digest: US Crude Oil Inventories Decline Amidst Growing Supply Risks

Week Ahead: US CPI And ECB Decision Will Be In Focus

Michael Hewson Michael Hewson 12.03.2023 10:07
UK Spring Budget – 15/03 – the last few months have been challenging ones for the UK economy, in the aftermath of the emergency Autumn budget, with the main narrative from those times being peak pessimism. At the time we had the OBR, IMF, and the Bank of England all doubling down with deeply depressing outlooks for the UK economy. All of them were uniformly pessimistic about the prospects for the UK economy arguing that the economy was already in recession and likely to be so for at least 2 years. Since those dark days in October as well as the political upheaval and market turbulence that followed, inflation has started to come down albeit slowly, while industrial unrest has grown. Consumer spending has been weak with retail sales showing sharp falls at the end of last year. On the plus side tax revenues proved to be extremely resilient, helped by higher-than-expected inflows from self-assessment of £21.9bn, as well as strong inflows from Capital Gains tax, which contributed £13.2bn in January. This is good news for the Chancellor of the Exchequer as it means that the UK government has borrowed £30.6bn less than OBR forecasts. It also potentially gives him more wriggle room in this week's budget to rethink some of the recent tax hikes, specifically the increase in corporation tax, which has been widely criticised. At a time when the UK economy needs all the help it can get it beggars belief that a UK Chancellor seems to think raising taxes on highly stretched businesses is a good idea. We've already seen and heard from several companies taking the decision to postpone or cancel investment programs in the wake of the prospect of higher tax and regulatory burdens, while other companies are looking at moving away from the UK completely. It's an absolute fallacy that higher tax rates mean higher tax revenue, despite the UK Treasury pushing back on keeping the rate unchanged. Looking at it another way 19% of something is better than 25% of nothing, and that's the outcome that HMRC and the Treasury might be facing. It's strange that so many people fail to understand that concept, large companies are mobile, but people are not. There has also been speculation that the Chancellor may well extend the energy support scheme for businesses, as well as freezing the energy price cap for consumers at its current level of £2,500 given the recent sharp decline in energy prices. A further freeze on fuel duty also seems likely. The super deduction which expires in April could well be replaced with measures that allow offsetting against profits. In short, this week's budget is the ideal opportunity for the government to stop running scared, push back on the Treasury, and start to take measures to stimulate investment and innovation, champion business, push back on the siren calls for more taxes which are self-defeating, and don't raise the sums claimed. US CPI (Feb) – 14/03 – with the Federal Reserve in a blackout period ahead of next week's FOMC meeting there has been much discussion over whether the Fed got it right when they downshifted their rate hiking cycle in February when they raised rates by 25bps, following on from a similar slowdown in December of 50bps. Since the 25bps rate move, US economic data has shifted up a gear, with retail sales in January surging 3%, and US payrolls growth also showing a strong start to the year. Inflation measures have also ticked higher in contrast to the disinflation narrative that Powell encouraged at his last press conference. While headline inflation slowed in January from 6.5% to 6.4%, markets had been expecting a larger fall, with core prices also proving to be sticker at 5.6%. Since those numbers were released subsequent inflation measures were revised higher, with PPI measures in December revised up, meaning that core PPI instead of coming in at 4.9% in January, came in at 5.4%. This week's February CPI numbers are forecast to show another slowdown, from 6.4% to 6%, and for core prices to come in at 5.4%. With the Fed due to hike by another 25bps next week, this week's numbers, along with the PPI numbers due on the 15th could well dictate whether we're set for another 2 or 3 rate hikes in the next few months. UK Unemployment/wages (Jan) – 14/03 – UK labour market has been one of the bright spots of the UK economy, even accounting for the fact that wages are lagging inflation. The most recent wage numbers showed wage growth jumped sharply in the three months to December, rising from 6.5% to 6.7%. What was also notable was that payrolled employees rose by 102k in January which in turn reinforces the tight nature of the UK labour market with headline inflation still in double-digit territory. Private sector pay continues to lead with an average of 7.3%, compared to 4.2% in the public sector. Unemployment remained steady at 3.7%, however given the gains seen in payrolled employees in January, this could see a fall to 3.6% in this week's January numbers. Furthermore, resilience in wages data will make it much harder for the Bank of England to procrastinate over its rate-hiking policies. Bank of England governor Andrew Bailey may like markets to think that the MPC is almost done when it comes to rate hikes, however with headline CPI still above 10% and core prices and wages growth well above 6% he may be able to kid some of the people some of the time, but he is unlikely to be able to push back against at least another 50bps of hikes between now and the summer. US Retail Sales (Feb) - 15/03 – having seen the US consumer retrench at the end of last year, with two successive monthly declines of over -1%, there had been an expectation that January would see a rebound in spending, especially given the strength of the jobs report a few days earlier. What no one was quite prepared for was a 3% gain as the US consumer came roaring back with a vengeance. Even the control group measure which is used to calculate the GDP contribution, rose by 1.7%, meaning that the consumer rebound was broad-based. The big question is whether this was maintained into February and if it has then it will have significant ramifications for Fed policy with respect to guidance next week when the Fed meets to decide on its forward guidance as well as the trajectory of its dot plot guidance for further rate hikes. ECB Rate Meeting – 16/03 – we already know that the ECB is set to hike by another 50bps this week, with the wider question being how many more hikes the governing council has in its locker. The hawks on the ECB have been becoming ever more vocal led by Bundesbank head Joachim Nagel who, despite the real prospect that the German economy is in a recession is calling for more aggressive action on sticky inflation. The most recent ECB minutes showed that a number of governing council members wanted to go harder than a 50bps move at the last meeting and wanted to go by 75bps. They only relented because of the pledge to do another 50bps this month, as central bankers weigh up the risks of overtightening, as opposed to doing too little and allowing inflation to become entrenched. These calls for tighter policy have been echoed by other ECB members, like Austria's Robert Holzmann who has called for 50bps in March, May, June, and July. Markets have already started to price in an ECB terminal rate of over 4% meaning that any further rises in long-term yields in countries like Italy could cause real-term problems in the long run if sustained. With core CPI already at a fresh record high this month of 5.6% and headline inflation back on the increase in Spain, France, and Germany the ECB is continuing to play catchup, while also needing to remain mindful of financial stability. China Retail Sales (Feb) – 15/03 – having seen retail sales collapse at the end of last year this week's Chinese retail sales numbers have the potential to provide a significant upside surprise after lockdown restrictions started to get eased in December. The recent China trade numbers pointed to a modest improvement in domestic demand, and with the period also including Chinese New Year, there would appear to be a decent probability of a bit of so-called revenge spending, as consumers celebrate coming out of lockdown with a bit of a spending spree. A rather modest rebound of 3.5% is expected, following on from two months of declines, while industrial production is expected to also see a rebound to 3.2% from a 1.3% rise in the previous month. Deliveroo FY22 – 16/03 – the Deliveroo share price appears to have found a bit of a base around the 80p area. At its last trading update, there was a positive response to its Q3 trading update, despite the company downgrading its full-year guidance on sales growth. The uplift was hugely welcome given that the shares are well below their 390p IPO price, which suggests that a lot of pessimism may be already in the price. Gross Transaction Value (GTV) saw an increase of 8% year on year, with the UK operation outperforming international markets, rising by 11%. Consequently, Deliveroo downgraded its full-year guidance on GTV growth to between 4% to 8%, due to concerns about consumer disposable income. There was some good news as EBITDA margins were revised higher to between -1.2% and -1.5%, which suggests the company is making progress on reducing its costs by way of lower marketing spend. In its Q4 update in January, the shares popped to a 2-month high before sliding back again, after announcing that it generated over £1bn of UK GTV for the first time ever, a rise of 9%, pushing total GTV up to £1.8bn. For the full year Deliveroo said it expects to deliver just over £7bn of GTV across all operations, a rise of 7%, and that its adjusted earnings almost achieved breakeven during the second half of the year. This number is expected to continue to improve into the next fiscal year with EBITDA margins revised up from the previous -1.2% and -1.5%, to -1%. In an attempt to streamline its operations further, Deliveroo also took the decision to exit its Australia operation back in January. Balfour Beatty FY 22 – 15/03 – after upgrading its profit expectations for the year back in December the shares have moved up to their highest levels since 2008. It's been a long road back for a business that was on the brink back in 2013, and also got caught up in the Carillion fallout 5 years ago when it had to take millions of pounds of write-downs. Under the stewardship of CEO Leo Quinn refocussed its efforts on higher margin work in all of its markets, primarily in the US and UK, while disposing of underperforming or non-performing assets. This focus on higher margin work has realised £65m in profits in respect of the disposal of five assets. Its order book is expected to be around 5% ahead of last year, as is full-year revenue. In January Balfour Beatty announced another contract win of £1.2bn in respect of the Lower Thames Crossing which involves the design and delivery of 10 miles of new roads connecting the M25 at junction 19 and the A13 with a river crossing at Tilbury Essex. The company also set out a plan in January to buy back up to a further £50m of shares to be completed by May. Adobe Q1 23 – 15/03 – Adobe shares took a swan dive to their lowest levels since March 2020 last September after the company downgraded its Q4 revenue numbers. These came in as expected at $4.53bn in December, while profits beat expectations, coming in at $3.60c a share. On guidance, Adobe said they expected revenues of $4.6bn to $4.64bn for Q1 while keeping its full-year estimates unchanged. The company was on the receiving end of some unwelcome news last month after its $20bn deal to acquire Figma, a mobile web interface design company, was reported to be the subject of an antitrust investigation by the DOJ with a view to blocking the deal. Profits are expected to come in at $3.67c a share. Williams-Sonoma Q4 23 – 16/03 – this high-end retailer has seen its share price tread water over the last few months but it remains a popular brand amongst US consumers at the upper end of the income scale. In Q3 the owner of Pottery Barn reported record revenues for the quarter of $2.19bn, beating forecasts. Profits fell slightly short of forecasts, although they were still up from a year ago at $3.72c a share. Due to concerns over the outlook the retailer declined to reiterate its previous full-year guidance of mid to high single digital annual net revenue growth, due to high levels of "macro uncertainty" and elevated inventories, sending the shares lower, although we've seen a modest recovery since then. Inventory levels are expected to come down in Q4, however, they are still 33% above the levels they were a year ago. Profits for Q4 are expected to come in at $5.46c a share. FedEx Q3 23 – 16/03 – after falling sharply back in September last year to two-year lows, after issuing a surprise profit warning, the shares have slowly clawed back their lost ground, and are up over 40% from that trough. In December FedEx beat those lowered Q2 expectations on profits, returning $3.18c a share, although they missed on revenues, which came in at $22.8bn. The outperformance came about due to the company increasing its prices, as well as announcing widescale cost reductions back in September. FedEx also said it would be cutting another $1bn in costs on top of the $2.7bn it announced previously. FedEx also reinstated earnings guidance for the full year, announcing a new target of between $13 and $14 a share. The big jump in retail sales seen in the US economy at the start of this year augurs well for a decent number for Q3 for FedEx with profits expected to come in at $2.74c a share. For further comment from Michael Hewson, please call 0203 003 8905 or 07824 660632Email: marketcomment@cmcmarkets.comFollow CMC Markets on Twitter: @cmcmarketsFollow Michael Hewson (Chief Market Analyst) on Twitter: @mhewson_CMC
Riksbank's Potential Rate Hike Amid Economic Challenges: Analysis and Outlook

Week Ahead: The Australian Unemployment Rate, The ECB Is Widely Expected To Raise Interest Rates

Craig Erlam Craig Erlam 12.03.2023 10:13
US The labor market is still strong but is showing signs it is ready to soften as wages cool.  Wall Street will pay close attention to the February inflation report.  Disinflation trends are struggling here and a hot report could not only lock the Fed into boosting their hiking pace but possibly lead markets into expecting a higher peak rate.  Headline inflation is expected to slow from 6.4% to 6.0%.  The monthly inflation rate is expected to edge lower from 0.5% to 0.4%, while the core reading is expected to hold steady at the 0.4% pace.  While the inflation report will get the majority of the attention, traders should also pay close attention to the February retail sales data which should show consumer spending is weakening.  Housing data is expected to remain weak, while a couple of Fed regional surveys (Empire/Philly) should show manufacturing data remains deeply in contraction territory. Friday’s release of consumer sentiment is expected to hold steady, while many traders will pay close attention to see if inflation expectations continue to retreat.  With the Fed’s blackout period quickly approaching, only Bowman will make an appearance on Tuesday at the Community Bankers Event in Hawaii.  Eurozone The ECB is widely expected to raise interest rates by 50 basis points on Thursday but it’s what comes next that investors will be most interested in. This makes the new economic projections that are released alongside the decision, and the press conference, arguably the most important things to watch out for. UK Labor market figures on Tuesday are the standout release next week but it’s the spring budget a day later that people may be most interested in. The fact that the UK is not already in recession will come as a big surprise to many and one of the benefits of that may be a little extra fiscal headroom for the Chancellor. Unfortunately, giveaways may be few and far between for a number of reasons that may make holding off more appealing to the government.  Russia The CBR is expected to leave interest rates unchanged at 7.5% on Friday. Inflation has been declining but remains far above target which may encourage the central bank to stay on hold for now.  South Africa It’s a little light on economic data next week with manufacturing production and retail sales the only notable indicators on Tuesday and Wednesday, respectively.  Turkey No major data or events next week.  Switzerland It’s a little quiet next week but the focus will remain on what the SNB will do on 23 March, especially after the inflation overshoot in February. Markets are still pricing in 50 basis points with a small chance of 75. China The National People’s Congress (NPC) has made a more conservative forecast of 5.0% GDP growth in 2023. Recent economic data has shown a strong recovery in the economy, confirming expectations for an early recovery but softening expectations for fiscal and monetary stimulus. The lifting of the zero-Covid policy has led to a surge in business activity, reduced operational interruptions, and robust data on commercial activities.  Powell’s testimony this past week lifted the US dollar against the Chinese yuan pushing the pair close to the psychological level of 7.0000 which may attract attention once more.  Focus next week will remain on the data including retail sales, industrial production, fixed asset investment, and unemployment. India Markets are pricing in one more rate hike in the tightening cycle at the next meeting on 6 April but next week’s inflation data could change that. Recent trends around the world have seen more rate hikes being priced in and India is no exception after the inflation jump in January. If it doesn’t prove to be an anomaly, further hikes could be priced in. Australia & New Zealand Next week offers the Australian unemployment rate, employment change, and change in full-time employment on Thursday. From New Zealand, we’ll get fourth-quarter GDP data on Wednesday and we’ll also hear from Assistant Governor, Karen Silk on Sunday Japan There isn’t much on the agenda next week, with the minutes of the Bank of Japan’s January monetary policy meeting on Wednesday arguably the highlight. Minutes are often viewed as being outdated but nowhere is this more true than in Japan, where those of the January meeting are released after the March meeting has taken place. For that reason, it would take something extraordinary for them to have a big impact on the markets.  Kazuo Ueda, the new governor of the BoJ who will take office in April, recently stated that it is not a good time to abandon the current policy considering the current economic environment. He supports its continued commitment to massive quantitative easing and is not expected to significantly adjust the yield curve control, which has limited the attractiveness of the yen. Singapore Unemployment data on Monday is the only economic release this upcoming week. Economic Calendar Sunday, March 12 Economic Events New Zealand Food Prices Japan BSI Manufacturing Index Monday, March 13 Economic Data/Events India CPI  Mexico Industrial Production New Zealand REINZ House Sales Australia Westpac Consumer Conf, NAB Business Confidence BOE’s Dhingra speaks Tuesday, March 14 Economic Data/Events Fed’s Bowman Speaks at Community Bankers Event in Hawaii UK Claimant Count Rate, Jobless Claim Change, ILO Unemployment Rate Swiss Producer and Import Prices Italy Industrial Production India Wholesale Prices South Africa Mining Data BoJ Minutes of January Meeting BoJ Outright Bond Purchases Riksbank in hearing on the annual report, monetary policy Wednesday, March 15 Economic Data/Events US Empire Manufacturing, Retail Sales, PPI, NAHB Housing Market Index, MBA Mortgage Applications, Business Inventories, Net Long-term TIC flows China PBOC 1-year MLF Rate, Industrial Production, Retail Sales, Fixed assets, Nw Home Prices  UK Chancellor Hunt delivers annual budget EIA Crude Oil Inventories Sweden CPI  France CPI Poland CPI Italy Unemployment Rate, General Government Debt South Africa Retail Sales  India Trade Data New Zealand GDP  Australia Employment Change Thursday, March 16 Economic Data/Events US Initial Jobless Claims, Philly Fed Business Outlook, Import and Export Prices, Housing Starts, Building Permits Canada Wholesale Trade Sales ECB Rate Decision: Expected to raise Main Refinancing Rate by 50bps to 3.50%  ECB President Lagarde holds a post-rate decision press conference BOE releases Ipsos inflation survey  Japan Industrial Production Sweden Prospera’s Inflation Expectations Survey Czech Current Account Poland Current Account Swiss SECO March Forecasts New Zealand Q4 GDP  Riksbank Business Survey, Floden speaks UK OBR briefs on budget Japan Trade Balance Australia Employment Change Singapore Non-Oil Domestic Exports Friday, March 17 Economic Data/Events US Industrial Production, Leading Index, University of Michigan Sentiment, Canada Industrial Product Price Eurozone CPI, OECD Publishes Interim Economic Outlook Sweden Unemployment Rate Baker Hughes Rig Count Russia central bank (CBR) rate decision: Expected to keep rates steady at 7.50% Sovereign Rating Updates Turkey(Fitch) Belgium (S&P) Spain (S&P) This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Oanda Podcast: US Jobs Report, SVB Financial Fallout And More

Oanda Podcast: US Jobs Report, SVB Financial Fallout And More

Craig Erlam Craig Erlam 12.03.2023 10:16
Craig Erlam joins Jonny Hart to discuss the US jobs report, SVB Financial fallout, UK Budget, and the week ahead.   This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Rising Tensions in Japan Amid Currency Market Concerns and BOJ Insights

Stock Market Summary Of The Week 6-10.03.2023

Conotoxia Comments Conotoxia Comments 12.03.2023 10:19
The Fed announces that it will raise interest rates and one of the big Silicon Valley banks has liquidity problems. As the news becomes widespread, this bank's shares fall by 60% in a single session. This seems to have had a knock-on effect on the shares of the entire financial sector. Could other banks really be in trouble because of this, and what else have we learned during the past week? Macroeconomic data Monday's reading of the UK construction sector sentiment index came as a surprise at the start of the week. The data beat analysts' expectations, coming in at 54.6 points (49.1 points were expected). This is the first reading in two months heralding an improvement in the health of the sector. Tuesday's key event was a speech by Fed Chairman Jerome Powell, who said, among other things: "If the totality of the data indicated that faster tightening of financial policy was warranted, we would be prepared to increase the pace of interest rate hikes." Following Powell's speech, the S&P 500 Index (US500) began to fall, ending the week at minus 3.6%. Source: Conotoxia MT5, US500, Daily Wednesday brought us the US non-farm employment forecast report (ADP). The document, created from the payrolls of US companies, seemed to predict the final readings of the change in non-farm employment quite well. The current reading was better than expected at 242,000 (200,000 was expected). This would indicate that the US labour market is still strong, which may encourage the Fed to raise interest rates further. The Bank of Japan's interest rate decision seemed to come to the fore on Thursday. The institution's new governor chose not to change the negative level of interest rates. Japan's Nikkei index (JP225) was able to gain in anticipation of the announcement of the decision, before returning to levels seen earlier in the week. Source: Conotoxia MT5, JP225, Daily In Germany, CPI inflation for February came in at 8.7%, unchanged for three consecutive readings, as forecast. An important news item for the US market could be the non-farm employment reading, where an increase of 205,000 is expected. The stock market In Thursday's session, we learned of the problems of SVB Financial Group bank, whose shares slumped by as much as 60%. This seems to have caused declines in the entire US financial sector. It ended the week with a performance of more than minus 5%, as could be seen in the listing of the Financial Select Sector SPDR Fund (XLF). Source: Conotoxia MT5, XLF, Daily Source: https://www.sectorspdr.com/sectorspdr/tools/sector-tracker Among the companies whose shares fell the most this week are the aforementioned SVB Financial Group bank, whose shares slumped by more than 60%. Shares of electric car manufacturer Tesla fell by almost 10%. Among the few companies whose shares rose are: Apple, up 3.2%; Meta (Facebook), up 4.1%; and General Electric (GE), up 6.8%. All key changes can be seen below. Source: https://finviz.com/map.ashx?t=sec&st=w1 Currency and cryptocurrency market In the foreign exchange market, we could see another week of strong strengthening of the US dollar. The EUR/USD pair exchange rate fell by 0.4%. The biggest changes in USD quotations could be seen on the pair with the Australian dollar. The USD/CAD exchange rate rose by 1.8%, approaching resistance levels of 1.4. Source: Contoxia MT5, USDCAD, Daily The value of cryptocurrencies is plummeting as a result of the issues surrounding Silvergate bank, a key player in the market. Bitcoin has lost more than 12% of its value over the past week, falling below $20,000, while ethereum has shrunk by 11.6%. The situation appears to be unfavourable for cryptocurrencies. The weekly change in stablecoin market capitalisation, which determines the value of capital in the market, has now fallen by 2% m/m. Grzegorz Dróżdż, Market Analyst of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76,41% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.     search   g_translate    
The Commodities Digest: US Crude Oil Inventories Decline Amidst Growing Supply Risks

Another Decline In Inflation In The US Is Expected

Kamila Szypuła Kamila Szypuła 12.03.2023 11:15
US CPI data will be a key economic event that steers market movements. Previous data Inflation rose by 0.5% in January after rising by 0.1% in December, according to the Consumer Price Index published on Tuesday. The CPI increased by 6.4% compared to the same period in 2022. Both figures were higher than expected. Super-basic services inflation, which is central to the Fed and excludes food, energy and shelter, rose 0.2% in a month and was 4% higher than a year ago. Inflation picked up in early 2023 as rising housing, gas and fuel prices took a toll on consumers. Rising shelter costs accounted for about half of the monthly increase, the Bureau of Labor Statistics said in a report. This component accounts for more than a third of the index and was up 0.7% over the month and was 7.9% higher than a year ago. Energy also made a significant contribution, with 2% and 8.7% respectively, while food costs increased by 0.5% and 10.1% respectively. Rising prices meant a loss of workers' real wages. According to a separate BLS report, which adjusts wages for inflation, average hourly earnings fell 0.2% over the month and fell 1.8% from a year ago. While price increases have been declining in recent months, January data shows that inflation continues to be a force in the US economy, which is threatened with recession this year. Forecast As for February's inflation performance, inflation is expected to decline once again to 6.0% (Y/Y) and to 0.4% (M/M). Core inflation is expected to remain unchanged. Other important data The long-awaited US non-farm payrolls report for February showed that US employers created 311,000 jobs. new jobs compared to the forecast 205 thousand. While the headline figures were impressive, showing that the US labor market is still strong, the unemployment rate rose to 3.6% vs. expected 3.40% and average hourly wage at 4.6% y/y vs. forecast 4.70% y/y. Recession and the Fed According to TS Lombard chief economist Steven Blitz, the US Federal Reserve cannot break the cycle of interest rate hikes until the country enters a recession. The Fed is unclear about the ceiling for interest rate hikes in the absence of such an economic slowdown. Powell told lawmakers on Tuesday that stronger-than-expected economic data in recent weeks suggested "the final level of interest rates is likely to be higher than previously projected" as the central bank looks to bring inflation back to earth. The next meeting of the Federal Open Market Committee on monetary policy, on March 21 and 22, will be crucial for global equity markets, with investors closely watching whether policy makers decide to raise interest rates by 25 or 50 basis points. Market expectations for the final Fed funds rate were around 5.1% in December, but they have been rising steadily. When inflation-adjusted GDP fell in the first two quarters of 2022, a huge number of economists and policymakers announced that a recession had arrived. In fact, none of that was true. The onset of a recession does not depend on a single factor, real GDP, but on reading a series of economic statistics simultaneously. In 2022, the economy has not experienced a single month where all of these economic indicators have fallen, much less for at least the next few months needed to meet the definition of a recession. Over the past year or so, a bunch of economists have repeatedly announced that a recession is just around the corner, based in part on reading economic indicators from the past before recessions, and what they saw as an almost inevitable decline, given the recent similarities with these past relationships. Clearly, the economy is under some downward pressure due to the Federal Reserve's increase in the federal funds rate target, but the US economy may well avoid recession. Source: investing.com
US Flash, that is to say preliminary, PMI for April came in at a better-than-expected 50.4 versus a downwardly revised 49.2 in March and a forecast 49

Nonfarm Payrolls In The US Rose By 311k Last Month, Less Than The January's Print

Saxo Bank Saxo Bank 13.03.2023 08:14
Summary:  A slight recovery in sentiment was seen into the Monday open as US regulators stepped in to prevent further fallout from the SVB crisis and announced an emergency bank term funding program assuring SVB depositors they will be fully protected and have access to their money as the week begins. US jobs data on Friday was mixed, putting focus on the CPI this week, although the banking crisis reduces the case for a 50bps rate hike this month.   What’s happening in markets? US equites pulled back on Friday after the Silicon Valley Bank fuelled fear The futures turned green, indicating Monday could potentially see buying return. Market jitters were calmed after the Fed announced an emergency bank term funding program, with SVB depositors to have access to all money from Monday. On Friday though, markets were hurting, SVB parent, SVB Financial Group’s (SIVB:xnas) demise was felt through markets, triggering a sharp sell-off in US equities with the Nasdaq 100 and S&P500 falling 1.4% on Friday and wiping off 3.8% and 4.6% over the week. The banking sector was hit hard, as investors worried about the risk of contagion after 16th largest bank failed, which lead to selling in other banks, and deposit withdrawals – with American losing faith in the banking system. The KBW Bank Index shed 3.9% on Friday, and 15.7% over the week. PacWest Bancorp (PACW:xnas) tumbled 37.9% on Friday and a massive 53.7% since Thursday. US equity futures rallied on Monday Asian hours after the Fed assured depositors in the Silicon Valley Bank they will be fully protected. Treasury yields plunged on safe-haven bids amid banking woes and Fed speculation Safe-haven demand and reduced likelihood of aggressive rate hikes drove down Treasury yields. Meanwhile, asset markets were jolted by the Silicon Valley Bank incident, leading to a surge in safe-haven buying of Treasuries. Prices of Treasuries climbed, and yields fell sharply, with the front end and belly of the curve seeing the best performance. Traders are now speculating whether the contagion of the crisis to other banks, and the widening of credit spreads will sway the Fed in favor of keeping the next hike at a modest 25bps, or perhaps even pausing earlier than expected. These speculations are supported by the slight 0.2% month-over-month or 4.6% year-over-year increase in average hourly earnings, and an increase in the labor force participation rate to 62.5% in February. Interest rates implied by SOFR contracts fell significantly, with June, September, and December 2023 plunging 28 basis points, 44.5 basis points, and 52.5 basis points, respectively. This brought the terminal down to 5.29% in June 2023, from 5.70% in September 2023 just two days earlier on Wednesday. The 2-year Treasury yield tumbled an astounding 28 basis points to 4.59%, while the 10-year yield dropped by 20 basis points to 3.70%. As a result, the 2-10-year yield curve steepened by almost 7 basis points to 89 basis points on Friday. Given the ongoing banking crisis, Treasuries are likely to remain in high demand. Hang Seng Index and China’s CSI 300 plummeted amid concerns about consumption recovery in China The Hang Seng Index and CSI300 experienced sharp declines on Friday, with losses of 3% and 1.3% respectively, resulting in weekly losses of 6.1% and 4%. This was attributed to investors selling China internet and consumer names after JD.COM's (09618:xhkg) downbeat comments on consumer spending prospects in China, causing JD.Com to plummet by 11.5%. The Hang Seng TECH Index also dropped significantly by 3.8%. Auto stocks, particularly BYD (01211:xhkg) and Great Wall Motor (02333:xhkg) took a major hit, with declines of 8.1% and 6.2% respectively, due to an intensification of price war prompted by Dongfeng (00489:xhkg) and other Chinese automakers' price cuts. Auto names were among the largest losers in A-shares on Friday. The tech war involving semiconductors may extend beyond advanced equipment to materials, leading to concerns about Japan restricting the export of crucial chemicals like photoresists to China. In addition, the turmoil in U.S. banking stocks overnight further weighed on sentiment. Australian equities (ASXSP200.I) somewhat unscathed following global rout. Gold miners charge After the demise of the US’ 16th largest bank, SVB with other US banks in jeopardy, Australia’s market has so far outperformed global equity markets, falling 1.9% last week, while the S&P500  shed 4.6% and Hong Kong’s Heng Seng slumped 6.1%. The prudential regulation over Australia’s banks is keeping ASX listed banks relativity unscathed, however smaller non-financial companies with less financial strength are being penalised. The worst performing ASX200 stocks today are BrainChip, and Lake Resources, both down over 4.6%. While capturing upside and lot of bids are, gold miners, with Capricorn Metals, Ramelius Resources and Regis Resources all up 7-9%. FX: Dollar on the backfoot on chatter of SVB bailout After slumping to fresh lows on Friday to get in close sights of 104, the US dollar reversed higher into Friday’s close but gains were short-lived as the announcement on a potential backstop funding from the Feb for distressed bank SVB brought risk trades back to the table. AUDUSD pushed back above 0.66 to highs of 0.6647 in early trading amid thin liquidity and a recovery in sentiment. NZDUSD also took another look at 200DMA at 0.6166. GBPUSD testing 1.21 handle again with this week’s focus being the Spring budget and the labor market data. ECB’s hike remains in focus, and EURUSD taking another hit at 1.07 as risk sentiment improved this morning in Asia. Crude oil prices jumped higher on Friday but closed with a weekly loss Fears of further monetary tightening, coupled with risks of a financial contagion, raised concerns of a demand weakness and saw crude oil prices slide lower last week. The weak sentiment was compounded by high crude oil inventories in the US. This dominant narrative continues to overshadow signs of stronger demand in China. Some respite was however seen on Friday and into early Asian trading on Monday as US regulators announced measures to protect depositors and let them withdraw money from SVB starting Monday. WTI prices touched $77 from lows of sub-75 on Friday and Brent was above $83 from sub-81 levels earlier. The spread between Brent and Dubai narrowed to USD2.70/bbl, as Dubai crude gained against the global benchmark, suggesting robust Asian demand. Gold making a fresh stride higher despite easing banking sector crisis concerns Gold prices saw a big jump on Friday and gains were extended further on Monday morning in the Asian session as a mixed US jobs report and risks of a contagion in the banking sector spooked investors and prompted safe-haven demand. Expectations of a rapid Fed tightening also eased, and Fed swaps fully priced in a 25bps rate cut by year-end. This, along with rising inflation (breakeven) expectations and a sharp drop in yields, has made gold attractive for investors with precious metal charging higher and breaking above key resistances. Gold prices touched highs of $1890 this morning before easing slightly.   What to consider? SVB fallout spreads; Fed announces plans to fully protect Silicon Value Bank and potentially Signature Bank After the demise of the US’ 16th largest bank, SVB, on Friday and its takeover by the FDIC – which marked the largest bank failure since the 2008 financial crisis, the fallout spread. Regulators took control of another bank, Signature Bank. Unlike SVB which supports venture capital firms, Signature bank specialises in providing banking to law firms. The Fed stepped in and announced an emergency bank term funding program, assuring SVB depositors they will be fully protected and have access to their money from Monday, with agencies said to enact a similar program for Signature Bank. All this follows the Venture Capital community urging startups to withdraw funds, which led to civilians taking their money out of banks. Regulators are seeking buyers for SVB. Meanwhile, the Fed said it’s providing additional funding to banks. US nonfarm payrolls remained elevated in February Nonfarm payrolls in the US rose by 311k last month, less than the January's blowout print of 504k (revised down from an initially stated 517k) but still remaining elevated and above consensus expectations of 215k. While the headline continued to reaffirm a tight labor market, other indicators from the report were rather weak. Average hourly earnings rose +0.2% MoM in February, lower than the expected and last month’s +0.3% MoM. The annual rate of averag hourly earnings rose from +4.4% in January to +4.6% YoY, a touch short of the 4.7% that the market was expecting. The unemployment also picked up by 0.2% pts to 3.6% against market expectations of no change, likely as participation rose 0.1% pt to 62.5%. The data remained short of cementing a 50bps rate hike possibility for March, also given the recent concerns on the US banking sector from the SVB collapse. Focus now turns to CPI release on Tuesday to further shape Fed expectations. China's February aggregate financing surged beyond expectations with 9.9% Y/Y Growth China's aggregate financing growth in February was much better than expected, reaching RMB 3160 billion, far above the RMB2300 consensus estimate. The outstanding aggregate financing growth also accelerated to 9.9% year-on-year (Y/Y) in February, up from 9.4% Y/Y in January. Furthermore, M2 increased at a faster pace in February, growing 12.9% Y/Y, up from January's 12.6%. The surge in outstanding RMB loans played a major role in driving the credit growth, increasing by 11.6% Y/Y in February, compared to January's 11.3% Y/Y. Corporate loans were the primary driver, while household loans remained weak. Bank of Japan’s Kuroda ends term without sparks The Bank of Japan kept its policy unchanged on Friday at Governor Kuroda’s last meeting of his decade-long tenure. The target band for the 10-year JGB yield was kept unchanged at around 0%, with an upper limit of 0.50% after being raised in December. The BOJ held its short-term rate at -0.1%. Despite some expectations of another tweak, the outcome carried his usual dovish tone, ensuring a smooth handover to incoming Governor Kazuo Ueda who has conveyed policy continuity in his first remarks after being nominated. Incoming data will be key to watch for what tweaks the next governor Ueda can bring, but near-term focus shifts to US data on inflation, as well as the extent of fallout in the US banking sector as the market appears to be a panic mode after SVB’s collapse which may bring some safe haven flows to the yen.   For a global look at markets – tune into our Podcast. Source: Global Market Quick Take: Asia – March 13, 2023 | Saxo Group (home.saxo) 
US Inflation Eases, but Fed's Influence Remains Crucial

The Focus This Week Will Be Whether The U.S. Regulators Succeed In Calming Down The Markets’ Concern About The U.S. Banking System

Saxo Bank Saxo Bank 13.03.2023 08:17
Summary:  U.S. regulators moved to calm markets by backstopping depositors in full. The Fed’s monetary policy has been complicated and market expectations swung from a faster pace back to downshifts and earlier pause as the crisis of Silicon Valley Bank and Signature Bank unfolded. Investors’ number one focus this week will be whether the U.S. regulators succeed in calming down the markets’ concern about the U.S. banking system and avoiding systemic risks. The US CPI, PPI, and retail sales data, while being important, may take a back seat in terms of market focus. China will monitor the retail sales data coming out from China this Wednesday to gauge the strength of the Chinese economic recovery. SVB contagion limited by authorities, but risks could remain As risks of a contagion from the US bank SVB’s collapse rose last week, authorities have stepped in to contain the risks and prevent a broader impact on the financial sector. Equity futures have responded positively to the news of a backstop funding, but Treasury yields continued to slide and the US dollar weakness also extended further. The headlines around this will continue to be key to watch this week as there may be lingering fears for depositors for not just the SVB but also more broadly in the US banking sector. President Biden’s address on Monday morning will be key to watch. The development has also complicated the Fed’s monetary policy outlook further, and March rate hike expectations have reversed back from 50bps to now 25bps again with calls for a pause also gaining traction and financial stability concerns arise. However, the Fed’s response to the situation asserts that financial risks remain under control, while the inflation risks may continue to be an issue, suggesting potential yield curve bull steepening.  Investors should remain on guard after the SVB fallout spread to Signature Bank. Market to search for concentration risk clues We all know the US’ 16th largest bank, SVB, on Friday was taken over by the FDIC. Then regulators took control of another bank, Signature Bank. We know the Fed offered an emergency bank term funding program, to SVB depositors, so they can access money from Monday, while authorities suggest Signature Bank depositors would also be supported. This is not only the biggest bank failure since the 2008 financial crisis, but also, risk still remains. Now investors and option holders may be forced to take risk off the table for those assets that are embroiled in the saga. Secondly - it’s really vital to consider the ripple effects of the banking fallout. With Continuous Disclosure obligations for listed companies, we expect companies involved with SVB or Signature bank to disclose their exposure and or relationship over the coming days. This has already started to occur in Australia- with companies on the ASX such as Xero (XRO) revealing they have a 1% of their cash and cash equivalents with SVB. Thirdly – consider the market will be searching for opportunity to de risk – perhaps selling out of firms that are prone to concentration risk or could potentially be under financial duress. That may include financial institutions that have concentrated (not diversified) client's books and revenue streams. Or those companies that have lent money to high-risk technology companies or starts ups. For the investor, it could be worth considering reviewing your portfolio, to ensure the company’s asset quality and clientele are not at risk. Upside in US CPI is also unlikely to make Fed go for 50bps in March US inflation has been the talk of town for several months now, although the focus has lately turned to financial contagion risks that may stop the Fed from switching back to a higher rate hike path trajectory. Still, February CPI – due to be released on Tuesday – will be a big test after last month’s print reversed the disinflation narrative that the markets had started to accept, and continued to point at sticky services inflation. Headline consumer prices are expected to rise +0.4% MoM in February, cooling slightly vs the +0.5% in January, with the annual rate seen easing to 6.0% YoY from 6.4% previously. Core CPI is expected to rise +0.4% MoM in February, matching the January pace, though the annual rate is likely to fall to 5.5% YoY from 5.6% in January. Overall message is likely to remain that inflation remains stubbornly high, especially after tough weather conditions in California, but the risk of a 50bps rate hike from the Fed in March remains low as the central bank becomes wary of “something breaking”. Other US data of note this week includes PPI and retail sales for February, both of which are expected to show a modest cooling but still remain high. Consensus expectations are for February producer prices to rise by +0.3% MoM (prev. +0.7%) or 5.4% YoY (prev. 6.0%). Retail sales are expected to cool from January jump of 3.0% MoM on warmer weather and expected to come in cooler at +0.2% MoM. If the January outperformance in US data is not repeated, and the contagion fears continue, we could see Fed expectations being pulled back significantly this week as the market is in panic mode. China retail sales are expected to bounce strongly China is scheduled to release retail sales, industrial production and fixed asset investment this Wednesday. Investors will focus on the retail sales data for a gauge of the strength of the recovery of consumption after the economy reopened. Consensus estimates expects retail sales to bounce strongly to a growth of year-on-year growth of 3.5% in the first two months of the year, after declining 0.2% in January. Industrial production is expected to come in at +2.5% Y/Y year-to-date. European Central Bank to go for another 50bps rate hike this week The ECB is still expected to hike the deposit rate by 50bps to 3.0% at the March 16 announcement, given what was said in the February meeting and recent commentaries. Focus will be on the guidance for the path of interest rates from here, as well as on the comments around the risks of a financial contagion spreading from the SVB collapse. Recent data such as an upside surprise in core inflation has prompted ECB pricing to shift to a terminal rate of 4% by July, suggesting a lot of room for give back if financial risks broaden. If the central banks stays away from guiding for another 50bps in May, that could come as a dovish surprise for markets. The latest inflation forecasts will also be key, with core inflation expectations likely to be revised higher for 2023 after strong reads in January and February. UK budget on watch for growth and fiscal picture; jobs data key for BOE The UK Chancellor of the Exchequer Jeremy Hunt will be delivering the spring budget on March 15, which will be a key watch especially after the market turmoil in September when Hunt's predecessor Kwasi Kwarteng and former Prime Minister Liz Truss unveiled lavish tax cuts roiling the markets. Expectations are for the Hunt to prioritize keeping public finances steady, announce less near-term borrowing but only a marginally improved medium-term fiscal outlook. Lower energy prices will also likely boost the short-term growth outlook, helping recession fears recede, although longer-term growth may remain marred with low labor force participation and weak productivity growth. Before the focus turns to UK budget on Wednesday, the UK labor market data will be released on Tuesday and investors will be scrambling to gauge how much room does the BOE have to tighten further. Bloomberg consensus expects the unemployment rate to rise to 3.8% in the three months to January from 3.7% previously, with headline jobs growth likely to ease to 60k from 102k in January. However, even with a slightly softer jobs report, the BOE is expected to continue its hiking cycle in March as activity data has been stronger than expected, but the trend in labor market from here will be key to see where BOE could pause its tightening cycle.  Australian pulse checks: business and consumer confidence and jobs numbers Australia business and consumer confidence, numbers released on Tuesday will give a gauge of how the economy is feeling after the RBA made its 10th rate hike, with businesses and consumers likely to lean into the RBA’s comments that it could pause rate hikes soon. Later in the week on Thursday, the all-important unemployment rate will be released for February – with Bloomberg’s consensus suggesting the jobless rate will fall from 3.7 to 3.6%, with 50,000 jobs expected to be added last month. If the data shows employment is rising, contrary to what the RBA expects, then the Australian dollar would likely gain pace, as the RBA would gain power to keep rising rates by 0.25% for the next few months, with the market expecting hikes can made till September. Macro data on watch this week: Monday 13 March India CPI (Feb) Tuesday 14 March US CPI & Core CPI (Feb) U.K. Employment (Jan) & Payrolls (Feb) Australian consumer and business confidence Wednesday 15 March US Retail sales (Feb) US PPI & Core PPI (Feb) Eurozone Industrial production (Jan) UK Budget Japan BoJ monetary policy meeting minutes (17-18 Jan) China Retail sales, industrial production, & fixed asset investment (Feb) Thursday 16 March US Housing starts & building permits (Feb) US Initial jobless claims Australian employment data – jobless rate (Feb) ECB policy rate decision Japan exports (Feb) Japan Machinery orders (Jan) Friday 17 March US Industrial production (Feb) US university of Michigan Consumer Sentiment Survey (Feb) UK BoE/Ipsos Inflation next 12 months (Feb) Japan Tertiary industry activity (Jan)   Earnings on watch this week: Tuesday: Volkswagen, Lennar, Foxconn Wednesday: Adobe, Constellation Software, BMW, E.ON, Ping An Insurance, Alimentation Couche-Tard Inc Thursday: FedEx, Dollar General, Enel, Li Ning Friday: Vonovia, Longfor, CMOC Group Lt Source: Saxo Spotlight: What’s on the radar for investors & traders this week? | Saxo Group (home.saxo)
How investors can best position themselves amid unclear Federal Reserve rate outlook?

The Authorities Have Not Just Responded To The Idiosyncratic Risks Posed By SVB

Saxo Bank Saxo Bank 13.03.2023 08:19
Summary:  The US authorities have stepped with liquidity measures and also announced a new lending program for banks to prevent the risks of a contagion from the collapse of Silicon Valley Bank (SVB) on Friday. Fed pause bets for March are increasing, but the authorities’ response on containing the financial risks suggests that the room to fight against inflation has been maintained. Risks to inflation also tilt further to the upside with the added liquidity measures, and the longer-run impact on US tech sector innovation will remain key to consider in portfolios. A comprehensive response from US authorities As risks of a contagion from the US bank SVB’s collapse rose last week, authorities have stepped in to contain the fallout and prevent a broader impact on the financial sector. New liquidity measures from the Federal Reserve and the announcement that both SVB and Signature's depositors will be made whole have shielded the banking industry from contagion risks. The Fed also announced a new lending program called the Bank Term Funding Program (BTFP) which allows any insured depository institution to borrow from the Fed for up to a year using banks' investment securities as collateral. The banks can borrow funds equal to the par value of the collateral pledged, even if the market value of the collateral has been eroded due to high interest rates. This will allow banks to meet withdrawal demands, without having to sell their bonds at a loss as was the case with SVB last week. So the authorities have not just responded to the idiosyncratic risks posed by SVB, but the breadth of measures from the US regulators suggest they were wary of some systemic risks. Whether those risks have been pre-empted will be key to watch, but near-term relief is likely. The announcement of BTFP will put the depositor concerns at ease about their exposure to smaller regional banks, and clearly puts a floor on any panic brewing in the system for now. Key things to keep on your radar Biden’s address US President Joe Biden will be speaking on Monday morning US time on the SVB situation, and his administration will be briefing Congress. Focus will be on any measure being announced to strengthen oversight and tighten regulation to avoid further banking sector stress as the Fed continues its inflation fight. Monetary policy response and the direction of yields The risks of a financial crisis have further complicated the monetary policy response function in the US. Markets went from pricing in a 25bps rate hike for the March meeting to 50bps after Powell’s testimony last week back to 25bps after risks of a contagion in financial sector arose. Terminal rate pricing has gone down from 5.7% last week to 5.0% now. Some banks are also calling for the Fed to pause in March to re-assess the impacts of their policy tightening. But the Fed has responded to the financial risks very strongly, further suggesting that the room to fight against inflation has been maintained. Further, steps to add liquidity to prevent a financial crisis could mean more risks of inflation. Some may also argue that with the backstop in place, the Fed can continue to raise interest rates without harming held-to-maturity assets, since they can still be traded in at par if banks need liquidity. This enables the Fed to go higher for longer. Could we start to see more tightening expectations being priced in again if the fallout from SVB is contained but US CPI comes in hot once again on Tuesday? Longer term, this may impact the US tech startup productivity The SVB crisis has highlighted the pains of the US tech sector, where demands for withdrawals possibly ramped up as liquidity pressures worsened. While the Fed has been nimble on addressing financial stability risks, fear waves are rippling through the entrepreneurial sector in the US especially in the tech space, and that may potentially leave some long-lasting scars on the productivity of the tech sector. VC funding could continue to weaken as interest rates remain high, impacting the innovation in the tech sector. Market implications US equity futures and Asian equities have responded positively to the news of a backstop funding, but Treasury yields continued to slide and the US dollar weakness also extended further as calls for Fed’s tightening path continued to ease. Risk rally could extend into the US session after a sharp drop in equities last week. Friday’s US jobs report was mixed but the headline continued to hint at labor market tightness. Tuesday’s CPI release will be the next big test of the Fed path from here, and if it is evident that inflation risks remain prominent, while the Fed can convince the markets that financial risks will be responded to, then yields could reverse back higher once again and USD could strengthen. Equities will likely continue to be under pressure, and the pressure on smaller businesses (best represented by RUSSELL 3000 index) or the tech innovation could mean these parts of the market could continue to shed their froth. This continues to emphasise that flight to quality will be key for portfolios as the Fed tightening cycle continues. However, even if the Fed goes ahead with a 25bps rate hike next week, there will be considerable uncertainty on the outlook if the market continues to believe that the Fed won’t hike rates higher and keep them there for longer. How the Fed addresses these market concerns will be key to watch from here.   Source: US authorities step in to restrain the SVB contagion – what to watch from here? | Saxo Group (home.saxo)
Decline of Canadian retails sales plays in favour of holding the rates by Bank of Canada

The Better-Than-Expected US Nonfarm Payrolls (NFP) Join The Bank Of Canada’s (BoC) Dovish Play To Weigh On The Loonie Prices

TeleTrade Comments TeleTrade Comments 13.03.2023 08:31
USD/CAD takes offers to extend pullback from five-month high. US regulators unveil plans to tame SVB, Signature Bank inflicted risk. Fed rate hike expectations ease amid looming fears on US banks. Oil price cheers softer US Dollar with eyes on EIA, OPEC monthly reports. USD/CAD stands on slippery grounds, declining nearly 0.80% intraday to 1.3720 heading into Monday’s European session. In doing so, the Loonie pair sellers cheer the broad US Dollar weakness, as well as the recent recovery in prices of Crude Oil, Canada’s key export item. US Dollar Index (DXY) drops to the lowest levels in a month, down 0.80% near 103.80, as risk-on mood joins easing hawkish Fed bets to drown the greenback’s gauge versus the six major currencies. On the other hand, WTI crude oil rises for the second consecutive day, up 0.50% intraday near $77.00 at the latest. After witnessing the stock and bond market rout on Friday, the market sentiment improved as the US Treasury Department, Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) took joint actions to tame the risks emanating from the Silicon Valley Bank (SVB) and Signature Bank during the weekend.  “All depositors of Silicon Valley Bank and Signature Bank will be fully protected,” said the authorities in a statement released afterward. While reacting to the US regulators’ actions, US President Joe Biden said, “American people and American businesses can have confidence that their bank deposits will be there when they need them.” It should be noted, however, that the latest fallout of the SVB and Signature Bank flagged fragile conditions of the US bank, which in turn pushed back hopes of more rate hikes from the US Federal Reserve (Fed). With this in mind, Goldman Sachs expects to rate hike in March while the Fed Fund Futures also cut previously upbeat odds favoring a 0.50% rate lift in the Fed rate in March. Alternatively, China’s dislike for the US interference in Taiwan matters and the better-than-expected US Nonfarm Payrolls (NFP) join the Bank of Canada’s (BoC) dovish play to weigh on the Loonie prices. On Friday, US Nonfarm Payrolls (NFP) grew more than 205K expected to 311K in February, versus 504K (revised), while the Unemployment Rate rose to 3.6% for the said month compared to 3.4% expected and prior. Further, the Average Hourly Earnings rose on YoY but eased on monthly basis for February whereas the Labor Force Participation increased during the stated month. At home, Canada’s Net Change in Employment rose to 21.8K versus 10K market forecasts and 150K prior while the Unemployment Rate remained unchanged at 5.0% compared to 5.1% expected. Looking ahead, Tuesday’s US Consumer Price Index (CPI) for February to direct immediate market moves. Following that, the Retail Sales and preliminary readings of the Michigan Consumer Sentiment Index for March, up for publishing on Wednesday and Friday, will be crucial for clear directions of the USD/CAD traders. Technical analysis Friday’s Doji at multi-day high joins overbought RSI to favor USD/CAD pullback towards the late 2022 peak surrounding the 1.3700 round figure.
National Bank of Poland Meeting Preview: Anticipating a 25 Basis Point Rate Cut

Assessing the Silicon Valley Bank fallout

ING Economics ING Economics 13.03.2023 08:56
A troika of the Fed, Treasury and regulators stepped in over the weekend to help calm nerves in the wake of the SVB collapse. We show that SVB is an outlier in many ways, but it is too early to call the all-clear on the sector; it's a risk from the aggressive rate-hiking environment. So far the system looks fine, but it needs to be treated with caution ahead, just in case Silicon Valley Bank, the 16th largest bank in the US, has collapsed Eerie echoes of the global financial crises, but also material differences The demise of Silicon Valley Bank was fast, super fast. It started on Wednesday as SVB took a US$1.8bn loss on a forced USD$21bn bond liquidation from its available-for-sale portfolio; it then announced an intention to raise US$2.25bn in capital to help plug the gap. Thursday then saw material deposit outflows, and the SVB stock collapsed. Inevitably, with trust gone, Friday saw SVB go down. The regulators stepped in, with the FDIC acting as receiver in a clean-up exercise. An attempted auction process began over the weekend, seeking suitors. There has already been a degree of market contagion, on fears for replication in other banks. There has already been a degree of market contagion, on fears of replication in other banks. All banks hold securities, for various reasons. In the traditional banking model, deposits raised are used to underwrite loans. Banks have the option to invest in bonds as an alternative to writing loans, and this is most applicable where, for whatever reason, there is either not enough demand for loans, or the terms on writing loans are less appealing. Unusually, SVB employed far more of its deposit base in long-dated bonds than in writing loans. This meant it was more susceptible than most banks to the performance of its bond portfolio. Moreover, SVB's bond portfolio had a large longer-dated fixed-income component. As rates rise, the value of this portfolio fell. This would damage the running yield on such a portfolio, pressuring the implied interest rate margin down. Under pressure, liquidation of the bond portfolio crystallised losses, necessitating the subsequent need to raise capital. Banks that hold either a lower proportion of bonds to loans (most do) and/or hold more of their securities in floating rates would be far less susceptible to an SVB-type repeat. The Federal Reserve and Treasury are ahead of the game just in case But that does not mean that there aren't other SVBs out there. Treasury Secretary Janet Yellen in fact alluded to the possibility that there may indeed be some, as she noted on Friday that the Treasury was monitoring some other banks. So far, it seems that the potential problem banks are few, and importantly do not extend to the so-called systemically important banks. But even if that's the case, there is still a fear that contagion risks are uncomfortably elevated. In the end, the banking system is a game of trust. So there needs to be some assurance that system breakdown risk is low. But crucially, we have assurance that system breakdown risk is low. To help achieve that outcome, a joint statement by the US Treasury, the Federal Reserve and the FDIC over the weekend announced that SVB "depositors will have access to all of their money starting Monday, March 13". They went on to state that "we are also announcing a similar systemic risk exception for Signature Bank, New York, which was closed today by its state chartering authority. All depositors of this institution will be made whole". This is a clear effort to calm nerves and ensure that we don't have depositors queueing outside other banks that might come under scrutiny ahead. The statement outlined that shareholders and certain unsecured debtholders will instead not be protected. The Federal Reserve also announced the creation of a Bank Term Funding Program as a means for banks to backstop deposits. Basically, this is a facility that provides collateralised liquidity for banks that can't obtain it elsewhere. The new funding programme offers loans of up to one year in length against high-quality collateral valued at par including US Treasuries, agency debt and mortgage-backed securities, and other qualifying assets. The purpose is to eliminate the need to sell those securities in times of stress to obtain liquidity. Note that if these securities are meant to be held to maturity, utilising the funding programme would not create a need to fair value these securities. Most can already access the discount window for liquidity purposes. The federal funds rate is the primary credit programme for banks. But there is also a secondary credit programme where liquidity can be accessed at a more penal rate. Basically, the additional programme is a means to making liquidity available on good terms, at least until the current period of elevated systemic pressure passes. The system is under scrutiny, but fine so far. But the Fed now needs to be careful One of the reasons that the Federal Reserve could deliver fast and impactful interest rate increases over the past year is that the system could take it. Equity markets and bond markets may have crumbled, but as long as the system was intact the Fed could continue to tighten. The SVB saga as a stand-alone mutes the ability of the Federal Reserve to over tighten from here, as there is an implied threat to the system should the Fed be seen to be overdoing it. Risk barometers like FRA/OIS and the cross-currency basis have spiked, but not dramatically so. This suggests the system has had a wobble but is absolutely not under immediate threat. But, the down move in the yield curve (curve has shifted lower by 40bp) points to a material reduction in the likelihood that the Fed overdoes it on rate hikes. The 50bp March hike that Chair Jerome Powell had managed to build last week is gone; it's now 25bp. The 50bp hike that Chair Jerome Powell had managed to build last week is gone We argue that what equity markets do here is not that relevant. They can come under pressure, but the really important thing to monitor is the financial system. If that were to be materially threatened, put simply, the Fed could not hike at all. We only have to look at the global financial crisis and the pandemic as templates that showed the Fed is single-minded when the system is under threat, and that is to cut rates and ease policy, significantly. We are not at that point, and we most likely won't get to that point. But if the inflation data refuses to dampen in a material fashion it places pressure on the Fed to make a tough choice. The simplest choice is to stick with 25bp, and let the market calm down of its own accord in the weeks and months ahead.   We need to accept that some banks will come under pressure at this stage of the interest rate cycle. The Fed has hiked from zero to near 5%. Moreover, starting from zero rates means a bigger rate sensitivity to hikes (think duration). If some balance sheets get eroded by a ratcheting down in market valuations, and become an eyesore, before you know it there are trust issues to deal with. Big banks are less affected; they have to meet tougher hurdles to begin with. But there could well be further stress in the smaller bank sector. This could and indeed probably should all blow over. But we need to also let a bit of time pass before we can be sure. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Indonesia's Inflation Slips, Central Bank Maintains Rates Amidst Stability

FX Daily: Policymakers move to limit SVB fallout

ING Economics ING Economics 13.03.2023 08:59
Over the weekend US policymakers have taken measures to restore confidence and halt the deposit run in parts of the US banking system. Expect a nervous market to closely track US banking stocks today. The dramatic re-pricing of the Fed curve and the bullish disinversion of the US curve is a dollar negative. Expects the Swiss franc and Japanese yen to stay bid USD: Policymakers move swiftly to restore confidence US policymakers have acted quickly to restore confidence in the US banking system after Friday's second-largest bank failure in history. The Federal Reserve, US Treasury, and Federal Deposit Insurance Corporation have together announced two key measures. The first is that all uninsured depositors of SVB will be made whole.  This addresses the fear that uninsured depositors (in this case in the venture capital/tech sector) would lose deposits and would pull funds from other banks with high ratios of uninsured deposits (reports suggest 96% of SVB's deposits were uninsured). The second key measure has been the Fed announcing a new liquidity programme - the Bank Term Funding Program (BTFP). This will allow eligible financial institutions to access dollar liquidity in return placing US Treasuries, Agencies, or Mortgage-Backed Securities as collateral. Importantly the collateral values will be taken at par, meaning no write-downs. This addresses SVB's problem of the need to meet deposit outflows with sales of securities - a move that forced SVB to realise losses and burn through equity capital. Read our article for more. For today, investors will watch US banking stocks carefully to gauge whether the above measures have been enough to restore confidence. Worryingly over the weekend another bank, Signature Bank in New York, was also taken into administration by US authorities. One clear read for the market is that the Fed is not going to be able to deliver a 50bp hike on 22 March if, at the same time, it is introducing new liquidity measures for the US banking system. The market has now scaled back expectations for this month's FOMC to +25bp, with some high-profile names now calling unchanged rates. Indeed, the pricing of the December 2023 FOMC meeting is now 75bp lower than in the middle of last week. For FX this means the following. The first major US financial crisis since 2008 has seen a significant bullish disinversion of the US yield curve - which is dollar bearish. We have been arguing for some that time that bullish disinversion would be required to send the dollar lower - but had felt that it would be US disinflation or weak activity data - not a financial crisis - which would be the trigger. Expect investors to remain wary this week and continue to prefer the CHF and JPY over the dollar. In a way, we are going back to former periods of risk aversion - when selling the dollar and buying US two-year Treasury notes was the key strategy in a crisis. DXY to probably trade alongside the US KBW banking index - particularly the Regional banking Index - today. Risks lie to the 103.50 area and potentially 102.50 this week. Chris Turner  EUR: Spreads narrow markedly in favour of EUR/USD The dramatic re-pricing of the Fed policy curve has seen two-year EUR:USD swap rate differentials narrow inside 100bp - the narrowest since October 2021. This is EUR/USD positive. Unless there is a massive rally in US banking stocks today which suggested that US authorities had been incredibly successful in putting the genie of US banking sector risk back in the bottle, we would say EUR/USD is biased to the 1.0780/1.0800 area. On Thursday this week, the European Central Bank policy meeting will be challenging. Presumably, it will have to push ahead with a 50bp hike for fear of adding even more volatility to the markets. Chris Turner GBP: Bailouts and budgets Sterling did a lot better than we were thinking on Friday. We very much struggle to buy into sterling as a safe-haven currency, given the UK's large current account deficit and large financial sector exposure. Instead, we suspect deleveraging and the unwinding of short sterling positioning played a role. Today the focus will be on the UK's support of the tech sector in response to SVB's UK arm. As in the US, depositors in the UK are being made whole and the government is looking to address the working capital needs of those exposed. The market still expects the Bank of England to push ahead with a 25bp hike on 23 March. This still may be at risk of being priced out, given the BoE was not far away from a pause anyway. We could easily see EUR/GBP retracing back up to 0.8900, while we would not chase GBP/USD over 1.22. Chris Turner CEE: Forint and koruna should reverse losses The second half of the month in the Central and Eastern Europe (CEE) region traditionally offers a weaker economic calendar and given the global story, we assume that regional factors will not be the driver this week. Romania's inflation for February was released this morning and rose by 15.52% year-on-year, slightly above market expectations. Tomorrow, we will see in Romania, industrial production and on Wednesday we will see labour market data. Also, on Wednesday we will see this week's highlight, Poland's inflation number. We expect an increase from 17.4% to 18.7% YoY, above market expectations, which should be the peak inflation this year in our view. However, the number has a lot of uncertainty due to the consumer basket weight update. Then, on Thursday, we will see the current account results across the region and on Friday, core inflation will be published in Poland.  In FX markets, given the global story, it will be difficult for the CEE region to find its way. However, risk aversion seems to be declining and a higher EUR/USD should help the region correct some of the losses from the end of the last week. Moreover, in the case of the Czech koruna and Hungarian forint, which faced the biggest losses, the biggest jump in gas prices since June last year played a role as well, making room for new gains. In our view, these two currencies should see a positive start to the week. In the case of the koruna, however, the falling interest rate differential will play against it. Thus, we expect the koruna to move lower to 23.60 EUR/CZK and for the forint to 380 EUR/HUF.  Frantisek Taborsky  Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Inflation Numbers Signal Potential Pause in Fed Rate Hikes Amid Softening Categories

US regulators closed Signature Bank, HSBC has announced to acquire SVB’s UK

Saxo Bank Saxo Bank 13.03.2023 10:23
Summary:  US equity futures are rallying, the dollar is lower, and Treasury yields have extended their declines following a busy weekend which resulted in regulators backstopping uninsured bank deposits at SVB Financial and Signature Bank. Traders have dialed back Fed rate-hike bets to just one while the yield curve has flattened as bank deposits are being converted to short maturity bonds. Gold jumped in response to these developments but whether the overall improved risk appetite can be maintained remains to be seen, and for this we need to watch credit spreads and default swaps. What is our trading focus? US equities (US500.I and USNAS100.I): be wary of the short-term celebration A busy weekend in the US for regulators have ended with a backstop of all insured and uninsured deposits of SVB Financial and Signature Bank including a new “Bank Term Funding Program” that will offer 1-year loans to banks on easier terms than normal. The Fed is also relaxing terms for lending through its discount window. US equity futures are rallying this morning with S&P 500 futures up 1.4% trading around the 3,955 level (just above the 200-day moving average), but our stance is that investors should be extremely cautious of celebrating too early. The lessons from the Great Financial Crisis and the Euro Crisis are that the early cracks and the first rescue attempt by regulators are often not enough as these events to not happen in vacuum. At this point we simply do not have enough information to guess the secondary effects from this event so investors should remain cautious. Investors should monitor money market spreads, yield curve shape, flows in USD etc., instead of equities this week for information what is happening in the system. Chinese equities (HK50.I and 02846:xhkg): Rally as US backstops depositors Hong Kong and Chinese stocks rallied as U.S. regulators rolled out plans to prevent the woes in Silicon Valley Bank and Signature Bank to turn into systemic risks. Hang Seng Index jumped 1.8% and CSI300 rallied 0.6%. China’s Two Sessions concluded this morning. President Xi secured a third term and his ally Li Qiang took the position of Premier, both being widely expected. The People’s Bank of China’s Yi Qang unexpectedly remains as the central bank’s governor. Nonetheless, his appointment is likely to be transitory pending the establishment of the National Financial Supervision Bureau. Energy, consumer, and internet stocks led the advance of the Hang Seng Index. In A-shares, SOE telcos outperformed. Belt-and-Road-Initiative-related stocks were well bid. FX: Dollar on the backfoot as Fed rate hike expectations recede on financial risks The dollar trades sharply lower following the Sunday announcement from the US authorities that it will backstop bank deposits to avert a deepening crisis after the SVB collapse. With short-end US yields collapsing and the market pricing just one rate hike before a December cut, the dollar index has dropped to a near a one-month low while the euro after finding firm support around €1.035 last week has rallied back above €1.07. AUDUSD pushed back above 0.66 to highs of 0.6672 in Asian session amid a recovery in sentiment. NZDUSD also pierced above the 200DMA to reach 0.62. GBPUSD rose above the 1.21 handle again with this week’s focus being the Spring budget and the labor market data. ECB’s hike remains in focus, and EURUSD taking another look above 1.07 as risk sentiment improved this morning in Asia.  Crude oil prices bounce as risk sentiment improves but economic outlook still weighing Crude oil prices continue to ebb and flow with the general level of risk sentiment and prices are higher overnight after US authorities stepped in over the weekend to restrain the SVB contagion. The result being a commodity supportive drop in the dollar as interest rates collapse and rate hikes are being priced out of the market. However, the risk of a US recession has strengthened on the back of these developments and with that in mind the short-term outlook points to continued range bound trading. Meanwhile, the spread between Brent and Dubai narrowed to USD2.70/bbl, as Dubai crude gained against the global benchmark, suggesting robust Asian demand. Both Brent and WTI will be facing resistance at their 21- and 50-DMA levels, both currently meeting at 83.75 and 77.70 respectively. Also, in focus this week are monthly oil market reports from OPEC and IEA Gold making a fresh stride higher despite easing banking sector crisis concerns Gold together with US government bonds have seen strong safe-haven demand since Friday as the SVB fallout has led to concerns about contagion in the banking sector. Two of gold’s main engines, the dollar and treasury yields have both seen a sharp drop since Friday and together with technical levels being broken and hedge funds holding a much-reduced long position, the market briefly managed to touch $1890 overnight. Despite the Sunday announcement from the US authorities, gold will likely benefit from continued worries about the financial system, increased recession worries and a swap market now pricing in just one rate hike ahead of a December cut. Support at $1871 and $1858 while a break above $1900 is needed to signal a reversal of the February correction. Treasury yields plunged on safe-haven bids amid banking woes and Fed speculation The Silicon Valley Bank Incident has since Friday driven continued safe-haven demand for bonds while the swap market is now pricing in just one more 25 bps rate hike, down from four since Thursday, with the first cut now priced in for December as recession worries and financial stability takes centre stage.  Prices of Treasuries climbed, and yields fell sharply, with the 2-year yield falling to 4.4% after briefly trading above 5% last week. Traders are now speculating whether the contagion of the crisis to other banks, and the widening of credit spreads will sway the Fed in favour of keeping the next hike at a modest 25bps, or even pausing earlier than expected. These speculations are supported by the slight 0.2% month-over-month or 4.6% year-over-year increase in average hourly earnings, and an increase in the labor force participation rate to 62.5% in February. Given the package rolled out by the regulators will backstop depositors but not unsecured creditors and the Fed may downshift, the front end of the Treasury curve is likely to remain in high demand. What is going on? US authorities step in to restrain the SVB contagion – what to watch from here? The US authorities have stepped in with a liquidity backstop of uninsured deposits and announced a new lending program for banks to prevent the risks of contagion from the collapse of Silicon Valley Bank (SVB) on Friday. Fed pause bets for March are increasing, but the authorities’ response on containing the financial risks suggests that the room to fight against inflation has been maintained. Risks to inflation also tilt further to the upside with the added liquidity measures, and the long-run impact on US tech sector innovation will remain key to consider in portfolios. Read more here. HSBC acquires SVB’s UK unit HSBC has announced to acquire SVB’s UK unit after meetings over the weekend highlighted the importance of SVB UK in relation to the UK’s VC and startup ecosystem risking wider economic implications if a plan to safeguard deposits was not found. Signature Bank closed by US regulators Yesterday, US regulators closed Signature Bank which was another smaller US bank that came under pressure Thursday and Friday last week. The bank is less connected to the startup ecosystem but has connections to the cryptocurrency industry which was rattled with the liquidation of Silvergate Capital last week. Signature Bank’s insured and uninsured deposits will be accessible to customers on the same basis and under the emergency process as with SVB Financial. ECB monetary policy meeting on Thursday There is little doubt the ECB will hike interest rates by 50-basis point this week, to 3 %. The uncertainty about the magnitude of the monetary policy tightening beyond the March meeting is high, however. Our baseline is that the ECB will certainly signal another 50-basis point hike in May and give no real guidance after that. There is another possibility: the ECB could confirm it will continue hiking rates by 50-basis point in the coming meetings and could open the door to a faster reduction of holdings after June. This would be a hawkish scenario, in theory good for the euro. But we think the likelihood it will happen is small. Ahead of Thursday's meeting, the money market forecasts that the terminal rate in the eurozone will be slightly above 4 %. Nomura is currently the most hawkish bank. Its economists call for 50-basis point hikes in March, May, June followed by 25-basis points in July, leaving the terminal rate at 4.25 %. US nonfarm payrolls remained elevated in February Nonfarm payrolls in the US rose by 311k last month, less than the January's blowout print of 504k (revised down from an initially stated 517k) but remaining elevated and above consensus expectations of 215k. While the headline continued to reaffirm a tight labor market, other indicators from the report were weak. Average hourly earnings rose +0.2% MoM in February, lower than the expected and last month’s +0.3% MoM. The annual rate of average hourly earnings rose from +4.4% in January to +4.6% YoY, a touch short of the 4.7% that the market was expecting. The unemployment also picked up by 0.2% pts to 3.6% against market expectations of no change, as participation rose 0.1% pt to 62.5%. The data remained short of cementing a 50bps rate hike possibility for March, also given the recent concerns on the US banking sector from the SVB collapse. Focus now turns to CPI release on Tuesday to further shape Fed expectations. China's February aggregate financing surged beyond expectations with 9.9% y/y Growth China's aggregate financing growth in February was much better than expected, reaching RMB 3160 billion, far above the RMB2300 consensus estimate. The outstanding aggregate financing growth also accelerated to 9.9% year-on-year (Y/Y) in February, up from 9.4% Y/Y in January. Furthermore, M2 increased at a faster pace in February, growing 12.9% Y/Y, up from January's 12.6%. What are we watching next? US inflation figures Tomorrow, the first estimate of the US February CPI will be released followed on Wednesday by the February PPI. The CPI is certainly the most important data point to focus on this week. This is the latest major US data release before the FOMC March meeting of 21-22 March. The Cleveland Fed produces nowcasts of inflation based on recent publicly observable price moves. According to their latest forecast, the monthly inflation will come in at a similar level to January for February. If so, that is not encouraging. A 50-basis point interest rate hike is certainly not a done-deal in March. But this is a clear possibility. Credit and money markets Besides the focus on US inflation figures this week, we will be watching financial conditions in the financial markets with a key focus on credit and money market rates and spreads to gauge risks in the banking system. In addition, Bitcoin will be monitored for understanding risks in the wider cryptocurrency system as this part of the market is where the highest marginal risk-taking takes place. Finally , June and December Fed Funds Rate futures should be monitored for assessing the market’s pricing of monetary policy off this event. Earnings to watch This week’s key earnings are Volkswagen, BMW, Adobe, and FedEx with tomorrow’s focus on Volkswagen where everything is about the EV outlook as it is increasingly looking like VW is having difficulties to keep up with the production ramp up at Tesla and BYD. Analysts expect FY23 revenue growth of 2% y/y for Volkswagen which if realized will prove to low to satisfy investors when the leading EV-makers such as Tesla and BYD are growing much faster. Later this week we will focus on Adobe and FedEx. Tuesday: Foxconn, Volkswagen, Generali Wednesday: Constellation Software, BMW, E.ON, Ping An Insurance, Prudential, Inditex, Adobe, Lennar Thursday: Verbund, Rheinmetall, KE Holdings, Enel, FedEx, Dollar General Friday: Vonovia Economic calendar highlights for today (times GMT) No major releases today Source: Global Market Quick Take: Europe – March 13, 2023 | Saxo Group (home.saxo)
Key Economic Events and Earnings Reports to Watch in US, Eurozone, and UK Next Week

Economic Data Could Remain Under The Shadow Of The Bank Crisis

Swissquote Bank Swissquote Bank 13.03.2023 10:53
The Silicon Valley Bank (SVB) and Signature Bank collapsed.SVB’s flash crash raised questions that other similar local banks in the US could also experience liquidity issues and may not be able to pay their depositors back, unless they also start selling their probably loss-making portfolios. The bank crisis The US authorities now step in to avoid contagion. The bank crisis will likely interfere with Federal Reserve (Fed) rate hike expectations. Fed Activity in Fed funds futures now assesses more than 98% chance for a 25bp hike in March, not because the US jobs data was soft enough to overhaul rate hike expectations last Friday, but because the Fed can’t ignore the issues caused by the steep interest rate increases in the banking sector and can’t afford to trigger a financial crisis to bring inflation back to 2%. CPI Tomorrow’s US inflation data is still important, but the developments across the banking sector could overshadow the data. Watch the full episode to find out more! 0:00 Intro 0:43 US bank crisis widens as SVB, Signature Bank collapse 5:49 The bank crisis hammers Fed expectations 8:05 Economic data could remain under the shadow of the bank crisis Ipek Ozkardeskaya  Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #SVB #Signature #Bank #collapse #bank #crisis #Fed #rate #expectations #USD #NFP #inflation #jobs #data #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
The Collapse Of The Silicon Valley Bank Weakened The Dollar And USD/JPY But Supported EUR/USD, AUD/USD, And GBP/USD

The Collapse Of The Silicon Valley Bank Weakened The Dollar And USD/JPY But Supported EUR/USD, AUD/USD, And GBP/USD

Kamila Szypuła Kamila Szypuła 13.03.2023 11:40
The dollar fell on Monday on heightened expectations the Federal Reserve will be less aggressive with monetary policy as authorities stepped in to limit the fallout from the sudden collapse of Silicon Valley Bank. The U.S. government announced several measures early in the Asian trading day, saying all SVB customers will have access to their deposits starting on Monday. Tomorrow’s US CPI report will make things interesting should inflation come in higher than expected, making the Fed’s task that much harder. USD/JPY The yen pair started the new week at the level of 134.8590 and in the first trading hours it was in the range of 134.25-134.75. USD/JPY then started a dip towards 133.75 but rebounded back to near 134.75. In the European session, USD/JPY fell again, but this time towards 133.00. At the time of writing, the yen pair is trading around 133.40. Concerns about the imposition of a global economic action continue to weigh on investor sentiment, which in turn favors a safe haven for the Japanese yen (JPY) and puts some downward pressure on the major currency. Both added further fueled by recent Chinese volume data, which appear to have left domestic demand weak and lowered on a strong recovery in the world's second-largest economy. However, any significant pullback in USD/JPY still seems elusive amid expectations that the Bank of Japan (BoJ) will remain dovish to support a fragile domestic economy. In fact, the new BoJ governor, Kazuo Ueda, recently stressed the need to maintain ultra-loose policy settings and said the central bank is not aiming for a quick turnaround from a decade of massive easing. Bets were further raised after the release of the final GDP printout, which showed Japan's economy narrowly avoided a technical recession in the final months of 2022. EUR/USD The euro pair started the day at 1.0686, but started falling. After the decline, the EUR/USD pair gained momentum and exceeded 1.07. In the following hours, the EUR/USD pair traded in the 1.0720-1.0730 range. In the European session, the euro fell again below 1.07 and at the time of writing trades above 1.0670. EURUSD rose overnight to a new monthly high of 1.0737 as the USD sell-off continued. At the European open, EURUSD pulled back slightly, flirting again with 1.0700 as markets scrutinize the SVB news and emergency measures taken by the US authorities to ensure confidence in the banking sector. Regulators have confirmed that the Bank's customers will have access to their deposits on Monday, while launching a new facility to give banks access to emergency funds.  EURUSD continues to look more favorable going forward as market participants dropped expectations for a 50bps hike by the Federal Reserve at its March meeting on Friday. This is in contrast to the European Central Bank (ECB), whose interest rate decision will be taken on Thursday, with consensus and market participants favoring a 50 basis point hike. GBP/USD GBP/USD started the day at 1.2077 and the first moves were similar to the euro. In the Asian session, the pair of the cable crossed the level of 1.2125, but did not maintain momentum and started a downtrend that is still ongoing. At the time of writing, GBP/USD is below 1.2075. AUD/USD The movement of the Australian pair is like the euro. AUD/USD started trading at 0.6633 and then fell towards 0.6600. After the decline, the Aussie pair rose and for the next hours of trading in the Asian session it was in the range of 0.6660-0.6670. In the European session, the AUD/USD pair started a downward move towards 0.6610. At the time of writing, the trading level of the Aussie pair was below 0.6620. The Australian dollar gained support on Monday morning after continued concerns over the collapse of the Silicon Valley Bank. The result was a dovish overestimation of Fed interest rates. Money markets have drastically reduced the potential for a 50bps towards a 25bps increment. Source: finanace.yahoo.com, investing.com
Hawkish Fed Minutes Spark US Market Decline to One-Month Lows on August 17, 2023

The Fed May Likely Take A Pause In March Until U.S. Regulators Provide Significant Liquidity

InstaForex Analysis InstaForex Analysis 13.03.2023 13:16
The EUR/USD pair soared at the start of the new trading week, testing the 7th figure. The dollar was under pressure amid the unfolding crisis in the U.S. banking sector. The collapse of Silicon Valley Bank triggered the price turbulence at the currency market, and this turbulence was not in favor of the U.S. currency. Yesterday it became known that another large bank (Signature Bank) collapsed in the United States, thereby increasing panic moods among investors. Additional pressure on the greenback came from Goldman Sachs, whose currency strategists have radically revised their expectations regarding the prospects for a Fed rate hike in March. As a result, the U.S. dollar index updated almost a month low today, reflecting the general situation in the foreign exchange market. Bank Crash and its Consequences Signature Bank closed this week, which had $110 billion in assets at the end of last year. It had an extensive network of branches (about 40 in most states of the country) and almost 2,000 employees. The regulator decided to close the bank "because of systemic risks." The U.S. Treasury, Federal Reserve and the Federal Deposit Insurance Corporation issued a joint statement saying depositors will receive reimbursements—taxpayers would not suffer any losses. Recall that at the end of last week, another large bank went bankrupt in the United States—Silicon Valley Bank—whose assets were estimated at more than $200 billion. The U.S. authorities are now taking active steps to address the growing concerns of bank customers about the security of their deposits. And not only of a verbal nature. For example, the Federal Reserve announced the creation of a credit fund for the country's banks. A new Bank Term Funding Program will be created, offering loans for up to one year to banks, pension funds, credit unions and other institutions secured by U.S. Treasury obligations, agency debt obligations, etc. Representatives of the Fed did not name a specific figure for the size of the new loan program, but made it clear that it would be very significant. According to the statement of the U.S. Treasury Department, the agency plans to allocate up to $25 billion from the Exchange Stabilization Fund to support financing of the program. At the same time, the Fed, according to the statement, "does not expect that there will be a need to use these additional funds." During Monday's U.S. trading session, U.S. President Joe Biden will issue a special statement on the banking sector to calm the panic that apparently still hovers among investors. SVB, Goldman Sachs, and the Fed The SVB bankruptcy is the largest since the 2008 financial crisis. Overall, the collapse of two large banks is a serious stress test for the U.S. financial system. But still, according to many experts, this situation will not trigger a major financial crisis in the U.S. (with the same analogy in 2008). But how would this affect the resolve of the Fed members, who have been hawkish for the past weeks? Less than a week ago, on Tuesday, the market began discussing the increased probability of a 50-point hike at the Fed's March policy meeting. Whereas today there are already opposite assumptions—that the Fed might not raise rates this month. At least, that was the forecast made today by Goldman Sachs strategists. In their opinion, the regulator will take a short-term pause in the light of the serious stress in the U.S. banking system. As for the further prospects, Goldman Sachs analysts expect three 25-point hikes in May, June and July. Such a sharp reversal in expectations put pressure on the greenback, which sank across the market. Conclusions The Fed may likely take a pause in March until U.S. regulators provide significant liquidity to banks facing deposit outflows and build depositor confidence. According to the CME FedWatch Tool, there is now a 92% chance of a 25-point rate hike at the end of the Fed's March meeting. Meanwhile, at the beginning of last week the market was almost certain (75%) that the regulator would implement a 50-point scenario. As you can see, the hawkish expectations are indeed declining, putting pressure on the dollar. The complexity of the situation is also in the fact that from today the so-called "silence mode" is in effect: within 10 days before the meeting, members of the Fed do not have the right to announce their position in public. This puzzle will get more complicated tomorrow (March 14) when the data on U.S. inflation growth will be released. If the CPI comes out in the green again, the dollar will regain some of its lost ground. If inflation slows down more than expected, the EUR/USD might hit the upper boundary of the Kumo cloud, i.e., 1.0800 resistance level. In conditions of such uncertainty for the pair, it is advisable to maintain a wait-and-see attitude.   Relevance up to 10:00 2023-03-14 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/337404
The Entire Movement Od EUR/USD Pair Still Appears More Like A Swing Than A Trend

The Entire Movement Od EUR/USD Pair Still Appears More Like A Swing Than A Trend

Paolo Greco Paolo Greco 14.03.2023 08:05
5M chart of EUR/USD On Monday, EUR/USD continued to trade in "Friday mode". That is, quite volatile and at the same time, with a clear upward bias. In our fundamental article, we have already analyzed the reasons for the euro's growth (or more exactly, the dollar's fall). On the 5-minute chart, you can see that the pair managed to grow considerably as well as fall during the day. And this happened despite the fact that there were no macro data released during the day. However, U.S. President Joe Biden delivered a speech and the FOMC meeting was held, at which the issue of the stability of the banking system after the collapse of two large banks was decided. This news became the drivers on Monday, though it was rather difficult to say which one of them had an effect on the pair and at what time. Speaking of yesterday's trading signals, everything was as simple as possible. The price fell to the area of 1.0658-1.0669 in the middle of the European session, from which it bounced. After a buy signal appeared, the pair went up about 50 pips, which traders could take advantage of by opening a long position and closing it manually in the evening. So, the day was quite good, in terms of trading. Although the movements, of course, were mixed. COT report: A new COT report came out on Friday... for February 21... That was almost a month ago, while the report of February 14 has disappeared... It seems that the Commodity Futures Trading Commission will now publish reports with a month's delay for some time. In the event of this, the reports will hardly be of great importance. Recall that there was a failure in the CFTC, so the data we receive now is considered irrelevant. So far, we can say that in the last few months, the overall picture has been corresponding to the market situation. On the chart above, we see that the net non-commercial position of large traders (second indicator) has risen since September 2022. At about the same time, the euro started to rise. The net non-commercial position is bullish and continues to increase with each new week, allowing us to expect the uptrend to stop shortly. Such a signal comes from the first indicator, with the green line and the red line being far apart, which is usually a sign of the end of a trend. The euro has already begun its bearish move against the greenback. So far, it remains unclear whether it is just a downward correction or a new downward trend? According to the latest report, non-commercial traders closed 100 long positions, and 1,300 short ones. Consequently, the net position rose by 1,200. The number of long positions exceeds that of short ones by 165,000. In any case, a correction has been looming for a long time. Therefore, even without reports, it is clear that the downtrend will continue. 1H chart of EUR/USD On the one-hour chart, EUR/USD surged, but in general, the entire movement still appears more like a "swing" than a trend. I am quite sure that the pair might start to sharply fall this week, since it did not have such strong reasons to grow. The market is still in an impulsive state, but sooner or later it will calm down. During that time, we should expect a resumption of more or less logical and reasonable movements. On Tuesday, important levels are seen at 1.0537, 1.0581, 1.0658-1.0669, 1.0762, 1.0806, 1.0868, 1.0938, and also Senkou Spahn B lines (1.0610) and Kijun Sen (1.0637). Ichimoku indicator lines can move intraday, which should be taken into account when determining trading signals. There are also support and resistance although no signals are made near these levels. They could be made when the price either breaks or rebounds from these extreme levels. Do not forget to place Stop Loss at the breakeven point when the price goes by 15 pips in the right direction. In case of a false breakout, it could save you from possible losses. On March 14, the market will be focused on the U.S. inflation report. There are no important reports or events planned for the EU. In addition, the market may continue to be under the impression from the bankruptcy of the two U.S. banks. Indicators on charts: Resistance/support - thick red lines, near which the trend may stop. They do not make trading signals. Kijun-sen and Senkou Span B are the Ichimoku indicator lines moved to the hourly timeframe from the 4-hour timeframe. They are also strong lines. Extreme levels are thin red lines, from which the price used to bounce earlier. They can produce trading signals. Yellow lines are trend lines, trend channels, and any other technical patterns. Indicator 1 on the COT chart is the size of the net position of each trader category. Indicator 2 on the COT chart is the size of the net position for the Non-commercial group of traders.   Relevance up to 01:00 2023-03-15 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/337460
UK PMI Weakness Supports Pause in Bank of England's Tightening Cycle

US CPI Still A Key Focus Ahead, Gold Broke Above The $1900 Barrier

Saxo Bank Saxo Bank 14.03.2023 08:20
Summary:  Banking sector concerns continued to roil markets as the SVB fallout still remains a big unknown despite measures from US authorities to stem contagion. Flight to safety accelerated further with 2-year Treasury yields slumping by a massive 60bps, and Fed rate expectations continued to shift lower with terminal rate expectations now down to 4.8% from 5.7% last week. Dollar was broadly sold and gold and silver were in favor on yield drop. US CPI still a key focus ahead but a softer print can prompt a further shift lower in the expectations of the Fed tightening path.   What’s happening in markets? US equities assess the probability of Fed rate cuts, while both the recession and volatility indexes spike After the sweeping failure of regional lenders, including Silicon Valley Bank, and ahead of the all-important US inflation read, tech stocks edged cautiously ahead, while bond yields fell - as SVB’s collapse severely complicated the Fed's rate path. Meanwhile, the NY Fed probability of a recession index, climbed to its highest level since the GFC, while the Volatility index hit its highest level since October last year. As such we remain cautious. The swaps market is now showing a less than 1-in-2 chance probability the FOMC can continue to hike rates, while also showing a probability of several rate cuts this year. So, the two-year treasury (bond) yield plunged 61 bps to below 4%, the biggest one-day slump in decades, while the 10-year yield dropped 16 bps. While the US dollar plummeted, sending the kiwi, yen and Aussie all up by 1.2% or more. Fed launches probe into the supervision of SVB. Bank stocks continue to tumble, notching biggest decline since the COVID19 crash The Federal Reserve will launch an internal probe to the supervision of Silicon Valley Bank after its collapse sparked criticism by the central bank oversight, with Michael Barr leading the review, which is said to be publicly released by May 1. Not only the Fed is concerned, but so too is Washington and investors alike. The KBW Bank Index shed 12% on Monday, continuing last week’s rout that saw the index slide 16%- with the index collectively notcing its biggest monthly pull back since COVID19. First Republic Bank shares tanked 62% on Monday, with other regional banks such as Western Alliance Bancorp falling 47%, and California-based PacWest Bancorp down 21% - as investors fret about the strength of liquidity in the lending market. Larger companies also are not immune to the sell off- Charles Schwab shares slid 12% with traders also de-risking and even perhaps shorting some financial institutions. As mentioned on Monday’s Podcast - we think the rout of several lenders in Silicon Valley could have a profound ripple effect on the innovation eco system – and future lending meaning access to liquidity in the VC and cryptocurrency market could be limited – and this could also impact the private equity market. All this reinforces Saxo long held belief that the physical world will continue to outperform the intangibles (the technology sector). This view was reinforced in our Quarterly Outlook. Massive bull steepening as investors flocked to 2-year Treasuries On the back of U.S. regional bank turmoil, investors quickly repriced the front end of the Treasury curve and removed additional future rate hikes in this tightening cycle. Investors flocked to 2-year Treasuries in safe-haven bids and traders closed out curve-flattening positions. Yields on the 2-year plunged 61bps to 3.98% while the 10-year yields fell “only” 13bps to close at 3.57%. The 2-10-year curve steepened to -46bps, after hitting as inverted as -110bps last week. Hang Seng Index and China’s CSI 300 rallied on U.S. regulators’ decision to backstop depositors Hong Kong and Chinese stocks rallied as U.S. regulators rolled out plans to prevent the woes in Silicon Valley Bank and Signature Bank to turn into systemic risks. Hang Seng Index advanced 2% and CSI300 climbed 1%. China’s Two Sessions concluded this morning. President Xi secured a third term and his ally Li Qiang took the position of Premier, both being widely expected. Premier Li Qiang’s remarks at the press conference had a pro-growth and market-friendly tone. Energy, telco, China consumption, and China internet stocks drove the advance of the Hang Seng Index. Hang Seng TECH Index gained 2.9%. Bilibili (09626:xhkg) jumped 10.7% following the video-sharing platform being included in the Stock Connect. In A-shares, SOE telcos outperformed. Belt-and-Road-Initiative-related stocks were well bid. Australian equities (ASXSP200.I) trade lower for the sixth week. Swaps show RBA’s hiking cycle is over After not only the dovish commentary from the RBA but the recent demise of several large VC and cryptocurrency lending banks in the US, now we are seeing that the RBA’s interest rate hiking cycle could be over. That’s according to the swaps market, which reflects that there is just a 50% chance for an increase in the RBA’s cash rate for the rest of this year. FX: Expectations of a less aggressive Fed weighing on the dollar The USD continued to slide on Monday as Fed expectations were revised further lower (read below) but some floor was being found in early Asian trading. AUDUSD touched highs of 0.6717 before reversing to 0.6650, while NZDUSD surged to 0.6250+ before heading back towards the 0.62 handle. GBPUSD could not move above 1.22 and focus turns to labor market data in the UK today before the budget announcement tomorrow. EURUSD touched 1.0750 with a 50bps rate hike still on the table this week. Safe haven JPY and CHF continued to outperform as bank risks reign, with USDJPY staying below 134 and USDCHF testing support at 0.91. Crude oil prices slump amid risk off Oil prices closed lower by 2.5% on Monday as banking sector concerns continued to spell caution on risk assets. However, expectations of a less aggressive Fed monetary policy helped crude oil to recover from its lows, and focus now turns ahead to the US CPI data due today. WTI futures still trading below $75/barrel while Brent is at $80. OPEC is scheduled to issue its monthly market report later Tuesday, while the International Energy Agency follows with its release on Wednesday, providing on snapshot on the outlook for supply and demand, but focus is unlikely to be back on fundamentals until market concerns ease. Gold and Silver benefitting from the drop in yields Gold broke above the $1900 barrier as flight to safety continued despite the efforts of US regulators to reduce the risk of contagion from the SVB collapse. The massive drop in 2-year Treasury yields of the order of 60bps as well as market pricing in as many as 4 rate cuts this year have seen the dollar come off considerably from its highs and brought the precious metals back in focus. Additional demand for Gold from momentum traders looking for a fresh upside attempt, could bring Gold towards the January high around $1950. Silver was up over 6% on Monday as well breaking the $21.70 resistance which will be followed by $22 and $22.27. What to consider? Bank worries bring a significant shift in Fed expectations Bonds continued to soar as markets digested the measures of the US regulators to stem contagion from the collapse of SVB. But that continued to complicate the path of monetary policy with the Fed having broken something. As markets continued to re-assess the path of monetary policy from here, 2-year Treasury yields plunged 61bps to below 4%, the biggest one-day slump in decades, while 10-years dropped 16bps. The CME FedWatch tool now shows a 35% chance of no move from the Fed next week, and 65% probability of a 25bps rate hike. Fed Funds futures are now pricing in a terminal rate of 4.8% as early as May (down from 5.7% in July earlier) and as much as 100bps of rate cuts this year (compared to one 25bps rate cut expected last week). Upside in US CPI is also unlikely to make Fed go for 50bps in March US inflation has been the talk of town for several months now, although the focus has lately turned to financial contagion risks that may stop the Fed from switching back to a higher rate hike path trajectory. In fact, several banks are now calling for a pause next week, with one also expecting a rate cut and an end to quantitative tightening. Still, February CPI – due to be released on Tuesday – will be a big test after last month’s print reversed the disinflation narrative in goods inflation, and continued to point at sticky services inflation. Headline consumer prices are expected to rise +0.4% MoM in February, cooling slightly vs the +0.5% in January, with the annual rate seen easing to 6.0% YoY from 6.4% previously. Core CPI is expected to rise +0.4% MoM in February, matching the January pace, though the annual rate is likely to fall to 5.5% YoY from 5.6% in January. Overall message is likely to remain that inflation remains stubbornly high, especially after tough weather conditions in California, but the risk of a 50bps rate hike from the Fed in March remains low as the central bank becomes wary of “something breaking”. Submarine deal moves ahead  - the market is still awaiting further detail The US, Australia and the UK unveiled further plans for a new fleet of nuclear-powered submarines when the country heads met in the US on Monday. There will be an initial budget of about A$9 billion through to June 2027, with the tri nations deepening their Aukus Defense partnership that formed 18 months ago, to counter China in the Pacific. The market awaits further detail with much of the discussion remaining confidential. To read more on what to expect, click our article here. Chinese peak construction season ramps up. Iron ore makes green shoots. Iron ore stocks follow higher The iron ore (SCOA) price has extended its rebound - with the steel ingredient's price is up 2.7% so far this week, after rising 2.7% last week. All in all, the iron ore is now trading 8% higher year to date, and above the $132 for the first time since April last year. We’ve been speaking a lot about how iron ore buying usually picks up around this time of year, with Chinese steel mills getting ready for peak construction season - which runs from March through to June. Fresh data released on Friday showed by both steel stockpiles and iron ore inventories fell last week, which implies there is a need to top of up stockpiles. We think buying of iron ore will likely continue in 2023, as the re-opening of China’s economy pick up, all while iron ore supply remains short. And this is underpinning price strength, despite some in Beijing accusing iron ore market participant's of price manipulation. Australian pulse checks: business and consumer confidence and jobs numbers   Australian business and consumer confidence, numbers released today – show consumer confidence is somewhat improving, while businesses remain cautious - feeling the aftereffects of the RBA’s 10th rate hike. Despite the RBA’s comments previously alluding to a potential pause on rate hikes soon - business confidence fell by 4 points in February. The next gauge we will get on Australia’s economy is due on Thursday - with all-important unemployment rate released for February. Bloomberg’s consensus is suggesting the jobless rate will fall from 3.7% to 3.6%, with 50,000 jobs expected to be added last month. If the data shows employment is rising, contrary to what the RBA expects, then the Australian dollar would likely gain pace, as the RBA would gain power to keep rising rates by 0.25%. UK labor data on watch today for the path of BOE The UK labor market data will be released on Tuesday and investors will be scrambling to gauge how much room does the BOE have to tighten further. Bloomberg consensus expects the unemployment rate to rise to 3.8% in the three months to January from 3.7% previously, with headline jobs growth likely to ease to 60k from 102k in January. However, even with a slightly softer jobs report, the BOE is expected to continue its hiking cycle in March as activity data has been stronger than expected, but the trend in labor market from here will be key to see where BOE could pause its tightening cycle. Focus also turns to UK’s budget announcement tomorrow. For what to watch in the markets this week – read or watch our Saxo Spotlight. For a global look at markets – tune into our Podcast.
BRICS Summit's Expansion Discussion: Impact on De-dollarisation Speed

The Federal Reserve Will Launch An Internal Probe To The Supervision Of Silicon Valley Bank

Saxo Bank Saxo Bank 14.03.2023 09:11
Summary:  An historic move in interest rates accelerated yesterday as investors rushed to price an end to the current Fed hiking cycle and even an eventual easing starting as early as Q3 after US officials moved to prevent contagion in the US banking sector. The US 2-year treasury yield, which traded above 5.0% mid-last week, traded below 4.0% late yesterday. The US dollar is down sharply, gold and bitcoin are soaring, and equities can’t decide whether to sell off on the uncertainty or celebrate the sharp drop in yields. What is our trading focus? US equities (US500.I and USNAS100.I): has the dust settled post SVB Financial bailout? Yesterday’s session saw big moves across US government bonds with especially the US 2-year yield declining 60 basis points as many corporates likely converted deposits into short-term bonds to reduce deposit risk. In equities mega caps were seen as safe havens with Apple shares gaining 1.5% while the broader S&P 500 Index was flat, and the Russell 2000 Index was down 1.5%. US financial conditions tightened to the tightest levels since late September and thus under those circumstances the S&P 500 Index should be trading closer to 3,600 than the close of 3,855 yesterday. Moves in times of crisis are always exaggerated and often not consistent so investors should continue to be cautious and not celebrate too early despite equities help up yesterday. The key indicators to monitor remain US bond yields, USD, FRA-OIS spreads (interbank stress), VIX, credit default swaps, and banking stocks. FX: USD weakens as market prices imminent end of Fed hiking cycle The USD continued to slide on Monday as US yields at the front end of the curve suffered an historic collapse, with Fed expectations revised lower (read below), although a floor in US rates was found in early Asian trading near 4.00% for the US 2-year yield. AUDUSD touched highs of 0.6717 late yesterday before reversing to 0.6650. GBPUSD found resistance ahead of 1.22 and focus turns to labor market data in the UK today before the budget announcement tomorrow, although incoming data feels suddenly less urgent than just a week ago, given the uncertainty the turmoil in the financial sector has generated since late last week. EURUSD touched 1.0750 with a 50bps rate hike still on the table this week from the ECB, although the probability for a hike of that size has dropped significantly, and ECB tightening expectations have seen a sharp downgrade since late last week. JPY and CHF continued to outperform, with USDJPY staying below 134 and USDCHF testing support at 0.91. Crude oil tests strength of support near bottom of current range Crude oil prices closed lower by 2.5% on Monday as banking sector concerns continued to challenge growth and demand dependent commodities from cotton and copper to crude oil. However, expectations of a less aggressive Fed monetary policy helped crude oil find support with WTI and Brent both finding support in the bottom 20% of their current ranges. In Brent, the prompt month backwardation remains elevated around 50 cents while the contango in WTI has not widened despite the current weakness, both signalling a discrepancy between current robust fundamentals and the overall weak sentiment. Ahead of today’s US CPI print, OPEC is scheduled to issue its monthly market report, while the International Energy Agency will follow on Wednesday. Gold and silver benefitting from the yield collapse Gold broke above $1900 barrier on Monday as flight to safety continued despite the efforts of US regulators to reduce the risk of contagion from the SVB collapse. The massive drop in 2-year Treasury yields of the order of 60bps as well as market now pricing in as many as four rate cuts this year (from four hikes less than a week ago) have seen the dollar come off considerably from its highs and brought the precious metals back in focus. Since the SVB news broke late Thursday, gold has gained 4.2% while silver has added a massive 8.5%, and with several rate cuts now priced in, and short end yields unlikely to continue their decline, the risk of a profit taking ahead of the CPI print has risen. Support levels that may get challenged in gold are 1900 followed by 1890 and 1872. Copper looks to China for support Copper trades back above $4 after managing to find support around $3.94, the December high. With the arrival of the peak season and the drop in copper prices, consumption in China is expected to continue to recover, potentially offsetting growth concerns elsewhere Massive bull steepening in US Treasuries as investors flocked to 2-year Treasuries On the back of U.S. regional bank turmoil, investors quickly repriced the front end of the Treasury curve and removed additional future rate hikes in this tightening cycle. Investors flocked to 2-year Treasuries in safe-haven bids and traders closed out curve-flattening positions. Yields on the 2-year plunged 61bps to 3.98% while the 10-year yields fell “only” 13bps to close at 3.57%. The 2-10-year curve steepened to -46bps, after hitting as inverted as -110bps last week. What is going on? Fed launches SVB probe as bank stocks tumble the most since the Covid-19 crash The Federal Reserve will launch an internal probe to the supervision of Silicon Valley Bank after its collapse sparked criticism by the central bank oversight. The KBW Bank Index declined 12% yesterday extending last week’s rout that saw the index slide 16%. In biggest declines were among banks such as First Republic Bank (-62%), Western Alliance Bancorp (-47%), and California-based PacWest Bancorp (-21%) as depositors and investors were nervous about smaller financial institutions. Larger financial institutions were not immune to the risk-off with Charles Schwab shares declining 12%. Credit Suisse has found material weakness in financial reporting The Swiss-based investment bank was forced to postpone the release of its annual report last week due to US regulators and the morning the bank says that it has identified material weaknesses in its financial procedures for 2021 and 2022. The bank is working on remediating those errors. Credit Suisse 5-year CDS prices hit a new all-time high yesterday at 485. Bank worries bring a significant shift in Fed expectations Bonds continued to soar as markets digested the measures of the US regulators to stem contagion from the collapse of SVB. But that continued to complicate the path of monetary policy with the Fed having broken something. As markets continued to re-assess the path of monetary policy from here, 2-year Treasury yields plunged 61bps to below 4%, the biggest one-day slump in four decades, while 10-years dropped 16bps. The CME FedWatch tool now shows a 35% chance of no move from the Fed next week, and 65% probability of a 25bps rate hike. Fed Funds futures are now pricing in a terminal rate of 4.8% as early as May (down from 5.7% in July earlier) and as much as 100bps of rate cuts this year (compared to one 25bps rate cut expected last week). What are we watching next? US CPI will still get some attention, even if incoming data’s importance has fallen sharply US inflation has been the talk of town for several months now, although the focus has lately turned chiefly to financial contagion risks that may stop the Fed from switching back to a higher rate hike path trajectory. In fact, several banks are now calling for a pause next week, with one also expecting a rate cut and an end to quantitative tightening. Still, the US February CPI – due to be released today – will be a big test after last month’s print reversed the disinflation narrative in goods inflation and continued to point at sticky services inflation. Headline consumer prices are expected to rise +0.4% m/m in February, cooling slightly vs the +0.5% in January, with the annual rate seen easing to 6.0% YoY from 6.4% previously. Core CPI is expected to rise +0.4% m/m in February, matching the January pace, though the annual rate is expected to fall to 5.5% y/y from 5.6% in January. Despite the SVB’s failure, we still believe the February CPI release will be particularly relevant for the FOMC’s March policy decision as the Fed may try to pretend that it can focus on business as usual. Evidence of economic resilience and persistent price pressures would prolong the Fed’s tightening cycle. However, by year-end, we expect the U.S. economy will start to experience more significant disinflationary pressures. NFIB survey for February Given that small businesses are particularly sensitive to domestic economic dynamics, sentiment among small business owners will provide an update on inflationary conditions and the labor market situation. Earnings to watch Volkswagen earnings are the big focus today at 9:00 CET but VW’s investment plans have already been surfaced increasing to €180bn in investments during 2023-2027 which is 13% higher than previously announced and with 70% going to EV. Next key US earnings are Adobe and Lennar tomorrow with analysts expecting Adobe’s revenue growth at 9% y/y which is unchanged from a year ago suggesting the growth rate is stabilising. Analysts are also expecting Adobe to show meaningful improvement in operating income as the software maker has reduced costs. Lennar is expected to report -3% y/y and –41 q/q revenue growth for FY23 Q1 (ended 28 Feb) and a significant hit to EBITDA at $725mn down from $1,527mn. Tuesday: Foxconn, Volkswagen, Generali Wednesday: Constellation Software, BMW, E.ON, Ping An Insurance, Prudential, Inditex, Adobe, Lennar Thursday: Verbund, Rheinmetall, KE Holdings, Enel, FedEx, Dollar General Friday: Vonovia Economic calendar highlights for today (times GMT) During the day: OPEC’s Monthly Oil Market Report 1230 – US Feb. CPI 1230 – Canada Jan Manufacturing Sales MoM 2030 – API's Weekly Crude and Fuel Stock Report 2120 – US Fed’s Bowman (Voter) to speak   Source: Global Market Quick Take: Europe – March 14, 2023 | Saxo Group (home.saxo)
Assessing 'Significant Upside Risks to Inflation': Insights from FOMC Minutes

Oanda Podcast: SVB Collapse And Fed Interest Rate Expectations

Craig Erlam Craig Erlam 14.03.2023 09:16
Craig Erlam joined Jonny Hart to discuss the latest on SVB and what it means for interest rate expectations and this week’s big US data. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

ECB Expectations Soften Sharply, No Consensus About What The Fed Will Do Next

Swissquote Bank Swissquote Bank 14.03.2023 10:22
Monday was yet another ugly day for bank stocks around the world, as the selling pressure continued following the SVB debacle in the US last week. The money flew into the safe havens. Yields Treasury yields around the world tumbled sharply. The S&P500 was flat, while technology stocks and gold rallied. Fed For now, the pricing on Fed funds futures suggests that there is slightly more than 70% chance of a 25bp hike next month, and slightly less than 30% chance for no rate hike. US CPI But the expectations could easily change after US CPI data due later today. Both headline and core inflation are expected to have eased in February, but investors are cautious given that last month’s disappointment could be repeated this month. Eurozone In the Eurozone, traders now see less than a 50% chance for another 50bp hike from the European Central Bank (ECB) this Thursday, and the expectation of the peak ECB rate fell below 3.5%, from around 4% last week. But despite the softening ECB expectations, the EURUSD flirted with 1.0750 yesterday, as the US dollar sank deeper across the board. Watch the full episode to find out more! 0:00 Intro 0:42 Banks down, treasuries up 3:35 No consensus about what the Fed will do next 4:14 How could US CPI shape Fed expectations? 7:06 Tech, gold rally on tumbling yields 8:42 ECB expectations soften sharply, as well. Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #US #inflation #CPI #data #bank #crisis #Fed #rate #expectations #USD #ECB #EUR #XAU #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
If The Bank Of England Hike Interest Rates Again Later This Month Will Exert Downward Pressure On The EUR/GBP Cross

If The Bank Of England Hike Interest Rates Again Later This Month Will Exert Downward Pressure On The EUR/GBP Cross

TeleTrade Comments TeleTrade Comments 14.03.2023 10:31
EUR/GBP drifts lower for the fifth straight day and drops to a nearly two-week low on Tuesday. The GBP’s relative outperformance comes amid rising bets for additional rate hikes by the BoE. The mixed UK jobs data fails to push back against hawkish BoE expectations or lend any support. Speculations for more jumbo rate hikes by the ECB warrant caution for aggressive bearish traders. The EUR/GBP cross remains under some selling pressure for the fifth successive day on Tuesday and drops to a nearly two-week low during the early European session. The selling bias remains unabated following the release of the mixed UK monthly employment details and drags spot prices below the 0.8800 mark, with bears now eyeing to challenge a technically significant 100-day Simple Moving Average (SMA). In fact, the UK Office for National Statistics reported that the number of people claiming unemployment-related benefits fell by 11.2K in February, less than the 12.4 decline anticipated. The slight disappointment, however, was offset by a sharp downward revision of the previous month's reading to show a drop of 30.3K in the Claimant Count Change against the 12.9 fall estimated. Furthermore, the jobless rate held steady at 3.7% during the three months to January as compared to a modest uptick to 3.8%, while the rolling three-month average indicated that the UK wages are cooling. Nevertheless, the data is strong enough to allow the Bank of England (BoE) to hike interest rates again later this month, which continues to underpin the British Pound and exerts downward pressure on the EUR/GBP cross. Apart from this, a goodish pickup in the US Dollar demand is seen weighing on the shared currency, which further contributes to the heavily offered tone surrounding the EUR/GBP cross. That said, the recent hawkish comments by several European Central Bank (ECB) officials, stressing the need for more interest rate hikes beyond March, could lend some support to the Euro. Traders might also refrain from placing aggressive bearish bets ahead of the ECB monetary policy meeting, scheduled on Thursday. The focus will then shift to the BoE meeting next week, which should help determine the next leg of a directional move for the cross. Hence, any subsequent decline is more likely to find decent support near the 100-day SMA, which should act as a pivotal point ahead of the key central bank event risks.
The Commodities Feed: US announces SPR purchase

Brent And WTI Was Testing The Lower End Of These In Response To The Turmoil

Craig Erlam Craig Erlam 14.03.2023 10:34
Wild fluctuations in oil Oil prices are continuing to whipsaw while remaining within the broad ranges they’ve traded within since early December. Yesterday we saw Brent and WTI testing the lower end of these in response to the turmoil that erupted in the financial system that triggered widespread risk aversion. Today we’re seeing them trade lower again, albeit still higher than yesterday’s lows. If we see markets settle down, that could prevent a break of the lows but oil traders, like those elsewhere, will remain nervous about the prospect of further turbulence. Suddenly, a break below the lows looks a much greater risk which may keep pressure on in the short term. A strong rally An extraordinary rally in gold over the last couple of sessions has seen it rebound almost 5% and move back above $1,900 which could have been a major barrier of resistance under normal circumstances. But that isn’t what we’re seeing at the moment and the dramatic decline in yields, combined with a softer dollar and clamor for safe havens sent the yellow metal soaring. That may not last if markets correct themselves, assuming the dust settles, which could see interest rate expectations shift higher. Then there’s today’s CPI data which may refocus attention on the Fed’s primary goal of price stability and the success it’s having, or not, in driving inflation back to target. It promises to be another interesting day for gold. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
Saxo Bank Podcast: A Massive Collapse In Yields, Fed's Tightening Cycle And More

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

Saxo Bank Saxo Bank 14.03.2023 10:37
Summary:  Still very early days, as we ponder the ongoing fallout from the turmoil in the US banking system, which has triggered a massive collapse in yields as the market brings forward the end of the Fed's tightening cycle. One significant danger is that we risk a credit crunch as banks are forced to scramble for funding and deposits. We highlight areas and indicators that are flashing red, the impact of the situation into currencies, precious metals, and equity sectors. Today's pod features Garnry on equities, Ole Hansen on commodities, and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: Careening toward a credit crunch? | Saxo Group (home.saxo)
Gold Trading Analysis: Technical Signals and Price Movements

EUR/USD, GBP/USD And AUD/USD Is Trading In Red, Only USD/JPY Is Positive

Kamila Szypuła Kamila Szypuła 14.03.2023 11:34
The dollar rose in somewhat calmer trading on Tuesday after collapsing on Monday following the collapse of Silicon Valley Bank (SVB) as investors waited for the release of US consumer inflation data later in the day. Tuesday's data on the Consumer Price Index (CPI) could potentially fuel further volatility in global markets, coming a day after fears of a potential banking crisis caused traders to quickly lower their expectations of a Federal Reserve rate hike. Over the weekend, US authorities took emergency action in response to the collapse of the SVB, promising depositor protection to bolster bank confidence. US President Joe Biden on Monday announced measures to ensure the security of the banking system. USD/JPY The yen pair started the day at 133.0870. The USD/JPY pair rose towards 134.00 in the first hours of trading, but failed to maintain momentum and fell towards 133.25. From then on, USD/JPY traded around 133.50 until the end of the Asian session. In the European session there was an upward impulse and the yen pair breaks through 134.00. At the time of writing, USD/JPY is above 134.10. EUR/USD The Asian session for the euro pair, which started Tuesday's session at 1.0727, was bearish. At the end of the Asian session, EUR/USD fell below 1.07. The European session brought an upward impulse to the EUR/USD pair and the trade rebounds above 1.07 again. The euro is trading cautiously this morning which is to be expected as markets prepare for the upcoming US CPI report. Meanwhile, markets are also trying to figure out whether SVB collapse will influence the European Central Bank's (ECB) rate decision later this week. ECB policymaker Yannis Stournaras said on Tuesday that he does not see any impact from the collapse of Silicon Valley Bank (SVB) on Eurozone banks. Although the ECB is in quiet period, the Euro could stay resilient against its rivals in case other ECB policymakers deliver similar comments. GBP/USD The cable pair started Tuesday's session at the level of 1.2168 and, just like the euro pair, was in a downward move in the Asian session. Towards the end of the Asian session, the GBP/USD pair got a strong upward impulse towards 1.2180. In the European session, the pound pair again started to fall towards 1.2150. At the time of writing, GBP/USD is trading above 1.2160. Early Tuesday, the data published by the UK's Office for National Statistics showed that the Unemployment Rate remained unchanged at 3.7% in three months to January. More importantly, annual wage inflation in the three months to January, as measured by Average Earnings Including Bonus, declined to 5.7% from 6% in December. Similarly, Average Earnings Excluding Bonus retreated to 6.5% in the same period from 6.7%. AUD/USD The Aussie pair started trading at 0.6656 and like the European pairs the first move was down. Still in the Asian session, the AUD/USD pair rebounded and grew towards 0.6672. The upward momentum was not maintained in the European session and the pair of the Australian pair started a downward move towards 0.6645. At the time of writing, AUD/USD is trading at 0.6651. Most Asian currencies weaken against the USD in the morning session amid higher Treasury yields. Source: investing.com, finance.yahoo.com
The Commodities Feed: Further oil supply disruptions

Oil Is Unlikely To Be Helped By Speculation That The Fed May Keep The Federal Funds Rate At 4.75%

Marek Petkovich Marek Petkovich 14.03.2023 12:26
The oil market is full of mysteries. U.S. companies have drastically reduced investment in production, suggesting lower supply and higher prices. But prices are falling! Western sanctions were supposed to hit Russian exports, and strong U.S. macroeconomic data for January should have stimulated demand. Instead, oil reserves in the United States are increasing, and Brent has fallen below $79 per barrel for the first time since the beginning of the year. The U.S. dollar failed miserably due to the bankruptcy of the SVB, which on paper means a higher cost of oil, but it breaks all ties! What's the matter? Have the markets gone crazy? In fact, oil is an indicator of the health of the global economy. And its health is clearly not good. For a long time, Brent has been trading in consolidation as investors were choosing between the East, led by China, which is ready for a rapid recovery, and the West giving alarming signals. After deflation began to smell in China, it became clear that the "bears" were pulling the strings. Inflation cannot be weak in a strong economy! Chinese consumers continue to be cautious after exiting lockdowns, which deprives the North Sea grades of important support and forces the reversal risks down to their lowest level since August. Brent Reversal Risk Dynamics Sellers clearly outnumber buyers in the options market. Investors are more concerned about slower demand growth than supply issues, which results in the peak of Brent. Indeed, with Saudi Aramco predicting that oil consumption will reach a record 102 million bpd in 2023, worrisome signals of an imminent U.S. recession are undermining optimists' positions. The bankruptcy of the 16th largest U.S. lender suggests that something is broken because of the Fed's aggressive monetary restriction. More precisely, the banking system. And the more actively regulators try to save it, the more it scares the financial markets. The volatility of oil is not diminished at all by the guaranteed return of SVB deposits, 90% of which were actually uninsured. Let the U.S. labor market continue to look monolithic, but if the volume of bank lending goes down sharply, a slowdown in the economy cannot be avoided. Most likely, the recession, which the yield curve has been signaling for a long time, is just around the corner, which negatively affects the demand for oil and pushes futures down. Dynamics of oil volatility Oil is unlikely to be helped by speculation that the Fed may keep the federal funds rate at 4.75% in March, although a couple of days ago, investors believed in +50 bps. Combined with falling Treasury yields, this weakens the U.S. dollar. Nevertheless, the suspension of the cycle occurs due to the crisis, and the crisis in the economy is always for oil. Technically, the inability of the Brent bears to win back the three-touch pattern is a sign of their weakness. Falling below the $79.2 per barrel pivot level or rebounding from resistances at $81.75 and $82.7 are reasons to sell.   Relevance up to 08:00 2023-03-19 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/337505
USD Stable as Oil Prices Rebound Ahead of US CPI Report Release

EUR/USD Pair And GBP/USD Pair May Back To Their Bearish Moods

Jakub Novak Jakub Novak 14.03.2023 12:33
The unexpected crisis in the US banking sector has crushed all hopes for a new acceleration in the pace of interest rate hikes. Goldman Sachs economists said they no longer see the Fed raising rates next week, even after US authorities took steps to contain the crisis caused by the collapse of Silicon Valley Bank and Signature Bank. This caused two-year Treasury bond yields to fall by 18 basis points to 4.34%, reaching its sharpest three-day drop since October 1987. Expectations of a less aggressive policy stance and sharp demand for German bonds also affected the euro. Interest rate Most likely, Fed officials will announce a pause in interest rate hikes this week ahead of their meeting on March 21-22. Economists were expecting to see around 0.25% to 0.5% increase earlier, but everything changed since last Sunday, when US authorities had to act very quickly in order to contain the spreading of SVB's problem to other US banks. The Fed had to open an emergency line of credit, allowing banks to pledge a range of high-quality assets to obtain cash for a period of one year. They also pledged to fully protect uninsured depositors in SVBs, as well as relax lending conditions through the Fed's discount window. These measures should provide liquidity shortages to banks. Now, the Fed is expected to raise the rate by a quarter point next week, which means that the peak will be around 5.1% in six months, slightly lower than the previously projected 5.74%. USD The current situation is quite negative for dollar as it most certainly raises risk appetite. However, market players should keep in mind that if the crisis in the US banking sector is not solved quickly, it will spread to other regions, which will result in a collapse in other currencies such as euro and pound. US economy Ahead is an important US report, that is, the inflation data for February this year. Economists are predicting that the index will show a 0.4% increase, slightly lower than the previous month's 0.5%. Yearly data should be 5.5%, which is also lower than the 5.6% earlier. Euro Demand for euro has intensified after all the news, so buyers have a chance to continue building the new upward trend. However, the quote needs to stay above 1.0700 as only by that will euro go beyond 1.0730 and head towards 1.0770 and 1.0800. Should the quote decline below 1.0700, EUR/USD will slip to 1.0666. Pound In GBP/USD, bulls also control the market, but the quote needs to stay above 1.2130 so that pound could have the chance to break through 1.2170 and head towards 1.2215 and 1.2265. If bears manage to gain control, the pair may dip to 1.2080 and 1.2050.a     Relevance up to 08:00 2023-03-15 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/337507
The Collapse Of The SVB Triggered A Massive Rally In Bond Markets

The Collapse Of The SVB Triggered A Massive Rally In Bond Markets

InstaForex Analysis InstaForex Analysis 14.03.2023 14:18
U.S. authorities took emergency action on Sunday to boost confidence in the banking system after the collapse of Silicon Valley Bank (SVB) threatened to trigger a broader financial crisis. Regulators said that from Monday, customers of the failed bank would have access to all their deposits. And to give banks access to funds, they created a new mechanism. The collapse of the SVB triggered a massive rally in European and global bond markets. On Monday, government bond yields fell in the eurozone as investors flocked to safe-haven assets. The yield on two-year German bonds fell 34 basis points to 2.746%. This is the biggest one-day drop since 1995. Yields move inversely to prices. And last week, the yield on 2-year bonds, which is very sensitive to ECB interest rate expectations, exceeded 3.3%. There will likely be a slight rate hike by the European Central Bank (ECB) on Thursday. Expectations for the ECB's next decision changed sharply on Monday. Market pricing showed that traders see a 25 basis point hike as the more likely outcome, even though a 50 basis point hike seemed almost likely last week. In U.S. markets, the 2-year Treasury yields fell 36 basis points to 4.232%, its biggest daily drop since 2008. According to analysts at Goldman Sachs, the Federal Reserve will not raise interest rates at its meeting on March 22, as there is uncertainty about how to proceed due to the failure of the SVB. Monday's pricing in money markets showed that traders believe there is about a 20% chance the Fed will leave rates unchanged and an 80% chance of a 25 basis point hike. Last week, pricing suggested a 50 basis point rise was the most likely outcome. The rush to safe-haven assets included long-term bonds. The yield on German 10-year bonds fell 23 basis points to 2.228% after falling last February to its lowest level at 2.168%. Italy's 10-year yield fell 16 basis points to 4.156%. European stocks fell sharply, while U.S. stocks rose. The European banks index (.SX7P) fell another 5% after falling 3.8% on Friday. The European Central Bank is not planning an emergency meeting of its banking supervisory board after the collapse of the SVB.     Relevance up to 08:00 2023-03-19 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/337511
UK Gfk Consumer Confidence index got better fourth month in a row

The Pound Has Not Reacted To The Release Of Data

Kenny Fisher Kenny Fisher 14.03.2023 14:27
The British pound has reversed directions after an impressive rally that saw GBP/USD climb 370 points. In the European session, GBP/USD is trading at 1.2154, down 0.24%. US dollar recovers The collapse of the Silicon Valley Bank (SVB) on Friday sent the financial markets into turmoil on Monday. US bank stocks declined sharply, while safe-haven gold powered higher. The US dollar retreated against the major currencies and the 2-year Treasury yield fell almost a full point. Tuesday has brought better news, as the markets appear to have settled down. The US dollar has regrouped and is higher against the majors. There is an uneasy calm in the air, but that doesn’t necessarily mean that this latest crisis is behind us. Investors are on alert and will be very sensitive to new developments and any negative news could renew market volatility. The Fed and Treasury Department acted quickly to protect depositors and President Biden sent a reassuring message at an impromptu television address, but the collapse of the 16th largest lender in the US means it’s unlikely to be “business as usual” for some time. It was just a week ago that Fed Chair Powell’s hawkish testimony on the Hill raised expectations of the Fed delivering a 50-bp increase at the March 22 meeting. Those expectations have vanished into smoke, with the markets now expecting a 25-bp hike, with an outside chance of a pause.  We could see further market repricing after today’s CPI report, with headline CPI expected to fall to 6.0%, down from 6.4%. In the UK, the employment report was within expectations. The unemployment rate remained at 3.7%, shy of the estimate of 3.8%. Hourly earnings fell to 5.7%, as expected, down from an upwardly revised 6%. The pound hasn’t reacted to the release and the data is unlikely to change minds at the Bank of England, which is expected to raise rates by 25 bp at the March 23 meeting.   GBP/USD Technical GBP/USD tested resistance at 1.2113 earlier in the day. Above, there is resistance at 1.2294 There is support at 1.1984 and 1.1854 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
US Inflation Eases, but Fed's Influence Remains Crucial

US financial stability trumps near-term inflation

ING Economics ING Economics 14.03.2023 15:09
US core inflation came in hotter and has nudged expectations for a rate hike higher. While the Fed is probably inclined to hike 25bp, this is contigent of calm being restored to the financial system. Irrespective of this, the fallout from recent events will inevitably lead to a tightening of lending conditions which will weigh on growth and inflation 0.5% MoM increase in core inflation   Higher than expected Hot inflation lifts rate hike chances Headline US CPI rose 0.4% month-on-month in February, as expected, but core (ex food and energy) was up 0.5%, versus the 0.4% consensus. As a result, the annual rate of headline inflation slows to 6% from 6.4% while the annual rate of core inflation moderates to 5.5% from 5.6%. On the face of it this supports the case for a Federal Reserve rate hike next week (we are up to about 19bp priced now), but that is still contingent on market calm. Financial stability risks always trump near-term inflation worries. The details show shelter costs remain elevated, rising 0.8% MoM while airline fares jumped 6.4%, recreation increased 0.9% while apparel rose 0.8% MoM for the second month in a row. On the softer side, used car prices fell sharply again despite car auction prices suggesting the opposite while medical care costs continue to ease. But inflation to fall as economic conditions deteriorate Despite the strength in today’s core inflation measure, we expect inflation to slow rapidly through the second half of 2023 as the decline in house prices, which is leading to a flat lining in new rent agreements eventually feeds through into the CPI. This is not the only reason though. This has been the most aggressive monetary policy tightening cycle for 40 years and by going harder and faster into restrictive territory the Federal Reserve naturally has less control over the outcome. Higher borrowing costs have been accompanied by a rapid tightening in lending conditions, which will increasingly weigh on credit flow. Banks will become increasingly cautious on the back of the SVB/Signature fallout and regulators will be more watchful, which will in turn make banks even more cautious. This will restrict access to credit and put up its cost, further weighing on the economy and eroding corporate pricing power. Tight lending standards will get tighter, hitting the economy hard Source: Macrobond, ING Corporate profit margins will increasingly be squeezed This was again evident in today’s National Federation of Independent Businesses survey on the economy. The proportion of companies that said they raised prices over the previous three months dropped to 38% in February from 42% in January. This is the lowest reading since April 2021 (having hit 66% in March last year). More importantly, the proportion of companies looking to raise prices over the coming three months dropped back to 25% from 29% – close to the 24% figure hit in December. As the chart below shows, this has a good lead quality on core CPI and suggests sub 3% inflation by year-end.   NFIB price plans series points to a rapid slowdown in core inflation Source: Macrobond, ING   Companies, particularly in the small business sector "remain doubtful that business conditions will get better in coming months", according to the survey. Bank failures will not make them any more cheerful and intensifying competition is likely to mean profit margin squeezes and slower inflation.  Fed probably still inclined to hike rates next week, but cuts are coming So where does this leave us with the Fed next week? We don’t see the need to hike rates. The tightening of lending conditions that will inevitably result from the fallout of the past few days heightens the risk of a hard economic landing and inflation returning to target by early next year. We do think there is an inclination for the Fed to hike if conditions allow. Longer term our view on the high chance of rate cuts before year-end has only been reinforced by recent developments. Read this article on THINK TagsUS Interest rates Inflation Federal Reserve

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